1. The Sigma Experience of Public Internal Financial Control Peer Reviews
Third Eurosai Training Event
Seminar on Evaluation of Internal Control Systems
Prague, May 2003
The Sigma Experience of Public Internal Financial Control
Peer Reviews
François-Roger Cazala
Principal Administrator Sigma

2. I- The Sigma Peer Review Experience in Candidate Countries
to the European Union
A- What is Sigma and what is Sigma doing?
B- The peer review concept and experience
II- General overview
A- The key components of an ideal/theoretical system of financial control in the public sector
B- The actual situation in the countries under review
II- A practical example: the development of internal audit in the public administrations of candidate countries
A- A new concept
B- A major challenge: the introduction of an “audit culture”
C- The foundations of internal audit, key-component of financial control system

3. I- The Sigma Peer Review Experience in Candidate Countries
to the European Union
A- What is Sigma and what is Sigma doing ?
Sigma Programme: Support for Improvement in Governance and Management.
A joint initiative of the Organisation for Economic Co-operation and Development (OECD) and the European Union, financed principally by the EU.
Geographical coverage: 10 Central and Eastern European candidate and acceding countries, Western Balkans, Turkey.

4. I- The Sigma Peer Review Experience in Candidate Countries
to the European Union
A- What is Sigma and what is Sigma doing ?
Topics addressed:
Civil service and public administration, including input to primary
and secondary civil service legislation which ensures professional
staffing and integrity for the implementation of the acquis
communautaire.
Financial control and external audit, including sound
management of EU pre-accession funds; preparation for
the post-accession use of structural funds; completion of peer
reviews of public internal financial control systems; support
to networks of supreme audit institutions and financial controllers.
Public expenditure management and public procurement, assisting in the completion of budget, treasury and procurement systems which meet EU standards.

5. A- What is Sigma and what is Sigma doing ?
I- The Sigma Peer Review Experience in Candidate Countries to the European Union
A- What is Sigma and what is Sigma doing ?
Sigma assistance: support to law-drafting, management advisory functions, advice within the framework of the management and control of EU pre-accession funds (Sapard, EDIS for Phare and Ispa ), training activities, strategic development plans, support to networks, in particular for external audit
Key instrument in this context: the peer review concept

6. B- The peer review concept and experience
I- The Sigma Peer Review Experience in Candidate Countries to the European Union
B- The peer review concept and experience
Thorough examinations and external independent analysis
using the professional knowledge and experience of
member state senior practitioners and Sigma experts
Conducted by Sigma in the area of PIFC in Lithuania, Slovakia,
Bulgaria (1st phase), Slovenia and the Czech Republic.
Planned for Poland, Hungary, Romania, Bulgaria (2nd phase).
Objectives :
independent review of quality and adequacy of financial
management and control as well as public internal audit
- support efforts to ensure and further develop sound
financial management of national and EU resources.

7. II- General Overview
A- The key components of an ideal/theoretical system of financial control in the public sector (1)
A strong central ministry responsible and accountable for
the direction and co-ordination of all public finance matters
Centrally established standards for controls, accounting, financial
statements and reports, internal audit, and systems to enforce
these standards
Clear and transparent lines of accountability and responsibility for
organisational units and government officials (including civil
service schemes)
Effective and coherent systems and procedures of preventative,
detective and directive controls

8. II- General Overview
A- The key components of an ideal/theoretical system of financial control in the public sector (2)
Clear, comprehensive and transparent rules and procedures for financial and performance reporting
An effective internal audit function
Strong oversight by parliament and effective supreme audit
institution, with professional relationship to internal audit
Effective implementation capacity (staffing, IT systems and
other equipment etc).

9. B- The actual situation in the countries under review (1)
II- General Overview
B- The actual situation in the countries under review (1)
Weak central systems (ministries of finance, treasury)
Un-coordinated systems and procedures
Basic budget and treasury controls often hardly in place
Accountability arrangements oriented towards individual
rather than organisational/corporate liability
Very formal procedures, at the expense of the substance

10. B- The actual situation in countries under review (2)
II- General Overview
B- The actual situation in countries under review (2)
All this operating in a context of:
- Scarce resources and limited change absorption capacity
- Multiple and sometimes adverse priorities
- Deficient integrity framework
- Limited understanding of new concepts (“financial control”….)
Insufficient political backing to ensure consistency and
continuity of reform.
Specific problems of building-up the external audit

11. Existing control bodies: their roles and limitations
III- A practical example : the development of internal audit in the public administrations of candidate countries (1)
A- A new concept
An unclear concept for most candidate countries
Existing control bodies: their roles and limitations
Risk of confusion
Scepticism and risks for independence of internal audit

12. B- A major challenge : the introduction of an
III- A practical example : the development of internal audit in the public administrations of candidate countries (2)
B- A major challenge : the introduction of an
“audit culture”
Raising managers awareness
Establishing legitimacy and demonstrating the usefulness of the internal audit by getting started with the actual audit work
Avoiding wrong priorities and ensuring that first things come first
Creating the adequate co-ordination, support and networking activities for internal audit

13. Professional certification Salary levels
III- A practical example : the development of internal audit
in the public administrations of candidate countries (3)
C- The foundations of internal audit, key component of financial control system : Staffing, Pay and Conditions
Staff recruitment and staff retention
Professional certification
Salary levels
Career structure and development

14. III- A practical example : the development of internal audit in the public administrations of candidate countries (4)
C- The foundations of internal audit, key component of financial control system: Practice of Audit
Audit Needs Assessment
Documentation standards
Identifying and organising spreading of good practices
(e.g. SAPARD and National Fund.)
Quality assurance
Systems/risk based approach
Internal/external audit relationship
Follow-up and action plans for recommendations

15. III- A practical example : the development of internal audit
in the public administrations of candidate countries (5)
C- The foundations of internal audit, key component of financial control systems: Professional development and training
Professional qualifications
Support to professional networking
Skills and training profiles
Manuals

16. Conclusion
Reformed financial control systems and procedures, including
internal audit, do not result only from a new legal framework, even
with some technical recipes from external assistance.
A long-term process and a strategic approach, involving the
administrative actors but also the political decision-makers.
Not to be conducted in isolation from the public administration
reform processes, in particular in the area of public finance.
Implies cultural change.
Balance to find between the institution-building activities and the
daily work.
A crucial role to play for Supreme Audit Institutions.
Also a challenge for EU member states.