1. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division PEM-PAL - 2nd Internal auditors Community of Practice Workshop Chisinau, Moldova, June 20-22 2007 Development and implementation of internal audit strategy in Croatia for the change of public sector Tomislav Mičetić, CPIA, CAE

2. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 2 Contents Strategy what is it, drafting, inputs, process Croatia Development of IA strategy IA development in brief Legal framework Lesson learned Conclusion

3. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Strategy – what is it? Management plan or method for completing objectives; plan of procedures to be implemented, to do something. (Source: www.answers.com) IA Strategy – plan to implement IA according the internationally accepted IIA standards in the public environment 3

4. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Strategy drafting - overview 4 PROCESS of drafting strategy OUTPUT IA strategy Learning INPUTS (staff, IT, informations, equipment, projects)

5. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Strategy drafting - inputs Government support European Union as target Leader - CHU head CHU with: English skilled people – CORE WORKGROUP External project assistance Information of other countries examples of strategies Extended workgroup SAI, academics, inspection services Administrative Cooperation Agreement with DG Budget 5 PROCES of drafting strategy OUTPUT IA strategy Learning INPUTS (staff, IT, informations, equipment, projects)

6. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division PROCESS of drafting strategy Process of drafting strategy 6 Drafting Compliant (i.e. DG Budget) Check (by workgroup CORE and EXTENDED) NO Yes PROCESS of drafting strategy OUTPUT IA strategy Learning INPUTS (staff, IT, informations, equipment, projects)

7. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division IA development strategy Part of PIFC (Public Internal Financial Control) Strategy PIFC = FMC + IA + CHU FMC – Financial management and control IA – Internal Audit CHU – Central Harmonisation Unit 7 PROCESS of drafting strategy OUTPUT IA strategy Learning INPUTS (staff, IT, informations, equipment, projects)

8. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Croatia in brief 4,5 mil. Inhabitants - 7.700 per capita 15 bil. annual budget – central state level ~3000 budget users 8

9. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Development of PIFC strategy in Croatia + outputs 9 PIFC strategy 2004 PIFC strategy 2005 Action plan for PIFC until end of 2008 -IA rulebook -PIFC law -IA manual -Certification system for IA -IA rulebook -FMC training Outputs

10. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 10 Internal audit in PIFC Strategy (2005) – Example of output Contents: Existing situation and weaknesses Organisation of IA on goverment SABs Job title: Internal auditor Development of Internal Audit PIFC law finalisation Criteria for IA establishment Endorsment of IA Charter Development of methodology Development of IA Strategy and Annual plans Training of internal auditors See: Croatia PIFC 2005 Strategy: Chapter 4.2.

11. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 2003 MoF department for internal audit and control established – CHU Assistant minister + 3 civil servants Budget law introduction of IA in the public sector managerial responsibility budget inspection Start of EU funded project CARDS 2002 Development of Public Internal Financial Control and Internal Audit 11

12. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 2004 Signed Administrative Cooperation Agreement (ACA) with European Commission - DG Budget in the area of the PIFC - Chapter 32. Rulebook on budget users IA PIFC strategy adopted by Government TAIEX – PIFC presentation for Croatia 2nd workshop for CHU – Hungary Start of IA training and certification Session held by CARDS 2004 project 12

13. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 2005 Change of MoF organizational decree Department for harmonization of internal audit and financial control Internal audit department FMC department WB - Country Financial Accountability Assessment (CFAA) - recommended: Further development of legal documents Strengthening capacity of CHU Further promotion of documents Updated PIFC policy paper – in force IA training taken over by local trainers-professionals 1st seminar of Internal auditors New Rulebook on Budget users internal audit Criteria for IA establishment 13

14. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 2006 3th workshop of CHU- Bled-Slovenia Start of CARDS 2004 project – Strengthening of the PIFC structure in the Republic of Croatia Awareness raising seminars for managers and FMC persons Explanatory and bilateral screening 2nd IA seminar of IA PIFC law passed 14

15. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 2007 FMC modules started for FMC champions Drafting of PIFC policy for local self - government level CHU Action plan on development and implementation of PIFC until end of 2008 – continuing the development of IA 15

16. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 16 Croatia - Legal framework for Internal audit Code of ethics Internal audit standards Rulebook for budget users IA Internal audit manual PIFC Law PIFC policy Decree on organisation of SABs Rulebook for job description of SABs Charter of internal auditors Working procedures of IAD Strategic/annual plan Internal audit programmes/guidelines Internal audit reports/Follow up State CHU SABs

17. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Lesson learned Be not to ambitious Start with good contents Strategy – good tool for start of IA development Transparency and marketing EU – moving target PIFC – IA – good tool for fight against corruption – preventive measure PROCES of drafting strategy OUTPUT IA strategy Learning INPUTS (staff, IT, informations, equipment, projects)

18. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 18 IA - Conclusion Change is the law of life. And those who look only to the past or present are certain to miss the future. (John F. Kennedy) HRM – Staff is key of success! Success is the result of perfection, hard work, learning from failure, loyalty, and persistence. (Colin Powell)

19. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division 19 CHU: http://www.mfin.hr/str/100/#509 CARDS 2004 and CHU: http://pifc.mfin.hr For additional info visit:

20. Republic of Croatia - Ministry of Finance Central Harmonisation Unit & Internal audit Division Abbreviations CAE- Chief Audit Executive CFAA- Country Financial Accountability Assessmentt CHU – Central Harmonisation Unit CPIA- Certified Public sector Internal Auditor HRM – Human Resource Management FMC – Financial management and control IA – Internal Audit IAD - Internal Audit Department MoF – Ministry of Finance SABs – State Administrative Body WB- The World Bank 20