1. 2nd SIGMA NETWORKING SEMINAR
OECD Conference Centre Paris November 2008

2. Public Internal Financial Control (PIFC)
Ritva Heikkinen
European Commission
DG BUDGET B.4

3. PIFC: the concept What is PIFC? Why PIFC?
A comprehensive concept developed by the EC for re-engineering internal control systems in the public sector in line with international standards
EU accession requirement under Chapter 32
PIFC = (IC = FMC + IA) + CHU
Why PIFC?
Integral part of good governance: increased accountability and transparency in spending public money (3Es)

4. PIFC development stages
1. Conceptualisation
PIFC Policy Paper plus Action Plan
2. Legislation
Primary (framework) and secondary laws
3. Administrative Reform
CHU(s); Finance Directorates, IA Units
4. Training
For managers, financial officers/controllers, auditors

5. PIFC development: challenges (1)
Re-engineering internal control is a long-term project – no short-term political gains
Conceptualisation and legal drafting – too quickly, often by external assistance projects without necessary stakeholder consultations
Often very detailed, prescriptive primary legislation
Resistance to change (managers, inspectors)
Managerial accountability not either well understood or limited due to legal constraints and/or centralised decision-making

6. PIFC development: challenges (2)
Focus predominantly on IA; insufficient focus on FMC
FMC (mis)understood to be a job only for specialists rather than for everybody in the organisation
IA perceived as additional control, i.e. “old inspection with a new name” rather than consulting activity
IA not sufficiently independent
Dependency on technical assistance/ twinning: lack of sustainability after projects end

7. PIFC: Key conditions
Firm long-term political commitment from the outset and appropriate steps (Policy Paper and Action Plan)
General acceptance among public sector managers that reform is necessary
Adequately resourced and skilled Central Harmonisation Unit to drive for the change
IA development only in wider framework of Internal Control (parallel development of FMC)
Benchmarking procedures for measuring progress over time (e.g. peer reviews)

8. PIFC as a leading concept has a track record of success:
An integrated and innovative approach for policy making and central harmonisation
Internal control has become a strategic issue in the accession context
Irreversible and efficient move to modernisation of public administration: increased accountability and transparency
PIFC is the norm in public internal control area for Candidate Countries, Western Balkan and selected ENP countries

9. ‘Outside’ areas that interact with PIFC environment
PIFC is not a ‘stand alone’ approach
Interconnected with
Accounting
National budget cycle: from input to output budget
Fight against fraud (inspection)
External audit
Civil Service Reform

10. EU support on PIFC
Chapter 32 requirements generally define PIFC support in absence of a global PAR/PFM framework
Room for “cross-fertilisation”: Civil service reform, DIS, Public Expenditure Management
Appropriate mix of various instruments (SIGMA, TAIEX, twinning/ technical assistance) required

11. Further information
Welcome to the world of PIFC - Booklet by the European Commission (2006)
FccWebsite maintained by DG Budget
(for passwords)
PIFC: a European Commission initiative to build new structures of public internal control in applicant and third-party countries - Book by Robert de Koning (2007)
DG Budget, Unit B.4