Financial Inspection vs External & Internal audit in Republic of

Financial Inspection vs External & Internal audit in Republic of Moldova Grosu-Axenti Diana Financial Inspection Director

Similarities get confusion Ex post control functions Public sector area : The public finances and assets Working procedures: interviews, sampling, questionnaires etc Notion “Audit” and “control “as synonyms

Background Inspection To inspect –to compare the item or activity in line with specified requirements and standards Audit From “audio”–to listen Tradition from Latin countries Tradition from Saxon countries In ex soviet countries control Is an conditionality of EU Periodical checking of Internal auditor asses internal Inspection is a component of Internal audit is a component of system is based on revision economical-financial discipline or at the requests Government (Ministry of Finance) centralized control integration control in all processes, including operational ones internal control External audit is a component of Parliamentary control

Financial Inspection in Moldova Centralized financial control function of Government Regulated be Governmental decree, provisions in Organic budget law The mission: to protect financial Governmental interest Subordinated and report directly to MoF Scope: all public organizations and state owned companies,

Moldovan Financial inspection functions To check ex post financial transactions for compliance with the laws, budgetary and accounting rules To detect irregularities and frauds To impose sanctions To ask for corrections To contribute making managers accountable, passing materials to Prosecution and asking for bringing to justice

Types of inspections Planned, on risk based approach Ad hock, mandatory to be done: on requests of Government, Parliament, Court of Accounts, law enforcement bodies on signals about eventual frauds and serious irregulararities

Financial Inspection in Moldova Planning procedures On risk based analyses: - semiannual plan: proposals of Ministries, MoF knowledge of inspected areas and institutions requests of public institutions, citizens

Supreme Audit Institution in Republic of Moldova New regulation in 2008: Law on Court of Accounts The Court of Accounts is the only state public authority that controls the formation, management and use of public financial resources and management of public property by carrying out external audit in the public sector as a Supreme Audit Institution and shall be legally protected against interference of law enforcement or control bodies. Compliance with INTOSAI: The external public audit shall be performed according to the legislation of the Republic of Moldova, internal documents, own audit standards approved on the basis of the international auditing standards (INTOSAI). Scope: the central and local public administration authorities, other public authorities; the institutions and organizations financed from the national public budget; economic units, where the State has a full participation or its share in the statutory capital exceeds 50%;

Law on Court of Accounts Objectives of SAI assessment of the regularity, legality, conformity, economy, efficiency, and effectiveness of public financial resources and public property; promotion of the internationally recognized standards on the transparency and accountability in the area of public financial management; transparency by informing strategic and annual plans, findings and recommendations; certification of the staff with functions of public auditor.

Moldovan SAI Types of audit (1) The Court of Accounts shall control the management and use of public financial resources and public property via: a) regularity audit; b) performance audit; c) other types of audit. (2) The Court of Accounts shall carry out annually, on a compulsory basis, the audit of the Government reports on the execution during the expired budgetary year of: a) the state budget; b) the state social insurance budget; c) the compulsory medical insurance funds;

INDEPENDENCE of SAI The Court of Accounts shall carry out its activity independently The Court of Accounts shall have organizational, functional, operational and financial independence The Court of Accounts shall decide independently on its Activity Program, and on the way of its implementation. (3) No public authority may request or force the Court of Accounts to change its Audit Activity Program, to carry out or stop certain audit activities. (4) The Parliament or parliamentary factions may request the Court of Accounts to perform some audit work. The audit work may be requested

SAI strategic development objectives Transition from external control to public external audit, as an good governance tool; Institutional strengthening and increasing effectiveness; Harmonization of public external audit reform and implementation of Public Internal Financial Control, excluding duplications ; implementation of international standards and best external audit practices.

Republic of Molodva Inspection vs SAI Same scope Same tradition in controlling Different reporting line Different planning procedures Different working standards Different roles

Compliance

Internal Audit Financial Inspection SAI Scope Ministerial All public sector State enterprises All public sector State enterprises Planning Risk based At requests MoF decision Independent Audit/controlling Systems Tranzactions Accounts, systems Function Assurance and consultancy Governmental control Certify accounts, Evaluate Government performance Reporting To Manager CHU MoF Government Parliament Sanctions No Yes Yes In the case of eventual fraud send report to Standard have Law to elaborate enforcement bodies Law enforcement bodies

Accountable to Parliament Supreme audit institution Government Ministry of Finance Financial Inspection Public Internal financial control

Audit and the chain of accountability in parliamentary systems Confer authority on Voters Confers authority on Establish and appoint Prime Minister Parliament Departments Accounting Officers Cabinet Is accountable to Are accountable to Appoints Account to Reports to Auditor General Supreme Audit Institution Audits and evaluates

Arguments for friendship If the roles are not separated and defined, there is a fight for surviving If there is no inspection, internal auditor are asked to investigate individual transations, suspitions of fraudes If inspection exists, internal audit could focus on operational systems, provide consultancy services and add value If inspection exist, external audit could pay more attention to Governmental institutions performance and rely on inspection in compliance field

Coclusions? Collaboration! For mutual benefits and public welfare ! 09.08.23 Republic of Moldova Ministry of Finance 19