Public Sector in Bosnia and Herzegovina

1

• Public Sector in Bosnia and Herzegovina
• ENHANCEMENT
• OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
  THREE
• SUPREME AUDIT INSTITUTIONS

2
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Objective of the presentation
• To provide participants of the 19th ICGFM
  Conference with review of past, current and
  future status of the managements systems of
  internal controls
• in public sector of Bosnia and Herzegovina,
• seen through a prism of the
• supreme audit institutions practice

3
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Founding and start up of Supreme Audit
  Institutions operation in Bosnia and Herzegovina
• Constitutional structure of Bosnia and
  Herzegovina
• Three SAIs linked by INTOSAI standards, common
  interests and projects
• SAIBiH, SAIFED and SAIRS were established during
  2000., operational start in 2001.
• Coordination Board and the first Decision
  adoption of INTOSAI standards
• Partner Project with SNAO in the area of the
  institutional capacity building
• INTOSAI Membership (Seoul, 2001) and EUROSAI
  (Moscow, 2002)

4
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Our capacities and operations
• Independence of 3 SAIs priorities and
  occasional problems with Budget
• Human resources and capacities (total number of
  employees is 102, out of which 71 are auditors)
• Financial Audit and Compliance Audit the first
  independent controls in BiH
• Public audit reports in function of strengthening
  of democratic role of Parliament
• First reports on accounts of 2000 produced for
  less then 12 months from the day of establishment
  of SAIs (98 reports) Total of 124 reports on
  accounts of 2003 were submitted by December 2004.
  
• Trainings and PA Pilot Project will start in
  Sep. 2005.
• The first Peer review report Agency SIGMA
  (May/June 2005 final version)

5
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• For detailed information on visions, mission,
  objectives, mandate, operations, plans, audit
  reports and other issues, please refer to the
  following web sites
• SAIBiH www.revizija.gov.ba
• SAIFED www.saifbih.ba
• SAIRS www.gsr-rs.org

6
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Internal controls of the audited clients
• The most frequent and most significant findings
  of the audit for the period 2000-2005
• Internal control environment
• Procurement system management (goods and
  services)
• Project management
• Financial management, and
• IT system management

7
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Weaknesses and drawbacks related the clients
  control environment...
• Appointments, responsibilities, mandates, ethical
  qualities...
• Competencies of key staff, distribution of
  responsibilities
• Management style, management decision making
  processes and modes
• Internal rules, procedures, routines, control
  activities,
• Identification of risk, monitoring
• Internal control, internal inspection and
  internal audit
• Plan of Activities and Program monitoring of
  realization
• Frequent changes in organizational structure and
  management
• Internal system of communication and
  organizations culture
• Internal and external reporting

8
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Weaknesses and drawbacks related to the
  procurement system management
• Long-lasting, inherited problems and practice
• Fragmented procurements
• Transparency abuses in relation to public
  competition
• Evaluation with no previously set up criteria
• Joint procurements
• New law(s)

9
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Weaknesses and drawbacks related project
  management....
• Lack of basic/initial definition of the projects
• Project Budget often published without breakdown
  of Expenses
• Responsibility for implementation and reporting
• Projects documentation...
• Procurements for project...
• Engagement of government officials and foreign
  experts
• Other...

10
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Weaknesses and drawbacks related a clients
  financial management...
• Budget Projections is (not) based on consumption
  analysis
• Different practices of an institution budget
  execution monitoring
• Timely warning on available funds realization of
  obligations
• Lacking legal framework, procedures, regulations,
  instructions
• Control of expenditures
• PROPERTY, inventory lists, opening balances

11
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Weaknesses and drawbacks related to IT system
  management
• IT strategy, plans content
• Administrative and organizational control
• Procurement of IT equipment and software
• Security and protection of IT systems
• Security and protection of electronic information
• Procedures and control over data input in FIMS

12
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Changes of environment
• Public Finance Sector Reform and external audit
  support
• Introduction of Treasury system
• Treasury single account
• Financial Information Management System
• Parliamentary discussions that resulted after
  publicizing of the first audit reports
• Disclosing of the first audit report to public
• Awareness of presence of a control, and first
  actions by the Prosecutors Office

13
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Changes of environment
• Public Finance Sector Reform and external audit
  support (2)
• Ministry of Finance BiH, FBiH and RS
• Capacity building projects in cooperation with US
  Treasury Department and USAID
• Problems in Budget planning process, 'inherited'
  budgets
• Budget execution rare examples of exceeding of
  the Budget
• Budget projections not harmonized with approved
  funds and amount of factual realization (frequent
  changes of the structure, frequent rebalances,
  and needs of newly established institutions...)
• Lack of systematic regulations, instructions,
  procedures
• Establishment of the internal audit for Treasury
  has been postponed
• Due to the lack of systematic regulations and
  procedures , number of clients has adopted
  internal regulations for the most frequent
  expenditures great differences in approach,
  criteria, applied solutions and control
  procedures and monitoring are noticeable

14
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Changes in external environment
• Public Finance Sector Reform and external
• audit support (3)
• Audit of the State-owned companies
• Special Audits (2002/2003)
• Big problems in internal control system
  functioning
• Reports containing indication on losses of public
  money to the great extent, deals amongst linked
  persons, etc.
• New Law on the State-owned Companies (2004)
• Mandatory introduction and establishment of
  internal audit
• Role of SAI-s

15
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Changes that have been declared or being
  expected in near future
• Enhancement of public procurement process through
  application of the new Law on Public Procurement
• Improvements in Treasury operations (system of
  prior notification and confirmation of
  expenditure enhancement of the system of budget
  planning and projecting enhanced system of
  calculation of public servants salaries...)
• Number of instructions, rules and procedure
  proposals issued by the Ministry of Finance has
  increased
• Guides for establishment of efficient internal
  controls have been prepared and distributed to
  public institutions
• Implementation of the new Law on accounting and
  audit should result in reform and
  de-monopolization of existing education and
  certification system for auditors in commercial
  sector
• Adoption procedures for new laws on audit of BiH
  institutions and Law on Public Sector audit in RS
  and FBiH are ongoing
• Establishment of the first internal Audit
  Associations is expected

16
Public Sector in Bosnia and HerzegovinaENHANCEMEN
T OF INTERNAL CONTROL SYSTEMS SUPPORTED BY THE
THREE SUPREME AUDIT INSTITUTIONS

• Discussion
• Questions
• Comments
• Proposals