2nd SIGMA NETWORKING SEMINAR

1
2nd SIGMA NETWORKING SEMINAR

• OECD Conference CentreParis 27-28 November 2008

2
Public Internal Financial Control (PIFC)
Ritva Heikkinen European Commission DG BUDGET
B.4
3
PIFC the concept

• What is 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)
• http//ec.europa.eu/budget/library/documents/overv
  iews_others/brochure_pifc_en.pdf
• FccWebsite maintained by DG Budget
• budg-fccweb_at_ec.europa.eu (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
• budg-mailbox-b04_at_ec.europa.eu