EU requirements for Public Internal Financial Control in Bosnia and Herzegovina

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1 EU requirements for Public Internal Financial Control in Bosnia and Herzegovina Jeroen Willems Task Manager Public Administration Reform EC Delegation to BiH 5 June 2007

2 Overview of Presentation History of EU in a nutshell EU Membership requirements, including PIFC Current State of Play in BiH EC Support to PIFC development

3 History of the EU 1957: Belgium France Germany Italy Luxembourg Netherlands 1973: Denmark Ireland UK 1981: Greece 1986: Portugal Spain 1995: Austria Finland Sweden

4 Enlargement of the EU May 2004: Cyprus Malta Hungary Poland Slovakia Latvia Estonia Lithuania Czech Rep. Slovenia Jan 2007 Bulgaria Romania

5 Conditions for membership The Copenhagen Criteria (1993) Stable institutions to ensure democracy Society based on rule of law Respect for human rights Respect for and protection of minority groups Sustainable market economy able to compete in the Single Market Acceptance of EU objectives and existing legislation (acquis) in the EU The Madrid Criteria (1995) Capacity to adopt & implement the acquis

6 Adequate Capacity Presence of adequate sectoral administrative capacity to guarantee timely and correct implementation of EU regulations & directives has always been important for all enlargements Over time ever increasing focus on sectoral administrative capacity requirements (completion of internal market) Also, more focus on horizontal administrative capacities: Sectoral capacity buiding cannot be done in isolation EU based on mutual confidence that others are able to meet requirements Ability to participate in EU decision making process Capacity to manage budgetary means provided by the EU

7 SIGMA BASELINES Internal Financial Control Coherent & comprehensive statutory base defining the systems, principles and functioning of financial control Presence of management control systems and procedures Presence of a functionally independent internal audit mechanism Presence of systems to prevent and take actions against irregularities and to enable recovery of damages Capacity to upgrade financial control systems

8 PIFC part of Acquis (and SAA) A culture, code and other systems that support the overall objectives, risk management and internal control system Demonstration of the necessary commitment to competence, integrity and fostering a climate of trust Clear definition of authority, responsibility and accountability such that decisions are made and actions taken by the appropriate level Communication to all relevant staff levels of what is expected of them and the scope of their freedom to act Clear strategies for dealing with the identified significant risks together with a policy for risk management, supported by adequate knowledge, skills, tools and attention for the need to adjust the processes and controls reflecting new or changing risks or operational deficiencies An independent internal audit

9 In short: PIFC = IC + CHU

10 Progress Report 2006 BiH s preparations for PIFC at an early stage Current PIFC set-up inadequate Limited progress in 2006 through the development of an IA Framework Law However: IA Law would still need to be adopted IA Law developed without having a PIFC policy paper

11 European Partnership Short Term: Develop a PIFC Strategy Medium Term: Develop and implement the principles of decentralised managerial accountability and functionally independent internal audit in accordance with the internationally accepted standards and EU best practice Develop procedures and administrative capacities to ensure effective protection of EU financial interests

12 PAR Strategy for BiH 2007: PIFC Strategy 2010: Implementation of PIFC Strategy

13 EC support to PIFC development 2007: SIGMA will facilitate working group on PIFC Policy Paper + Action Plan : Support to MoFT in DIS : Capacity Building for CHU establishment and implementation of Action Plan

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