Internal and External Audit > Internal Audit, its mandate, coverage and quality

Public Internal Financial Control (PIFC)

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atseacliff:
Many colleagues will be familiar with the PIFC however for those who are not - a quick overview and links for further reading. Starting from its initial concern relating to the EU funds management and control, the PIFC concept was applied in EU Accession countries and is increasingly being developed in a number of Neighbourhood States.

There are three basic components for the definition of PIFC. The three pillars of managerial accountability-based PIFC are composed of:

 Financial management and control systems and procedures
 Internal audit
 Central harmonisation functions

For developing countries the PIFC countries offers an integrated approach; linking managerial accountability, internal control and a modern internal audit function. As so often it is tempting to rush into the development of the legislative and institutional base. However a culture of top down management reinforced supported by hard-hitting control agencies are the norm in many former communist states. It would therefore be naive to assume that these reforms are anything other than a long term endeavour. Donor agencies need to understand this and avoid a piecemeal approach which focuses only on internal audit reforms - without for example building in improvements in financial control systems and incentives for managers who take more accountability for service delivery and resource management (see my previous post).  I have recently seen more thoughtful approaches which have devoted considerable time and effort on developing clarity over policy and managerial acceptance before considering a large scale technical assistance project. Perhaps a case for having modest expectations and building up slowly over time??

In my experience countries often commit themselves to the PIFC concept with a poor understanding of the practical implications; or at least without fully thinking through the linkages to broader PFM reforms. However PIFC has the potential to align the interests of public sector managers, economists, accountants and auditors! 

If this stimulated interest the attached link to the EC is a good starting point.

Welcome to the world of PIFC - European Commission

http://ec.europa.eu/budget/library/documents/overviews_others/brochure_pifc_en.pdf

Robert de Koning's book on the subject is also worth getting hold of - link attached

http://www.pifc.eu/

Richard Maggs:
By far the biggest problem with PIFC is the unrealistic implementation plans. It is worth recollecting the timeframes for PFM reforms in the UK, France and elsewhere. Even relatively small changes in the UK e.g. the introduction of Whole of Government accounts took 4-5 years to complete. Donor desire for bite sized projects 2-3 years is one if the problems but a consistent front from practitioners would help here. 

atseacliff:
There were plenty of incentive for the EU Accession States....less so for the current wave of PIFC aspirants. While the PIFC model has its attractions in terms of providing a coherent holistic approach to PFM reform we do need more evidence of the benefits (and indeed limitations) to transition economies. If any one has any empirical evidence or concrete success stories please do share.   

STONE:
Despite the warning that this is an old topic I think it is still worth replying.

Richard Maggs might well be right about the unrealistic implementation plans but in my experience the fundamental problem is in the terminology. In many countries and government cultures its a real struggle trying to understand how internal audit, financial management control, inspection and external audit interact.  PIFC is about as meaningful as MTEF.  I know that Albania has really struggled with PIFC concepts.  They may be getting through it now, but the biggest problem was understanding the interaction.

STONE:
oh yes, forgot to say.  Kartlos tried to launch a discussion on internal audit in the georgian country board - Google translate is a wonderful thing.

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