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Fifth session of Internal Audit Community of Practice in the public sector PEMPAL was held in Yerevan. 28 October 2009

   Community of Practice of mutual study and exchange of experience in the sphere of public finance management (PEMPAL) unites countries of the Central Asia and Eastern Europe. Community was established in 2005, the goal was to strengthen internal potential of countries in the sphere of public finance and expenditure management. PEMPAL is supported by the World Bank, Organization of Economic Cooperation and Development, Ministry of International Development of Great Britain (DfID), State Treasury of the USA, SECO, GTZ and the association of public benefit "International Further Training and Development" (InWent, Germany). PEMPAL Secretariat is situated in the Centre of Excellence in Finance (CEF, Slovenia).

   Previous seminars were held in Slovenia (2006), Moldova (2007), Turkey (2008) and Slovenia in April 2009. The seminar, that was held in Georgia on 20-23 October this year, was attended by civil servants in charge of internal audit in the public sector of 14 countries – Albania, Bosnia and Herzegovina, Armenia, Georgia, Kazakhstan, Kirgizia, Macedonia, Moldova, Republic of Kosovo, Tajikistan, Uzbekistan, Ukraine, Croatia, Montenegro, as well as by specialists from Romania and Great Britain, delegates from the World Bank, CEF and InWent.

  Ukraine was represented by Head of Division of the Department of Budget System Reformation of the Ministry of Finance Serhiy Lysunia and ones of the oldest members of PEMPAL – Head of the Department of PIFC Harmonization of the MainCRO Maryna Barynina and Director of the Department of Organizational Operations of the MainCRO Serhii Chornutskyi.

  Official greetings on the occasion of opening of the seminar were announced by the Minister of Finance of Armenia Tigran Davtyan, manager of mission of the World Bank in Armenia Aristomen Varudakis and Chairman of Community of Practice Tomislav Micetic (Croatia).

   Agenda included several themes: International Professional Practices Framework, manuals of internal audit, training and certification of internal auditors, Internal Audit Capability Model, PIFC practical implementation, also logistics issues of Community of Practice.

  Member of the Committee of Public Sector of the Institute of Internal Auditors (Global) Daniela Danescu (Romania) presented international principles of professional practice, she made a stress on changes, introduced during the last year. It was added new standards, improved and interpreted the current ones. She also underlined crucial differences between standards for private and public sectors.

  Presentation of the manuals on internal audit of the Republic of Kosovo and national manuals of internal audit of Albania, Georgia, Kirghizia, Moldova and Ukraine was followed by a discussion.

  It is interesting that in the Republic of Kosovo internal audit started in a centralized form in Central Financial Agency in 2000 (as in 2003 in Ukraine and some time later in Moldova), long before adoption of laws about management of public finance and responsibility (2003) and about internal audit (2007). Nearly in all countries first variant of manual was developed with expert and financial assistance of international organizations. Manual on financial audit (financial audit in a decentralized system) in Armenia is operational since 2002, and the law draft on internal audit passed the first reading in the parliament this year. Internal audit in Croatia had been introduced 3 years prior to adoption of the relevant law.

  In the Republic of Kosovo upgraded manual on internal audit went through "pilot approbation" in 25 ministries and municipalities; in Armenia it was tested at three levels – in ministries, local authorities and public non-commercial organizations; so far in Ukraine it was tested only in five institutions of the central level. Nearly in all mentioned countries most of the time was wasted on bringing the manual in the line with the national legislation and glossary - with the translation.

  In Albania first services of internal audit were established on the basis of inspection units, in Ukraine, Moldova and Georgia - in an inspection government authority under the MoF or coordinated by the MoF.

  Chairman of Community of Practice Tomislav Micetic told the present about results of activity of the working group on training and certification of internal auditors since December 2006. In particular, attention was paid to a three-level model from the initial trainings in internal audit to certification of internal auditors.

  The manager of Central Harmonization Unit (CHU) of the Ministry of Finance of Armenia Karen Brutyan outlined basic differences of Armenian strategy of introduction of educational system, continuous professional formation and attestation of internal auditors. They lie in the necessity of first introduction of higher academic (master) education in the public finance sphere (including accounting in the public sector, public procurements, internal and external audit and other disciplines related to budget and tax processes), continuous professional formation and attestation of internal auditors of the public sector in the future. It was a great discussion on what authority (authorities) will be attested to internal auditors. 

  Internal Audit Capacity Model was discussed during the workshop of Community of Practice for the third time, its published variant was presented by Daniela Danesku.

  During the seminar it was considered a practical example of PIFC introduction  in Georgia. Apart from the matters of an "ideal model" of PIFC, common for all countries (financial management and control, based on responsibility and managerial accountability, internal audit (IA) and their harmonization), representatives of post-soviet countries discussed themes, immanent to them. In particular, participants discussed broadly place of inspection (within or outside the PIFC model) and change of its role in response to development of novel FMC and IA), its location (in MoF, in MoF and Treasury or in another authority, including the one, that performs centralized inspections) and functions (only set by description of the "ideal" model or for transitional period also additional, determined by environment, legislation and tasks). The present were also interested in practical interrelations between supreme audit institutions (SAI) and decentralized internal audit, possibility and forms of assuring quality of decentralized internal audit by CHU.

  For example, in Kirghizia CHU is, in fact, unit of IA methodology, it assesses work of internal audit services; legislation of Moldova stipulates assessment (once per five years) by the CHU of internal audit services. The same provision is in the Ukrainian program of activity and development of CHU till 2015. In Croatia "estimation team" is established including a CHU specialist and two internal auditors of other ministries; thus, there's a possibility for objective assessment (and improvement) of standards and methodology, developed by the CHU.

  In conclusion, participants of the seminar increased the number of members of Executive Committee of Community of Practice, elected them and discussed further steps and plans for 2009-2010. In particular, members of Community of Practice chose Ukraine as the host of the next plenary meeting, as one of the countries, in which considerable progress in the PIFC sphere had been achieved. It was also additionally proposed to hold a regional seminar for five post-soviet countries that are nearly at the same level of PIFC development and have many common topics for discussion – Armenia, Georgia, Kirghizia, Moldova and Ukraine. Besides, the most interesting topics for the future discussion were defined.