Posibilidades y límites de las proyecciones

Internal financial control in public sector is a term developed by the European Commission in order to assist in understanding and application of well-developed control systems in the EU accession process.

Internal financial control in public sector is a comprehensive system of financial and other controls established by the head of an organisation in public sector, with the aim of successful management and achievement of the organization's objectives. 2

Besides, the internal financial control in public sector includes the entire system which is established by the government in order to control use of the budget funds and it includes all measures for control of government revenues, expenses, assets and liabilities and all internal control systems as well as procedures in the public sector, thus helping to create conviction that public funds are spent and used purpesfully. 3

Internal financial control in the public sector should be considered within the overall field of public finance, which extends from creation of the state budget, through the approval and its execution, to the safe deposit issue, fiscal and debt management, including accounting, reporting, procurements, internal control etc. The system of internal financial control in public sector also includes financial management and control in public funds, internal auditors of public funds and the harmonization and coordination of financial management and control and internal audit carried out by the Ministry of Finance - CHU.

"Financial management and control involve the entire system of financial and other controls and is implemented by the policies, procedures and activities with the mission to provide reasonable assurance that the organization will achieve its objectives.

The internal audit is an activity of independent and objective persuasion, but a consulting activity as well,

designed with the aim of creating business improvement of an organization. It is functionally independent in its work, it is not a part of any business process or organizational unit of the organization, and in its work it is directly responsible to the manager of public funds. Functional independence is provided by independent decision-making about: the field of auditing, way of performing the auditing and reporting on the performed audit.

CHU is a special section in the Ministry of Finance which elaborates and directs the process of internal

financial control in public sector. It carries out and is responsible for providing professional development, certification and monitoring of the internal auditors’ work, professional development of managers and employees in public sector, in accordance with the internationally accepted standards. " 4

2.1. The regulatory framework

The reform of internal financial control and internal audit in public sector in The Republic of Serbia which started in 2002 by adoptioning of the budget system Law as well as a number of secondary law acts, the internal audit on central level was established in the Ministry of Finance. Obligation of establishing the internal control system was regulated by the amendments of the Law on the Budget System 5 _{in October,}

2006.

Based on this Law and in order to develop and implement the internal financial control in public sector as a comprehensive system of internal control, the bylaws regulating this area have been passed.

If certain laws passed in order to regulate this area are considered, two of them can be taken in special consideration - the new rulebook regulating the financial management and control and the rules governing the internal audit. Compared to the previous one, the new rulebook on financial management and control underwent minor changes in the title, while the major substantive has not been changed. Substantial changes primarily related the differences in defining of the terms, and defining of new terms, such as the managers’ management responsibility, risk management, audit trail, etc. Other differences can be recognized in defining of the methods of reporting in such a way that the deadline by which the head-user of public funds has to report to the Minister of Finance on the adequacy and functioning of the financial management and control has been prescribed.

The system of internal financial control is built into the legislation and its aim is to provide the benefits of transparent and healthy system of internal control for numerous stakeholders in the entire process led by the

2 _{Zugic, R., Kostic, R. (2012), Kontrola i revizija u funkciji izvrsenja finansijskog plana MO, SYMOPIS 2012, Serbia:} Belgrade, p.1

3 _{Leko, V., (2008), Vrhovna drzavna revizija javnih sredstava, Faculty of Law, Serbia: Belgrade, p. 304}

4 _{Zugic, R., Kostic, R. (2012), Kontrola i revizija u funkciji izvrsenja finansijskog plana MO, SYMOPIS 2012, Serbia:} Belgrade, p.2

5 _{Zakon o budzetskom sistemu, („Sluzbeni glasnik RS“, no. 54/09, 73/10, 101/10, 101/11, 93/12, 62/13 ispr. i 108/13),} articles 80 to 83 is defined establishing of a system of financial management and control, which should be carried out by policies , procedures and activities, with the main task to provide reasonable assurance that a user of public resources will achieve their goals.

government. Therefore, based on the legal framework, it is necessary to fully establish the organizational structures, job descriptions and criteria for monitoring and evaluation of the employees’ work results, the way of delegating tasks and ways of reporting in the system of internal financial control in public sector. It should also be said that the Action Plan together with Strategy, is a plan of activities related to development of the internal financial control in public sector which includes: joint activities, activities related to internal audit and implementation of financial management and control, and the plan is scheduled to be carried out in the period from October, 2009 to December, 2014.

2.2. Directions of development of the internal financial control system

The concept of internal financial control in public sector developed by the European Commission, is functional in terms of raising awareness and prevention, primarily through a number of conceptual, legal and organizational activities. For this concept the starting point is that the government, recognizing the necessity of raising the level of transparency responsibility and accountability, should start analysis of its internal control systems. 6

The abbreviation PIFC is often used inn literature relating internal financial control in public sector: 7 P - Public Sector;

I - Internal to the organization;

F - Financial systems mainly but not exclusively;

C - Control based on internationally accepted and recognized standards.

PIFC involves a comprehensive system established by the Government, i.e. public sector organizations for financial management and control, internal auditing and reporting on the use of public and the EU funds. The aim is to ensure that the management and control of public funds (including foreign funds) are in accordance with the regulations, description of the budget and the principles of sound financial management i.e. efficiency, effectiveness, reasonable distribution and transparency.

Internal financial control can be defined as an activity undertaken by management, boards, and other factors of management of the systems in order to improve risk management and increase the likelihood of achieving the goals.

The internal control system is established by the head of the organization, or by a person authorized by the head to establish a system of internal control. Internal control is an important component of risk management. It is implemented on all levels, in all organizational units and all workplaces. When establishing the internal control, it is the head’s obligation to to draw up Plans for establishing internal controls for all organisation units in its composition. After the first phase, i.e. the adoption of the Plan, the next step is creation of Procedures for financial risk management of the business and the Ordinance on internal control and internal control procedures.

Based on the foregoing, it can be concluded that the model of internal financial control in public sector covers not only the entire system of financial controls but also other sorts of control established by the head of the organization, with the aim to successfully manage and accomplish the objectives of the organization. All the issues considered so far clearly show that the internal control, during the work-process, exercises control of the following issues: whether the business is conducted in accordance with the prescribed procedures, whether the solutions and decisions have been made in accordance with rules and regulations, whether the contracts are in accordance with the Regulation on job classification, whether coefficients of the workplace are in accordance with the Regulation, and whether the process of procurement has been conducted in accordance with the regulations, plans and financial plan.

PIFC is a system that takes into account all aspects, i.e. it combines internal control and internal audit into one system like with the COSO model, plus a new element ,i.e. a centralized organization which is responsible for harmonization and coordination of both internal control and internal auditing standards, as well as the rules applied to all parts of public sector.

2.3. The future role of PIFC

PIFC concept has evolved gradually as response to a variety of inter-related events. Since the internal control systems in the EU Member States were not harmonized, the candidate countries could not know

6 _{De Koning, R., (2007). Initiative of the European Commission to build a new structure of public internal control in the} candidate countries and third countries, Belgium , p.24.

7 _{Zugic, R., Kostic, R. (2012), Kontrola i revizija u funkciji izvrsenja finansijskog plana MO, SYMOPIS 2012, Srbija:} Beograd, p.1

which system was to be considered as example of good practice. That is why these countries asked the European Commission to recommend the best practices in terms of choosing the best system. They were advised to focus on introduction of the activities and institutions that would influence upon increase of the public interest in sound financial management in private and public sectors and upon creation of strong awareness of the far-reaching consequences of corruption, fraud and embezzlement.

PIFC concept has become a strategy in order to give an answer to a great concern that all countries have regarding corruption and to develop the principles of responsibility and transparency. The only system was the only one which could be, and actually is based on the principles of democracy and obeying the laws. It represents harmonization of the standards and procedures and synchronizes the public internal controls with the appropriate international standards. It should be emphasized that the harmonization concepts are logical and useful, so this concept should be enrooted and expanded in all the countries which have accepted it. It is important that PIFC concept provides a strategic framework that is regularly reviewed and updated, which is available and supported by the highest authorities in charge of control. Within PIFC, CHU should develop and promote a self-assessment procedure in control and audit institutions. As for annual basis, a report on the state of PIFC should be made and submitted to the government. This concept has become a concept with a practical purpose, and its continues to develop as a tool by adopting latest relevant examples of good practice.