THE ROLE ACCOUNTING CHAMBER PLAYS TODAY AND ITS REFORMATION POTENTIAL

ON THE BASIS OF THE NEW LAW ON “ACCOUNTING CHAMBER”

Nevidomy V. I.

ACU Member, phd

14 June 2017 Kyiv

AIM OF THE PRESENTATION

• To introduce the role of independent external audit and priorities of reforming of ACU taking into account the reformation potential of the new law.

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STATE LEADERSHIP RECOGNIZES THE ROLE OF POWERFUL, WELL-

RESOURCED, INDEPENDENT SUPREME AUDIT INSTITUTIONS AS A

WEIGHTY CONTRIBUTION TO THE IMPROVEMENT OF THE PUBLIC

MONEY SPENDING TRANSPARENCY , ENSURANCE OF

ACCOUNTABILITY AND QUALITY-PRICE RATIO OF PUBLIC SERVICES .

MR. SHASHI KANT SHARMA

AUDITOR GENERAL SAI INDIA

MARCH 2015

GENERAL MEANING OF THE REFORMED AUDIT INSTITUTION

Fiduciary Duty - Assessing Existing Public Finance Management Systems and their Risk Effectiveness

(ISSAI 12):

• Strengthening of accountability, transparency and integrity of the public sector;

• Public sustainable relations with citizens, parliament and other stakeholders

• Implementation of Articles 346 and 347 of the Association Agreement between Ukraine and the EU

• The Audit institution is a model of perfect organization.

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• PANEL 2. Potential opportunities of a new legal reality for ACU

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ACU AND NEW LEGAL REALITY

• Improvement of the external audit capability of the ACU as a result of the implementation of Articles 346 and 347 of the Association Agreement between Ukraine and the EU;

• ARTICLE 347 In the field of external audit: - implementation of INTOSAI standards and practices, as well as exchange of best practices in the field of external control and audit of public finances of the EU with a special emphasis on the independence of the relevant authorities of the Parties.

• In the area of public internal financial control: - further development of the system of state internal financial control by harmonization with internationally agreed standards (Institute of Internal Auditors (IIA), International Federation of Accountants (IFAC), INTOSAI) and methodologies and best practices of the EU for internal control and internal audit in public authorities.

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NEW LEGAL REALITY- THE CHALLENGE OF PRESENT DAYS

Sub-item 7.1. Item 7 of the Operational part of the Association Agenda between Ukraine and the EU to prepare and facilitate the implementation of the Association Agreement approved by the meeting of the Association Council between Ukraine and the EU on March 16, 2015:

• "Ensuring the development of public external audit by ensuring the implementation of ISSAI;

• Ensuring the effective cooperation with relevant EU institutions and bodies in the context of checks and inspections related to the management and control of EU funds in order to carry out them in accordance with the relevant rules and procedures. ”

EU-Ukraine Association Agenda to prepare and facilitate the implementation of the Association Agreement [Електронний ресурс]. http://eeas.europa.eu/ukraine/docs/st06978_15_en.pdf.

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NEW LEGAL REALITY- THE CHALLENGE OF PRESENT DAYS

Action Plan of the cluster 1 of the Subcommittee on Economic and Other Sectoral Cooperation of the Association Committee between Ukraine and the EU (EU Delegation to Ukraine, October 8-9, 2015,

Kyiv)

1. To Inform the EU-Party about the technical assistance requests on the Accounting Chamber capacity development within the INTOSAI framework in order to receive appropriate support.

(2016 deadline)

2. To approve the strategy and action plan for the Accounting Chamber capacity development

(2016 deadline)

3. To prepare amendments to the Law of Ukraine "On the Accounting Chamber" in accordance with the expected changes to the Constitution of Ukraine (regarding local budgets, state-owned enterprises,

state property)

(The deadline- after making corresponding amendments to the Constitution of Ukraine)

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THE FULFILMENT OF THE ACTION PLAN OF CLUSTERСтан виконання Плану заходів кластеру

•The new law "On the ACU" as the legal basis for the transformation of the ACU into a modern audit institution.

•The Recommendations on management and quality control are approved by the ACU decision dated 10.11.2015 № 8-5.

•The Methodological Recommendations on the Financial Audit are approved by the ACU decision dated 09/22/2015 No. 5-5.

•The Rules of Professional Ethics are approved by the ACU decision dated 10.11.2015 № 8-6 .

•Pilot Financial Audit (with participation of GB NAO expert Alan Banks).

•GIZ project: a series of training events with the participation of foreign experts, in particular, on the budget system of Great Britain; Audit quality control systems; The audit of revenues to the state budget, as well as training on audit of state-owned enterprises and state-owned part in enterprises. Participation in seven training events organized by GIZ in the Ministry of Finance, and two study trips to Germany.

•The cooperation plan of the ACU with GIZ on providing expert assistance on improving the preparation of the annual report of the ACU for the Verkhovna Rada of Ukraine, implementation of the internal system of audits` quality control in accordance with the INTOSAI standards, performance of the functional review of the Accounting Chamber and improvement of the connections with civil society.

•Technical Assignment of the Twinning Project aimed at improvement of the state external audit through the implementation of INTOSAI standards (I-VI levels), improving the quality of audits, and strengthening the ACU`s institutional capacity.

•The auditors of the ACU are included in the Audit Group for the participation in audits of management and control systems, as well as audits of annual accounts of the 4 cross-border cooperation programs for 2014-2020, in particular: "Black Sea Basin", "Ukraine-Romania", "Ukraine-Hungary-Slovakia-Romania" and "Ukraine-Poland-Belarus".

•Training of 22 auditors under the CIA program of a company "Hoch International, Ukraine" has been completedPrepared by ACU Member Nevidomy V.I.

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NEW LEGAL REALITY- THE CHALLENGE OF PRESENT DAYSEUROPEAN NEIGHBOURHOOD TWINNING PROJECTS PIPELINE

FOR FIRST SEMESTER 2016 FROM JANUARY TO JUNE 2016

• Development of external audit and control of public finances in the country

Goal: Improvement of external state audit and control system through the implementation of INTOSAI standards and strengthening of the institutional capacity of the Accounting Chamber

• The tender is suspended till the election of new team members of the ACU

• Support Ukrainian

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TWINING PROJECT– DO WE NEED IT? GOALS ? (І)

4. The Goals of the Twining Project :

• Adaptation of legislation in the area of external control and audit in accordance with the INTOSAI standards (I-III level);

• Improving the quality of audits;

• Improvement of internal regulatory acts of the Accounting Chamber with the emphasis on creating a comprehensive audit quality management system, updating the Code of Ethics of the Auditor, methodology for carrying out audits and control measures, risk management systems, professional development and certification of employees;

• Strengthening institutional capacity of the ACU by improving cooperation with the Verkhovna Rada of Ukraine, the Government of Ukraine, and the public, especially by providing appropriate support and public access to the reports of ACU.

• The challenge for the institution: - readiness for management

• - preparation of Technical Assignment

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Panel 3. Priorities of interaction with the Parliament and civil society

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IMPLEMENTATION OF THE PARLIAMENT'S CONTROL FUNCTIONS ON THE GOVERNMENT ACCOUNTABILITY

• Legislative definition in the course of parliamentary reform in the Rules of Procedure is required .

• Correlation with the Rules of Procedure of the Verkhovna Rada of the ACU obligations on informing, submitting and listening to the reports of the ACU-members on the results of audits in plenary sessions at the Verkhovna Rada, incl. joint statements of the ACU-member in the case of hearing of key spending unit on the implementation of budget programs during the consideration of the annual report on the implementation of the State Budget (Article 162 of the VRU Rules of Procedure)

• Practical use of the consultative function of the ACU on the results of reviewing its reports for Parliament's legislative decisions on public finances (implementation of Article 37 of the ACU Law)

Legal regulation of the practical mechanism of cooperation between the ACU and the Parliament:

• The procedures for reviewing its reports in all of the profile committees

• Consideration by the Budget Committee of the Quarterly Conclusions of the ACU on the implementation of the State Budget

• Level of representation, forms of participation,

• Targeting at expected results for society in the form of completed projects, cost savings, improved financial management and quality of administrative / public services)

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ANNUAL REPORT ON THE ACU OPERATIONAL ACTIVITIES - AS AN EVENT OF THE BUDGETARY YEAR

• Parliamentary control of the Accounting Chamber by the results of the annual report on its activities (submitted by May 1 each year): transparency of ACU and the tool for open government (management)

• Key actions in the annual cycle of submission and presentation of the ACU`s annual report :

• Hearings in the Subcommittee and the Budget Committee (circle of participants, civil society participation) ;,

• Decision on the report

• System of monitoring of the provided recommendations (accountability of the Government and key spending units)

• Disclosure and interactive dialogue system: TV broadcasts, Internet forums, mass media, special reports, presentation of materialized results for the society

• The feedback and impact of the society on the Government (budget) and on the assessment of the ACU budget risks

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OUR VISION OF THE ANNUAL CYCLE OF THE ACU REPORTING TO THE PARLIAMENT

Annual report on the ACU Operational Activities

(submission to the VRU)

Preview at the Subcommitee

Hearing at the Budget Committee

Approval of the Committee's conclusions

The system of monitoring and evaluation of the state of

implementation of the ACU recommendations on the audits

that have been carried out

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Disclosure and

Interactive

Dialogue System

INFORMATION ABOUT ACU´s ACTIVITIES ( DECISIONS, ІNFORMATION NOTICES ) I

• Legal and documentary paperwork, periodicity classification of forms and listof documents in the ACU´s Rules of Procedure, which are sent to theParliament regularly

• The procedure for disclosure of information is provided in the form of theACU´s decisions (it has already been carried out and implemented through theACU website)

• Participation of parliamentarians, members of the subcommittee on the ACUactivities at meetings (on a systematic basis)

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INFORMATION ABOUT ACU´s ACTIVITIES ( DECISIONS, ІNFO-NOTICES ) ІІ

• The format and content of a special (informational) issue of the proposed audit reports on the model ofPoland:

• The format of the news-bulletin up to 45 pages signed by the Chairman and a member of the ACU (postedalso on the ACU website)

• Preface (introduction) - why is it published ?;

• Summary of audit conclusions - 2-3 pages (including the general description of the object and the subject of audit,what has been substantiated, the most important accents)

• All the audit findings

• Additional information on the planning / organization of the audit, taking measures on recommendations, financialimplications of the audit

• Copies of letters to audit objects and management bodies,

answers to them

• Edition 600 copies. (VRU, Government, executive branch,

libraries, civil society )

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COMPONENTS OF INTERACTION WITH ACU ON THE LEVEL OF PEOPLE'S DEPUTIES

EXISTING POSSIBILITIES

• Legally established duty ofconsideration of deputy requests andappeals at the ACU meetings (Article27 of the Law "On the ACU")

• Right of people's deputies toparticipate in the ACU meetings

• The right of legislative initiative toimprove the institutional capacity ofthe ACU

THE WAYS OF IMPROVEMET OF THE INTERACTION

• Possibility of early submission ofproposals on the IDEAS of thepublic finance audit for riskassessment and planning to thesubcommittee on the ACU activities

• Practical realization of the right ofparticipation of people's deputiesin the ACU meetings with theinvitation of the civil society

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THE WAYS OF INTERACTION BETWEEN ACU AND CIVIL SOCIETY

EXISTING POSSIBILITIES

• Art. 30 Placement of the Annual Report of the ACU on the website, presentation in the mass-media

• Regular publication in the mass- media of information on the activities of the ACU, including audit reports, work plans

• Compliance with the Law "On Access to Public Information"

THE WAYS OF IMPROVEMET OF THE INTERACTION

• A fundamental change in the strategy of theinformation policy of the ACU, including technicalmodernization of the ACU website (an interactive platformfor publicity and getting an assessment of ACUperformance, cooperation with public organizations andpeople's deputies, academics, professional auditors,educational institutions)

• Taking into account ideas of civil society andstakeholders for risk assessment and planning on thebasis of an unbiased analysis

• On the initiative of the ACU a regular holding of publicdiscussions of reports with the participation of publicorganizations, representatives of the Government, theMinistry of Finance, the State Treasury, the Committee onBudget with on-line broadcasting and publication ofspeeches

• Ensuring the possibility of informing ACU about the factsof unfair (corrupt) behavior of its employees19

EXPECTED RESULTS AND THE SUMM OF BENEFITS OF INTERACTION BETWEEN ACU WITH PARLIAMENT AND PUBLICITY:

Realization of a number of principles of open governance (management);

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Growth of credibility to the political-governmental institutions on the question of public finance management;

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Shaping of transparent fiscal policy and professional audit assessment of reports of the Government and the accountability of key spending units;

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Prevention and reduction of corruption risks, dissemination of corruption manifestations;

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Creation of added value for the society in the form of improving of financial management and saving of public funds, improving the quality and ensuring the availability of public services;

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Stable economic growth of the state 20

THANK YOU FOR ATTENTION!

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