This publication has been produced with the
assistance of the European Union. The contents of
this publication are the sole responsibility of the EU
Twinning Project «Strengthening PIFC in Armenia»
and can in no way be taken to reflect the views of the
European Union.”
EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
Dear friends,
In front of you, you have a summary of the performance of the Public
Internal Financial Control (PIFC) twinning project in Armenia.
The project started two years ago, since then the Swedish partners and the
Armenian partners, have jointly establish a solid foundation and base line
for implementation of the intern control system,.
We have drafted new legal acts and we have fine-tuning existing ones. The
knowledge and capability to support good practice of internal control has
increased within the Central Harmonization Unit(CHU) at the Ministry of
Finance. The project has drafted training materials in line with EU best
practice and trained Internal Auditors to become trainers, who will perform
training of colleagues. Similar activities have been done within Financial
Management and Control.
Awareness seminar for officials has been carried out, stressing the
importance of internal control in general and in particular managerial
accountability and a clear demarcation between policy making and
implementation in the public administration.The aim is to increase the
efficiency and effectiveness in the public sector of the Republic of
Armenia - to make better use of tax payers money.
Enjoy the reading and please do not hesitate to contact me if you have any
questions.
Anders Nilsson
MS Project Leader until May 2016
RTA from May 2016 till the end of the Project
E-mail: [email protected]
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Funded by EU
Implemented by Sweden
&
Armenia
The Central Harmonization Unit (CHU)
under the RA Ministry of Finance puts
a
high
value
on
the
activities
implemented with the EU Twinning
Project. The main focus of the EU
funded Twinning Project that was
launched
in
cooperation
procurement
methodology
and
PIFC
September
with
the
department
2014,
in
Public
was
the
introduction of one of PIFC pillars - financial management and
control (FMC) based on the concept of managerial accountability,
improvement of internal audit and assistance to CHU. We are
thankful to the Twinning team for sharing the EU best practices with
us. We believe that it will be useful during the implementation of
FMC reforms in the RA public sector.
We highly appreciate and attach importance to the assistance of the
European Union and we hope that the EU-Armenia cooperation will
continue in the future and it will more effectively assist the
development of PIFC in Armenia.
4
EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
Twinning Project
“Strengthening Public Internal Financial Control in Armenia»
This Twinning Project is funded by the European Union.
What is Twinning
Twinning projects bring together public sector expertise from EU
Member States and beneficiary countries with the aim of achieving
concrete mandatory operational results through peer to peer
activities.
Twinning aims at upgrading and/or modernizing the institution in a
beneficiary country through training, reorganization and
approximation of legislation to EU standards.
Twinning Partners


Swedish Financial Management Authority (ESV), Sweden
RA Ministry of Finance
Start: August 2014
End: August 2016
Budget: 1 000 000 Euro
Objectives
The overall objective of this Twinning Project was to strengthen the
implementation of a PFM/PIFC system in RA in accordance with
international recognised standards and EU good practices. To this
end the Twinning Project was divided into 4 main components
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Funded by EU
Implemented by Sweden
&
Armenia
that targeted the areas where the Compulsory Results of this
Twinning Project were to be reached.
About Swedish National Financial Management Authority
(ESV)
ESV is among other thing responsible for developing public-sector
financial management. The ESV is also responsible for establishing
the generally accepted accounting principles in central government
and for the development and administration of the central
government accounting system. ESV is the CHU for Financial
Management and Control and Internal Audit in Sweden. ESV is a
State agency under Ministry of Finance
About RA Ministry of Finance
The Ministry of Finance of the Republic of Armenia is the country’s
executive body responsible for developing and implementing the RA
Government’s policy in the spheres of national income formation
and public finance management.
What is Central Harmonization Unit
The CHU is responsible for developing and promoting internal
control and audit methodologies on the basis of in internationally
accepted standards and best practice and for co-coordinating the
implementation of new legislation on managerial accountability
(financial management and control systems) and internal audit. The
CHU in Armenia is placed in the Ministry of Finance.
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EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
Component 1: Legal framework
This Component was composed of 3 activities that were carried out
through a number of missions
Activity 1.1 - Reviewing existing material
Activity 1.2 - Drafting missing documents
Activity 1.3 - Updating PIFC Action plans
Number of revised documents: 12
Number of newly drafted documents: 5
Key MS experts: Mr.Bill Fraser, Mr. Vilhelm Reuterswärd, Mr.
Walter Jakobsson, Mr. Bo Dahlström
Compulsory result of the Component 1
All legal framework and other necessary texts and written materials
required, including proposals affecting the Treasury, budgeting, civil
service public organisation and local government legislation to
promote a modern PIFC system that is targeted to the needs of the
Armenian public sector and that will meet international standards,
taking into account the necessity to improve the efficiency and
effectiveness with which public services are delivered in Armenia.
Status: Achieved
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Funded by EU
Implemented by Sweden
&
Armenia
Enhanced Legal framework enabling a successful establishment
and implementation of Public Internal Financial Control (PIFC)
The objective of this component was to enhance the legal framework
of PIFC-, including Financial Management and Control (FMC) and
Internal Audit (IA), and harmonize it with the best international and
EU practices for a better establishment and implementation of PIFC.
PIFC system aims through adequate and transparent methods to
provide reasonable assurance, that public funds (taxpayer money) are
being used by the public authorities for the set objectives. Central to
PIFC are the concepts of managerial accountability and functionally
independent decentralized internal audit.The system is an effective
tool in preventing corruption and fraud.
The MS experts analyzed and reviewed all the existing documents of
the 3 pillars of PIFC – FMC, CHU and internal audit.
After a thorough analysis, the experts submitted several
recommendations and proposals for updating the Minister’s decrees
and other documents regulating the function of internal audit, but the
main focus was driven to FMC. The analysis revealed that there was
a lack of, legal acts, manuals or any other document regulating the
FMC area.
As a first step the MS experts in joint cooperation with the Armenian
CHU developed the concept note of PIFC and a draft of FMC law.
The introduction and implementation of FMC requires the leadership
and support of managers, who will clearly understand the core values
of this system and
demonstrate through their actions their commitments to ethical
values, honesty, integrity, reliability and openness. Therefore, prior
to the circulation the drafts of PIFC concept paper and the law, the
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EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
Twinning Project organized a training for the Armenian high ranked
public officials, mainly financial managers and head of staffs from
the Armenian public institutions where they were introduced to the
main concepts of PIFC (in particular FMC) – performance based
public management, managerial accountability and responsibility,
development of reliable internal controls and the role of CHU.
The second important step was the circulation of the concept paper
and the draft FMC law among the Armenian public institutions and
other stakeholders. Based on the received feedback and comments
the FMC draft law was updated.
Upon updating the draft FMC law and on the request of the
Armenian counterpart this Component was extended by 4 more
missions to assist the Armenian CHU in developing the secondary
legislation for FMC. A working group of Armenian experts was
established to closely cooperate with the MS experts and drafted the
relevant documents: FMC manual, Internal control standards,
Managerial accountability and Risk management.
During this Component the MS and BC experts studied and
reviewed the legal framework of PIFC’s two pillars – FMC and
internal audit, made recommendations on the improvement of the
internal audit function, as well as drafted the necessary legal
documents for effective introduction and implementation of FMC.
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Funded by EU
Implemented by Sweden
&
Armenia
Component 2: Capacity building of the CHU
This Component was composed of 7 activities that were carried out
through a number of missions
Activity 2.1 Reviewing functions and responsibilities
Activity 2.2 Preparing/adapting flow-chart of CHU
Activity 2.3 Drafting Job descriptions of CHU
Activity 2.4 Training Needs Analysis (TNA)
Activity 2.5 Long-term training strategy and plan
Activity 2.6 Organizing 3-day training for CHU staff
Activity 2.7 Study visits for CHU
Number of trained CHU staff: 9
Number of study visit participants: 8
Key MS experts: Mr. Tomas Kjerf, Mr. Rodney Betorina, Ms.
Angelica Davidsson, Ms. Annika Davidsson
Compulsory result of the Component 2
The CHU is well structured and possesses all the required
methodological capacity to effectively meet its mandate in the
implementation and further development of the PIFC system as well
as piloting the system and supervising its further developments by
coordinating the activities in the areas of FMC and Internal Audit.
CHU is adequately staffed with staff experienced in management,
accounting and knowledgeable about PIFC
Status: Achieved
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EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
CHU as driver for change
“The Central harmonization unit is responsible for developing and
promoting internal control and audit methodologies on the basis of
internationally accepted standards and best practice and for
coordinating the implementation of new legislation on managerial
accountability (financial management and control systems) and
internal audit.
A CHU is such a fundamental condition to the successful
introduction and development of PIFC that in reality the concept has
become part of PIFC itself. “
-
Welcome to the World of PIFC
(Publications, EU Commission,
2006)
The development of the Armenian CHU clearly reflects its present
capacity and the intensity of cooperation between the counterparts.
At the beginning of the EU Twinning Project the CHU was
composed of one head of division. Thoughout the implementation of
the Twinning Project, the CHU was devided into two divisions –
Regulation and coordination of Internal audit and Regulation of
FMC. Many new specialists were recruited to fill in the new position
in both divisions. Besides the day to day cooperation and exchange
of information and best practice, a specialised training course was
delivered to the members of CHU by the MS experts in order to
enhance the capacity of newly recruited CHU staff and provide them
with necessary professional knowledge and necessary tools in order
to meet the needs of CHU in implementing its role as a coordinator
of FMC and Internal audit.
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Funded by EU
Implemented by Sweden
&
Armenia
The Twinning Project also organized two study visits for CHU for
both areas of regulation –FMC and internal audit. The members of
CHU visited Sweden where they were introduced to the Swedish
best practice,
discussed issues of common interest and shared their experience and
knowledge.
To complete its support, the EU funded Twinning Project mapped
the business processes of CHU and reviewed the job descriptions,
conduced a Training Needs Analysis (TNA) and developed a draft
long term roll-out training plan.
At the end of the Twinning Project, the MS experts could clearly
state the professional attitude and knowledge, ethical values and
ability of the Armenian CHU to sustain the results reached through
the EU Twinning Project and ensure a further development
12
EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
Component 3 -Implementation of FMC systems and risk
management
This Component was composed of 5 activities that were carried out
through a number of missions
Activity 3.1 Assessing state of affairs
Activity 3.2 Developing Information system (changed from FMC to
IA system)
Activity 3.3 High-level seminar
Activity 3.4 Medium level Practical training course
Activity 3.5 Study visit for IC coordinators
Number of top management trainees: 84
Number of medium level trainees: 28
Number of certified trainers: 9
Number of study visit participants: 8
Key MS experts – Mr. Rodney Betorina, Ms. Annika Davidsson, Mr.
Magnus Gunnarsson, Mr. Bill Fraser
Compulsory Result of the Component 3
Necessary structures and training are completed to make public
managers eventually accountable and so capable of elaborating as
soon as possible a management & control system and implement a
regime of risk management. The legal grounds are available to
implement managerial accountability.
Status – Achieved
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Funded by EU
Implemented by Sweden
&
Armenia
Managerial accountability and responsibility to ensure the
successful introduction of financial management and control
system
The third Component was aimed at the enhancement of professional
knowledge on Financial Management and Control (FMC) among the
public managers and practical training of latter.
After the introduction training on FMC of high ranked Armenian
public officials and the assessment of the state of affairs in the
selected public institutions, the Twinning Project in close
cooperation with the Armenian counterpart organized a four week
training course on FMC for the middle management of the Armenian
public sector institutions. Now, when the tone at the top was set and
there was clear understanding by the top management, in particular
in the light of the transition to the program budgeting, the middle
management should have been provided the relevant professional
knowledge and practical tools to support the introduction and
implementation of FMC in Armenia.
The main topics were the result based management, economy,
efficiency and effectiveness in FMC, managerial accountability and
responsibility, as well as how to apply the COSO model in the
successful establishment of internal controls. After the training,
based on the test results and their interest, a number trainee,
including from CHU, were selected to become trainers on FMC.
Prior to the “Train the Trainer course”, the selected trainees took part
in a study visit to Sweden, where they had the opportunity to visit
different public institutions and get familiar with the Sweden’s best
practice in the area of FMC.
Upon their return the selected trainees were trained as FMC trainers,
the training material in Armenian language was developed and
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EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
adjusted to the Armenian context. The newly trained Armenian
trainers were given the opportunity to practice their knowledge and
presentation skills in two day training and delivered by them to their
colleagues from the public sector.
To ensure the sustainability of results, the Armenian trainers were
actively involved in the working group of drafting FMC secondary
legislation (activity 1.2) together with the MS experts.
By the end of the Twinning Project, there is a general awareness on
the FMC among the top management in the Armenian public
administration, 9 trained trainers able to provide further trainings of
FMC and to develop, elaborate and update all documents related to
FMC
Mr ArkadiPapoyan
Deputy Head of Development Projects and
Monitoring from the RA Ministry of Education
and Sciencesaid“, participant to EU Twinning
trainings and certified trainer on FMC
«The training on FMC is of high importance. The introduction of
FMC will help us to make the work of the public sector more
effective which will lead to the economic and social development of
the country. Armenia is now in a transition period to program
budgeting that requires result based management. Of course, there
are already some elements of FMC present in Armenia, nevertheless
only the full introduction of FMC will ensure the economic, effective
and efficient implementation of our activities. As a future trainer I
will do my best to enhance the understanding and implementation of
FMC through trainings, development of methodology, direct
discussions and support to our colleagues, etc”.
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Funded by EU
Implemented by Sweden
&
Armenia
Component 4 -Establishing professional internal audit services
This Component was composed of 4 activities that were carried out
through a number of missions
Activity 4.1 Audit Universe
Activity 4.2 Feasibility for certification of IA cancelled
Activity 4.3 In-depth training with certification
Activity 4.4 Study visit for IA
Number of trainees: 29
Certified trainers: 14
Number of study visit participants: 8
Key MS experts – Ms. Stina Nilsson Kristiansson, Mr. Rodney
Betorina, Ms. Elisabeth Styf, Mr. Bengt Sundgren, Mr. Anders
Jansson, Ms. Helen Öhrstedt
Compulsory Result of the Component 4
Necessary structures and training are completed for IA Units to
ensure that all public internal audit personnel operate to a
professional level compliant with EU and international best good
practices.
Status – Achieved
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EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
Independent and well-functioning internal audit
to add value to the organization
The Component 4 was to enhance the internal audit function within
the Armenian public institutions. Taking into consideration that the
law and secondary legislation on public internal audit was already in
place and successfully functioning, recommendations on the legal
framework of the internal audit were provided by the Twinning
experts. The objective of this Component was to provide more
practical trainings to strengthen the role of internal audit in public
institutions by highlighting how the internal audit can assist public
organizations in reaching set objectives by providing relevant and
reasonable assurance, as well as how it can add value thereto by
contributing to the effectiveness and efficiency of governance, risk
management, and control processes.
To this end the MS partnersin cooperation with the Armenian
counterpart developed a training program that focused on system
based audit and performance audit. The training material was
developed jointly and translated into Armenian. Two weeks of
training on system based audit and performance audit were delivered
to 15 internal auditors representing different public institutions,
including internal auditors from 4 regional administrations (Armavir,
Gegharkunik, Syunik and Tavush regions). The theoretical
knowledge was combined with practical examples and real case
studies that were adapted to the Armenian context. Workshops
included group works focusing on the concept of the 3 E-s
(Economy, Efficiency, andEffectiveness) for the performance audit
and the COSO model, the testing of internal controls and process
analyses for the system based audit. The MS experts highlighted the
similarities
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Funded by EU
Implemented by Sweden
&
Armenia
and differences between the EU and Armenian practice showing the
advantages of adopting the EU practice.
Based on the test results and interviews, 6 participants from the
training activity and 2 representatives from CHU participated in a
study visit to get familiar with the Swedish best practice in public
internal audit. The discussions and material received from the
Swedish peer organizations will serve as an inspiration for the
development of the Armenian public internal audit function. To
ensure the sustainability of the results, the Twinning Project also
conducted a Train the Trainers (ToT) training course for these
selected internal auditors. The Armenian trainers used the training
material developed by the experts and elaborated them by making it
their own. At the end of the Train the Trainers course the Armenian
trainers were delivered a certificate proving their qualification and
capacity of providing training courses on Performance audit and
System based audit.
Through another activity a review report on the comparison of the
current practice of mapping the audit universe with international
standards as formulated by the Institute of Internal Auditors (IIA)
was submitted to the Armenian CHU, where the MS experts
provided recommendations on the development and improvement
where deviations from the IAA standards were revealed.
Since all the internal auditors in Armenia use specific software at
their work and on the request of the Armenian counterpart the
Twinning Project conducted a thorough analysis of the software. The
MS experts revealed the deficiencies and the challenges of the
software and presented their recommendations that would help to
improve it make more user friendly.
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EU Twinning Project
«Strengthening Public Internal
Financial Control in Armenia
At the end of this Component the Twinning Project can count 14
certified trainers on Performance audit and System based audit to
support the roll out trainings and escalation of knowledge to
different levels of the RA public sector, trained internal auditors on
audit universe and risk assessment, as well as recommendations for
the improvement of the internal audit software to facilitate the daily
work of the internal auditors.
Mr ArtakYergenyan
Acting head, Internal audit division, RA
Government staff, participant to EU Twinning
trainings and EU Twinning certified trainer on
system based audit and performance audit
«The study visit organized for the public sector
internal auditors within the framework of EU funded Twinning
Project aimed at strengthening the public internal financial control in
Armenia was a unique opportunity to closely examine the Swedish
practice in establishing and implementing the internal audit function
in their public institutions. We were mostly impressed by the trust of
the top management and the society towards the internal auditors and
documents presented by latter, as well as the simple and independent
system of regulations in the field of internal audit. The results of the
trainings organized by the EU Twinning Project are invaluable and
will be transferred to our colleagues and future trainees».
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Funded by EU
Implemented by Sweden
&
Armenia
The MS partners of the EU Twinning Project “Strengthening Public
Internal Financial Control in Armenia” would like to thank our
counter parts and colleagues for a fruitful cooperation.
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