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Four years in Ukraine, financial decentralization continues. The government emphasizes the growth of the budgets of the regions, but how these funds are distributed, or they are used effectively to meet the needs of the population and the development of the region - in the future remains a mystery that ordinary citizens are in no hurry to solve, and the authorities frankly talk about it. Only significant violations or abuse attract the public.
However, the public finance management system provides for a mechanism to prevent irregularities and to promote the effective use of financial resources - internal control and internal audit.
According to the decision of the Volyn Regional Council, expenditures of the regional budget in 2018 are envisaged in the amount of 8 388 118 907 thousand UAH. Whether these funds will be used effectively or actually used - to a large extent the question to the sector of internal audit of the region.
Since 2005 Ukraine has undergone a reform of the system of state internal financial control - the Concept of development of state internal financial control has been approved; Amendments to the Budget Code of Ukraine regarding the basic principles of organization and implementation of internal control and internal audit; Internal Audit Standards, Code of Ethics for Internal Audit Workers, etc. have been adopted.
A logical extension was the adoption in 2017 of the Strategy for the reform of the public finance management system for 2017-2020, which, among other things, involves increasing the level of managerial accountability and the effectiveness of internal control and audit at central and local levels of government.
During the last decade, the successful cooperation of state bodies of Ukraine with international institutions, which help to reform the general government (Twinning, SIGMA, GIZ projects), is quite successful. Within these programs, experts have prepared comments and recommendations on public finance management, including fiscal policies, financial management and control, internal and external audits, government procurement and administrative services.
The project is being implemented in the framework of bilateral cooperation between the Ministry of Finance of Ukraine and the Ministry of Finance of the Kingdom of the Netherlands - Program for the Development of Internal Auditors of the Public Sector of Ukraine.
In addition, the manuals on internal audit, including: "State Internal Financial Control: Ukraine and European Experience", "Internal Audit of Effectiveness: Methodological Principles and Practical Aspects", "Internal Financial Audit" and "Internal Financial Audit" were developed and available on the official site of the Ministry of Finance of Ukraine. , "Methodological guidance on internal audit in the public sector of Ukraine", etc.
Today, in Ukraine there is a comprehensive support for the development of internal state audit, both from foreign donors and from legislators. It would seem that under such conditions, internal state audits should function effectively and effectively. What is really going on?
Internal audit of CEB today
The introduction of internal audit units in the CEB officially started on January 1, 2012. He was preceded by intensive training of responsible persons, the development of methodological aids conducted under the auspices of international donors. During this time, internal audit activity should already give tangible results. Instead, according to the State Audit Office of Ukraine (DASU) report for 2017, the estimated loss of resources reaches over 2.3 billion UAH per 1,500 enterprises; In institutions and organizations, more than 1.6 billion UAH of illegal and non-targeted expenditures and shortage of material and financial resources, including almost 818.0 million UAH - on operations with budget funds were established.
The most widespread financial violations are:
unlawful expenses as a result of payment of overpriced value of works performed and / or services rendered, excess pay as a result of exceeding the quantity or value of purchased goods;
use of money loans, loans of international financial organizations received under the guarantee of the Government of Ukraine, in spite of their intended purpose;
sale by subjects of management of goods, works or services free of charge or at low prices;
making illegal wage payments;
write-off of funds for expenses / expenses without receipt of goods, works or services or in volumes higher than their actual value;
non-payment and non-transferring of part of the profit to the budget by state and municipal enterprises;
Unlawful payments to individuals (compensation, benefits, privileges and subsidies, pensions, scholarships), including those who did not have the right to receive them or in excessive amounts.
The list is rather incomplete, but it is characteristic that, according to the DASU, these financial violations are the most extensive, repeating from year to year. And it is the internal audit that is intended to prevent these violations. Why do internal auditors fail to perform their tasks?
Root problems
The analysis of the DASU reports allows us to find an answer to this question. The reasons are:
insufficient number of employees of internal audit units;
the execution by internal state auditors of incompatible tasks, often associated with the existence of potential conflicts of interest;
widespread non-compliance with the requirements of Internal Audit Standards - documentation problems, insufficiency of audit procedures, poor audit evidence, unlawful interpretations of violations detected, etc .;
the statement of the revealed facts of financial violations without an analysis of the reasons for their commission and the presence of other shortcomings;
coverage of internal minority audits;
low percentage of coverage of audit objects (6 - 8%);
the lack of management decisions based on the results of internal audits, even when detecting significant violations and fraud facts.
Against the background of the situation described above with the training, prepared and published methodological recommendations, it seems strange the actual state of affairs. What are the real reasons for inefficiency and ineffectiveness of internal state audit? Why is such a striking contrast between theory and practice?
The answer to these questions lies in rather trivial things. Firstly, the low level of wages in the public sector does not allow for the recruitment of highly qualified specialists. Unfortunately, the public sector in these matters, unfortunately, is not able to compete with the private sector.
Secondly, the problems of considering minor issues and the simultaneous neglect of important aspects of activity indicate a violation of the fundamental principle of independence of auditors. In other words, internal auditors are afraid of losing their job if they find all the facts that are revealed during inspections by external controlling bodies, in particular the DASU. This problem is also directly related to the lack of effective management decisions based on the results of internal audit, demotivating specialists. What is the risk of looking for problems in the work of the organization and being at risk of being released if this is not interested in anyone and is not taken into account by the management?
The Volyn oblast has an internal audit sector that, in its organizational structure, is not able to fully implement international standards for conducting internal audit activities, given the critically limited staffing structure. In this work, this department has a priority activity on compliance audit, which in reality is actually inspection measures, and an audit of efficiency in accordance with the plans for work for 2018 is foreseen only in relation to one department of the regional state administration.
Therefore, there is a significant need for methodological and coordination assistance from the Ministry of Finance, as there are no organizational templates for the formation of internal audit units, systematization of processes and procedures, and a single classification of violations. There is no legislative consolidation who should develop the model, systems and processes of internal audit at the oblast level. At the moment, such a duty is assigned to the head of the RSA, but it is absurd to assume that the head of the regional state administration will do it personally.
Many gaps in legislative regulation and slow dialogue with the central unit of the Ministry of Finances harmonization create a significant discretionary field for both internal audit and field management, which should be avoided.
Will the internal audit be effective?
To solve the problems, it is necessary to involve internal auditors in the curriculum widely, where they could receive not only theoretical knowledge, but also practical training - how to carry out risk assessment, conduct a questionnaire, write a report in order to be clear and precise. Particularly important is the dissemination of best practices of colleagues regarding the successful implementation of the function of internal audit.
Internal auditors emphasize the need to train CEB managers and their departments. At the moment, there is a lack of understanding of the nature and objectives of the internal audit. Only a small percentage of managers understand the usefulness of internal auditors who can not only prevent illegal, inappropriate and ineffective spending of public resources, but also take part in the development of strategic documents, internal anti-corruption policy, etc.
Significant and long-awaited support for the development of internal audit in the public sector will be the implementation by the Department for the harmonization of internal financial control of coordination functions in the field of financial management and control.
Currently, Ukraine has laid only the foundation for developing the function of internal audit in public administration, which can become a real tool for ensuring the effective use of public resources.
The legislative basis, developed methodological approaches, and the training of internal state auditors have been launched. However, further resolution of the problem that impedes the full functioning of internal audit is required. Spent millions of dollars of international donors to reform this sphere in Ukraine, as well as the funds of our own budget - taxpayers funds, may prove to be a waste if the case is not brought to a logical conclusion.
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