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REVISTACUR

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ŢII DE CONTURI A ROMÂNIEI

ROMANIAN COURT OF ACCOUNTS

JOURNAL

Bilingual Magazine

N 6/2013o

CONTENTS

Page

4

10

THE FINANCIAL ENGINEERING INSTRUMENTS AND THEIR ROLE IN IMPLEMENTING THE COHESIONPOLICY OF THE EUROPEAN UNIONDaniel DRĂGAN, ,

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Audit Authority Head of serviceElena GUZGANU Audit Authority External public auditorRaluca MOȘTEANU Audit Authority External public auditor

PARTICIPATION OF THE ROMANIAN COURT OF ACCOUNTS IN THE 15TH MEETING OF THE INTOSAIWORKING GROUP ON ENVIRONMENTALAUDITING (WG15) - TALLINN, ESTONIA, JUNE, 2013Dumitru ALĂMÎIE, ,

, ,IX Department Counsellor of Accounts

Andreea MOTOC IX Department External public auditor

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REPORTING ON INTERNAL CONTROL IN THE PUBLIC SECTOR - RESULTS OF THE GLOBALSURVEY OF 2012 FROM INTOSAI SUBCOMMITTEE ON INTERNAL CONTROL STANDARDSSvetlana MUREȘAN Department I xternal public auditorCristina NENOV Department I xternal public auditor

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CONSIDERATIONS ON PLAINTIFF AND DEFENDANT IN THE ADMINISTRATIVE DISPUTESVasile GENTIMIR VII Department Legal adviser- Cătălin , ,th

NEW APPLICATIONS OF IT&C TECHNOLOGYSanda MIHAI Chamber of Accounts Dolj Deputy Director, ,

PARTICIPATION OF THE ROMANIAN COURT OF ACCOUNTS IN THE IV MEETING OF THE GOALTEAM 1 – CAPACITY BUILDING (GOAL TEAM 1 - GT 1) OF EUROSAI STRATEGIC PLAN FOR THEPERIOD 2011-2017 PARIS, FRANCE, MARCH 2013

TH

Moise POPESCU Department I, DirectorDoina Department I, Head of Unit

,DRĂNICEANU,

NOTE ON INTOSAI JOURNAL SYNTHESIS - APRIL AND JULY 2013 ISSUES -Liliana External Relations and Protocol Service CounsellorMUSTA�Ă, ,

CONSTITUTIONAL ASPECTS OF TAXING CONSTRUCTIONSChamber Director

Ionel BOSTAN Chamber External public auditorConstantin IAŢCO, of Accounts Iaşi,

, of Accounts Iaşi,

3 FOREWORD

FOREWORD

The introductory references to the content of this publicationsynthesize the subject matters approached, in an attempt tocomplete the image of the external public auditor profession,that of a guardian of Romanian citizens' financial interests.

The publication tackles a wide range of themes which cangratify the interest of consumers of professional informationspecific to the Court ofAccounts' scope of activity.

Consequently, a number of articles published in this sixthissue of the Magazine of the Court of Accounts aim at makingvisible, within the public environment, the role of internal control– a dynamic process which needs to be integrated in theinfrastructure of each entity managing public resources.

Moreover, in this publication, we were concerned to also promote subjects attempting to familiarizeus with the European Union cohesion policy and the associated financial instruments, which can beimplemented through a variety of governance models and legal structures, specific to member statesor to regions within the Community area. Why this concern? The answer to this question is to be foundin the organic law of the Court ofAccounts, which provides for our institution – by the intermediary of theAuditAuthority – competences in the field of external audit of pre- and post-accession funds granted toRomania in its capacity as a member state of the European Union. In this context, we considered itrelevant to present new ways of support from the European Union, known as forms of “intervention” – aconcept defining a further generation of innovative financial instruments, such as “equity platforms” or“debt platforms of the EU”, in relation to which the Court ofAccounts has verification competences.

The publication did not ignore either a very topical issue, that of environmental auditing,respectively the activity of the Working Group on EnvironmentalAuditing (WGEA) – established withinthe framework of the International Organisation of Supreme Audit Institutions (INTOSAI), so as toidentify ways to improve the capitalisation of the audit mandate and instruments in the field ofenvironmental protection policies.

In this same issue, the Magazine of the Court ofAccounts also forays into the legal field, allotting anample space to the topic of active procedural capacity in the litigations deriving from the activity of ourinstitution, but I leave it to our readers to enjoy discovering the complexity of this topic.

I am persuaded that the freshly printed issues shall elicit the interest of the constant readers of ourmagazine and I take this opportunity to extend in advance my thanks to those who have the kindness togo through these texts and forward us suggestions for the future issues.

NICOLAE VĂCĂROIUPRESIDENT

THE ROMANIAN COURT OF ACCOUNTS

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Daniel DRĂGANAudit Authority

Audit Authority

Audit Authority

Head of service

External public auditor


Elena GUZGANU

Raluca MOȘTEANU

1 .BACKGROUND

reimbursable financing

indirectly address the final beneficiaries

financial engineering instruments

four

joint initiatives

One of the main objectives of the Cohesion Policy forthe current 2007–2013 programming period is theConvergence Objective that targets the member states andthe less developed regions and focuses on innovation andknowledge society, adaptability at economic and socialchanges and on environment quality and administrativeeffectiveness. This objective is financed from the Structuraland Cohesion unds, respectively from the EuropeanRegional Development Fund (ERDF), European SocialFund (ESF) and Cohesion Fund (CF).

Along with these funds providing non-refundablefinancing directly to final beneficiaries, financial instrumentsproviding were also created which

. These areknown as .

The European CommissionCohesion Policy has underlineds i n c e i t s b e g i n n i n g t h eimportance of improving accessto finance for the development ofsmall and medium enterprises(SMEs) and referred, in particular, to the need to increasesupport for both SMEs and to start-up companies and microenterprises, through technical assistance, grants and otherinstruments such as classical loans on favourable terms,venture capital or guarantees, while highlighting the addedvalue of taking such actions. Such financial instruments for

achieving the objectives of Cohesion Policy have beenproposed in cooperation with the European InvestmentBank (EIB) and European Investment Fund (EIF) .

The European Commission and the EuropeanInvestment Bank Group and other financial institutions havedeveloped in this respect within the 2007-2013 period

. Two of these initiatives relate to thepromotion of financial engineering instruments (JEREMIEand JESSICA) and the other two (JASPERS and JASMINE)work as technical assistance tools

The European Investment Bank plays such animportant role in the co-financing of structural and cohesionfunds and in supporting EU ember tates by financingprojects for infrastructure development and other types ofinvestments framed within the objectives of national policyand of the European Union. The EIB is also directly involvedin the financing facilities through the financial instrumentsJASPERS, JASMINE, JESSICA and JEREMIE through itssubsidiary, the European Investment Fund (EIF).

As the users familiarize with these types of supportfrom the European Union and following the evaluation of theeffects in the economy, the role of these innovative financialinstruments tend to become increasingly important atEuropean Commission level, with the intention of increasingtheir role in the following programming period 2014-2020.However, this tendency to increase the use of innovativefinancial instruments shall not replace the grant, as the latteris necessary in a number of areas, and therefore the aim is tocomplete the grant by supporting projects fulfilling EU policyobjectives by means of other forms of interference .

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THE FINANCIAL ENGINEERING INSTRUMENTS AND THEIR ROLE IN

IMPLEMENTING THE COHESION POLICY OF THE EUROPEAN UNION

1Commission Communication of July 2005 "Cohesion Policy in support of

growth and creating jobs, Community Strategic Guidelines, 2007-2013"

Commission communication to the European Parliament and the Council -A framework to the new generation of innovative financial instruments –platforms equity and debt platforms of EU

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Within the context of a dynamic cohesion policy underlainby such uncertain economic climate as the current one, thefinancial engineering instruments should be seen as part of astrategy to achieve the objectives of cohesion policy togetherwith the non-refundable Structural Funds, aimed at promotingsustainable long economic growth of the regions of Europe

The Member States and the Managing Authorities havethe opportunity to use some of the grant resources madeavailable by the European Union through ERDF and ESF topromote financial engineering instruments.

Thus, through these financial engineering instruments,part of ERDF/ESF resources can be used to grant refundablesupport to private beneficiaries, in particular SMEs, but also toself-employed professionals or socially disadvantaged people,both for development of their own business and for urbandevelopment or investments in increasing energy efficiencyand in renewable energy.

The most common way of implementing these financialengineering instruments at the Member States' level, is eitherthrough lending instruments (loans and guarantees) as a

, or through own equityinstruments as a .

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2. WHAT THE FINANCIAL ENGINEERING

INSTRUMENTS ARE

Guarantee Fund/Fund Loan

Venture Capital Fund

Financial instruments maybe implemented through avariety of governance modelsand legal structures specific toeach Member State or eachregion

Thus a Member State or a region may either choose toinvest a part of an operational program resource

such as Guarantee Funds, Loan Funds,

Hedge Funds, Urban Development Fund, orestablished to invest the grants

received from EU through various specific instruments

If a Member State chooses to invest directly in specifictools developed by financial intermediaries, the ManagingAuthority has the role of evaluation and selection of financialintermediaries and for the financialengineering instruments.

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.

directly in

specific instruments

indirectly

through a Participation Fund

management of resources

European Commission:Non – refundable funds

EU (ERDF/ESF)

Member State:National co-financing

(O.P.)

Financial intermediary:Specific instruments(Guarantee & risk)

Final beneficiary:(Reimbursement &

capital funds)

The financial engineering instruments and their role in implementing the cohesion policy of the European Union

06

If the Managing Authority chooses a Participation Fund, itshall transfer the funds representing both the EU contribution(from ERDF/ESF) and related national contribution in theaccount of the Participation Fund.

It is the Participation Fund that manages all resourcesdedicated to financial engineering instruments and launches

for the selection of financialintermediaries. The selected financial intermediaries shallmake available to the final beneficiaries the loan or equityfinancial products, advantageous over similar products that donot receive the support of innovative financial instruments suchas those conducted through the Structural Funds.

Whatever the option of the Member State, theimplementation of financial instruments follows the legal andlogical framework of the Cohesion Policy and of sharedmanagement and the principle of subsidiary, assisting in theachievement of the objectives set on the level of certain priorityaxis and, implicitly, of the Cohesion Policy's specific objectives.

In both cases the legal framework applicable to financialengineering instruments is ensured both by the GeneralRegulation EC no 1083/2006 on the Structural and CohesionFunds and through the agreements concluded between themain actors involved in the development of each type ofintervention as well as through specific national legislation

expressions of interest

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Fig.1 – Implementation options for financial engineering instruments (option 1 – through a participation fund, option 2 –directly through financial intermediaries)


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Until the end of 2011, at EU level (except Ireland andLuxembourg) a number of 592 financial engineeringinstruments were set up and managed through 68 participationfunds and 524 specific funds, implemented through 178operational programmes .

The 68 participation funds managed over half of thefinancial resources allocated to engineering instruments.

At EU level, the allocated financial support throughfinancial instruments aims mainly at supporting companies(approx. 80% of funds), urban development (approx. 14%) andenergetic efficiency and renewable energy, as shown in thetable below:

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EC, DG Regio, DG Employment – Executive report on the progress infinancing and implementing financial engineering instruments co-financedfrom Structural Funds, status at 31.12.2011

According to art. 67(2) (j) of EC Regulation no. 1083/2006

As the importance of financial engineering instruments isconstantly increasing, in order to ensure an adequatemonitoring thereof, the EC officially enforced, starting with2012, on managing authorities within member states, toinclude in their annual implementation reports submitted to theEC, based on EC regulation applicable to structural andcohesion funds, information related to the implementationstatus of financial instruments at the level of each memberstate.

The financing of EUbudgetary expenditure with thehelp of innovating financialinstruments (other formsof intervention than nonrefundable financing) is notsomething new, consideringt h a t t h e u s e o f t h e s e

instruments for the first time dates as early as more than 10years ago. Starting with the programming period 2007-2013,the financial engineering instruments are part of the strategy for

the implementation of operational programmes agreedbetween EC and MS

The innovating financial instruments are currentlystrongly related to strategic documents for shaping future EUfinancing, offering a new and important financing flow ofstrategic investments, thus supporting long term sustainableinvestments in the current context of fiscal restraints

Strategy st ipulates ag r e a t e r m o b i l i z a t i o nof innovating financialinstruments, as part ofa coherent f inancingstrategy, by pooling thefinancing granted by theEU, the financing from the national public sector and from theprivate sector, in order to achieve the objectives of the strategyfor a smart and sustainable growth and in favour of theinclusion . Therefore, the innovating financial instrumentsshould be seen as ways to complete interventions with nonrefundable financing, aiming to create conditions ofdevelopment by supplying concrete financial aid proactivelyeven before the business community acknowledges thepotential.

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3. MAIN CHARACTERISTICS FOR FINANCIAL

INGINEERING INSTRUMENTS

The 2020 Europe

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Commission communication to the European Parliament and to the Council –Aframework to the new generation of innovating financial instruments – equityplatforms and debt platforms of the EU

COM(2010) 2020, „Europe 2020 – European Strategy for a smart, sustainableand inclusion favorable growth”

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08

For projects with long term commercial potential, thetendency is to use the EU funds in partnership with the bankingfinancial sector, especially EIB or others international financingbodies (IFI) and with the private financial sector.

This ensures a strong combination of professionalexperience and knowledge from these bodies and theCommission services in drafting and implementingprogrammes in order to achieve the EU's objectives. Inaddition, a rigorous design of financial instruments with helpfrom the financial bodies in partnership with the Commissionreduces the risks related to implementation and promotes theachievement of policy objectives related to the instruments.

Financial engineering instruments allow especially

To increase the capacity of the private sector to generategrowth, jobs, social inclusion and innovation, aiding inparticular the new companies, SME, micro-companies, socialcompanies, investments in human capital, researchinstitutions, commercial/scientific parks, knowledge/technology transfer or investments in intellectual propertyrights;

To build infrastructure with a flow of allocated income,using adequate financing structures such as PPPs, in order toconsolidate competitiveness and sustainability of the EU infields like transport, environment, energy and digitalinfrastructure;

To support mechanisms that mobilize private investments,in order to supply public services, such as climate andenvironment protection

The main advantages for using financial instruments, incomparison to non reimbursable funds are:

– an important advantage of theJEREMIE initiative in comparison to non reimbursablefunds is its capacity to ensure the renewal of funds(revolving type) by allowing the possibility of performingother investments within the SME's sector. A recyclingeffect is obtained during the innovating financialinstrument life cycle, when the capital reimbursement orinterests, as well as cashing following investments, areused again for the purpose of the instrument. Thisrepetitive character extends considerably the scope of

instruments;

Unlike non reimbursable funds, when financialinstruments involve investing funds committed by the EU,budgetary contribution can generate incomes, such asinterests or efficiency of the invested capital. At the end ofthe existence of the instrument, the initial investments'reimbursement, to which possible resulted benefits areadded, will return to the general budget, which will havepositive effects also on the global return of the interventionand thus, the supporting SME through European

structural funds

– Management Authorities (MAs)benefit from more flexibility in allocating resources tostimulate the SME sector and can also determine anoptimization of funds and a mitigation of risks following thediversification of supplied products. In addition, it allowsthe extension of expenditure eligibility conditions;

– budgetaryexpenditure through financial instruments does notinvolve a financial risk higher than through nonreimbursable financing, since the design and thecontractual structure of financial instruments guaranteethat the risk for the EU budget is limited, in all cases, tobudgetary contribution .

another significantadvantage of the JEREMIE initiative is the characteristicof this type of intervention to involve the private sectorsince it allows combining public JEREMIE funds with otherresources, especially from the private sector. ThusJEREMIE has the potential capacity to involve thefinancial sector through a participation fund powered alsoby public capital as well as additional capital from financialbodies. In order to have access to EIF sources, financialintermediaries themselves should identify the amountsthat can be added to the amounts allocated through EIF,ensuring in the end an increase of the efficiency andeffectiveness of public resources allocated to a financialengineering instrument

–Financial discipline is promoted through the potential toalign the implementing regulatory frameworks, managingprinciples and best practices, as well as setting upperformance indicators. The MS can benefit from theknowledge of EU bodies related to projecting financialproducts, as is the case for guarantee fund bodies, whichmay be absent at the level of certain MS. The presence ofa European guarantee/counter-guarantee either gives thepossibility that recent guarantee institutions increasevolumes even from their initial phase, or facilitatescreating such systems, thus bringing a considerablecontribution when setting up institutions”

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1) Recycling of funds

has a sustainable character.

High flexibility

Mitigated risks for the EU budget

Capacity to multiply –

5) Increased performance and financial discipline

2)

3)

4)

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8.

7Study ordered by the Budget Commission of the European Parliament: The

influence of EIB and EBRD co-financing on the EU budget”, May 2011Commission Communication to the European Parliament and to the Council

– A framework to the new generation of innovating financial instruments –equity platforms and debt platforms of the EU

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Instrumentele de inginerie financiară i rolul lor în realizarea politicii de coeziune a uniunii europeneș

Bibliography:

Websites:

1. European Commission DG REGIO, DG Employment –Executive Summary on implementation of financialengineering instruments co-financed from the structuralfunds. Status on 31.12.2011;

2. COM(2010) 2020, „Europe 2020 – An European strategyfor an intelligent and inclusive growth”;

3. Commission Communication of July 2005 "CohesionPolicy in support of growth and jobs, Community StrategicGuidelines, 2007-2013";

4. Commission Communication to the European Parliamentand the Council A framework to the new generation ofinnovative financial instruments - platforms equity and debtplatforms in the EU;

5. Coordination between JEREMIE, Cohesion Policy andother EU policies, a presentation of G. Kolivas, EuropeanCommission, DG REGIO;

6. European Investment Fund – Handbook of JEREMIEHolding Fund operations;

7. Financial Instruments Overview of Delegations'Comments on CPR Regulation no 615(2011) Regulation ofthe European parliament and of the council laying downcommon provisions on the European RegionalDevelopment Fund, the European Social Fund, theCohesion Fund, the European Agricultural Fund for RuralDevelopment and the European Maritime and FisheriesFund covered by the Common Strategic Framework andlaying down general provisions on the European Regional,Development Fund, the European Social Fund and theCohesion Fund and repealing Council Regulation (EC) o1083/2006);

8. Cohesion Policy of European Union for the programmingperiod 2007-2013;

9. Cohesion Policy and Europe 2020 Strategy;10. National Strategic Report 2012 drafted by the Ministry of

European Affairs with management authorities under Art.29 of EC Regulation no. 1083/2006 imposing obligation onMember States to submit to the European Commission bythe end of 2009 and 2012, a report containing informationon the implementation of operational programs 2007-2013co-financed through structural instruments;

11. Annual Implementation Report 2001 on implementation ofOperational Programme Increase of EconomicCompetitiveness JEREMIE Initiative;

12. JEREMIE 2011Annual Progress;13. Council Regulation (EC) o 1083/2006 of 11 July 2006

laying down general provisions on the European RegionalDevelopment Fund, the European Social Fund and theCohesion Fund and repealing Regulation (EC) o1260/1999;

14. Commission Regulation (EC) no 1828/2006 of 8December 2006 setting out rules for the implementation ofCouncil Regulation (EC) o 1083/2006 laying downgeneral provisions on the European RegionalDevelopment Fund, the European Social Fund and the

Cohesion Fund and of Regulation (EC) o 1080/2006 ofthe European Parliament and of the Council on theEuropean Regional Development Fund;

15. Regulation (EU, EURATOM) o 966/2012 of the EuropeanParliament and of the Council of 25 October 2012 n thefinancial rules applicable to the general budget of the Unionand repealing Council Regulation (EC, Euratom) o1605/2002;

16. Commission Delegated Regulation (EU) No 1268/2012 of29 October 2012 on the rules of application of Regulation(EU, Euratom) No 966/2012 of the European Parliamentand of the Council on the financial rules applicable to thegeneral budget of the Union;

17. Regulation of the European Parliament and of the Councilo 615/2011 laying down common provisions on the

European Regional Development Fund, the EuropeanSocial Fund, the Cohesion Fund, the EuropeanAgriculturalFund for Rural Development and the European Maritimeand Fisheries Fund covered by the Common StrategicFramework and laying down general provisions on theEuropean Regional Development Fund, the EuropeanSocial Fund and the Cohesion Fund and repealing CouncilRegulation (EC) o 1083/2006;

18. Management and control systems and financialmanagement – overview of delegations' comments onCSF Regulations;

19. Study conducted by the Commission for the EuropeanParliament's, Budgets Committee, "The Implications ofEIB and EBRD co-financing for the EU budget", May 2011.

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www.ec.europa.euwww.eib.owww.eif.orgwww.fonduri-ue.ro

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Dumitru ALĂMÎIE

Andreea MOTOC

IX Department

IX Department

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Counsellor of accounts


The International Organization of Supreme AuditInstitutions (INTOSAI) is the professional organization ofsupreme audit institutions (SAIs) in countries that belong tothe United Nations or its specialized agencies. INTOSAI wasfounded in 1953 and has grown from the original 34countries to a membership of over 180 SAIs.

The way that INTOSAI promotes the exchange ofideas and experiences among SAIs around the world isthrough triennial Congresses (International Congress ofSupreme Audit Institutions - INCOSAI) and annualmeetings.

In recent years, the countries that have hostedprevious INTOSAI-WGEA meetings were

Argentina, in November2011, the 14th Meeting of INTOSAIWGEA(WG14);

China, in June 2010, the13th Meeting of INTOSAI WGEA(WG13);

Qatar in January 2009, the12th Meeting of INTOSAI WGEA(WG12)

The 15th meeting of the INTOSAI Working Group onEnvironmentalAuditing (WG15) was held on 3-6 June 2013,in Tallinn, Estonia.

The meeting was attended by 72 SAIs which wererepresented by:

heads of Supreme Audit Institutions (generalauditors, lead auditors) and

SAIs full Courts members, heads of departments,managing directors, directors, auditors etc.).

At the 15th meeting of the INTOSAI WGEA (WG15)also attended as special guests: vicepresident of the Canadian Institute for Research andEducation, - - Minister ofEnvironment in Estonia, member of ECA,

- consultant to the German Societyfor International Cooperation, -Deputy Director General of INTOSAI Development Initiative,

Commissioner for Developmentsustainable Quebec region, in the Office of the AuditorGeneral of Quebec, Canada, - legalconsultant and

Estonian politician, amember of the EuropeanParliament the United NationsEnvironment Programme

The Romanian Court ofAccounts, in accordance withPlenum Decision no. 95/ 27.03.2013, was represented by

, counsellor of accounts, Headof IX Department and

, external public auditor,IX Department

The Working Group on Environmental Auditing(WGEA), under the International Organization of SupremeAudit Institutions (INTOSAI), aims to improve the use ofaudit mandate and audit instruments in the field ofenvironmental protection policies, by the members of theWorking Group and by non-member Supreme AuditInstitutions (SAIs).

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Mr. John Reed

Ms Keit PENTUS Rosimannus

Mr. Gijs de Vries

Mr. Tassilo von Droste

Ms Shefali S. Andaleeb

Jean Cinq-Mars

Mr. Arnold KreihuberMr. Andres

Tarand

Ms Motoc Andreea-Elena

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Mr. Dumitru Alămîie

PARTICIPATION OF THE ROMANIAN COURT OF ACCOUNTS IN THE 15TH

MEETING OF THE INTOSAI WORKING GROUP ON ENVIRONMENTAL

AUDITING (WG15) - TALLINN, ESTONIA, JUNE, 2013

11

The main objectives of this meeting were:

1. Adoption of the projects that were conducted under theWork Plan for 2011-2013;2. The final draft Work Plan for 2014-2016;3. Presentation of project results which were held under thechairmanship of Estonia Working Group on EnvironmentalAuditing of INTOSAI;4. Takeover of the Presidency of INTOSAI-WGEA by theSupremeAudit Institution of Indonesia.

The agenda also included several debates, workshopsand tutorials on relevant environmental issues. There were alsoa number of sessions of meetings (workshops and workinggroups) focusing on the latest developments in publicenvironment audit practice and challenges and successfulresults of SAIs that carry out environmental auditing.

Since the work plan for2011-2013 of the INTOSAI-WGEA is nearing completion,the meeting finalized draftresearch papers, guides, andother documentation which werecompiled jointly by members ofthe Working Group.

Thus, one of the objectivesof the meeting was to shareexperience and knowledgeobtained following completion of the projects, throughpresentations that were made by representatives of SAIs whoattended this meeting.

Following project completion and adoption of the WorkPlan for 2011-2013, the final version of the guidelines, researchprojects and other documents were made available to SAI foruse. In this context, it is noted that all the abovementioned documents will be available in English on thewebsite

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INTOSAI-WGEA Work Plan

For the period 2011-2013, the INTOSAI-WGEA WorkPlan provided the development and implementation of thefollowing projects:

research project on land use and land managementpractices (led by Morocco);

research project on environmental data (led byCanada and the U.S.);

research project on environmental and sustainability

reporting (led by Finland);research project on environmental issues associated

with infrastructure (NAO-led United Kingdom);research project on the impact of tourism on wildlife

(led by Lesotho);Updating guidance material regarding the water audit

2004 (GAO-coordinated U.S.);guidance on integration issues of fraud and corruption

in the practice of environmental auditing (coordinated bySAI Norway);

training modules on forest and mining audit(conducted by SAIs in Indonesia and Tanzania);

establishment of a training centre worldwideregarding environmental auditing (in collaboration withIndia);

WGEA study environmental auditing and collection ofannual environmental audit results at international level(coordinated by SAI Estonia.)

After the adoption of the draft regarding the Work Plan forthe period 2011-2013, projects that will be part of the Work Planfor the years 2014-2016 were discussed. The INTOSAI WGEAsuggested develop/update several projects in the next threeyears, including:

(1) Update of theprepared by the INTOSAI-WGEAin 2004;

(2) Review of the four ISSAIs regarding environmentalauditing, namely:

ISSAI 5110: Guidance on conducting audit activitieswith an environment perspective, 2001;

ISSAI 5120: Environmental audit and regularityaudit, 2004;

ISSAI 5130: Sustainable Development: The Role ofSupremeAudit Institutions, 2004;

ISSAI 5140: Methods of cooperation between SAI inauditing international environmental agreements, 1998.

(3) Development of the research projects, namely:

3.1. Env i ronmenta l r i sks and env i ronmenta lresponsibility of the State;

3.2. Renewable energy;3.3. Energy Saving;3.4. Environmental assessments;3.5. Marine: Audit of administrative measures on climate

change impacts on the marine environment, creativeand innovative strategies used by the SAIs;

3.6. The market-based instruments for protection (andmanagement) of the environment;

3.7. “Greening” of SupremeAudit Institutions.

http://www.environmental-auditing.org/Home/NewsEvents.aspx

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Guidance on waste management audit,

Participation of the Romanian Court of Accounts in the 15th meeting of the INTOSAI Working Group on Environmental Auditing (WG15)

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An important part oft h e m e e t i n g w a s t h epresentations made by someSAIs on the successfulpractices and challengesfaced in environment auditwhich they carried out. Therewere presentations made bySAI Estonia, SAI China, SAIFrance and SAI Bhutan, thelast one providing a broaddescription of the risksidentified in the mine audit.

In this context, we believe that the presentations mentionedcould serve as examples to be followed regarding the structurepresentation.

On 5 of June, the Romanian Court of Accounts has alsopresented in the plenary session, the internationalenvironmental audits attended in previous years, namely:

(1) Compliance audit regarding the provisions of theDanube Convention on cooperation for the protection andsustainable use of the Danube River (2004, 2006). ThisConvention was signed in Sofia on 29 June 1994, ratifiedby Law no 14 of 24 February 1995;(2) Compliance audit regarding the provisions of theConvention for Protection the Black Sea against Pollution(2006, 2007, 2010, 2011). This Convention was signed inBucharest in April 1992, by the representatives ofRomania, Bulgaria, Georgia, Russian Federation, Turkeyand Ukraine (which are Parties to the Convention).

It was highlighted the performance audit findingsregarding "

and the issue of the.

All presentations will be made public on the officialwebsite of the INTOSAI Working Group on EnvironmentalAuditing-http://www.environmental-auditing.org/.

The Romanian Court ofAccounts prepared and presentedthree posters with suggestive images regarding biodiversityand the environment protection, in which it was reflectedspecific aspects of the Danube Delta, Carpathians mountains,and the Black Sea.

At the meeting, the Secretariat of INTOSAI-WGEAannounced that from 25 November to 11 December 2013 willbe held the first training course in environmental auditing, inEnglish, organized jointly by the Global Training Project andSAI of India.

The course is open to anyone interested in conductingenvironmental audits, namely to the execution andmanagement staff of INTOSAI, the time limit for participation inthe end of July 2013. Courses will be held in the new"International Centre for Environment Audit and SustainableDevelopment" opened in the city of Jaipur, India.

In the closure meeting, it was held the ceremonyregarding the surrender of the INTOSAI-WGEA Presidency bySAI of Estonia and takeover by SAI of Indonesia, which will beresponsible for coordinating all projects in the work plan for theyears 2014-2016.

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Patrimonial situation of forests in Romania between

1990-2012” Guidance on conducting the

environmental audit

In the context of the audit practices presented by representatives participating sites and given the importance of the subject and theneed to adjust to the best practices of other SAI was submitted for approval Plenum, conducting audits, with the theme:

Audit of contaminated sites;Audit of waste management at national level;Expanding performance audit on ”Conservation of biodiversity of forest ecosystems, the state, development, management

and administration of national forests .

In this regard, the management of the IX Department will develop the amendment and completion of theActivity Program for 2013,accordingly to the Methodology of the development, modification and follow-up of the Activity Program of the Romanian Court ofAccounts, approved by Plenum Decision No 91/21.07.2009.

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Vasile GENTIMIR- CătălinVII Departmentth

Legal adviser

The issue of active proceduralcapacity in the disputes derivingfrom the activity of the Courtof Accounts started to haveconsistency once the RomanianConstitution has been review in theyear 2003 and, accordingly, theLaw no. 94/1992 on the organization and operation of theCourt ofAccounts

If in the year 1864, when it was established , the RulerAlexandru Ioan Cuza conceived it as a modern institution toexercise the control of public finances, the subsequentlegislative developments shaped its organization andfunctioning according to the historical and political events ofthe years that followed.

Returning to the Romanian Constitution reviewed inthe year 2003, one can notice that the change of the art. 139of the Romanian Constitution of 1991 , involving the removalof the jurisdictional responsibilities, was a new chapter onthe organization and functioning of this fundamentalinstitution of a state (subject to the rule) of law/constitutionalstate. Also, the establishment in the Constitution of thespecial administrative jurisdictions in the 4-th paragraph ofthe article 21, and the declaration of those as being optionaland free of charge, marked a new stage in the administrativereports.

In this way, the provisions of the art. 52 par.(1) andart.126 par.(6) of the Romanian Constitution establishesexpressly, nowadays, the principle according to which theadministrative act is subject to judicial review by theadministrative courts.

The historical context represented by the accessionnegotiations of Romania to the European Union determined

the review of the Fundamental Law, meaning that thedisputes deriving from the activity of the Court of Accountsshould be trialed by the specialized administrative courts.One can notice that even nowadays these constitutionalprovisions established in the art. 140 par. (1) second thesisof the Fundamental Law, have yet to find a development inan organic law, and so, have no practical application. In thisway, the disputes deriving from the activity of the Court ofAccounts are still trialled by the common administrativecourts.

The provisions of the Law no.94/1992 on theorganization and functioning of the Court of Accounts and ofthe Regulation on the organization and development of theCourt of Accounts' specific activities, as well as the follow upof the documents resulting from these activities , approvedby the plenum of the Court of Accounts, in accordance withthe provisions art.11 par.(2)-(3) and art.33 par.(1) of the Lawno.94/1992, develop the constitutional provisions previouslyshown

Through the Regulation on the organization anddevelopment of the specific activities of the Court ofAccounts, as well as the follow up of the documentsresulting from these activities, art. 174-229, it establishes aprocedure of administrative appeal, by which one can admitthe possibility of the higher organs of those who issued theattacked administrative acts to resize the measures taken,in accordance with the law. As such, we no longer have ajudicial activity of the Court of Accounts, characterized bythe trial of the disputes by an independent and impartialorgan.

1

2 .has been changed

3

4

5

.

CONSIDERATIONS ON PLAINTIFF AND DEFENDANT IN THE

ADMINISTRATIVE DISPUTES

1 The Romanian Constitution of 1991 has been changed and completed bythe Reviewing law of the Romanian Constitution no. 429/2003, published inthe Official Journal of Romania, Part I, no.758 of october 29, 2003.

Republished according to the art. IV of Law no.217/2008 on the changeand complete of Law no. 94/1992 on the organization and operation of theCourt of Accounts, published in the Official Journal of Romania, Part I,no.724 of October 24, 2008, giving the text a new numbering.

The Law on the establishment of the Court of Accounts, published in theOfficial Journal of Romanian United States, no.18 of january 24/ february 5,1864.

The Romanian Constitution of 1991 was published in the Official Journal ofRomania, Part I, no.233 of november 21, 1991.

2

3

4

5The Regulation on the organization and development of the Court of

Accounts specific activities, as well as the follow up of the documentsresulting from these activities has been approved by the plenum of theCourt of Accounts bill no.130 of November 4, 2010, published in the OfficialJournal of Romania, Part I, no.832 of December 13, 2010 and entered intoforce on January 1, 2011.

15

In the process of the follow up of the documents resultingfrom the Court of Accounts specific activities it has beenestablished a prior administrative procedure as a mandatorycondition, the nonperformance of which affects the exerciseitself of the right of action in the administrative. In this way,against the audit report prepared by the external publicauditors, the management of the verified entity may makeobjections within 15 calendar days from the date of registrationat the entity or from the acknowledgment of its receipt (art. 120-122 of the Regulation).

In order to follow up on thefindings listed in the audit report,the Court of Accounts structuresissues which may beappealed by the management ofthe verified entity within 15calendar days from the date of thereceipt (art. 204-210 of the Regulation). The commission forremedies issues which can order either the totalor partial admission, or rejection of the appeal (art.211-226 ofRegulation). Against the conclusion issued by the commissionfor remedies, the management of the verified entity may appealthe competent administrative court, within 15 calendar daysfrom the acknowledgment of its receipt, in keeping with theAdministrative law. In conclusion, the act appealed in court isthe commission conclusion.

The settlement procedure of the appeal against theadministrative acts issued by the county chambers of accountsis In any case, it does notmeet the conditions provided by the art.21 par.(4) of Romania'sConstitution and by the art.6 of theAdministrative law. The prioradministrative appeal is a much faster way to restoration oflegality, aimed to protect the Court of Accounts which, byrepairing any error committed at issuance of the act, can avoidits summons as a defendant, as well as to protect the verifiedentities, which have the possibility to obtain the annulment ofthe act through a much simpler and free of legal expensesadministrative procedure.

According to the provisionsart. 227 of the Regulation, a lawapproved in accordance withthe reference provision art. 11par.(2)-(3) and art.33 par.(1)of Law no.94/1992,

, within 15calendar days from the acknowledgment of its receipt, inkeeping with the Administrative law. In other words, when themanagement of the verified entity is dissatisfied with thecommission for remedies' conclusion solution/settlement, itmay appeal the competent administrative court. Thecompletion of this prior administrative procedure is amandatory condition, whose unfulfilling affects the exerciseitself of the right of action in the administrative.

As we have shownpreviously, only the managementof the verified entity may appealthe competent administrativecourt. The analysis of this lawreveals that it is necessary tomeet :1. only the verified entity mayappeal the administrativecourt the measures taken by the Court ofAccounts and 2. of theverified entity, only the management may appeal theadministrative court.

Regarding the first condition, this derives from a legal andlogical analysis of the laws. In this way, according to theprovisions art. 23-25 of the Law no.94/1992, the Court ofAccounts performs the specific activities on

, strictly stipulated by law,determined or determinable according to certain criteria. But,as long as the Court of Accounts conducts the control of theestablishment, management and use of certain entity financialresources, stipulated by law, and takes measures to remedythe deficiencies strictly at its charge, it is natural that it mayappeal the measures taken.

From the analysis of the provisions art. 1 par.(2) ofAdministrative law no.554/2002, with later changes andadditions , one can ask the legitimate question, as we think, if inthe disputes deriving from the activity of the Court of Accountsthe person aggrieved in his/her legitimate rights or interests bymeans of an individual administrative act, addressed to adifferent subject of law, it is possible to acquire activeprocedural quality. In other words, for instance, it is possible forthe former management of the audited entity or a corporationwith whom the audited entity concluded the contracts auditedby the Court ofAccounts to acquire active procedural quality?

In order to answer this question, we think that someobservations are needed regarding a certain crucialadmissibility condition of the administrative action, and that isthe justification of aggrieved legitimate rights or interests, asthis notions are defined by art. 2 par.(1) let.o) and p) ofAdministrative law.

a decision

a conclusion,

a prior administrative procedure.

against

the conclusion issued by

the commission for remedies,

the management of the

verified entity (it and only it!)

may appeal the competent

administrative court

two essential conditions

certain

categories of public entities

6

6Administrative law no.554/2004 was published in the Official Journal of

Romania, Part I, no.1154 of december 7, 2004.

Considerations on plaintiff and defendant in the administrative disputes

16

In this way, is defined as any rightprovided by Constitution, law or any other legislative act, whomis been prejudice by a administrative act. The fundamentalrights and freedoms are expressly established under principlesin the second Chapter of the second Title of the Country'sFundamental Law.

Also taken in consideration the jurisprudence of the HighCourt of Cassation , in the cases submitted to our review, westill think that the fundamental rights established by theConstitution and the law cannot be assimilate with the rightsderiving from a contract concluded between a corporation anda public entity audited by the Court of Accounts. As previouslyshown, the categories of public entities on which the Court ofAccounts has competent control are strictly stipulated by law,and these are performing their activity either in a public power,or as commercial or financial public institutions.

In the cases submitted to our review, the dispute is aboutthe annulment of the administrative acts issued by the Court ofAccounts, in this case the decision issued by the manager ofterritorial structure or the head of the department, whichconcluded the audit and the conclusion issued by theCommissions for remedies of the Court of Accounts. Aspreviously shown, by these administrative acts measures aretaken before the management of the audited entity.

So, we think that it is,obviously, about themanagement in charge atthe date of the audit,because it is the only onewhich may accomplishthe measures taken bythe audit body.

Also, the acts contested in court have been issued by theCourt of Accounts in compliance with its organic law (Lawno.94/1992, republished) and its special regulations(Regulation on the organization and development of the Courtof Accounts specific activities, as well as the follow up of thedocuments resulting from these activities), being addressedexclusively to the audited entity. In other words, we think thatbetween the Court ofAccounts and the audited entity there maybe only a legal relationship of administrative law

W h e n w e r e v i e w t h econdition of legitimate interest,generally, we have to emphasizeits legitimate character, first of all,this means that not any interest,public or private, is protected byj u s t i c e . T h e i m p o r t a n c eattributed to the legitimate

character of the protected interest towards a legal action,generally, and towards the administrative, in particular, is due tothe fact that not any kind of interest is subject of protectiontowards a legal action. It has to consider an interest founded onlaw, culture or the general principles of law, because it isinconceivable that illegitimate interests should be protected byjustice

From the review of the twodifferent notions defined by the law,one can easily notice that the socialvalues present in characterizing thenotion of public legitimate interestare much more important than theprotected values in case of the private legitimate interest. Inadministrative reports, protecting the society interests, as awhole, is much more important than protecting some individualor group interests. This time, we are not reviewing the case fromthe legitimacy point of view only, because both interests aresupposed to be in the sphere of legality. It is strictly aboutpriority protecting some social, state interests against individualones.

The Court ofAccounts and itsterritorial functional structureshave specifically this duty to controland to oversee the establishment,management and use of state andpublic sector financial resources. If we analyze the importanceof public funds and the serious economic consequences ofillegal, uneconomical and inefficient spending of those, weconsider that the legitimate interest protected by this activityexceeds by far the private interests of some people or interestgroups.

In other words, the public interest is being alwaysanalyzed first and prevails upon the private interest, becausethe possible area of injury of a public interest is greater. Otherkind of argumentation would mean the private interest of anindividual exceeds the society interest, as a whole, that isunacceptable reasoning in a state of law and constitutionaldemocracy.

an aggrieved right

7

8.

9

10.Regarding , is being defined,

by art. 2 par.(1) let.p) of Administrative law, as the possibility toclaim a certain conduct, in order to achieve a foreseeable andfuture, prefigured subjective right.

On the other hand, the law establishesas being the interest that targets the rule of

law and constitutional democracy, guaranteeing thefundamentals rights, freedoms and duties of the citizens,satisfying community needs, achieving competence of publicauthorities.

the private legitimate interest

the publiclegitimate interest

7High Court of Cassation, The Section for Contentious Administrative and

Fiscal Business, Decission no.3116, september 28, 2006, in Jurisprudence2006 II, pp.20-24, apud Gabriela Victoria Bârsan and Bogdan Georgescu,Administrative law no.554/2004, annotated, second edition, HamangiuPublishing Company, Bucharest, 2008

Antonie Iorgovan, Administrative law treaty, vol.II, 4-th edition, pp.573-574.Although the example analyzed by the well-known professor concerns theNational Securities Commission, we think that it overlaps our review.

.8

9Verginia Vedinaș, Administrative law, 6-th edition, reviewed and updated,

Universul Juridic Publishing Company, Bucharest, 2011, pp.172-174.10

Antonie Iorgovan, op.cit, vol.II, 4-th edition, pp.561-562.

Considerations on plaintiff and defendant in the administrative disputes

17

Ionel BOSTAN

Constantin IAŢCOChamber

Chamber

of Accounts Iaşi

of Accounts Iaşi

Director


1. Preliminary observations

2. Concepts and rules

Basically, fiscal inspections are not included amongthe attributions of a public external auditor, but the adequateknowledge of the entire array of issues concerning the localtaxation system is vital to the auditor, when it comes tocertain types of missions, at the level of administrative-territorial units (ATU). This is the reason why, in the presentarticle, we shall insist upon certain elements related toimposing buildings.

This matter is simultaneously complex and sensitive,especially after Romania’s adherence to the EuropeanUnion, with the rigors of Community Law exerting

at a practicallevel has made it so that multiple cases have been broughtbefore the constitutional judges, cases which required thesolution of certain exceptions of unconstitutionalityregarding particular provisions of Law no. 571/ 2003 on theFiscal Code (exceptions raised by various contributors,especially those with legal personality).

The constitutional ground regarding taxes, fees andother contributions is to be found in art. 139 of theFundamental Law (the Romanian Constitution, 2003).Thus,”taxes, fees and any other forms of revenue of thestate budget and social ensurance budget shall only beestablished by law” and ”the local taxes and fees are set bythe local authorities, within the limits of the law”.

As a general rule, a building is addressed as “anybuilding located above or below the ground, irrespective ofits nomenclature or use, and which has one or more roomsthat can be used for sheltering humans, animals, objects,products, materials, facilities, equipment…” (Law no571/2003 on Fiscal code, art. 249). The material used for theconstruction is not important from a fiscal point of view; thebasic structural elements of the buildings – the walls and theroof – are the ones that matter.

Obviously, the owner of any building located inRomania owes a yearly tax for it, unless the owner is a legalentity of public law. According to Government Ordinance no30/ 2011 of 31 August 2011, amending and supplementingLaw no 571/2003 regarding the Fiscal Code, as well asregulating financial-fiscal measures, taxation and declaringbuildings to have them enter the records of local authoritiesrepresent obligations of the owner, even if they were builtwithout a permit.

a specialbearing on the financial-accounting system, fiscal systemand budgetary system (Andreşan, 2010; Dascălu, 2006;Boulescu et al., 2009). For that matter, lately, the modalitythrough which the specific legislation is applied

CONSTITUTIONAL ASPECTS OF TAXING CONSTRUCTIONS

18

r

graph graph

The fiscal code also took intoaccount the situations whenstate’s public or private buildingsare leased, rented, or in-use to/ bypersons who are not of public law.Therefore, the rule states that”the tax on the building isestablished epresenting thefiscal duty of the tenants,inhabitants or administrators in

conditions similar to those in effect in the case of tax onbuildings”.

In all cases, the beneficiary budget of this type of paymentis that of the village, town or city in which that particular buildingis located. Our article does not address the modality ofcalculation, mentioning in accounting, declaring, reporting,maturity, payment or tax exemption on buildings, we shall solelyfocus on certain regulations and interpretations that haverecently caused some controversies worth mentioning withinthe auditing activity.

As apparent from the foregoing, the tax on buildings isconnected to the local budget of the administrative-territorialunit where a particular building is located, with the exception ofthe buildings which are state's public or private property. But ifthese buildings are leased, rented etc., those who managethem temporarily still owe this tax.

It is this very provision that represented the subject ofraising an objection of unconstitutionality in a file (no.5839/2/2010) of the Court ofAppeal Bucharest – administrativeand fiscal legal department, corresponding to Court File no.1535D/2011. The taxpayer under discussion (a company)raised the issue of “a privileged status of the state and aninequity among taxpayers, created by the provisions criticized”(Constitutional Court Decision no. 438/2012).

Principles of Taxation (Fiscal Code, art. 3)

Taxes and fees covered by this code are based on thefollowing principles:

a) the neutrality of fiscal measures in relation to thedifferent categories of investors and capitals, and to the form ofownership, ensuring equal conditions to the investors, to theRomanian and foreign capital;

b) the certainty of imposition, through clear legal norms,

which cannot lead to arbitrary interpretations, while terms,modalities of payment and the respective sums can beprecisely established for each payer, so that each payer canmonitor and understand his/ her/ its tax responsibilities, andeach payer can determine the influence of their managementdecisions upon their tax burden;

c) tax fairness at the individual level, through imposingrevenues according to their size;

d) effective imposition through providing long-termstability for the tax code provisions, so that these provisions donot lead to unfavourable retroactive effects for individuals andbusinesses, in relation to taxation in effect on the date whenthey take major decisions concerning investments.

Specifically, the legal provisions that were criticized werethe ones found in art 249 para (3) and art 256 para(3) of Law no 571/2003 regarding the Fiscal Code. Here youcan observe their form, criticized by the author of the exceptionof unconstitutionality.

Art. 249 paragraph (3): ”For public or private buildings ofthe state or of the municipalities that are leased, rented, orgiven on an in-use agreement to legal entities other than thoseof public law, the tax on building is established, being the taxburden of the tenants or the persons in charge of themanagement of the respective building(s), under conditionssimilar to all taxes on buildings”.

Article 256 paragraph (3): ”For the public or privateproperty land, belonging to the state or to the municipalities,there shall be established a tax which represents the tax burdenof the concessionaires, tenants, persons with rights ofmanagement or of use, according to each case, under similarconditions used for taxing land”.

In such a context, we should not overlook the fact the fiscaland budgetary policy, chosen by the Government at a giventime, can lead to differences – often significant – in approachingthe matter, and that at the basis of this policy there is exactly theconcept of chargeable asset ownership (Bostan, 2008). Anyideological stand from the ”opposite party”, according to whichthe state's lack of obligation to pay taxes automatically triggersthe phenomenon of the state becoming unjustly wealthier, doesnot hold its own ground.

–

–

3. Modalities to solution unconstitutionality exceptions

regarding provisions in the Fiscal Code on imposition of

buildings

3.1. The alleged discrimination in the imposition based

on the category to which owners belong

�

�

Constitutional Aspects of Taxing Constructions

19

And when it comes to tax exemptions/ cuts, it is only thelegislator that can decide upon them in favour of certaincategories of tax-payers, if the circumstances and the country’seconomic and financial status allows for it.

Analyzing the claims of constitutional judges regarding aviolation of the principle of equality before the law, we note thatthe creation of the different taxation system for land andbuildings – in the circumstances where the goods subjected totaxation are part of the state’s public or private property – isabsolutely correct, and no discrimination between the twocategories of owners can be brought into discussion.

In fact, when the Constitutional Court rejected asunfounded the plea of unconstitutionality mentioned above, itfundamented its decision on an essential aspect. Namely, thatthe legislator ”enjoys complete freedom in establishing taxes,assuming these taxes are in proportion, reasonale and fair…”Then it added, also as an argument, the fact that, generally,”concession, lease, as well as in-use agreements of buildingsthat are state’s public or private property or belong to themunicipalities are established in very long term…”

In another case, in which the Court decided against thealleged violation of the constitutional provisions, as to create asituation that can be considered as giving a privilege to the stateor to municipalities (Court Decision no 518/2010), the Courtalso established that “public authorities – budgetary creditors –may be exempted from the payment of taxes or duties,because their activity is financed by the state budget, and therespective taxes also become revenue for the state budget, asit would otherwise be absurd for the authorities at issue to beformally obliged to pay a tax that returns to the same budget”.

This time, what comes into prominence is observing themethod of solving the exception of unconstitutionality in thecase of art. 253 para (6) of Law no 571/2003 regardingthe Fiscal Code in conjunction with art. 249 para (3) of thesame law, exception mentioned in Case no 11.661/3/2011 ofthe Court of Appeal, Section VIII of legal matters concerningadministrative and fiscal issues, representing the subject ofCase no 35D/2012 of the Court.

If art. 249 paragra (3) has already been mentionedabove, there are provisions (subjected to criticism) of art. 253paragrap (6):

”In the case of a building which has not been revalued, thebuilding tax rate is established by the local council/ the GeneralCouncil of Bucharest between:a) 10% and 20% for the buildings which were not revalued in the3 years preceding the fiscal year at issue/ of reference;b) 30% and 40% for the buildings which were not revalued in the5 years preceding the fiscal year at issue/ of reference;”

In explaining the motivation for the exception ofunconstitutionality (Decision no 55/2013 of the Court), itsauthor considers that the legal provisions violate theconstitutional provisions of art. 56 para. (2), because “thepenalty tax burden, as 10%, is imposed on a legal person forwhom it is impossible to carry out a reevaluation, but also in aposition to be evicted from the building through stopping thesupply of utilities (…) even before the ruling of the Court”.

In this case, the Court found that “no valid criticism ofunconstitutionality was formulated, but what was brought intoquestion was a matter of enforcing the law”. And this matter isoutside the jurisdiction of the court, which, according to art. 2para (3) of Law no 47/1992, is limited to deciding on theconstitutionality of the documents that are brought before it.

This was also the argument for which the court rejected,through a final and binding decision, the above-mentionedexception of unconstitutionality, considering it unfounded.

Probably this is common knowledge the fact thatindividuals that own two or more buildings, not acquiredthrough legal succession, owe a tax on the respectivebuildings, increased as follows (Tax Code, art. 252):

a) 65% for the first buildingbesides the home address;b) 150% for the secondbuilding besides the homeaddress;c) 300% for the third buildingand other buildings besides thehome address

Besides the disadvantage of increasing the tax burden,those owners have the obligation to make a special statementto the specialized departments of local authorities in theterritory of residence, as well as those of the territory wheretheir other buildings are located.

graphgraph

ph

h

graph

.

3.2. Erroneously attacking the measure of increasing tax

rate on the buildingsn not re-evaluated on term

4. Discussions on the constitutionality of progressive

taxation of buildings based on the number of properties

owned by a person

–


20

Before including the measure of progressively taxingbuildings (depending on the number of properties owned by oneperson) in the present form of the Tax Code, the provisionsfound in rt. 5 para (2) of Government Ordinance no36/2002 regarding local taxes were in effect (the legal solutionwe analyzed here belongs to the same ordinance).

This is what it stipulated:(1) The tax on buildings, in the case of individuals, is calculatedby applying the rate of 0.2% in urban areas and 0.1% in ruralareas on the taxable value of the building (...).

(2) If the taxpayers referred to in para. (1) own several buildingsintended for housing, building tax shall be increased as follows:

a) 25% for the first building besides the home address;

owning several properties to contribute more, through taxes, tothe public expenditure ... In its jurisprudence, the ConstitutionalCourt, accordant with the European Court of Human Rights, hasestablished that equality does not mean uniformity, so it is

a graph

b) 50% to the second building, besides the home address;c) 75% to the third building, besides the home address;d) 100% for the fourth and subsequent buildings, besides thehome address.

(3) The numerical order of the properties is determined inrelation to the year of acquisition of the building, in whateverform, resulting from documents proving ownership (...).

In a case for an annulment of administrative acts (file no5.276/CA/2003), the Bucharest Court approached theConstitutional Court as regards the exception ofunconstitutionality of the provisions mentioned. According tothe author of the objection (Decision no 477/2004), "it is notpossible for a law to establish a differentiated system forbuilding tax, based on the number of properties owned by aperson", as it is contrary to the constitutional principle ofequality of citizens before the law.

It also claims that, through the legal provision subjected tocriticism, a double discrimination occurs: "on the one handbetween individuals who, depending on the number of buildingsowned, owe differentiated tax rates, and secondly betweenindividuals and the state, through the latter’s private buildings,buildings for which it is exempted from taxes”.

The Government’s position was that "the GovernmentOrdinance no 36/2002 was repealed by Law no 571/2003regarding the Fiscal Code, but the provisions of art.Article 5. (2),claimed to be unconstitutional, were resumed almost identicallyin the Tax Code, art. 252 para. (1) The provisions criticized arenot contrary to the text of the constitution (art. 16 para (1)),because the principle of equality [...] does not mean uniformity;the established legal treatment is different, as are thecircumstances of the taxpayers, circumstances determined bythe number of buildings they own. "

On this occasion, the Court noted, inter alia, that, after thenotification, the Government Ordinance no 36/2002 was indeedrevoked through art. 298 para (1) section 27 of Law no

571/2003 regarding the Fiscal Code, but the legislative solutioncontained in art. 5. (2) of the Ordinance no. 36/2002 was takenover by the provisions of art. 252 para (1) of Law no.571/2003 regarding the Fiscal Code. Its content was thefollowing: "If an individual owns two or more buildings used asdwellings, which are not leased to another person, building taxshall be increased as follows: a) 15% for the first buildingbesides the home address, b) 50% for the second buildingbesides the home address, c) by 75% for the third buildingbesides the home address, d) 100% for the fourth andsubsequent buildings besides the home address . "

The constitutional provisionsbrought into question by theauthor of the exception ofunconstitutionality in order tosupport it are the following:Article 16 para. (1) - "All citizensare equal before the law andpublic authorities, without anyprivilege or discrimination."Article 44. (1) and par. (2) Thefirst sentence - "(1) The right toproperty and claims against theState are guaranteed. The content and scope of those rightsshall be determined by law. (2) Private property is guaranteedand protected equally by the law, regardless of ownership. "

Examining the exception of unconstitutionality, the Courtholds (Decision no. 477/2004) that "in essence, the criticism ofunconstitutionality consists of supporting the fact that bycreating a surtax for the individuals who own two or morebuildings used for housing/ dwelling, this measure violates theconstitutional principle of equal rights provided by art. 16 para.(1) and constitutional provisions of art. 44 par (1) andpar (2) regarding the right to private property. "

Explaining whether or not there is any sort ofdiscrimination to the taxpayers who own several buildings, incomparison to those who only own one building, the Courtstates that “there is enough reason behind the text that is beingcriticized for establishing a different legal system, namely aprogressively calculated tax, according to the number ofbuilding owned”. Reference is made to the provisions of art. 56para (2) of the Constitution, according to which " the legaltaxation system must ensure a fair distribution of the taxburden."

A fair distribution of the tax burden implies, on the onehand, taking into account the financial situation of the taxpayer,and on the other hand, the increased possibility for those

graph

graph

graph

agraphagraph

graph


21

possible to set a different legal treatment for special situations,when it is justified rationally and objectively. (Decision no477/2004)

The apparent inequality in taxation, between the stateand other taxpayers who own several buildings, is annihilatedby the reference to the provisions of art. 250 (1) ofthe Tax Code, according to which the fact that no tax is due onthe building for some buildings belonging to the state isjustified, on the one hand, through the nature and purpose ofthese buildings, intended to serve the general interest, and onthe other hand, through the need for a simplification of financialoperations, given the fact that institutions are financed by thebudget, and the state contributes through revenues andexpenditures to local budgets with sums of money from certainrevenues of the state budget, and subsidies from the statebudget ...

Finally, without acknowledging any violation of theprovisions in the international documents regarding theprotection of private property rights, mentioned by the author ofthe exception of unconstitutionality, the Court rejected theexception of unconstitutionality in its entirety. In our opinion,raising a new exception in the same matter of regulating theprogressive taxation of buildings according to the number ofproperties owned by a person would deliver the same finalresult, given the lack of new circumstances.

The consequences of the financial crisis (still inprogress), plus the growing financing needs of differentactivities in local communities, exhibit the need to increaserevenue from taxes of all administrative-territorial units. In thischapter, we have proven that things got as serious as possiblein this respect, as demonstrated by the recent adoption, by theexecutive committee, of the Ordinance on Financial Crisis andInsolvency for municipalities.

Certainly, when drafting the text of that Ordinance,several aspects were taken into account. Essentially, what wasdesired was to avoid the increase in arrears recorded byadministrative units (ATU) and therefore to mitigate thetermination of the Stand-By Agreement with the IMF. On theother hand, the government intended not to reach a state ofblocking the activity of the suppliers of goods, services andworks which have to recover from ATU various sums of moneyrepresenting arrears.

What is certain is the fact that the procedure regardingthe financial crisis and insolvency seems to give authorities achance to improve the economic situation of ATU, so as toensure that the citizens be provided essential services. Also,applying it, municipalities would be able to meet their paymentobligations to employees, dealers and suppliers, but also topromote financial and accounting procedures, as well asbudget and tax practices necessary for financial recovery.

However, it remains desirable not to enter into suchproceedings and to ensure increased financial inputs throughlocal management measures, while optimizing the use of allavailable resources. However, as shown in the (external)financial audit reports following assessments of most ATU, thesituation is far from being considered at least acceptable.

Beyond the weaknesses in the administration of assets,attracting and using EU funds, expenditures and so on, thereare often multiple weaknesses to be observed in the settingand collection of one’s own revenues. Throughout auditactivities, it is no longer a surprise to find out that an entireseries of buildings, together with the related land, is not to befound in the fiscal documents.

The reasons are the most diverse - from the uncertainlegal status of the property (being the object of various types oflitigation) to withholding tax table and omitting certain sumswhen declaring them to municipalities. Obviously, the solutionis the knowledge and application of tax laws, both among thosewho have to apply and those who control/audit, which is why webelieve that this article may represent a plea in this regard.

paragraph

5. Perspectives

References

Andreşan, B., Grigoriu, T. (2010). Tratatele Uniunii Europene - Varianta oficialăconsolidată, Hamangiu Publishing House, Bucharest;

ş ;Boulescu, M., Ispir, O., Dascălu, E.D. (2009). Uniunea Europeană. Instituţii,buget, audit. Editura Didactică şi Pedagogică, Bucharest;Dascălu, E.D., Nicolae, F. (2006).

;ţ ;

;ţ ş

;*** (2012). Decizia Curţii Constitu ionale nr. 438, referitoare la excep ia deneconstitu ionalitate a dispozi iilor art. 249 alin. (3) şi art. 256 alin. (3) din Legea

;*** (2010). Decizia Curţii Constituţionale nr. 518, de neconstituţionalitate adispoziţiilor art. 249 alin. (3) din Legea nr. 571/2003 privind Codul fiscal, M.O.nr. 337 din 20.05.2010;*** (2013). Decizia Curţii Constituţionale nr. 55, referitoare la respingereaexcepţiei de neconstituţionalitate a dispoziţiilor art. 253 alin. (6) din Legea nr.571/2003 privind Codul fiscal coroborate cu cele ale art. 249 alin. (3) din acelaşiact normat ;*** (2002). Ordonanţa Guvernului nr. 36 privind impozitele şi taxele locale, M.O.nr. 92 din 02.02.2002;*** (2004). Decizia Curţii Constituţionale nr. 477, asupra excepţiei deneconstituţionalitate a dispoziţiilor art.

Bostan, I. (2008). Drept financiar, Tehnopress Publishing House, Ia i

InternalAudit in public institutions, EconomicPublishing House, Bucharest*** (2003). Constitu ia României, M.O. nr. 767 din 31 octombrie 2003***(2003). Legea nr. 571 privind Codul fiscal, http://static.anaf.ro/static/10/Anaf/Legislatie_R/Cod_fiscal_norme_2013.htm*** (2011). Ordonan a de Guvern nr. 30 pentru modificarea i completarea Legiinr. 571/2003 privind Codul fiscal, M.O. nr. 627 din 2 septembrie 2011

] ]] ]

nr. 571/2003 privind Codul fiscal, M.O. nr. 446 din 4 iulie 2012

iv, M.O. nr. 209 din 12.04.2013

252 alin. (1) din Legea nr. 571/2003privind Codul fiscal, M.O. nr. 54 din 17 ianuarie 2005.


22

Moise POPESCU

Doina

Department I,

Department I,

Director

Head of Training Unit

DRĂNICEANU

PARTICIPATION OF THE ROMANIAN COURT OF ACCOUNTS IN THE IV

MEETING OF THE GOAL TEAM 1 – CAPACITY BUILDING (GOAL TEAM 1 -

GT 1) OF EUROSAI STRATEGIC PLAN FOR THE PERIOD 2011-2017

PARIS, FRANCE, MARCH 2013

TH

EUROSAI Strategic Plan 2011-

2017

component

(SAI) first strategic plan

4 strategic goals

organization's needs and priorities

approved within the VIII Congress of EUROSAI Lisbon,

Portugal, May 2011

4 strategic goals

has drawn up a for the period, meant to represent the framework for efficiently and effectively

conducting the activities of the Supreme AuditingInstitutions . This was designed in the spiritof transparency, further to consulting all the EUROSAI members,being developed based on reflecting the

. The Strategic Plan washeld in

in

The are focusing on:

th

.

�

�

�

�

Capacity building

Professional standards

Knowledge sharing

Governance and communication

: strengthening the institutional capacity means the development of skills, knowledge and workingmethods by means of which an organisation becomes more efficient starting from the pros and removing discrepancies anddeficiencies. EUROSAI envisages the development of strong, independent and highly professional Supreme AuditInstitutions.

: in view to competently and professionally fulfil their tasks, the Supreme Audit Institutionsrequire an updated framework of international professional standards, relevant for their tasks and needs. These standards aredeveloped by INTOSAI, while EUROSAI is focusing on promoting and facilitating their implementation by its members.

: in view to enhance public sector auditing, accountability, better governance and transparency,EUROSAI promotes the improvement of sharing knowledge, information and expertise among its members and with externalpartners.

: in view to effectively fulfil its mission and to increase its capability of meeting itsmembers' requirements, EUROSAI should have a good leadership. The current model was designed in accordance with theprinciples of good governance and effective communication, reflecting the strategic goals and encouraging the widest possibleinvolvement of the member Supreme Audit Institutions in the organisation's activity. Strong relationships are built up betweenall the EUROSAI bodies involved in the Strategic Plan implementation.

The implementation of EUROSAI Strategic Plan

to the success of INTOSAI Strategy in

Europe

in view to further develop public sector auditing

in the region. The active role of all EUROSAI members in

the Strategic Plan implementation is required

will contribute, observing the INTOSAI core values and

maximising the efficient use of INTOSAI initiatives and

results,

.

GOAL TEAM 1: CAPACITY BUILDING

23

To this end, the 4 strategic goals were formulated asfollows

facilitating the EUROSAImembers' institutional capacity development andstrengthening”

promoting andfacilitating the implementation of International Standards ofSupreme Audit Institutions (ISSAI) and participating in theirfurther development”

– encouraging thecooperation and expertise exchanges between EUROSAImembers, within INTOSAI, as well as with external partners”

– ensuringEUROSAI leadership in accordance with the principles ofgood governance and effective communication” .

In view to implement the 4 strategic goals of EUROSAI,the VIII EUROSAI Congress decided, on the grounds of art.9.5of EUROSAI Statute, the establishment of 4 goal teams (GoalTeams - GT), as follows

:

.

.

:

�

�

�

�

.

Goal 1: ”Capacity building –

Goal 2: ”Professional standards –

Goal 3: ”Knowledge sharing

Goal 4: ”Governance and communication

Goal Team 1 (GT 1): Capacity building

Goal Team 2 (GT 2): Professional standards

Goal Team 3 (GT 3): Knowledge sharing

Goal Team 4 (GT 4): Governance and communication

th

�

�

�

�

The IV meeting of GT 1,

context of implementing the strategies related

to capacity building,

EUROSAI members'

training improvement and with the enhanced organisation

of Supreme Audit Institutions and their institutional

strengthening

line, IV

meeting of GT 1 importance

of sharing best practices and expertise within EUROSAI

key-activities of the Strategic Plan

4 sub-groups (Task Groups – TG), in direct

correlation with the strategic goals of the EUROSAI

Strategic Plan 2011-2017 the responsibilities were

redefined

th thwhere Ms. Doina Drăniceanu,Head of Training Unit, Department I and Mr. Moise Popescu,director within Department I, participated, was held in Paris,France, on March 18 , 2013.

In thethe key issues on which GT 1 is focusing

in view to facilitate the development and the strengthening ofinstitutional capacity are dealing with

.

On this alike with previous meetings, thetook place under the aegis of the

.From the perspective of allotting as adequately as possible the

, in accordance with thedecision taken by GT 1 members during the third meeting, heldin November 2012, of restructuring the 7 sub-groups previouslyestablished into

,as such:

th

�

�

�

�

TG 1 „Availability of data”, (coordinator Latvia)

TG 2 „Identification of needs and innovations” , (coordinator Georgia)

TG 3 “Strategic support“, (coordinator France)

TG 4 “Independence”, (coordinator Hungary

, will set up the conditions for ensuring the maximum possible use ofresources and expertise available in the field of capacity building (Latvia, Spain, Sweden).

, will set up the operational framework meantto facilitate the development of capacity building (Georgia, Romania, United Kingdom).

, will facilitate and support the development of capacity buildingstrategies at the level of SupremeAudit Institution (Slovakia, Portugal, France).

), will act in the direction of strengthening and supporting theindependence of SupremeAudit Institutions. (Hungary,Austria, France).

Participation of the Romanian Court of Accounts in the IV meeting of the Goal Team 1 – Capacity building EUROSAI Strategic Plan 2011 - 2017,th

24

.

In the opening of the IV meeting of GT 1, the welcomespeech was made by Mr. Jean-RaphaelAlventosa, the Directorof International Relations Department from the French Court ofAccounts. The was followedby the agreement on previous meeting conclusions.

a key issue in the agenda of theIV meeting, with a stress upon the presentation of theestablished operational plan and upon the recentchanges/proposals, as well as of the proposed annual road-map (summarizing the annual priorities).

One of the main topics of interest on the agenda of the IVmeeting of GT 1 was

. Thus, the French Court ofAccounts delivered a general presentation of this topic and ofthe French case.

Likewise, a where eachcountry presented its own .

gave an overview of the waysour institution disseminates the activities and information atinternational level: the provisions of Institutional DevelopmentStrategy, of the Communication Strategy and of the HumanResources Strategy, as well as the planning of theirimplementation; the Romanian Court of Accounts' Journal; ourinstitution's website – the section concerning InternationalRelations, the activity reports drawn up by the participants ininternational events, subject to the Plenum sessions approval,the Journal of International Relations and Protocol Unit, theWorking Group established at the Court level in view toimplement ISSAIs, the studies carried out with regard toimplementing the expertise acquired as result of participation ininternational meetings in our institution activity.

not declaratively, but through , scanningthe English version of the .

in terms of structure, contents ofdocuments published on it and the way it

.

The round table was succeeded by a general andby formulating the following conclusions:

- all the Supreme Audit Institutions are facing the same

, both within the institution and towards the interestedstakeholders; all of them should constantly prove the

, by making use of theirskills;

- most of the Supreme Audit Institutions participating in theround table have an ,with at least one presentation of the institution and access to theabstracts of main reports;

;- most of the Supreme Audit Institutions

, alsohaving an informal network of „liaison officers” orrepresentatives, sometimes structured as “organisationalcommittee” (e.g.: France);

- some of the Supreme Audit Institutions developed an, through

weekly debriefing points accessible to the whole staff (e.g.:Sweden);

- some of the Supreme Audit Institutions developed

(e.g.: Hungary, posting all the missionreports).

As for the evolution of the operational planimplementation, the coordinators of the 4 working sub-groups(Task Groups – TG), Latvia, Georgia, France and Hungaryindicated the achieved and theencountered in

. Each sub-group responsible SAIpresented

as subject to debates; its was agreed asconsequence of discussions between all GT 1 members.

made ain the context of GT 1, with an overview of

related tasks

th

th

th

adoption of the meeting agenda

Focusing on the implementation of the new

operational plan represented

the topic of disseminating the

international activities and information within the

Supreme Audit Institution

round table was organised,

practices The representatives of

Romanian Court of Accounts

The presentation of these ways of disseminating the

activities and information at international level was done

concrete examples

website The members of GT 1

expressed their positive opinions about the Romanian

Court of Accounts' website,

ensures the

dissemination of activities and information at international

level

debate

challenges in terms of disseminating the knowledge

acquired as follow-up to participating in international

activity

value

added at international level

communication

English version of their own website

some of them developed an

external portal integrally in English (e.g.: Romania)

report on the

international activity directly to their leadership

interesting way of disseminating best practices

IT tools

allowing for all their staff full access to the entire

international activity

progresses difficulties

fulfilling each strategic goal of EUROSAI

Strategic Plan 2011-2017

comments and proposals on the operational

plan final version

The task groups (TG) presentation of the

activity carried out


25

�

�

�

�

TG 1 : coordinator Latvia

Latvia transmission of the draft

database

Capacity

Building Committee (CBC), chaired by United Kingdom

IDI

„success stories” within EUROSAI related to capacity

building

Sweden AFROSAI-E

TG 2 : coordinator Georgia

Georgia

discrepancies

needs

Romania requested a change in expression

from

accepted

providing all the pieces of information e-learning

Romania will

continue to permanently contribute with suggestions on

improving the design of EUROSAI website, which will be

transmitted to GT 4.

Spain mail

United Kingdom

innovations in EUROSAI

Spanish

French

German Russian

Lithuania

TG 3 : coordinator France

Portugal

clear contact points within

EUROSAI, to whom IDI will transmit information on the

training programmes or sessions

TG 4 : coordinator Hungary

Hungary questionnaire on independence

seminar

Other discussed issues

replacing the inactive GT 1 members (Cyprus and Ukraine)

new members

the Report on the

participation in GT 3 meeting and the cooperation with

ASOSAI (the French Court of Accounts),

financial rules of EUROSAI (EUROSAI Secretariat) has

been done

Suggestions on a main topic of debates for the first

part of the next GT 1 meeting

Possible topics

conclusions agreement upon future actions.

importance of sharing best practices and expertise within

EUROSAI was reiterated

discussions

constructive involvement of participants in the debates

keeping on the

collaboration between the GT 1 members the

next GT 1 meeting

requested theto all GT 1 and IDI members and afterwards to all the

regional organisations collaborating with the:

the pursued goal is the stabilisation and the checking out of thedatabase adequacy and content previously to adopting adecision on posting it on-line, as a tool. This was circulated inMarch 2013 and should be assessed at the next meeting ofGT 1, in autumn 2013.

suggested Sweden to propose a method/project on

. It was decided upon drawing up a description of“positive examples” for the next meeting, previously to theadoption of a decision on generalising the approach. The first„success stories” could come from GT 1 members. The goal isto identify the interesting and reproducible cases and to ensurethe contact between the Supreme Audit Institutions needingsupport and those which have successfully overcome the sameobstacles. The assessment is to be carried out on the occasionof the next GT 1 meeting, in autumn 2013.

reported on the evolution within . Itwill address AFROSAI-E an invitation to participate in the nextGT 1 meeting, in autumn 2013.

Starting from the database built up by Latvia, hasthe intention of presenting within the next autumn meeting amethod of keeping on identifying the andpossible that should be discussed with IDI. Theassessment will be carried out during the next GT 1 meeting, inautumn 2013.

(„collaboration with EUROSAI members GT 1”), a changethat was . Romania will further send an informale-mail message to all the GT 1 members, kindly asking for

about themodules existing within the Supreme Audit Institutionsmembers of GT 1. The assessment will be carried out on theoccasion of next GT 1 meeting, in autumn 2013.

In view to acquire the position of “members” instead of“experts”, requested a formal . GT 1 expressed itsagreement on this issue.

The made a presentation of thebrochure related to . It was agreedthat Spain will accomplish its translation into , while

France will carry out the translation into . France willtransmit it to Germany and to Russia for an eventual translationinto and .

will inform GT 1 through an e-mail abouteventual proposals on an award for innovation. Theassessment will be achieved on the occasion of the next GT 1meeting, in autumn 2013.

presented news about the activity of GT 3. It wasagreed upon the setting up of

.

presented theto be filled in by all the Supreme Audit Institutions till July 31 ,2013 and announced that next year it will host a onindependence. A funding request could be prepared in view tobe agreed upon during the next GT 1 meeting.

envisaged the procedure of

and of inviting on volunteer basis. No fundingwas requested for 2013. A presentation of

as well as of the

.

are expected from each SAImember of GT 1 (such as the one referring to the disseminationof activities and information at international level within theSupreme Audit Institutions, from the IV GT 1 meeting ofMarch 2013). , proposed by France in itsposition of GT 1 Chair would be: Does EUROSAI have specificneeds of institutional capacity building as compared to otherregional working groups? How does your Supreme AuditInstitution assess its own performance?; Focusing on therelations with donors: the way of interacting with the WorldBank, the International Monetary Fund and other donors.

The IV GT 1 meeting ended with drawing upon the The

.The satisfaction for the carried out and for

thewas expressed.

It was agreed upon keeping in touch andby e-mail, until

.

st

th

th

European Organisation of Supreme AuditInstitutions


26

Sanda MIHAIChamber of Accounts DoljDeputy Director

NEW APPLICATIONS OF IT&C TECHNOLOGY

Motto: “No one knows anything, really. It's all rented, orborrowed.” - Ian McEwan

Introduction: External public auditors face in theirmissions, more and more complex challenges in obtainingsufficient adequate audit evidence to sustain their findings,conclusions and recommendations. The use, by the auditedparties, of database management systems, can provide anabundance of useful data and information, but is oftenrequired specialized knowledge, either to access the entity'sapplications – e.g. the software used by National Agency forFiscal Administration, The National Public Pensions Fund,The National Health Insurance Fund, or to collect, analyze,filter and interpret the data provided. In this field, thedissemination of knowledge is essential to insure thesuccess of the audit missions, but the time budgetlimitations set for these missions make difficult theemployment of classic training procedures, which imply theinterruption of current professional activities in order toparticipate in week-longtraining sessions. This articlepresents a few alternatives,which are time – efficient andalso financially feasible, tocommunicate the bestpractices and to insureprofessional assistancebetween auditors.

Along with thepopularization of internetas a feasible way tocommunicate audio-videostreams, were developedsoftware platforms thatmake possible the setup ofinteractive meetings – inthe form of workgroups,presentations or teaching classes, which allow interestedparties to attend, irrelevant of their location.

The webinar term was introduced in 1981, joining thewords web (world wide web) and seminar, and is defined asa live, online educational presentation, during whichparticipating viewers can submit questions and comments.

The use of webinars to instruct the SAI auditors canoffer a significant improvement in results, especially in thecase of local missions, coordinated by the centraldepartments, where numerous auditors are involved, eachone with a different level of proficiency in IT&C. Also, thismethod is useful to communicate new methods for acquiringdata and information – e.g. practical courses for accessingthe Electronic System for Public Acquisitions, whichemerged as the main source of relevant informationregarding public acquisitions, or to gain proficiency in using

certain applications – Idea, Infopac, Infoteam, etc.The webinar session is initialized by the organizer,

who sends an e-mail message to the potential participants,establishing the date and hour of the internet seminar, andalso the web address at which it will be available.

The invitees will access the web address asinstructed, simply by clicking on it. Thus, they will view ontheir own computer, the screen of the organizer's computer,and also any operations that he will execute throughout themeeting. This technique (desktop sharing) allows theparticipants to witness the steps and commands that theorganizer gives, as if they were right beside him.

The organizer can communicate with the otherparticipants both audio, through the microphone attached tohis computer, and also through video stream. Also, theparticipants can request the necessary clarifications, usingthe same communication means.

Furthermore, the organizing party can transfer – eithertemporarily or permanently, control of the meeting toanother participant, regardless of his location. Thus, itpossible to organize training sessions with multiplesubjects, with lecturers from any local structure, or fromexternal service providers.

To insure the correct and complete dissemination ofthe presented practices, the sessions can be recorded andmade available to the participants, so they can always revisitthem when necessary.

Besides the obvious advantages provided by thepossibility of quick know-how dissemination in various fieldsof interest, this technique minimizes the period in which theauditors are diverted from the current mission. It is not evenrequired to be present at the local structure's headquarters,because the auditors can participate in the meetings fromany possible location with adequate internet access, andcan resume the daily activities once the meeting ends.

Furthermore, by planning a diverse program ofmeetings, on different subjects and at different levels ofproficiency, it can ensure the effectiveness of thedissemination activities, by avoiding the participation ofauditors with already sufficient knowledge in the respectivefield. This way, the auditors will have the option to participateat any seminar organized, choosing the most beneficialones

� Online conferencing. The “webinar” method.

.

27

New applications of IT&C technology

There are numerous available online seminar platforms,among the most popular being: Adobe Connect, Cisco WebEx,Infinite Conference, Click Webinar, Microsoft Office LiveMeeting, each offering, along with the capabilities describedabove, a series of other practical features, as: file transfer,password protection, encryption, even the possibility ofattending using a smartphone

Whilst during a webinar, the participants can view thelecturer's desktop, without the possibility of actively intervening,the remote administration method has the opposite purpose,allowing its user (the administrator) to remotely access, byusing his own computer, any remote workstation, with access tothe internet. Along with the access to remotely stored files onthe target computer, the administrator can operate it through itsperipherals, also viewing its desktop, as if right in front of it.

The remote administration technique is widely used by ITassistance companies. This way, they are able to remedyoccurring errors, or provide specialized assistance, without theneed of physical presence at the client location.

By analogy, considering the various IT knowledgerequired by the auditors (several versions of Windowsoperating systems, M.S. Word, M.S. Excel, Outlook, Ideea,Infoteam, Infopac, etc.), the use of a “specialist”, either a fellowauditor, an own IT specialist, or an external contractor, can leadto significant improvements in audit related activities, and alsoin the quality of audit reports and the audit evidence.

We, as auditors, often give or receive assistance from ourco-workers, on operating the IT equipment and its software,and sometimes we forgo certain investigative procedures giventhe complexity of the IT procedures involved. The use of remoteadministration allows delocalization and also specialization ofassistance received. The presence of a skilled co-worker is nolonger necessary to maximize the benefits of IT technology, andthe assistance given is no longer limited to his knowledge.

One of the most popular remote administration software isTeamViewer2. In its latest release, the application can be runeven from a memory stick, without requiring installation. Toallow the administrator's access, the beneficiary party mustcommunicate the ID number (same every time) and the accesspassword (different each time, as a security measure). Withoutthis information, the target computer cannot be accessedremotely. The administrator can control the target computer asif in front of it, dealing with the problems at hand – errors, pcmalfunctions, or software related difficulties. As soon as theremote administration session ends, the password is reset,making it impossible to open a new session using the samepassword. Similar software3 is GoToMyPC and SymantecPCAnywhereTM

The challenges brought on by the “digital era” havebeen acknowledged both bycompanies and government,each striding to updatethe teach ing methodsused in the educationalprocess. For instance,the American organization“Digital Promise”, authorizedby Congress in 2004, has the mission to “improve all levels ofeducation and provide Americans with the knowledge andskills needed to compete in the global economy”.

The stringent need to acquire new digital skills is also feltby auditors of the Supreme Audit Institution, and this sectionproposes an innovative method in this regard.

The sandbox term is derives from the softwaredevelopment sector, where, in order to test all possiblecommands, even the destructive ones, and to detect possibleerrors, some causing severe consequences to the workstationor network, the testing of new software is virtualized.

This way, an isolated software environment is created,where the application can be operated without anyconsequence to the exterior.

The sandbox method can also be used for educationalpurposes, allowing new users to operate all the specificcommands of an application, and to observe their effects,without causing data alteration, deletions or other changes.

Using this method to build an enclosed testing facility,hosting the software applications used by the major auditedparties either in fiscal administration or in financialaccounting, each one with its own test database can proveextremely useful in training new auditors, who require access tothese applications.

For advanced users, the sandboxing technique allows forcomplex procedures on the IT systems employed by theaudited parties.

For instance, in 2012 wemanaged to load the entiredatabase used by a local fiscaladministration (using a back-upcopy of the entire server anddatabase), and also the front-endapplication, creating a virtual copyof the entire IT infrastructure on a

single laptop. Using it, the auditor could achieve any specificfiscal operation (from creating new taxpayers, adding tax data,the issuing and cancelation of tax receipts), without any realeffect on the audited entity's data, whilst gainingcomprehensive knowledge of the IT system employed.

This way, we concluded that the cashiers accounts couldcancel tax receipts without the requirement of superiorapproval, and that, by setting improper access rights to theapplication, the cashiers could even record or cancel banktransfers, even though this was strictly an accountant privilege

.

�

�

Remote administration

The Sandbox method

.

.

−

28

Svetlana MUREȘANDepartment I

Cristina NENOVDepartment I

E

E

xternal public auditor

xternal public auditor

Romanian Court of Accounts is member of theINTOSAI Subcommittee on Internal Control Standardssince 2002 when it was invited to join the activities of thisimportant work group.

This Subcommittee is a particular one as it is the onlyone who works for the public sector and does not functionsonly for SAIs as the majority of the groups from this area.

The most significant result of the members of thisSubcommittee is INTOSAI GOV document which statedthe issue of the legal framework for reporting oninternal/managerial control in many of the European Unioncountries or INTOSAIs members. Thos document wastranslated in Romanian for the internal use of RomanianCourt of Accounts (as part II of the Guidance for internalcontrol evaluation in public sector – 2011). We areunderlying the important contribution of Romanian Court ofAccounts in the issue of INTOSAI GOV.

Recent works of the Subcommittee focused onanalyzing two main aspects regarding internal/managerialcontrol in public sector of the INTOSAI member countries,such as:

Reporting on internal control (going beyondcompliance with legal acts and regulations towardseffectiveness of the implementation of objectives andtasks performance);

Risk management (taking into consideration thefuture consolidation of the risk monitoring and riskassessment).

ly applied, can help reduce fraud, corruption andfinancial abuse. Enhancing and enabling accountability isespecially important today due to political instability,turbulent economic climate, and unparalleled challengesfaced by public services, austerity measures and risingunemployment rates in some regions. Good governance,transparency, accountability and integrity have become themost common expectations of citizens from governmentsand public managers.

The mission of the INTOSAI Subcommittee onInternal Control Standards is to focus on the developmentand promotion of good practices in the field of internalcontrol, and to establish improved and focused managerialaccountability in the public sector. Task 4 of theSubcommittee's Action Plan for the years 2010-2013 wasto conduct a survey on reporting on internal control bypublic sector entities – the results of the survey have beenpresented in this paper.

is to establish the extent towhich internal control reporting by public sector entitiesexists, under what forms and what the underlying frames ofreference are. The survey also intends to establish theSAIs' involvement in reporting on internal control. Theresults of the survey will be used as a background forupdating INTOSAI GOV 9110 on internal control reportingwhich will be implemented after 2013. The questionnairefor the survey was developed by the SAI of Lithuania – theCoordinator for Task 4, in cooperation with the SAI ofPoland – the Subcommittee Chair. To gain necessaryinformation, the questionnaire was sent to all INTOSAImembers and it contained questions on

,

�

�

:

INTRODUCTION

is a powerful tool which, whenconsistent

the legal and organisational framework for reportingon internal control,

the scope of internal control assessment and reportingon internal control by public sector entities,

�

�

Accountability

The aim of the survey

REPORTING ON INTERNAL CONTROL IN THE PUBLIC SECTOR - RESULTS

OF THE GLOBAL SURVEY OF 2012 FROM INTOSAI SUBCOMMITTEE ON

INTERNAL CONTROL STANDARDS

29

�

�

assessment of reports on internal control and auditing ofinternal control,

an opinion on the revision ofINTOSAI GOV 9110

.

Answers were received from 64INTOSAI members SAIs from allover the world, representing thewhole INTOSAI communityassociated in seven regionalworking groups (42.2% fromEUROSAI) .

1. The guidelines on internal control which were initiallydeveloped in 1992 were updated in 2004 by the INTOSAISubcommittee on Internal Control to make them relevant forthe control environment and challenges at that time. It isnecessary to emphasise that

in theconcept and assumptions refer to the worldwide recognisedintegrated frameworks of the Committee on SponsoringOrganizations of the Treadway Commission (COSO). TheINTOSAI vision comprised in INTOSAI GOV 9100 goes beyondthe private sector approach and takes into account the publicsector perspective, including primary ethical aspects as afundamental point of reference for public officers.

The main elements of this vision, as defined in INTOSAIGOV 9100, are the following:

1.1. is a dynamic process built into theeveryday activities of entities that is continuouslyadapting to the changes which an organisation is facing.It means that internal control is not an activity that mustbe added to daily operations, but an inevitable aspect ofthe methods of work integrated with well-known typicalmanagement functions, such as planning, executing andmonitoring. The definition states that internal control isan integral process that is affected by an entity'smanagement and personnel, and it is designed toaddress risks and to provide reasonable assurance thatin pursuit of the entity's mission accountabilityobligations are fulfilled as one of specific objectives.1.2. Fulfilling implies theprocess whereby public service organisations andindividuals within them are held responsible for theirdecisions and actions, including their stewardship ofpublic funds, fairness, and all aspects of performance.This will be realised by developing, maintaining andmaking available reliable and relevant financial and non-financial information, and by means of a fair disclosure ofthat information in timely reports to internal as well asexternal stakeholders. Non-financial information mayrelate to the economy, efficiency and effectiveness ofpolicies and operations.1.3. Effective information and communication as one ofthe components of internal control is vital for eachorganisation to run and control its operations. Informationis needed at all levels in order to obtain effective internalcontrol and to achieve the entity's objectives.1.4. Management's ability to make appropriate decisionsis affected by the quality of information which implies thatthe information should be appropriate (is the neededinformation there?); timely (is it there when required?);current (is it the latest available?); accurate (is itcorrect?); accessible (can it be obtained easily by therelevant parties?).1.5. All personnel should receive a clear message fromtop management. They should understand their own rolein the internal control system, as well as how theirindividual activities relate to the work of others.Communication should raise awareness about theimportance and relevance of effective internal control,communicate the entity's risk appetite and risktolerances, and make personnel aware of their roles andresponsibilities in effecting and supporting thecomponents of internal control.

2. In 1997, the Subcommittee on Internal Control Standardsissued

Several

Guidance forReporting on the Effectiveness ofInternal Controls: SAI Experiencesin Implementing and Evaluating

Internal Controls

1

THE BASICS OF REPORTING ON INTERNAL CONTROL

IN THE LIGHT OF INTOSAI GOVs

.

Guidelines for Internal Control

Standards for the Public Sector (INTOSAI GOV 9100)

Internal control

accountability obligations

Guidance for Reporting on the Effectiveness of

Internal Controls: SAI Experiences in Implementing and

Evaluating Internal Controls (INTOSAI GOV 9110)

1An extrapolation of the results to INTOSAI as a whole is not possible since

about two-thirds of the INTOSAI members did not participate in the survey.However, this survey shows the main trends in reporting on internal control.The specific results of the survey are presented on the following pages by totalnumber and percentage of the returned questionnaires.

Reporting on internal control in the public sector

30

examples have been presented of useful practices in creatingand monitoring a strong internal control framework and controlstructure.

These are:

a) having a constitutional or legislative provision thatestablishes in the law an overall basis (or a requirementand objectives) for maintaining effective internalcontrols;

b) prescribing internal control standards to be followedwhen designing an internal control structure and whichcan be patterned after or adopted from INTOSAIstandards;

c) focusing management's attention on theirresponsibilities for implementing effective internalcontrols and continuously maintaining a positive internalcontrol environment;

d) emphasising the prevention of internal controlbreakdowns – rather than detecting and correcting them– through such means as requiring managers toperiodically undertake self-evaluation of internal controloperations;

e) stressing the role of internal auditors as a critical partof an organisation's internal control structure; andensuring that Supreme Audit Institutions play a key rolein (1) establishing internal control standards, (2) creatinga solid internal control framework, (3) working withinternal auditors, and (4) evaluating internal controls asan integral part of both financial and performance audits.

1.1. An obligation to report on internal control, if set out indifferent legislations, is ascertained in various ways,usually in legal provisions and acts issued by the

government, but there is a small group of countries whereother specific legislations, such as statutory acts, areprovided as well.1.2. There is a visible practice that all public sectorentities are obliged to report on internal control, however insome countries reporting liability exists only for centralgovernment public sector entities.1.3. The frequency of reporting remains an essentialissue with regard to accountability. There is a prevailingdemand for public entities to report once a year – after theend of the fiscal year. In some cases reporting is expectedwhen required by the competent supervising body or onother specific dates, for example on a monthly or quarterlybasis.1.4. Usually a manager of a public entity is responsiblefor reporting on internal control. Interestingly, there arequite a meaningful number of countries where personsreferred to as managers of entities, as well as internalauditors or chief accountants (financial directors) aredesignated to meet reporting obligations.

1.5. The Ministry of Finance in most cases is the ultimateaddressee of reports on internal control, partly indirectlythrough the supervisory body. Sometimes other specificbodies, such as the parliament or the Supreme AuditInstitution are indicated as the addressee, especially whenthe internal control report is a component of an annualreport, or a facet of a financial statement. Interestingly, thenumber of countries where there is an obligation to providea report on internal control to the public is relatively low –and it is most often done through the internet.1.6. There is a balance when it comes to the form of areport on internal control between the practice ofdeveloping separate reports, and elaborating them as apart of a public sector entity's financial statement. In somecases, reports on internal control are embedded inmanagement/ accountability reports.1.7. To support the reporting processes, guidelines onhow to assess internal control for public sector entities areprovided in less than a half of the respondents. Moreover, itis often required that internal control assessment shouldbe conducted in accordance with a set of defined indicatorsrelated to internal control objectives, such as compliancewith legal regulations and internal procedures,effectiveness and efficiency of the activity, reliability ofreports, protection of resources, compliance with ethical

FINDINGS AND PRACTICES IN THE LIGHT OF THE

RESULTS OF THE 2012 SURVEY

1. Legal and organisational framework for reporting on

internal control


31

conduct rules and their promotion. Additionally, methodshave been indicated for assessing internal control togetherwith templates for reporting and even special instructionshow to complete the report.1.8 Negative consequences for a failure to present astatement on internal control or for presenting an unreliablestatement, such as penalties, fines, or administrativesanctions, are not a common practice around the world.

Without doubt, in most countries public sector entitiesregularly and systematically assess their internal controlsystems. However, it is worthwhile to notice quite a substantialnumber of cases without any activity in this field.

2.1. A review by the management or their expert is thepredominant method of internal control assessment,followed by an evaluation by the internal auditor, externalauditors, and Supreme Audit Institutions. Even though

emphasise that internal control should be an integralpart of day-to-day management operations, self-assessment workshops are not a widespread type ofexercise applied in the public sector.2.2. Compliance with applicable laws and regulations isthe primary subject of assessment and reporting out of thefour objectives of internal control. The analysis andreporting on the reliability of financial statements, issuesrelated to corruption, misappropriation or ethical aspects oftask performance and effectiveness of the implementationof objectives (tasks) set by the entity management are lessfrequently applied.2.3. All internal control components are assessed in most

countries. There is, however, quite a big number of caseswhere assessment is confined only to some aspects ofinternal control, for instance control mechanisms, controlenvironment or reporting on fraud and corruption.2.4. The state of internal control usually is the subject ofassessment, however usually there is no scale for anoverall evaluation. Generally, where there is a scale, theassessment is given in a descriptive manner, for examplevery good/ good/ satisfactory/ unsatisfactory orcompliance/ partial compliance/ non-compliance, or theinternal control system is effective/ the internal controlsystem is operating, but some minor improvements arenecessary/ the internal control system is operating, butessential improvements are necessary/ the internal controlsystem is not effective.2.5 Sometimes reports on internal control includevaluable information about internal control deviations/discrepancies, planned activities to undertake with a viewto improve internal control, basis for assessing internalcontrol and sources used for assessment or activities toimprove internal control planned for the year to which thestatement applies.

3.1 An entity's internal audit function, in addition to anexternal auditor, usually provides the assurance on thereliability and transparency of a report on internal control.In some countries, the competent ministry responsible forinternal control methodology (usually the Ministry ofFinance) plays an important role in this process as well.

3.2 The role of internal audit in the internal controlassessment process and reporting on internal control hasbeen identified. The role of SAIs in assessing internalcontrols, reporting on it and promoting good practices isquite alike. Internal control assessment is applied by SAIsmostly during financial audits, followed by complianceaudits, and it is the least frequently applied in performanceaudits.

3.3 Taking into consideration the activities of SAIs, thebasic and most often used form to report on internal controlis an audit report, however a separate document, e.g. aletter to the management, an annual report on the state ofaccounts, or even an annual report on internal control werealso indicated by those surveyed.

Summary: Although most of the countries have

implemented some formal requirements, the legal

obligation regarding reporting on internal control in the

public sector in its scope and range vary from country to

country, and the distinctions are broad and explicit. An

obligation to report, if expressed directly at all, primarily

takes into consideration the source of the obligation, the

type of entities legally bound to report, the subject and

frequency of reporting, ultimate addressee, and negative

consequences in case of failing to report. It seems

worthwhile to emphasise that only a few countries have

established reporting on internal control to the public.

Guidelines for Internal Control Standards for the Public

Sector

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.

2. Scope of internal control assessment and reporting

on internal control by public sector entities3. Assessment of reports on internal control and

auditing of internal control


32

THE RESULTS OF THE SURVEY IN FIGURES

PRESENTATION OF INTOSAI REGIONAL WORKING GROUPS IN THE SURVEY

Answers were received from 64 INTOSAI members SAIs; however one of the respondents informed that it is in the process ofaddressing the issues connected with internal controls and risk management, they gave a general overview only, and they did not answerthe questionnaire. Apart from a few SAIs, the rest did not answer all questions. The results are presented by the total number andpercentage of the returned questionnaires. In some questions, more than one answer was possible, or SAIs indicated more than oneanswer – in these cases the total percentage of the returned questionnaires exceeds 100.

2Nine INTOSAI member SAIs belong to two regional working groups, so the total percentage of the returned questionnaires exceeds 100.

3.4 Most frequently SAIs report barely on thedeficiencies in internal control. Only some of them give anoverall assessment and use a descriptive form (forexample: meets the requirements/partially meets therequirements/does not meet the requirements; or:very good/good/satisfactory/ poor; or: very well/well/satisfactory/ unsatisfactory; or: strong/ weak).

3.5 Since they play an important role in maintaininginternal control, almost all SAIs wish to promote goodpractices with regard to improving organisationalprocesses, and it is done by different means, such asconducting audits and issuing recommendations, andproviding guidelines for an internal control model.

In the light of the survey whose results have beenanalysed in this paper, it can be concluded that there is thebasis for undertaking a revision of INTOSAI GOV 9110, so thatto acknowledge the latest developments in the field, and tomeet the needs of all stakeholders. Such a revision will beincluded in the next work plan of the INTOSAI Subcommittee onInternal Control Standards as one of its tasks for the upcomingyears.

.

.

Summary: There are two main parties involved in the

assessment of reports on internal control and auditing of

internal control. Assurance on the reliability and

transparency of the report on internal control is mostly

provided by internal auditors with a visible commitment of

the national Supreme Audit Institution as an external

auditor. SAIs assess the internal control systems by

focusing, first of all, on financial and compliance audits,

and expressing their opinion against deficiencies rather

than drawing up an overall appraisal. SAIs are aware of

their position and influence on internal control in the

public sector, so generally they demonstrate a positive

attitude towards the promotion of good practices in the

field.

4. Opinion on the revision of INTOSAI GOV 9110:

Guidance for Reporting on the Effectiveness of Internal

Controls: SAI Experiences in Implementing and

Evaluating Internal Controls

QUESTIONS

SECTION 1: LEGAL AND ORGANISATIONAL FRAMEWORK FOR REPORTING ON INTERNAL CONTROL


33


34


35

3According to the COSO model, internal control components are the following: control environment, risk assessment, information and communication, control activities,

monitoring.

In the countries which use a scale for assessment, the following scales were indicated:from 1 (completely not applicable) to 5 (completely applicable);very good/good/satisfactory/unsatisfactory;high/medium/low;compliance/partial compliance/non-compliance;the internal control system is effective/the internal control system is operating, but some minor improvements are necessary/the

internal control system is operating, but essential improvements are necessary/the internal control system is not effective;the scale is verbal (without obligation to use standard words).

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SECTION 3: ASSESSMENT OF REPORTS ON INTERNAL CONTROL AND AUDITING OF INTERNAL CONTROL

SAIs which give an overall assessment of internal control, do it in the following manners:non-systematic overall assessment (in the form of a specific chapter of the report);meets the requirements/partially meets the requirements/does not meet the requirements;very good/good/satisfactory/poor;very well/well/satisfactory/unsatisfactory;strong/weak.

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SECTION 4: OPINION ON REVISION OF

“ UIDANCE FOR REPORTING ON THE EFFECTIVENESS OF INTERNAL

CONTROLS: SAI EXPERIENCES IN IMPLEMENTING AND EVALUATING INTERNAL CONTROLS”

INTOSAI GOV 9110

G

When answering “Yes”, the respondents were asked to give suggestions; these were the following:COSO ERM;Examples of reporting on statements on internal control should be included, as the present INTOSAI GOV 9110 focuses only on

the components of internal control;To include a description of the use of surveys and peer reviews as internal control assessment methods;To disseminate, at the national level, good practices evidenced to be followed and bad practices to be preventively avoided;Presentation of examples of reporting done by SAIs on internal control in the public sector;To include the most recent experiences of SAIs from various countries and consider the recent financial crisis;To include a template for a report;The document should be re-written in the form of a standard, and not as a discussion document. It is currently not useful and is

out of date;More examples on components of internal control – sample tools, templates, scale system etc. for an overall assessment of

internal control system;Specific roles of internal audit and management.

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List of countries which responded to the questionnaire on internal control reporting

EUROSAI

ASOSAI

ARABOSAI

AFROSAI

OLACEFS

PASAI

CAROSAI

1. Austria2. Belgium3. Bosnia and Herzegovina4. Bulgaria5. Cyprus (declares also membership inASOSAI)6. Czech Republic7. Denmark8. Estonia9. Finland10. France11. Georgia (declares also membership in ASOSAI)12. Germany13. Hungary14. Iceland15. Italy16. Latvia17. Lithuania18. Netherlands19. Malta20. Norway21. Poland22. Portugal (declares also membership inOLACEFS)23. Russian Federation (declares also membership inASOSAI)24. Romania25. Slovakia26. Sweden27. Turkey (declares also membership inASOSAI)28. Ukraine

29. Australia30. Bangladesh31. China32. Japan33. Korea34. Malaysia35. Pakistan36. Singapore36. Thailand

37. Jordan38. Kuwait (declares also membership inASOSAI)39. SaudiArabia (declares also membership inASOSAI)40. Yemen (declares also membership inASOSAI)41. Qatar (declares also membership inASOSAI)42. United Arab Emirates (declares also membership inASOSAI)

44. Côte d'Ivoire45. Egypt (declares also membership inARABOSAI)46. Republic of SouthAfrica47. Rwanda48. Uganda49. Zimbabwe50. Zambia

51. Belize (declares also membership in CAROSAI)52. Brazil53. Chile54. Columbia55. Costa Rica56. Honduras

57. Kiribati58. Maldive

59. Bahamas

60. Salvador61. Lesotho62. United Republic of Tanzania63. United States ofAmerica64. Philippines

Countries which did not declare membership in any

Regional Working Group


39

Liliana MUSTA�ĂExternal Relations and Protocol ServiceCounsellor

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.

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The April 2013issue of INTOSAI Journal isstructured according to tenchapters, featuring the latestinformation on externalpublic audit at internationallevel

**The Editorial by Mr. Liu Jiayi, Auditor General ofChina and First Vice-Chairman of the INTOSAI GoverningBoard is XXI INCOSAI: Building Consensus to OvercomeChallenges

Mr. Liu Jiayi deals with the XXI INCOSAI Congress tobe held in Beijing, China, in October 22–27, 2013. In hisopinion, this event is extremely significant, since leaders andrepresentatives from the whole world are going to celebratetogether the 60th INTOSAI anniversary and 50 years of SAIAustria's chairmanship of the General Secretariat.

Mr. Liu Jiayi then makes an overview of INTOSAIevolution and achievements since its establishment and upto date, and highlights the significance of this organisation'srole for the joint development of SAIs, through the promotionof collaboration, based on experience exchanges,knowledge and skills sharing, adoption of new auditstandards, drafting of manuals and methodologies meant toenhance external public audit, an activity through whichSAIs contribute to the establishment of a credible social andeconomic development, which eventually would bring about

good governance at global levelAfter a brief analysis of the existing economic and

social situation at global level, Mr. Liu Jiayi mentions theeffort that needs to be made by everyone to transition thedeep changes required to attain efficiency of goodgovernance of an international economic system.

Mr. Liu Jiayi highlights:

In this context, INCOSAI XXI has the mission to identifythe required changes and to build consensus to adopt themeasures to implement them.

** “ ” includesan article named “A Conscious Move toward GlobalActivism”, written by Mr. Terence Nombembe, Chairman ofthe INTOSAI Governing Board and Auditor - General ofSouthAfrica.

The article deals with the role of INTOSAI in its capacityas an extremely important organization in charge of settingthe direction of SAIs activities, at global level, underlining thefact that the InternationalAudit Standards (ISSAIs) are a richsource of reference which make it possible for all SAIs tointernalise operation principles and guidelines on thefulfilment of requirements to attain good governance

**„News in brief” lists the latest information on theactivity of a number of SAIs, INTOSAI members

: There is anarticle on page 12 referring tothe

. It is called

, and features thefollowing information

– The Romanian Court of Accounts has issued itspublic report for 2011, presenting the findings andconclusions of audits performed during 2012 for fiscalyear 2011. This report contains several new features,

.

.

.

:

“The international audit

environment needs to set further new targets, relevant in this

respect.”

Thoughts From the Chairman of the Board

“Recent

Developments at the Court of

Accounts”

ROMANIA

Romanian Court of

Accounts

NOTE ON INTOSAI JOURNAL SYNTHESIS

- APRIL AND JULY 2013 ISSUES -

40

including separate chapters on performance audit andinternal/managerial control systems of the audited entities.The report has been submitted to the Parliament and isavailable on the Court's website.

– The performance audit manual has been updated. Themanual is designed to help ensure high qualityperformance audit and to enhance the professionalexpertise of the Court's external public auditors. It wasdeveloped according to ISSAIs 3000 and 3100, keeping inview the exposure draft of ISSAI 300.

– The new six chapters in the manual provide a generalunderstanding of performance audit and its principles,details for each stage of performance audit (planning,execution and reporting), and the factors needed to ensureaudit quality during all stages of the audit.

– The Romanian Court of Accounts also developedguidance on conducting environmental audits that are tobe implemented in 2013. This guidance presentsmechanisms for all stages of the environmental auditprocess, taking into consideration the diversity of potentialenvironmental audit topics and objectives, as well as themethods for collecting and analysing available field data. Itwas developed in accordance with level 4 of the ISSAIframework: ISSAIs 5110, 5120, 5130, and 5140

Furthermore, on establishing them, consideration wasgiven to the organisation and conduct of the Court's activities,the follow-up on reports resulting from these activities, theCourt's audit standards and best practices in environmentalaudit

** On page 15, under the there is an articlecalled

This article is based on a presentation made by theFrench Court of Accounts at thePASAI Congress held in NewCaledonia, in October 2012. Itoutlines the unique characteristicsof the Court of Accounts' model forSAIs.

The French SAI, the Court of Accounts (Cour desComptes), represents a very specific model that encompassesabout a third of the world's SAIs, primarily in Europe,Africa, andSouth America. This article seeks to explain this jurisdictionalmodel that, having existed for centuries, still retainscharacteristics useful for the modern world to ensureindependence and fight corruption.

The court's jurisdictional powers are the originalcharacteristic of the French model. Members of the Court areindependent magistrates who cannot be removed from office.

Another unique characteristic of the Court of Accounts isthe diversity of the magistrates' skills. They are appointed bydecree of the President of the Republic.

Another important feature of the French Court ofAccountsis its equidistance from both the Parliament and the Executive.The court is subordinated to neither of these institutions.

** On page 19, SAI Hungary publishes the article: “UsingOnline Communication to Enhance SAI Performance”

Besides the official site, SAIHungary set up an additional webaddress to provide the public withnew information in a timely manner.The official site shall publish only themost important news and events,while the additional one shall publish

a wider range of data on the activity of SAI Hungary as well asother public interest news. The main aim of the on-linecommunication channel extension was to encourage partners(the public, media, MPs) to consider the new site as a primarysource of information regarding its activity. To attain this target,new methods need to be approached in the publiccommunication process. That is which it was necessary tochange the institutional attitude to a certain extent, whichproved that if an organisation introduces novelties in its activityand received the foreseen feedback, then the commitment andinvolvement employees in the fulfilment of objectives increasesproportionally

** On page 24, Mr. Terence Nombembe,Auditor-Generalof South Africa, publishes the article called “AuditingGovernment Performance Information”.

Legislation in South Africa hashighlighted the importance ofauditing performance information.The Public Audit Act requires theAuditor-General of South Africa toexpress an audit opinion or aconclusion on the performanceinformation reported by SouthAfrican government institutions.

In South Africa, the audit of performance information isconducted in accordance with the requirements of the PublicAuditAct.

The audit of performance information is an integral partof the annual regularity audit process in South Africa andconfirms the credibility of the performance informationgovernment institutions report annually. This audit should notbe confused with performance auditing, which can be definedas an independent audit of the management measuresgovernments institute to ensure economical procurement andefficient and effective utilization of resources.

.

.

.

Editor's Note,“An Overview of the Cour des Comptes de France”

.

.

Note on INTOSAI Journal Synthesis

41

The Capacity Building Committee issues the guide

. Under thecoordination of the Swedish NationalAudit Office, the CapacityBuilding Committee, in cooperation with the ProfessionalStandards Committee, has issued the guide Implementing theInternational Standards for Supreme Audit Institutions(ISSAIs): Strategic Considerations” The guide highlights areassuch as the benefits of implementing the ISSAIs, changemanagement considerations, different audit environment andthe use of resources. The guide also helps identify the steps totake before implementation.

Subcommittee on peer review

SAI Slovakia took over the chairmanship of Sub-committee 3 within the Capacity Building Committee followingthe decision voted at the INTOSAI Governing Board Meeting,which was held in China, in the period 19 – 22 November 2012.This Sub-committee coordinates the peer review on qualityassessment and good practice promotion.

Working Group on EnvironmentalAuditing

The Secretariat of the Working Group on EnvironmentalAuditing (WGEA) has issued a report on the results of theWGEA's Seventh Survey on Environmental Auditing, whichwas conducted among INTOSAI members, fromFebruary–May 2012. The report summarized contributionsfrom 118 SAIs that either filled in the questionnaire or statedthat they had not conducted or were not planning to undertakeaudits on environmental matters in the near future. The reportidentified many important trends that reflect generaldevelopments in the performance audit practices of SAIsaround the world. The full report of the seventh WGEA survey,which includes results broken down according to INTOSAIregions, is available at www.environmental-auditing.org

The 15th meeting of the INTOSAI Working Group onEnvironmental Auditing (WGEA) was held June 3–6, 2013, inTallinn, Estonia. The draft work plan for 2014–2016 wasendorsed at the meeting and will be subsequently approved.

Working Group on Accountability for and Audit ofDisaster-relatedAid

In January 2013, the Professional Standards Committeepublished the exposure draft INTOSAI GOV 9250, IntegratedFinancial Accountability Framework: Improving information onfinancial flows of humanitarian aid.

The endorsement version of INTOSAI GOV 9250 will bepresented to the seventh meeting of the working group, in Chile,

in May 2013 and then to INCOSAI, in China, in October 2013.

Finance andAdministration Committee Meeting

On October 16, 2012, the National Audit Office of theUnited Kingdom hosted the eighth INTOSAI Finance andAdministration Committee meeting in London

** In the Editorial of the July 2013 issue, formerComptroller and Auditor General of India, Mr. Vinod Rai,contributes an article called

.

In time, the INTOSAI builton the foundation laid in Limaand i ts re i te ra t ion andconsolidation in Mexico andhas emerged as a champion ofSAI independence.

Based on sustained efforts, INTOSAI developed and hadoutstanding achievements, among which:

formulating SAI auditing standards and guidance onbest practices for good governance;

building a partnership with multilateral internationaldonors and national development agencies to promoteSAIs capacity building in institutions in need of suchefforts; and;

supporting INTOSAI member SAIs in the process ofimplementation of the ISSAIs and in the efforts made tocope with the changes and challenges involved by theglobal economic and social situation.

These developments also underscore the fact thatINTOSAI is a catalyst in a paradigm shift in the way public auditis perceived today and its relevance to modern societies isdemonstrated. In a few months, INTOSAI will be adopting astandard that asserts the values and benefits of SAIs.

With increasing globalization and interdependencebetween national economies, tremors are felt in one corner ofthe world when financial or economic imbalances occur inanother.

All of this poses huge challenges to SAIs' capability,effectiveness, and credibility and to the skill base needed tosupport their respective governments in meeting thesesituations. SAIs have a role in predicting and preventingeconomic and financial crisis— like the recent the Europeandebt crisis— by red-flagging areas requiring governmentintervention.

The INTOSAI community responded to such challengeswith both alacrity and foresight, based on mechanisms that are

** “Inside INTOSAI”

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„Implementing the International Standards for Supreme Audit

Institutions (ISSAIs): Strategic Considerations”

“Reflections on INTOSAI's

Development and Future Challenges”

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42

activated almost on reflex to deal with issues that engage theattention or demand the response of the organisation. In thisrespect, INTOSAI established committees, subcommittees,working groups, and task forces preparing audit guidance indiverse areas. The most remarkable development in recenttimes has been the formulation and adoption of ISSAIs, which“we can now proudly call our standards”, says Mr. Vinod Rai.This is the most important reform, achieved at SAIs level, topromote a culture of professionalism in SAIs and support theadoption of recognized best practices.

** “ ” includes thearticle titled: “Facilitating Action on Independent SAI Reports:Tying up Loose Ends with Those Charged with Governance”,written by Terence Nombembe, Chairman of the INTOSAIGoverning Board andAuditor-General of SouthAfrica.

The article highlights theimportance of partners' attitudeto auditors' work in order tooptimize the quality of theinformation audited.

In this regard, ISSAI 1260: Communication with ThoseCharged with Governance is quite explicit and exhaustiveabout the conditions and interventions that we should takeadvantage of, in order to create a successful relationship withthose charged with governance.

Mr. Terence Nombembe focuses in this article on a fewpractical steps that can be used as the basis of a consistent andpersistent conversation with government leadership. Thesesteps will always enhance the quality of our advice to them andmaximize mutual understanding.

1. Submitting reports to reflect citizens' expectations,which may become important tools for government leadership.

2. Setting up an internal control system that wouldconsolidate the credibility of government reports.

3. Building an efficient, responsible and monitored systemof government based on discussions and analyses establishedjointly with government leadership.

4. The final strategic step is the promotion of a performingmanagement required to promote government organisationalculture.

Discussions with government leadership, focussed onthese strategic issues can have a positive impact on publicsector professionalism promotion.

** “News in Brief”

On page 10 there is anarticle on the

. Theti t le of the art ic le is“Romania: Visit to theSpanish Court of Audit” anddeals with issues of theofficial visit made in April2013, by a delegation of the Romanian Court of Accountsheaded by President Nicolae V roiu, at the invitation ofRamón Alvarez, the Spanish homologue. The two presidentsdiscussed institutional cooperation within INTOSAI andEUROSAI, as well as bilateral cooperation between theRomanian Court ofAccounts and the Spanish Court ofAudit.

They also discussed the Spanish SAI's institutionalframework and relationship with the Parliament, carrying outthe audit function in an environment of deep economic crisisand public spending constraints, the Spanish SAI'sjurisdictional function and contributions to the fight againstfraud and corruption, as well as aspect relating to theirexperience in auditing EU funds.

The Romanian delegation also met with members of theJoint Commission of the Spanish Parliament for Relations withthe Spanish Court ofAudit.

**is the article on page 13,

written by Aleksandr Piskunov, from the Accounts Chamber ofthe Russian Federation.

This article describes the way in which the proposal of theRussian SAI proposed at Chengdu, China, last year namely toestablish a new task force on audits of public contracts withinthe INTOSAI.

SAIs interested in knowing more about the task force andits work are invited to contact the Russian SAI [email protected]].

The SAI of the Russian Federation proposes that thebodies auditing public contracts should work together to identifya set of common principles which would orient audits so thatthey are genuinely useful in making contracts concluded withgovernment entities more efficient.

Thoughts from the Chairman of the Board

“Common Principles for Audits of Public Contracts: An

Opportunity for INTOSAI Cooperation”

ROMANIA

Romanian

Court of Accounts

ăcă


43

To implement this initiative, SAI set the objective to checkefficiency in identifying public requirements. Most of them haveaccumulated a lot of experience in the public sector audit andhave enough relevant methodological documentation toenable them to conduct a careful verification and an effectiveassessment.

The procurement performance model is one of the mostimportant and useful documents; it is established and updatedby the Work Group on Public Procurement within EU memberstates SAIs Contact Committee.

The task force would have the following objectives:

To develop a common set of principles for publicprocurement audit consistent with the INTOSAI's fundamentalauditing principles and core values as well as relevantinternational documents, such as the Model Law on PublicProcurement of the UN Commission on International TradeLaw.

To translate these general principles into operationalguidelines covering audits of the entire procurement cycle,including planning and preparation of the procurement, pricing,value for money assessment, tendering and supplier selection,contract management, and contract evaluation.

To establish manuals on public contract audit in specificsectors and areas, that are of urgent interest for SAIs. Taskforce activities and focus areas will need to have anappropriate degree of flexibility. They will need to addresspractical issues and needs of countries with mature publicprocurement systems in keeping with the national standardsand regulations.

- The INTOSAI Working Group on the Value andBenefits of SAIs (WGVBS) launched the project ISSAI 2:The Value and Benef i ts o f Supreme Audi tInstitutions—making a difference to the lives of citizens and

exposed it to the INTOSAI community for comment.

Draft ISSAI 2 provides guidance to SAIs on how they can berelevant to their societies by:

strengthening the accountability, integrity, andtransparency of government and public entities;

demonstrating ongoing relevance to citizens andother stakeholders;

being model organizations that lead by example.

In Johannesburg, at INTOSAI XX Congress of 2010, themembers of this work group were established: AFROSAI – Eand CREFIAF. It is coordinated by the INTOSAI-DonorSecretariat within the INTOSAI Development Initiative (IDI).

The WGVBS focussed on the impact of SAIs activity forsociety, in other words on the values and benefits they offer.

The performance measurement framework (PMF)established by the WGVBS consists in a set of measurementindicators and guidelines to analyse performance quality.Performance is measured by means of 24 indicators from 7domains. All indicators have in view two aspects: one providedin legal frameworks, and the second one happening inpractice. The influences of external factors are listed in aseparate report.

In parallel, a secondpilot project is to be launchedin 2013, which would allow forthe testing of the workframework in relation to thewide range of SAIs models inthe world.

Additional information is available at the web address:.

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