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Chapter 28 - Financial Control
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 December 2004

Background - Main elements of the Financial Control acquis

The acquis under Chapter 28 covers only a limited number of Regulations, it rather refers to general, internationally agreed principles of sound financial management and control. The European Commission is called to assess the existing financial control systems in the candidate countries with regard to five main elements:

I. Public Internal Financial Control (PIFC) is one of the central elements of the Financial Control system and includes financial control activities in the public sector, covering control exercised by central and decentralised government agencies, involving ex-ante approval as well as ex-post internal audit systems. A basic feature in an effective PIFC system are the clear demarcation lines between financial management and control (FMC) and the internal audit, which assures, that FMC, including ex-ante controls, works properly (so-called functional independence of the internal auditors).

In the field of PIFC the main criteria for the assessment are the presence of the legislative framework (primary and implementing legislation), the development of the internal audit function and ex-ante control mechanism throughout all the income and spending centres, as well as ensuring the functional independence of the internal auditors.

II. External Audit comprises the ability of the candidate countries to confirm the independence of their external control body in terms of deciding on the questions of audit approach and choice of inquiry, as well as reporting without restriction or interference by the government or other bodies. It is also of crucial importance that the Candidate Country ensures an independent audit of the financial accountability of all public funds, irrespective of their origin. The presence of the formal mechanism for the Parliament for a proper reaction to the audit findings is of particular importance.

III. Control Measures relating the EU Own Recourses imply that the bodies in charge of collecting and controlling own resources should be aware of the requirements to assure the correct execution of their tasks. In this context it is of particular importance to ensure timely fiscal controls and an effective customs administration. (This issue is also tackled under Chapters 10, 25 and 29)

IV. EU Pre-accession funding and future Structural Action: The correct use, control, monitoring and evaluation of EU funding constitute an important element in assessing the Candidate Countries ability to apply the acquis under this Chapter. As no distinction should be made in terms of control for the national budget and for EU resources, the PIFC procedures (ex-ante financial control as well as internal audit) should apply in the same way to all the public funds irrespective of their source. With reference to the internal control procedures related to the EU pre-accession funds, the Commission requests the Candidate Countries to establish the appropriate ex ante control and functionally independent internal audit mechanisms, to make available experienced and qualified staff resources and to produce procedure manuals as well as audit trails for each pre-accession instrument. One of the important indicators is the existence of the procedure for the recovery of the lost EU funds.

V. Protection of the EU financial interests comprises the ability to implement the relevant EC Regulations by the accession, namely Regulation on the protection of the EC financial interests and Regulation on the on-the-spot checks carried out by the Commission in order to protect the EU financial interests against fraud and other irregularities. The Candidate Countries are also requested to designate a single contact point for co-operation with OLAF and to ensure the development of the administrative capacity necessary to implement the "acquis", including the capacity of the law enforcement bodies and judiciary to address cases where EU financial interests are at stake.

State of play

The chapter was closed with Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia and Slovakia in December 2002. The chapter has also been closed with Bulgaria and Romania in December 2004.

As the acquis under this Chapter is based rather on the internationally accepted and EU compliant standard then on the number of legislative acts, the implementation of these standards is of major importance for the Candidate Countries in order to achieve the full compliance with the acquis upon accession. That is why DG Budget in co-operation with DG Enlargement is attaching high importance to the monitoring exercise for the candidate countries. This exercise (being performed with the help of Peer Reviews or monitoring missions) is focused on the evaluation of the implementation of financial control legislation and of the administrative capacity in the ministries, subordinated agencies and other budget spending centers as well as in the Supreme Audit Institutions.

No transitional periods have been requested by the Candidate Countries under this Chapter.

Compliance with the acquis

The latest assessment of each candidate country’s compliance with the acquis under this chapter heading, can be found in the 2004 Regular Reports and in the Comprehensive Monitoring Reports, available at:
http://ec.europa.eu/enlargement/archives/key_documents/reports_2004_en.htm.

Country by country

Bulgaria

  • Chapter opened: second half of 2001
  • Status: closed in December 2004 (provisionally closed in the second half of 2002)
  • Transitional arrangements: none

Cyprus (New Member State)

  • Chapter opened: first half of 2000
  • Status: Closed December 2002 (provisionally closed in the first half of 2000)
  • Transitional arrangements: none

Czech Republic (New Member State)

  • Chapter opened: first half of 2000
  • Status: Closed December 2002 (provisionally closed in the second half of 2001)
  • Transitional arrangements: none

Estonia (New Member State)

  • Chapter opened: first half of 2000
  • Status: Closed December 2002 (provisionally closed in the second half of 2001)
  • Transitional arrangements: none

Hungary (New Member State)

  • Chapter opened: first half of 2000
  • Status: Closed December 2002 (provisionally closed in the first half of 2000)
  • Transitional arrangements: none

Latvia (New Member State)

  • Chapter opened: first half of 2001
  • Status: Closed December 2002 (provisionally closed in the second half of 2001)
  • Transitional arrangements: none

Lithuania (New Member State)

  • Chapter opened: first half of 2001
  • Status: Closed December 2002 (provisionally closed in the second half of 2001)
  • Transitional arrangements: none

Malta (New Member State)

  • Chapter opened: first half of 2001
  • Status: Closed December 2002 (provisionally closed in the first half of 2001)
  • Transitional arrangements: none

Poland (New Member State)

  • Chapter opened: first half of 2000
  • Status: Closed December 2002 (provisionally closed in the first half of 2000)
  • Transitional arrangements: none

Romania

  • Chapter opened: first half of 2002
  • Status: closed in December 2004 (provisionally closed in October 2003)
  • Transitional arrangements: none

Slovakia (New Member State)

  • Chapter opened: first half of 2001
  • Status: Closed December 2002 (provisionally closed in the second half of 2001)
  • Transitional arrangements: none

Slovenia (New Member State)

  • Chapter opened: first half of 2000
  • Status: Closed December 2002 (provisionally closed in the first half of 2000)
  • Transitional arrangements: none 
updated: 17/12/2004
 
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