Official title of the project

Support to the Development of Public Internal Financial Control - Phase 3


Project information

Region / City
Total budget of programme / project

EUR 1,999,600

Implementation period
2011. Mar - 2013. Aug
Expected results
  1. The Central Harmonisation Unit (CHU) is a fully functional institution, working in line with EU and internationally accepted requirements for harmonisation bodies.
  2. Decentralised units for internal audit are established, trained, supported, fully functional and working in line with internationally accepted standards for internal audit in the Ministry of Finance, fifteen  line Ministries, City of Belgrade and City of Novi Sad and mandatory social security organisations (MSSO’s).
  3. Management and relevant staff have been trained on Financial Management and Control (FMC) requirements and FMC structures and procedures have been introduced in participating institutions including organisational structure, methods and procedures to the INTOSAI internal control standards.
  4. A roll-out strategy and timetable for the remainder of the line ministries and public bodies covered by the Budget Law to establish internal control functions including internal audit services have been laid out.
  5. Business process/ audit trails are described for all operating procedures to ensure their implementation in accordance with principles of legality, economy, effectiveness and efficiency.
  6. The Development of a management system (information flow and monitoring).
  7. The concept of managerial accountability has been explained and established as a principle and enshrined in legislation describing that managers of public funds beneficiaries shall bear responsibility for delegated fiscal, management and programme authorities. In the organisation concerned, managers are responsible for planning and programming, preparing the budget/financial plan, implementing the budget/financial plan, accounting, control, reporting, archives and supervision and/or they are responsible for setting and accomplishing the set targets.
  8. Training programmes in English and Serbian are established in a selection of line ministries and other institutions in particular to explain and demonstrate the concept of managerial accountability.
  9. Audit Trails (in the form of diagrams, flow charts or similar) are developed and prepared for the internal control system.
  10. Procedures for the identification, assessment and management of risk have been prepared and completed.
  11. Updated Internal Audit and Financial Management Manuals have been completed.
  12. A Certification scheme for internal auditors has been improved, amended and finalised. By the end of the project it is expected that practitioners will have graduated from the programme.
  13. Comprehensive legal framework for PIFC has been developed and submitted for the Government for approval. This could be done through passing of the Law on PIFC or amending the budget law adequately.
  14. Increased awareness within politicians and senior civil servants regarding PIFC reform has been generated through regular public relation and visibility activities and events.

Ministry of Finance and Economy of the Republic of Serbia, Central Harmonisation Unit

Target Groups

Sixteen Ministries, the City Administrations of Beograd and Novi Sad, together with three Mandatory Social Security Organisations (MSSO’s) (Republic Institute of Health Insurance, the National Employment Fund and the Republican Fund for Pens

Summary of the project

Public administration reform and governance issues remain priorities of the Serbian government.  In recent years there has been a noticeable improvement of awareness and priority for the need to improve PIFC to international standards and EU expectations contained in Chapter 32 of the Acquis Communautaire. 

Public institutions remain in a weakened state in part due to continuing politicisation and centralisation of authority, frequent changes in regulations and institutions through non-transparent processes, and limited strategic planning. 

The EU has previously provided two phases of technical assistance to increase awareness and develop improved PIFC arrangements in the public sector.  The cumulative impact of this assistance has been to significantly raise awareness at all levels of the benefits to public sector service delivery that improved PIFC processes can bring.  These projects have helped create a legal, tertiary, institutional environment allied to a cadre of trained personnel that can effectively lead and guide full implementation of PIFC reforms throughout the public sector using the CHU as its conduit.


The implementation and subsequent sustainability of the sound basis laid for PIFC reforms needs to be driven by a Government created institution the CHU. 

Experiences in candidate and recent member states provide evidence that the CHU is pivotal to providing the impetus and support needed to embed reforms.  To compensate for the lack of capacity that will be inherent in the staff of the CHU it is crucial that they are provided with the support of suitably qualified public finance management experts who have experience of CHU development as well as understanding the standards required by the EU, INTOSAI and the IIA amongst others.

The main message is that the application of sound financial management processes, including the use of internal audit, thro

Programme/Project objectives

  1. To improve efficiency, effectiveness and transparency in the allocation and expenditure of public funds and to contribute to the continued process of public administration reform through the decentralisation of financial management and control.
  2. To implement a public internal financial control system covering decentralised internal audit and financial management control arrangements within the Ministry of Finance and Economy and a minimum of fifteen line Ministries, Mandatory Social Security Organisations (Pensions, Health and Employment) and two cities.