TWINNING PROJECT INTERIM QUARTERLY REPORT · 2017/early 2018, the final part of the audits can be realized only after the auditees’ financial state-ments have been developed and

Twinning Contract Number: AL 13 IB FI 01

TWINNING INTERIM QUARTERLY REPORT

TWINNING INTERIM QUARTERLY REPORT number: 7

EUROPEAN COMMISSION

TWINNING PROJECT

INTERIM QUARTERLY REPORT

Project Title: “Strengthening of external audit capacities”

Partners: MS: Najwyższa Izba Kontroli (NIK) – Supreme Audit Office of Poland in

consortium with the State Audit Office, Croatia (SAO)

BC: Supreme State Audit of Albania (ALSAI)

Date: 12.12.2017


2

LIST OF ABBREVIATIONS

ALSAI / HSC Albanian Supreme State Audit

BC Beneficiary Country

CFCU Central Financing and Contracting Unit (Ministry of Finance of Albania)

CP Counterpart

CL Component Leader / Key Expert

EU The European Union

EUD Delegation of the European Union to Albania

HR Human Resources

IDI INTOSAI Development Initiative

INTOSAI International Organisation of Supreme Audit Institutions

ISSAI International Standards of Supreme Audit Institutions

MS Member State

NGO Non-government organisation

NIK Najwyższa Izba Kontroli (Supreme Audit Office of Poland)

PL Project Leader

PFM Public Financial Management

RTA Resident Twinning Adviser

SAI Supreme Audit Institution

SAO

STE

State Audit Office of Croatia

Short Term Expert

WB World Bank


3

Section 1: Project data

Twinning Contract Number IPA AL 13 IB FI 01

Project Title: “Strengthening of external audit capacities”

Twinning Partners (MS and BC) MS: NIK and SAO BC: ALSAI

Report Number: 7

Period covered by the report: 17 August 2017 – 16 November 2017

Duration of the project: 24 months

Rapporteur: Mr Wojciech Kutyła, MS PL

in cooperation with: Ms Luljeta Nano, BC PL

Mr Wojciech Kutyła Ms Luljeta Nano MS PL BC PL


4

Section 2: Content

2A - BACKGROUND Overall objective Project purpose

Project purpose and indicators of achievement

State of achievement/ problems encountered

Improve external auditing capacities according to EU good practices and to INTOSAI standards

During the seventh quarter, missions within the Activities 2.2.5, 2.2.7, 2.3.3, 2.4.4 and 3.1.4 took place

1. Number of guidelines prepared for implementing the new legislation

On-going

2. An assessment of the legal frame-work vis-à-vis EU models

Accomplished

3. An assessment of the legal frame-work vis-à-vis the INTOSAI Declara-tions.

Accomplished

4. Recognized (or tailored) qualification scheme in place

On-going

5. Staff appraisal system which is con-sistent across the office, based on ob-jective criteria and which motivates and rewards good performers.

On-going

6. Separate core groups of staff with the skills required to undertake finan-cial and performance audits to interna-tional auditing standards (30 and 12 staff respectively)

On-going

7. 10 staff members across` Audit de-partments able to undertake Computer -assisted audit techniques, with at least 2 competent to train others

Accomplished

8. HSC undertakes audits covering a broad range of topics and institutions and provides the Parliament with quali-ty reports and advice

On-going

9. Audit staff members aware of their role and responsibilities with respect to fraud and corruption

Accomplished

10. Overall strategy and internal guid- Accomplished


5

ance on the role of SAI in the fight against fraud and corruption

11. Feedback from Parliament’s Com-mission on Economy and Finance members and audited bodies on impact and usefulness of audit

On-going


6

Policy Developments


7

Project assumptions Regarding the relevant project activities having taken place during the reporting period, the follow-ing evaluation is made with respect to fulfilment of project assumptions:

Assumptions for Project Purpose: Evaluation (regarding report-ing period)

Adequate commitment of all partners Assumption met

Efficient cooperation between BC and MS partners Assumption met

Assumptions for Activities which took place:

Activity 2.2.5

Appropriate selection and attendance of HSC financial audit personnel and its readiness to participate in the training

Access to and availability of HSC audit background materials to produce case studies and examples of audit work to be used in the course of training

If required, interpretation to English of the proceedings of this activity

Availability of premises and required administrative and technical support

Undisturbed funding of this project activity

Stability in the composition of the group of experts

Assumptions met

Activity 2.2.7

Appropriate selection and attendance of HSC compliance and financial audit personnel and its readiness to participate in the expert-supported audits

Access to and availability of HSC audit planning documentation

If required, interpretation to English of the proceedings of this activity

Availability of premises and required administrative and technical support

Undisturbed funding of this project activity

Stability in the composition of the group of experts

Assumptions met

Activity 2.3.3

Access to ALSAI previous performance audit reports

Selected SAO staff involved in pilot performance audits available to work on implementing activity

Assumptions met

Activity 2.4.4

Access to the HSC IT audits’ reports and working papers.

Well motivated group of the HSC auditors ready to work on risk analysis

with use of the EUROSAI IT Working Group ‘E-government control space’

tool, and to perform the IT audit.

Topic, calendar and content of the audit agreed by the HSC auditors and

SMEs.

Approval by the HSC management to the topic, calendar, content and re-

sources necessary to conduct the audit.

Analytical team of the HSC experts ready to collaborate at the implementa-

tion of a new methodology to the SAI’s audit approach.

The HSC management’s approval to the modification of the audit approach.

Assumptions met

Activity 3.1.4

Intense cooperation of the HSC managers with STEs in order to create

synergy and accentuate the impact of project’s deliverables

Documents translated in sufficient quality and on time

Full commitment of the HSC staff to ensure viability and continuity of the

project

Assumptions met


8

B - ACHIEVEMENT OF MANDATORY RESULTS The project is generally on track, however within Activity 2.2.7 three pilot financial and compliance audits are planned to be carried out. The financial audit timeline has to be coordinated with the fi-nancial reporting cycle in auditees. While interim financial audit stage could be started in late 2017/early 2018, the final part of the audits can be realized only after the auditees’ financial state-ments have been developed and officially issued, i.e. after 31 March 2018. Therefore, in our opin-ion the project needs to be extended by a few months to ensure the proper implementation of the project’s activities in this area. In September 2017 the ROM mission also took place and provided the Twinning Project’s partners with some conclusions and recommendations (especially the development of the Sustainability Plan for the project), which also need the above mentioned extension to be properly addressed. Given this extension is granted (by means of an addendum to the twinning contract), there are no other imminent risks to the overall achievement of the mandatory results of the project.

This quarterly report reviews all activities in the three components. In the following table, activities developed during the seventh quarter are highlighted in grey. No Side Letters were submitted in the seventh quarter.

Component Activity Benchmarks Sources of information Implementation

status

Component 0: General ac-tivities

Activity 0.1:

Kick off meeting

work plan and main results to be achieved during the implementa-tion presented

media informed about the start of the project

press conference press release

press releases first quarterly report

Completed

Component 1: Improvement of legislative framework for audits

Activity 1.1.1

An analysis of the ALSAI legal framework vis-à-vis the INTOSAI Lima and Mexico Declarations, other relevant international standards and EU Member States models. An analysis of the provisions of the Constitution, ALSAI Law and other laws, which relate to matters of state audit from the point of view of completeness of regulation and mutual con-sistency of these acts and other provisions, which influence the legal posi-tion of ALSAI. Analysis of cur-rent application of the law

Developed analysis of the legal framework vis-à-vis the INTOSAI Declarations and other international standards

Developed analysis of the ALSAI legal framework vis-à-vis EU Member States models

Developed analysis of the applied law and identification of poten-tial barriers in imple-menting introduced amendments (identifi-cation of possible legal gaps which could hin-der audit activity, and consideration whether it would be reasonable to propose relevant legislative changes; identification of possi-ble areas that are not sufficiently defined in acts of law and require amendment).

STEs mission report Interim quarterly report Paper: analysis of the

ALSAI legal framework vis-à-vis the INTOSAI Declarations and other in-ternational standards

Paper: analysis of the ALSAI legal framework vis-à-vis EU Member States models

Paper: analysis of the ap-plied law and identification of potential barriers in im-plementing introduced amendments

Completed


9


status

Activity 1.1.2.

Development of recommenda-tions on how to apply the provi-sions of the new ALSAI Law (practical guide-lines for imple-menting the new Law in particular areas) together with a concept of a commentary to the new rules, which could be developed by the ALSAI. The concept and ALSAI Activity program in order to effectively apply the provi-sions of new Law. Develop-ment of the ac-tion plan to draft the by-laws to the new ALSAI Law

Developed concept of a commentary to the new regulations, which could be developed by the ALSAI

Developed practical guidelines for imple-menting the new ALSAI Law in particu-lar areas

Developed table of contents for most of the internal guidelines elaborated and dis-cussed with ALSAI staff

Developed concept and ALSAI Activity program in order to ef-fectively apply the pro-visions of new Law. Development of the action plan to draft the by-laws to the new ALSAI Law

STEs mission reports Interim quarterly report Paper: concept of a com-

mentary to the new regula-tions

Paper: practical guidelines for implementing the new ALSAI Law in particular areas

Paper: action plan to draft the by-laws to the new ALSAI Law

Developed table of con-tents for most of the inter-nal guidelines elaborated and discussed with ALSAI staff

Completed

Activity 1.1.3

Revision of the Internal Regula-tion in accord-ance with amendments of the ALSAI Law and new audit approach for financial, per-formance and compliance au-dit

Developed analysis of internal regulations re-view and proposals of amendments

Identification of legal and organizational so-lutions which need to be amended and im-plemented into the methodology, report-ing, etc.

Developed analysis of issues related to pro-posed directions of ex-ternal activities (de lege ferenda pro-

posals) and internal activities (amendments in the internal regula-tions resulted from new goals and devel-opment directions) and proposed strategy of their implementation

STEs mission report Interim quarterly report Paper: analysis of internal

regulations review and proposals of amendments in accordance with the new ALSAI Law and new audit approach for finan-cial, performance and compliance audit (the analysis included in the mission report)

Completed


10


status

Activity 1.2.1.

An analysis of legal regulations and the practice of the ALSAI relations with the Parliament. Development of the draft guide-lines for the in-stitutionalisation of relations with Parliament. De-velopment of the program and measures for implementation of the draft guidelines for the institutional-isation of rela-tions with Par-liament

Developed analysis of legal regulations for the ALSAI relations with the Albanian Par-liament

Developed analysis of the practice of the ALSAI relations with the Albanian Parlia-ment

Developed draft guide-lines for the institution-alisation of relations of the ALSAI with the Al-banian Parliament

Developed plan and measures on how to implement the draft guidelines for the insti-tutionalisation of rela-tions of the ALSAI with the Albanian Parlia-ment

STEs mission report Interim quarterly report Paper: analysis of legal

regulations for the ALSAI relations with the Albanian Parliament

Paper: analysis of the practice of the ALSAI rela-tions with the Albanian Parliament

Paper: draft guidelines for the institutionalisation of relations of the ALSAI with the Albanian Parliament

Paper: plan and measures on how to implement the draft guidelines for the in-stitutionalisation of rela-tions of the ALSAI with the Albanian Parliament

Completed

Activity 1.2.2.

Seminar on the relations be-tween SAI and Parliament

Organised seminar on the relations with Par-liament

Draft guidelines on relations with Parlia-ment presented and any raised problems discussed

STEs mission report Interim quarterly report Paper: the seminar Agen-

da and explanatory note for participants

Paper: evaluation of the seminar

Completed

Activity 1.2.3.

Analysis of the legal framework and current practice of ALSAI on follow up of audit rec-ommendations. Drafting a man-ual on tracking audit conclu-sions and rec-ommendations. Development of a concept of the IT system for tracking the conclusions and recommenda-tions of the ALSAI audit

Developed analysis of the legal framework and current practice of ALSAI on follow up of audit recommenda-tions

Developed manual on tracking audit conclu-sions and recommen-dations

Developed concept of the IT application for tracking the conclu-sions and recommen-dations of the ALSAI audits

STEs mission reports Interim quarterly report Paper: analysis of the le-

gal framework and current practice of ALSAI on fol-low up of audit recom-mendations

Paper: manual on tracking audit conclusions and rec-ommendations

Paper: concept of the IT ap-plication for tracking the con-clusions and recommenda-tions of the ALSAI audits (for modelling processes a graphical language known as Business Process Modelling Notation will be used)

Not started yet

Component 2:

Develop-ment of audit methodol-ogies and reporting capacities

Activity 2.1.1

Review of the anti-corruption/fraud system in Alba-nia and ALSAI achievements in the field of tack-ling corruption and fraud

The overall strategy for anti-fraud and anti-corruption activities revised

Recommendations concerning the changes in the ALSAI cooperation with key stakeholders prepared

Revised approach to whistleblowing

Former and new ALSAI strate-gy and/or guideline – proposals of amendments ALSAI strategy, standards and/or guidelines STEs mission report Report summarizing findings and opinions

Completed


11


status

Compo-nent 2.2

Develop-ment of audit methodol-ogies and reporting capacities

Activity 2.1.2 Training of anti-fraud and anti-corruption activ-ity, including a whistle-blower system in ALSAI as a specific methodology for anti-fraud and anti-corruption

Delivery of 1 two-day training and 1 one-day practical courses

STE mission report Translated presenta-

tions and material for courses

Completed

Activity 2.1.3.:

Development of an audit manual related to issues of anti-fraud and anti-corruption and notifying law enforcement institutions about cases of fraudulent and corruption in public sphere, including main steps and good practice

Audit manual related to issues of anti-fraud and anti-corruption completed

An audit manual relat-ed to issues of anti-fraud and anti-corruption

STE mission report

Completed

Activity 2.1.4:

Study Visit to Poland

Study tour completed and best practices are presented

Participants‘ report Completed

Activity 2.2.1

Development and introduction of a risk based audit approach to compliance and financial audit strategic planning

Quantity: 80% of the Albanian government sector budget may be covered by the compli-ance and financial audit

Quality: compliance and financial audit strategic planning will be based on risk and overall material-ity

Target group: ALSAI audit planning staff

Time: 5 days of training and discussion

Place: ALSAI central office

Particular meeting (semi-

nars, training sessions)

presentations

Overall Activity conclusions

presentation

Activity implementation re-

port

Periodical Project Leader

reports

STE mission report

Completed

Activity 2.2.2:

Assist in devel-oping plans for the audit in 2017

Quantity: 80% of the Albanian government sector budget may be covered by the annual compliance and financial audit

Quality: compliance and financial audit annual planning will be based on updated risk assessment and updated materiality for the government sec-tor

Target group: ALSAI audit planning staff

Time: 10 days of training and discussion


Particular meeting (semi-

nars, training sessions)

presentations

Overall Activity conclusions

presentation


port


reports

STE mission report

Completed.


12


status

Activity 2.2.3:

Assess two most recent fi-nancial and compliance au-dits of govern-ment ministries, including re-sponses to find-ings and rec-ommendations, and identify as-pects that need to be improved

Quantity: 2 compliance and financial audits se-lected by the ALSAI are put under peer review

Quality: reports on 2 re-viewed compliance and financial audits identify possible improvements in the ALSAI financial audit process

Target group: selected ALSAI compliance and financial audit staff

Time: 10 days of peer review and discussion of results


Presentation of overall Ac-

tivity conclusions from peer

reviews carried out


port identifying possible ar-

eas of improvement in the

compliance and financial

audit process at entity level


reports

STE mission report

Completed

Activity 2.2.4:

Develop sup-plementary technical guid-ance on four topics to be agreed with the beneficiary (ALSAI

Quantity: 4 topics of training selected by STE team and agreed with the ALSAI audit staff

Quality: initial plan for training to be carried out under Activity 2.5

Target group: selected ALSAI financial audit staff

Time: 5 days of presen-tation proposals and dis-cussion



tivity conclusions from dis-

cussion on topics of training


port identifying 4 selected

topics of training and

agreed training parameters


reports

STE mission report

Completed

Activity 2.2.5:

Design and de-liver initial train-ing

Quantity: 2 (two) 2-day training sessions on 4 topics carried out by STE team for the selected 3 (three) 25-person groups of ALSAI audit staff

Quality: Training ses-sions delivered on agreed topics in accor-dance with best training practice

Target group: selected ALSAI financial and compliance audit staff

Time: 10 days of training proposals and discussion




cussions held in the course

of training and their results


port providing summary of

the training conducted and

its results


reports

STE mission report

Completed


13


status

Activity 2.2.6:

Propose up-dates/revisions of the ALSAI Financial and Compliance Audit Manual

Quantity: Conduct 4 presentation and discus-sion sessions on as-sessments and propos-als

Quality: Consultation and advice provided at expert level


Time: 5 days of presen-tations and discussions




cussions on various solution

to the topic issue



the proposals on the update

/ revision of the ALSAI Fi-

nancial and Compliance

Audit Manual


reports

STE mission report

Not started yet

Activity 2.2.7:

Conduct three expert-supported finan-cial and compli-ance audits (in-cluding one au-dit of externally financed pro-gramme or pro-ject), with ALSAI staff, at minis-tries and agen-cies/other public bodies

Quantity: Conduct of 3 expert-supported com-pliance and financial au-dits by the ALSAI audit staff



Time: 18 days of plan-ning review, conduct, and overview of compli-ance and financial audit proceedings



tivity conclusions from ex-

pert-supported audit de-

briefing stage



the conducted expert-

supported audits


reports

STE mission report

Ongoing

Activity 2.2.8

Assist ALSAI in developing a methodology to establish proce-dural links be-tween the annual audit of individ-ual ministry fi-nancial state-ments and the review of the annual budget execution report

Quantity: Conduct 4 presentation and discus-sion sessions on various aspects of the topic


Target group: selected ALSAI financial audit staff

Time: 5 days of presen-tations and discussions


Presentation of overall Ac-tivity conclusions from dis-cussions on various solution to the topic issue

Activity implementation re-port providing summary of the conclusions on proce-dural links between budget and financial information and possible audit solutions to verify consistency of the said information

Periodical Project Leader reports

STE mission report

Not started yet

Activity 2.2.9

Study visit to the European Court of Auditors

A comprehensive un-derstanding of the ac-tivity the ECA and its role in promoting ac-countability and trans-parency in the func-tioning of the EU, es-pecially in the field of compliance and finan-cial auditing

Lessons learnt and recommendations for application at the ALSAI

Participants‘ report Not started yet


14


status

Activity 2.3.1:

Review and up-date of a per-formance audit manual

Upgraded PA manual in line with internation-al standards and lead-ing EU practice.

Audit manual and other guidelines

Audit reports

Document of guidance to be included in a revised audit manual

STE mission report

Completed

Activity 2.3.2:

Development of training material and delivering training

training materials pre-pared

2 courses of training on performance audit deliv-ered

Evaluation reports pre-pared

Planning documents and presentations of training materials

Reports on the conduct and results of training

Completed

Activity 2.3.3.:

Pilot audits

4 pilot audits carried out

4 audit reports com-pleted


Audit reports

Ongoing

Pilot perform-ance audits: 2 completed, 1 underway, 1 to be started

Activity 2.3.4 Study visit to the Supreme Audit Institution of a third Member State

A comprehensive un-derstanding of the ac-tivity of a successful and effective SAI

Lessons learnt and recommendations for application at the ALSAI


Activity 2.4.1 Development of ALSAI’s IT Audit Manual

Frames of the new IT Audit Manual prepared and discussed with ALSAI

Frames of new IT Audit Manual

STE mission report

Completed

Activity 2.4.2 IT Audit module in standard training for ALSAI auditors

Group of ALSAI train-ers familiar with con-tent and logic behind the IT Audit Manual

Initial training materials

STE mission report Completed

Activity 2.4.3 Creating IT Audit Helpdesk

‘First and second line’

appointed

Review conducted

and necessary

amendments applied

List of first and second line experts

STE mission report

Completed

Activity 2.4.4 Pilot IT Audit of one of typical IT systems in Al-banian admin-istration and enhancing knowledge man-agement in IT Auditing

IT audit conducted

Organisational proce-

dure of using results

of completed audits in

risk analysis for plan-

ning purposes

IT audit materials

STE mission report

Ongoing

The audit is underway

Activity 2.5.1

Development of methodologies for quality con-trol and quality assurance

Improved and effective quality control and quality assurance system

STE mission report


Audit reports

Completed


15


status

Activity 2.5.2.:

Study visit to the MS SAO (The SAO Croatia)

A study visit aimed at presenting quality control and quality assurance of the State Audit Office of the Republic of Croatia

Audit manual

Pilot audit results

Participants‘ report

Completed

Component 3:

Strengthen-ing of ALSAI institutional capacity and improving impact of ALSAI audit results

Activity 3.1.1

Change man-agement plan-ning

Change management

communication plan

drafted

Change agents defined

STEs mission reports

Paper presenting risk analysis, communication plan and recommendations

Completed

Activity 3.1.2

Review of the ALSAI’s current internal struc-ture

Assessment of the

current structure

Recommendations pro-posed

STE mission report

Presentation of the review results and recommenda-tions

Completed

Activity 3.1.3 Risk-assessment of the revised in-ternal structure and the func-tional responsi-bilities for each unit

• Assessment of the reviewed internal structure

STE mission report

Risks analysis report

Completed

Activity 3.1.4

Job descrip-tions, lines of authority and responsibility

HR staff, managers and other relevant staff trained

• Template for drafting a job description

STE mission report

Draft job description tem-plate

Training materials and/or presentations

Completed

Activity 3.1.5

Review of the ALSAI’s current HR situation and defining HR pol-icy content

A comprehensive re-

view of the current HR

situation discussed

and agreed with the

ALSAI top manage-

ment

HR policy content

agreed with ALSAI top

management

STE mission report

ALSAI HR policy review report

Proposed HR policy con-tent

Completed

Activity 3.1.6

Study visit to Poland (Human Resources Man-agement in the Polish SAI and across the pub-lic administra-tion)

Study group familiar with the HR strategies, poli-cies, methods and tools across the Polish public sector, including NIK

Participants’ report Completed

Activity 3.1.7 Draft of the HR policy and the related guide-lines

HR policy drafted and reviewed by key stake-holders (top manage-ment, managers, em-ployees, legal review)

STE mission report

Draft of HR policy Completed

-

Activity 3.1.8 Implementation of the HR policy

Employees, managers and key stakeholders understand the new HR policy

STE mission report

Draft content of procedure manual agreed

Completed


16


status

Activity 3.1.9 Implementing schemes for managing and documenting the time of the audit work

Draft concept for:

a procedure for reg-istering working time

assessing (estimat-ing) operating time needed for all typical types of audit tasks performed by the ALSAI to improve ef-fectiveness of use of the resources

documenting the consumption of the working time with re-spect to progress of the audit task, that would allow the Management of the ALSAI to use re-sources in the most effective way and assess added value brought about by in-dividual auditors, teams, divisions and the Institution as a whole

STEs mission report

Draft concept for:

a procedure for register-ing working time

assessing (estimating) operating time needed for all typical types of audit tasks performed by the ALSAI to improve ef-fectiveness of use of the resources

documenting the con-sumption of the working time with respect to pro-gress of the audit task, that would allow the Management of the AL-SAI to use resources in the most effective way and assess added value brought about by indi-vidual auditors, teams, divisions and the Institu-tion as a whole

Completed

Activity 3.1.10 Review of the ALSAI’s current procedures and practices for auditors’ profes-sional develop-ment

Review report and recommendations drafted

STEs mission report

Review report and rec-ommendations

Completed

Activity 3.1.11 Defining ALSAI auditors’ desired competence and components of certifying proce-dure for auditors

ALSAI auditors’ de-sired competency de-fined

A scheme for new auditors development and certification

STEs mission report

Draft scheme for new auditors development

Ongoing (List of com-petencies de-fined)

Activity 3.1.12 Developing pro-cedures for con-tinued training and manage-ment develop-ment

ALSAI managers’ de-sired competence de-fined

A scheme for manag-ers development drafted

Needs analysis for permanent training performer

A concept of proce-dure/rules for perma-nent training drafted

STEs mission report

Draft scheme for manag-ers development

Draft concept of proce-dure/rules for permanent training

Not started yet


17


status

Activity 3.2.1 Review of the ALSAI’s reports submitted to the Parliament and the Parliamen-tarian Commis-sion on Econo-my and Finance in terms of transparency and communica-tion qualities and of the ALSAI respective guid-ance and prac-tice as com-pared to the EU good practice

The ALSAI’s audit reports’ communication goals de-fined

STEs mission report

The list of recommenda-tions

Not started yet

Activity 3.2.2 Drafting the ALSAI content and style guide for audit reports (and respective quality control and assurance procedures)

The ALSAI content and style guide for audit reports (and re-spective quality con-trol and assurance procedures) concep-tualized and drafted

Rolling-out activities planned

Seminar organised

STEs mission report

Seminar materials

Draft content and style guide for audit reports

Not started yet

Activity 3.2.3 Review of the current audit procedures re-lated to ensuring transparency aimed at in-creasing public confidence in the institution

Elements of proce-dures related to the planning, preparation, conducting audits and publication of their re-sults, which could have an impact on the perception of ALSAI activities and raise its public credibil-ity/profile defined and discussed

STEs mission report

The list of recommenda-tions

Completed


18


status

Activity 3.2.4 Defining steps and measures to achieve trans-parency of au-dits and in-crease public confidence in the institution

Guidelines on how to ensure better trans-parency of the con-ducted audits embrac-ing not only the pro-cedures and actions based directly on the provisions of the law but also good prac-tices drafted

Guidelines for improv-ing of the transpar-ency and openness of the ALSAI to the pub-lic, which would focus on making the time of reaction to emerging problems shorter, making the quality of the ALSAI’s products higher and making the message coming from the audits’ results more attractive and widely available drafted

STEs mission report

Draft plan for improve-ment of the transparency and openness of the AL-SAI

Completed

Activity 3.2.5 Review of the ALSAI’s com-munication Defining goals, tasks and tools of the Commu-nication Strategy of the ALSAI

List of communication

channels defined

SWOT analysis car-

ried out

Internal assessment

of the ALSAI’s com-

munication carried out

Identification of goals of The Strategy and suitable tools needed to implementation of modern communica-tion

Initial list of the “Strategy” goals completed

STE mission report

Completed

Activity 3.2.6 Internal commu-nication. Defin-ing internal communication needs and de-velopment of the operational strategy.

Development of a

concept of the ALSAI

Intranet portal mod-

ernisation

Employee’s model

developed as an “am-

bassador” of the office

Schemes of internal communication channels

STE mission report

Completed

Activity 3.2.7 External com-munication. Tra-ditional media vs. modern me-dia. Revision of the press/media function.

Developed for the

employment of mod-

ern and traditional

media to communi-

cate with stakeholders

and public

Communication strat-

egy of the ALSAI

drafted and approved

by the ALSAI Chair-

man

Draft guidelines

Guideline documents

Communication Strategy

and planning documents

STE mission report

Completed


19


status

Activity 3.2.8 Study visit to Poland (communica-tions policy) External com-munication. Me-dia as the transmitter of information. Non-media envi-ronment.

Study group familiar

with the communica-

tion strategies, poli-

cies, methods and

tools used by NIK

List of external ad-

dressees and recipi-

ents to which the SAI

wants to address their

statements and re-

ports

Schemes of assigning

type of messages for

each category of re-

cipients

Schemes of external

communication channels

Participants’ report

Completed

2C. ACTIVITIES IN THE REPORTING PERIOD Component 1: Improvement of legislative framework for audits

Activity 1.1.1: completed





Activity 1.2.3: not started yet

Component 2: Development of audit methodologies and reporting capacities









Activity 2.3.4: on-going













20





Activity

[reference No]

Activity

[title]

MS experts

[names]

BC experts

[number of participants and departments of origin]

Duration

[days and date]

2.2.5.3

Development of au-dit methodologies and reporting capaci-ties

Wieslaw Kurzyca Jeremi Śliwiński Agnieszka Mrozik Sławomir Grzelak

Audit staff 5 days (25-29 September 2017)

2.2.7.1

Conduct three ex-pert-supported fi-nancial and compli-ance audits (includ-ing one audit of ex-ternally financed programme or pro-ject), with HSC staff, at ministries and agencies/other pub-lic bodies

Wieslaw Kurzyca Jeremi Śliwiński Agnieszka Mrozik Sławomir Grzelak

Audit staff 3 days (2-4 Oc-tober 2017)

2.3.3 Conducting pilot au-dits

Bozo Vuletic-Antic Silvija Dorotic

Audit team for the pilot audit from the performance Audit Department, Director of the Performance Audit Depart-ment

3 days (24-26 October 2017)

2.3.3 Conducting pilot au-dits

Erik Israel Marieke Vennevertloo

Audit team for the second pilot audit from the perfor-mance Audit Department, Director of the Performance Audit Department

3 days (23-25 October 2017)

2.4.4.2

Pilot IT Audit of one of typical IT systems in Albanian admin-istration and enhanc-ing knowledge man-agement in IT Audit-ing

Paweł Banaś Wiesław Karliński Alo Lääne

IT Audit Directorate IT and Logistics Directorate Methodology and Develop-ment Directorate

Methodology and Develop-ment Directorate

3 days (19 – 21 September 2017)

Activity 2.2.5 A general assumption of the training was that audit made by ALSAI should be conducted in line with the International Standards of Supreme Audit Institutions (Level 4: Guidelines) and the object of the audit would be financial statements prepared by Albanian public bodies presently in line with the National Accounting Standards and, ultimately in the near future, in line with the International Public Sector Accounting Standards (IPSAS) or its European Union counterpart (EPSAS). As a result of conclusions from the Activity 2.2.4.1 („Develop supplementary technical guidance on five topics to be agreed with the Beneficiary”) and discussions with ALSAI audit management and


21

methodological staff five topics were selected for training and practical exercise within Activity 2.2.5. Three missions have been carried out so far and all five topics mentioned above have been tack-led. During the first mission (2.2.5.1) the topic selected referred to Risk assessment, including material-ity, concept of assertions, and internal control. Five training sessions were carried out, starting with internal control, then concentrating on the concept and practical use of assertions and materi-ality, then introducing the concept and practice of risk assessment, including the use of assertions, and finally the ways of risk mitigation by properly designed control activities. Training sessions were followed by tests of acquired knowledge, resolved either individually or by group effort. During the second mission (2.2.5.2) the topic selected referred to the Audit Scope and Timing and the Audit Sampling. The topics were discussed within four training days, first three focusing on main stages of the audit, their content and timeframe, and the fourth devoted to the concept, meth-ods and techniques of audit sampling. Each of the sessions was completed with information on specific nature of audit scope, timing, and specifics of audit sampling while auditing foreign-funded programs/projects. It was also agreed that additional practical guidance in the sampling area will be given to ALSAI auditors within Activity 2.2.7. - Conduct three expert-supported financial and compliance audits (including one audit of an externally financed program or project). Both training topics were followed by tests of acquired knowledge, answered first individually and then dis-cussed with all the participants. During the third mission (2.2.5.3), carried out in the reporting period, the training was devoted to 1) fraud and corruption in financial statements and compliance audit and to 2) financial statements and compliance audit reporting. The topics were discussed within four training days, first two of them devoted to the concept, indi-cations, risks, controls, detection, and reporting on fraud, including corruption, in financial reporting and public funds spending. The second day focused on practical aspects of auditing fraud, includ-ing corruption. The following two days we devoted to theoretical and practical aspects of financial statements and compliance audit reporting. The coverage of the both training topics included specific aspects of auditing fraud, including cor-ruption, and of audit reporting as regards audits of foreign-funded programs and projects. Both training topics were followed by tests of acquired knowledge, answered first individually and then discussed with the whole group of participants, focussing on repetitive wrong answers.

Activity 2.2.7 The STEs consulted with the Director of the ALSAI State Budget Department the selection of three entities to be subject of pilot financial/compliance audits. It has been agreed that all three pilot audit will comprise audit of financial statements (financial audit) with a strong compliance audit aspect. The entities selected for audits are: First Albanian Finance Development Company, Municipality of Tirana and Municipality of Durres. Preliminary audit and planning for the interim audit phase have been consulted in detail. Five more missions are planned within this activity. Activity 2.3.3

Altogether 4 pilot performance audit are planned to be carried out within this Activity: two with as-

sistance of experts from the SAI of Croatia and two with assistance of experts from the SAI of the

Netherlands. So far two pilot audits have been completed: the audit The Effectiveness of Policies

for the Strategic Development of Tourism carried out with assistance of Croatian experts (com-

pleted in the previous reporting period) and the audit Performance of Department of Public Admini-


22

stration (DoPA) – the implementation of the Human Resources Management Information Sys-

tem/HRMIS, carried out with assistance of Dutch experts (completed in the reporting period).

The second audit carried out with assistance of the Croatian experts (Quality of primary and

secondary school buildings) was carried out in the reporting period. The second audit with assis-

tance of Dutch experts is planned to be carried out in the next reporting period.

During the second mission of the pilot performance audit of the Quality of primary and secondary

school buildings, meetings with the director of the performance audit department and auditors (au-

dit team) were held. The audit objectives, methods and approach were discussed, as well as the

most important isssues in the quality of primary and secondary school buildings in Albania. Audi-

tors and experts focused mainly on decision-making system regarding the construction, recon-

struction and other investments in primary and secondary school buildings, institutional and legisla-

tive framework regarding primary and secondary school buildings, monitoring system for the im-

plementation of investments and records on the state and equipment of primary and secondary

school buildings.

The STEs concluded that the audit team had been successful in collecting a broad array of infor-

mation on various aspects on the state of school buildings which will be part of the audit program.

Further activites that audit team should take were recommended and the third mission in Decem-

ber 2017 was planned.

The second audit to be carried out with assistance of auditors from the Dutch SAI is going to be

carried out in 2018. During the first mission in the cycle of four to be dedicated to this audit, the

original plan was changed. Originally it was planned that the Dutch auditors would assist the audit

Audit on effectiveness of grants in the Agency for Rural and Agricultural Development (pilot on

ARAD), however it became clear that the Audit Program for the pilot audit was already approved

by the director and the Chairman of ALSAI and changes could not be made. Therefore, the STEs

changed the approach and decided to:

- Discuss how to present the findings in the draft report.

- Discuss options to gather findings given the audit questions.

- Discuss preliminary conclusions and recommendations.

- To dedicate the other three missions in this cycle to yet another audit.

It was agreed that the Dutch auditors would take part in all stages of the audit, starting from build-

ing its programme to be later approved by the ALSAI Chairman. For the best effect of the audit it

was agreed the work should start only after the study visit to the Dutch SAI, planned for mid-

January 2018.

Activity 2.4.4 During the three missions in the 2.4.4 activity the STEs and the Beneficiary participants are going to:

- support the pilot audit focused on IT systems of General Directorate of Local Taxes and Tariffs (agency of the Tirana municipality);

- advise on knowledge management in IT auditing.


23

The STEs applied different approaches to the two streams of the activity 2.4.4:

- pilot audit – assistance of the STEs to the ALSAI team at the current stage of the audit – start of risk analysis in this particular case

- knowledge management for the IT audit – review of conceptual potentials, with special re-gard to the needs exposed by the pilot audit.

Both activities were supported by a brief peer review of the latest ALSAI IT audits. Thanks to that mission the STEs could suggest the planned development for the next two missions:

- pilot audit (depending on progress of the audit): o 2.4.4.2 (September 2017):

completing the audit plan, or

first part of the field work, after online comments to the draft audit plan;

o 2.4.4.3 (January 2018):

completing of the audit report, or

lessons learnt analysis, after online comments to the draft audit report In both scenarios the STEs are ready to answer the ALSAI team requests by email, or through an online meeting – of course taking into account practical possibilities, limited by other assignments we have in our offices.

- knowledge management:

o 2.4.4.2 (September 2017) – suggestion of a solution fitted to needs of the ALSAI IT

Audit Directorate;

o 2.4.4.3 (January 2018) – presentation and testing of the solution with findings from

pilot IT audit.

Component 3: Strengthening of ALSAI institutional capacity and improving impact of ALSAI audit results






















24

Activity

[refer-ence No]

Activity

[title]

MS experts

[names]

BC experts1

[number of participants and departments of origin]

Duration

[days and date]

3.1.4.2 Job descriptions, lines of authority and responsibility

Wojciech Kutyła Dorota Habich Robert Łukasz Maciej Berek Grzegorz Haber

ALSAI: Directors and deputy directors of units Chairman Secretary General Legal Directorate and of Im-plementing Standards Human Resources and Ethics Directorate

3 days (19-21 September 2017)

Activity 3.1.4 The importance and impact on the institution of well-prepared job description was subject of the first mission within the activity 3.1.4. A well-prepared job description is crucial for:

- the recruitment procedure, - determination of duties and responsibilities of an employee, - placing the post in hierarchical structure of the institution, - indicating the goal for the post, - planning the personal development of an employee.

The aforementioned statements were the basis for a subsequent mission whose main goal was to recommend a template for job description in line with previous recommendations and comments. ALSAI is an independent institution, which means it is also autonomous in the employment area. With undisputed respect to this rule, STEs have noticed deep and effective amendments imple-mented during previous months in the Albanian civil service regarding regulation on job descrip-tions. In the STEs’ opinion it is worth following the common and refreshed regulations of the civil service as long as it does not breach the SAI’s independence and goals. During the mission it was confirmed that ALSAI generally carries out job descriptions as set forth in the Law on Civil Ser-vants. Therefore, all detailed recommendation presented by STEs are coherent with those regula-tion binding directly in the civil service sector in Albania having respect, however, for the independ-ent position of the ALSAI and its internal structure. As a final result of the mission STEs presented to the officials of ALSAI a detailed description of each element of the recommended template.

2C1. ACTIVITIES PLANNED FOR THE NEXT PERIOD In this section, the activities planned for the fifth quarter of the project, via visits or trainings and workshops but excluding consultations via e-mails, correspondence or telephone, are listed. In some cases their implementation status is described as completed or ongoing in order to reflect the status quo of the project on the date of this report’s publication.


25

Component Activity Benchmark Source of infor-mation

Implementation status

Component 1 Improvement of legislative frame-work for audits

Activity 1.2.3.

Analysis of the legal framework and cur-rent practice of ALSAI on follow up of audit recommen-dations. Drafting a manual on tracking audit conclusions and recommenda-tions. Development of a concept of the IT system for track-ing the conclusions and recommenda-tions of the ALSAI audit

Developed analysis of the legal framework and current practice of ALSAI on follow up of audit recommenda-tions

Developed manual on tracking audit conclu-sions and recommen-dations

Developed concept of the IT application for tracking the conclu-sions and recommen-dations of the ALSAI audits

STEs mission re-ports

Interim quarterly report

Paper: analysis of the legal frame-work and current practice of ALSAI on follow up of au-dit recommenda-tions

Paper: manual on tracking audit con-clusions and rec-ommendations

Paper: concept of the IT application for tracking the conclusions and recommendations of the ALSAI audits (for modelling pro-cesses a graphical language known as Business Process Modelling Notation will be used)

On-going

Component 2 Development of audit methodolo-gies and reporting capacities

Activity 2.2.6

Propose up-dates/revisions of the HSC Financial and Compliance Audit Manual

Quantity: Conduct 4 presentation and dis-cussion sessions on assessments and proposals


Target group: select-ed HSC compliance and financial audit staff

Time: 5 days of presentations and discussions

Place: HSC central office

Presentation of overall Activity conclusions from discussions on var-ious solution to the topic issue

Activity implemen-tation report providing summary of the proposals on the update / revi-sion of the HSC Financial and Compliance Audit Manual

Periodical Project Leader reports

STE mission report

Not started yet

Activity 2.2.7 Conduct three ex-pert-supported fi-nancial and compli-ance audits (includ-ing one audit of ex-ternally financed programme or pro-ject), with HSC staff, at ministries and agencies/other pub-lic bodies

Quantity: Conduct of 3 expert-supported compliance and fi-nancial audits by the HSC audit staff


Target group: se-lected HSC compli-ance and financial audit staff

Time: 18 days of planning review, con-duct, and overview of compliance and fi-nancial audit proceed-ings

Place: HSC central

Presentation of

overall Activity

conclusions from

expert-supported

audit debriefing

stage

Activity implemen-

tation report pro-

viding summary of

the conducted ex-

pert-supported

audits

Periodical Project

Leader reports

STE mission re-

port

On-going


26

office

Activity 2.2.8 Assist HSC in de-veloping a method-ology to establish procedural links between the annual audit of individual ministry financial statements and the review of the annual budget execution report

Quantity: Conduct 4 presentation and dis-cussion sessions on various aspects of the topic


Target group: se-lected HSC financial audit staff

Time: 5 days of pres-entations and discus-sions

Place: HSC central office

Presentation of

overall Activity

conclusions from

discussions on

various solution to

the topic issue

Activity implemen-

tation report pro-

viding summary of

the conclusions

on procedural

links between

budget and finan-

cial information

and possible audit

solutions to verify

consistency of the

said information

Periodical Project

Leader reports

STE mission re-

port

Not started yet

Activity 2.2.9 Study visit to the European Court of Auditors

A comprehensive understanding of the activity the ECA and its role in promoting accountability and transparency in the functioning of the EU, especially in the field of compliance and fi-nancial auditing

Lessons learnt and recommendations for application at the HSC


Activity 2.3.3 Conducting pilot audits

4 pilot audits car-ried out

4 audit reports completed

Audit manual and other guide-lines

Audit reports

On-going

Activity 2.3.4 Study visit to the Supreme Audit Insti-tution of a third Member State (NL)

A comprehensive understanding of the activity of a successful and ef-fective SAI

Lessons learnt and recommendations for application at the HSC

Participants‘ re-port

Not started yet

Activity 2.4.4 Pilot IT Audit of one of typical IT sys-tems in Albanian administration and enhancing knowledge man-agement in IT Audit-ing

IT audit conducted

Organizational

procedure of using

results of complet-

ed audits in risk

analysis for plan-

ning purposes

IT audit materi-als

STE mission report

On-going

Component 3: Strengthening of

Activity 3.1.11 Defining HSC audi-

HSC auditors’ de-sired competency

STEs mission report

On-going


27

ALSAI institutional capacity and im-proving impact of ALSAI audit

tors’ desired com-petence and com-ponents of certify-ing procedure for auditors

defined

A scheme for new auditors develop-ment and certifica-tion

Draft scheme for new auditors de-velopment

Activity 3.1.12 Developing proce-dures for continued training and man-agement develop-ment

HSC managers’ desired compe-tence defined

A scheme for man-agers development drafted

Needs analysis for permanent training performer

A concept of pro-cedure/rules for permanent training drafted

STEs mission report

Draft scheme for managers de-velopment

Draft concept of procedure/rules for permanent training

On-going

Activity 3.2.1

Review of the HSC’s

reports submitted to

the Parliament and

the Parliamentarian

Commission on Econ-

omy and Finance in

terms of transparency

and communication

qualities and of the

HSC respective guid-

ance and practice as

compared to the EU

good practice

The HSC’s audit reports’ communi-cation goals de-fined

STEs mission report

The list of rec-ommendations

Not started yet

Activity 3.2.2

Drafting the HSC con-

tent and style guide

for audit reports (and

respective quality con-

trol and assurance

procedures)

The HSC content and style guide for audit reports (and respective quality control and assur-ance procedures) conceptualized and drafted

Rolling-out activi-ties planned

Seminar organised

TEs mission re-port

Seminar materi-als

Draft content and style guide for audit reports

Not started yet


28

2D. TIMING AND DELAYS (as on 16 November 2017)

Adherence to time schedule / Recuperation of delays: There was no delay of activities in the reporting period.

Project Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Steering Committee

x x x x x x x x

Component 0

Kick-off x

Closing x

Component 1

Activity 1.1.1. x x x

Activity 1.1.2. x x x x x




Activity 1.2.3. x x x x x x x x

Component 2




Activity 2.1.4. x


Activity 2.2.2. x x x x

Activity 2.2.3. x x


Activity 2.2.5. x x x x x x

Project Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Activity 2.2.6. x x


Activity 2.2.8. x x


29


Activity 2.3.1. x x x x x x x


Activity 2.3.3. x x x x x x x x x x x x x x x



Activity 2.4.2. x x x x x x x x x x


Activity 2.4.4. x x x x x x x x x

Activity 2.5.1. x x x x x x x x x x


Component 3




Activity 3.1.4. x x x x x x x x x






Activity 3.1.10. x x



Project Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24







30



Activity 3.2.8. x

Activity/action Planned (according Work Plan of Contract)

Activity/action Planned (according approved Side Letters)

Activity/action Performed

Activity/action Delayed by more than 3 months


31

Time schedule adjustments according to the approved Side Letters (description):


32

2E. ASSESSMENT

Overall Assessment of progress

The positive progress of the Twinning project and the close and mutual cooperation between the ALSAI, NIK and SAO have been ongoing in the seventh quarter. The ALSAI Chairman, ALSAI’s management level and other responsible staff are very engaged in the project and support the pro-ject.

The Partners have decided to apply for extension of the project until mid-July of 2018 (in the form of an amendment to the contract), which will allow to achieve the assumed goals of the project by implementing the planned activities. The extension of the project will not require increasing the pro-ject’s budget.

Issues

None


33

Section 3: Expenditures

Provides total figures of disbursement in the reporting period for key groups of costs