Saturday, May 4, 2013

Manual for Financial Management and Control

MANUAL FOR FINANCIAL MANAGEMENT AND CONTROLRepublic of Macedonia MINISTRY OF FINANCE Public Internal Financial Control Department Central Harmonisation Unit for Financial Management and Control MANUAL FOR FINANCIAL MANAGEMENT AND CONTROL Skopje, December 2010 Financial Management and Control Manual 2 Dear, The reforms undertaken by the Government of the Republic of Macedonia in the European integration process of the Republic of Macedonia requires the establishment and development of sound and efficient system of financial management and control within the public sector entities. Law on Public Internal Financial Control ("Official Gazette of the Republic of Macedonia" no.90/09) adopted by Parliament of the Republic of Macedonia on July 22, 2009, secondary regulations for financial management and control and this manual is the legal framework of financial management and

control within the public sector entities in the Republic of Macedonia. Manual for financial management and control model is structured to establish a sound control environment, which aims to provide reasonable assurance that activities are carried out according to the principles of sound financial management, transparency, efficiency, effectiveness and economy, as well as current legislation and the budget. This Manual provides a comprehensive overview of the main principles of modern management and hopefully will serve as a guide and tool in performing everyday tasks and activities of all officers and persons involved in financial management and control. This Manual has been prepared by the Public Internal Financial Control Department in the Ministry of Finance which is the central unit for the harmonization of financial management and control within the EU twinning project "Strengthening of the Public Internal Financial Control and MATRA project" Strengthening and implementation of public internal financial control at the central level realized in cooperation with the Kingdom of the Netherlands. Manual for financial management and control will be published on the website of the Ministry of Finance www.finance.gov.mk, and will be updated and improved. Sincerely, Financial Management and Control Manual 3 CONTENT CHAPTER I…………………………………………………………………………………..6 INTRODUCTION 1.1. Purpose of the Manual on Financial Management and Control …………………..7 1.2. Users of the Manual ……………………………………………………………….......7 1.3. Structure of the Manual on Financial Management and Control ………………….8 1.4 Style of the Manual ……………………………………………………………………..8 CHAPTER II ………………………………………………………………………………….9 FINANCIAL MANAGEMENT AND CONTROL - GENERAL RULES 2.1 Public Responsibility …………………………………………………………………..10 2.2 Public Internal Financial Control ……………………………………………………..10 2.3 Managerial Responsibility …………………………………………………………….12 2.4 What can be achieved by internal control ...........................................................12 2.5 Limitations of internal control …………………………………………………………12 2.6 Checking and evaluating internal control …………………………………………...13 2.7 Financial management and control ………………………………………………….14 2.8 Components of financial management and control - COSO framework………....17 2.8.1 Component 1 - Control environment ………………………………………………18 2.8.2 Component 2 - Risk management…………………………………………………21 2.8.3 Component 3 – Controls…………………………………………………………….23 2.8.4 Component 4 - Information and Communication ………………………………..28 2.8.5 Component 5 - Monitoring ………………………………………………………….30 2.9 Interconnectivity (synergy) of the five components of internal control …………..30 CHAPTER III ……………………………………………………………………………….33 ESTABLISHMENT OF FINANCIAL MANAGEMENT AND CONTROL 3.1 Conditions for the establishment of financial management and control …………34 3.2 Establish financial management and control ……………………………………….37 3.2.1 Organizational establishment ………………………………………………………39 3.2.2 Preparation of the plan for the establishment and development of financial management and control ………………………………………………………………….43 3.2.3 Preparation of statements for the vision and mission and key business objectives …………………………………………………………………………………...47 3.2.4 Assessment...

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