With the purpose of establishing effective management and “Good Governance Principles”, the reform of Public Internal Financial Control (PIFC) has been underway since 2010, which is highly importance due to obligations Georgia has undertaken before EU and due to the potential benefits from its implementation. Implementation of the reform promotes the establishment of the Internal Control system, which ensures the straightened functioning of the entity based on the managerial accountability, therefore, more targeted, economical, efficient and productive use of the budgetary resources.
The Public Internal Financial Control consists of the following three components:
- Management and management control - Financial Management and Control (FMC);
- Independent - Assurance and consulting function- Internal Audit (IA);
- PIFC system coordinator - Central Harmonization Unit (CHU).
According to the EU model, the Public Internal Control Department of the Ministry of Finance of Georgia (Central Harmonization Unit) is the body responsible for the development, coordination and harmonization of Financial Management and Control, as well as internal audit system through the Georgian Public Sector.
The coordinating role of the Central Harmonization Unit requires relationship with all interested parties of the system, including all budgetary institutions, Civil Service Bureau, State Audit Office and all parties involved in the reform, which affects its course. PIFC is the part of PFM (Public Financial Management) and PAR (Public Administration Reform).
From the two elements of the Public Internal Financial Control Reform, initially, the implementation of Internal Audit Institutions has started gradually since 2010, with more than 100 Internal Audit units are established in the public sector for today, employing about 450 internal auditors. With the hard efforts of the Harmonization Unit and the supports from donors, internal audit subjects continue to function in perpetual development mode.
From 2015, the second important component of the reform the implementation of Financial Management and Control has begun in the public sector, which requires changes which will lead to implementing modern managerial culture in public governance.
The Public Internal Financial Control is a kind of indicator to evaluate the efficient functioning of the public entity. Development of this system is one of the crucial priorities for all EU member states and candidates.