Implementation of Internal Control System in the State Unemployment Insurance Scheme

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Implementation of Internal Control System in the
State Unemployment Insurance Scheme

• - An ICS Evaluation by the French Court of
  Accounts -

presentation by Marie-Thérèse Cornette Conseiller
Maître EUROSAI Seminar Prague, 27 May
2003
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Points to be presented

• 1. Context of the ICS Evaluation by the Court
• 2. Performing the ICS evaluation audit features
  and methods
• 3. Main findings
• 4. Prospects and conclusions

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1. Context of the ICS evaluation by the Court

• 1.1. Presentation of the Unemployment Insurance
  scheme (UIS)
• 1.2. Former interventions of the Court
• 1.3. Internal Control in UIS

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1.1. The State Unemployment Insurance Scheme (UIS)

• A private organisation jointly managed by
  representatives of employers, organisations and
  trade-unions
• Managed by autonomous organisations, 30 local
  ASSEDICs () co-ordinated by one central
  organisation, the UNEDIC (Union for employment in
  industry and trade). 700 information desks for
  unemployed persons, 14 000 officers.
• 20 billions benefits paid in 2000
• Accounts certified annually by private financial
  auditor
• Collecting compulsory contributions, therefore
  submitted to legal audit by the Court

() ASSEDIC ASSsociation pour lEmploi Dans
lIndustrie et le Commerce organisation
managing unemployment insurance benefits
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1.2. Former interventions of the Court

• Until 1998/99, the Court used to audit one or two
  ASSEDICs each year. This method failed to give a
  consistent view of the general situation of the
  Unemployment Insurance Scheme.
• The Court decided to adopt a transversal
  approach, and to privilege a second level audit,
  largely based on financial auditors works
• In 2000, an audit on the consolidated accounts of
  the UIS, (1994-1999) was performed. One of its
  conclusions was that the reliability of the
  certification system was based on a system of
  reinforced internal control.

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1.3. Internal Control System in UIS

• A system largely inspired by methods used in the
  private sector, and rather precursory - internal
  control still not widely implemented in France in
  public or semi-public institutions in the field
  of social welfare
• A system set up from 1999 onwards, defined as
  RCIQT (Référentiel de Contrôle Interne et de la
  Qualité des Traitements) system of reference
  for internal control and quality of
  transactions, complemented by a manual of
  internal control
• A system elaborated with the participation of
  both officers from ASSEDICS and external
  consultants, in accordance with national
  guidelines enshrined in an internal control
  charter
• Gradually spread to all ASSEDICs, which had to
  elaborate, for the first time in 1999, their own
  annual programme for internal control.

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2. Performing the ICS evaluation audit features
and organisation

• 2.1. Audit features
• 2.2. Audit organisation overview
• 2.3. Audit missions on the spot

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2.1. Audit features a co-ordinated audit with
UNEDIC

• The French Court of Accounts decided, in April
  2001, in line with its second level audit
  policy, to launch an audit on the internal
  control system in UIS
• At the same time, the UNEDIC decided to launch as
  well a national internal audit on the same
  subject
• It was thus decided, and fully agreed, to carry
  out a co-ordinated audit between the Court and
  the UNEDIC
• UNEDIC Internal auditors would not go into the
  ASSEDICs visited by the Court
• The Court team would have access to all
  documents and conclusions coming from the
  internal auditors
• Each team would remain independent in its
  assessment and conclusions

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2.1. Audit organisation overview

• Team two auditors, a senior and a junior, well
  informed of the characteristics of the UIS - they
  were in charge, the year before, of auditing the
  consolidated accounts
• Time schedule three months 15th April/ 15th
  July 2001
• Visit of 6 ASSEDICs
• selected in agreement with UNEDIC
• supposed to be at different stages of progress as
  regards implementation or internal control
• Periodical interviews, at UNEDIC headquarters in
  Paris, with the delegate director of UNEDIC
  network

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2.3. Audit missions on the spot visiting
ASSEDICs

• Meeting the main actors
• ASSEDIC director, at the beginning and end of the
  mission (restitution of the first conclusions)
• with officers in charge of main functions
  (benefits, contributions, support functions)
• the internal auditor,
• and sometimes the external auditor
• Analysing, with the officer in charge of
  monitoring the internal control, the
  implementation stage and specific difficulties
  met by the ASSEDIC
• Visit of information desks
• Meeting officers in charge of internal control
• Second level testing of files sample after random
  selection

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3. Main findings conditions to ensure ICS
success

• 3.1. Setting up a relevant annual programme of
  internal control
• 3.2. Taking results into account in daily
  management
• 3.3. Co-ordinating the system at the national
  level. UNEDIC role monitoring or leadership?

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3.1. Setting up a relevant annual Programme

• The rating of transactions in terms of risks is
  made in compliance with the methodology defined
  by the manual of internal control
• A specific risk analysis is necessary every year
  to adapt those principles to the particular
  situation of each institution. Financial auditor,
  as well as internal auditor and officers in
  charge of internal control have to provide input
  in the reflection. Lessons learnt from previous
  years should be taken into account
• Parameters used to determine the size of samples
  to control should vary in function of the level
  of risk specified for each transactions area
• Quality and suitability of ICS to the needs of
  the institution is strongly related to the
  relevance of the risk analysis
• However, Court auditors noted a reluctance, in
  some ASSEDICs, to perform every year a new risk
  analysis.

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3.2. Taking results into account in daily
management

• Major interest of ICS to increase possibilities
  to identify sources of error so that corrective
  actions can be implemented
• Different types of practises were observed some
  ASSEDICs insist more on individual corrective
  actions (personalised follow- up, tutorial
  system) , whereas others prefer collective
  actions (disseminating good practises)
• A dynamic communication policy to disseminate the
  results of the control contributes to the
  mobilisation of officers some ASSEDICs
  conceived, in this respect, simple and attractive
  documents
• The Court noticed that ASSEDICs better organised
  on internal communication obtain better results
  on internal control

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3.3. Co-ordinating the system at the national
level. UNEDIC Monitoring or leadership ?

• The UNEDIC plays a role of co-ordinator of the
  system (the delegate director of the UNEDIC
  network is in charge of this function)
• Regional RCIQT meetings, held quarterly, offer an
  opportunity to exchange experience and good
  practises
• A club of national users of the RCIQT has been
  created in order to maintain the RCIQT and to
  convey information
• Biannual investigation is made by UNEDIC to
  measure the rate of implementation of the annual
  programmes
• National audits of the implementation are
  regularly performed. The results of the first
  audit were published at the end of 2000. The
  second was in course in 2001
• The Court noticed that the ASSEDICs consider
  their observations not sufficiently taken into
  consideration by UNEDIC. They wish to play a
  larger part in the process of maintenance of the
  RCIQT.

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4. Prospects and conclusions

• The conclusions of the Court were part of the
  2001 annual public report. They were also
  communicated to UNEDIC, which expressed its
  agreement in an answer simultaneously published
  in the same document.
• 4.1. The dynamic dimension of the system has to
  be maintained and developed
• 4.2. Performance indicators need to be refined
• 4.3. From Internal Control to Quality of Service
  measure

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4.1. The dynamic dimension of the system has to
be maintained and developed

• The monitoring function must be developed in
  ASSEDICs
• monitoring officers appointed in all ASSEDICs
• training sessions organised
• manual of monitoring completed
• Making sure the RCIQT is maintained the
  statutory and organisational evolution of UIS
  implies periodical adjustment.
• Cost of ICS must be kept under control. Human
  means involved in the internal control were on
  average 2.6 of the total staff ( between 1.2
  and 5.1 )

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4.2. Performance indicators need to be refined

• UNEDIC selected five programme indicators in
  order to monitor the results of institutions and
  measure their efficiency
• Those indicators cannot be fully considered as
  pertinent unless the size of samples observed
  strictly corresponds to the application of
  statistic rules.
• Comparisons between the results of the different
  ASSEDICs must be unbiased - internal control
  practises should be harmonised through
  information sharing within the club of national
  users

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4.3. From Internal Control to the Quality of
Service measure

• Internal Control must be combined with a
  procedure aiming at improving the quality of
  service
• The RCIQT permits to measure for each category of
  operations it includes, a rate of the quality
  assessed or delivered by the providers of the
  service
• A second approach concerns the quality perceived
  by the users of the service. Some ASSEDICs have
  made significant steps in that direction,
  considering that the quality of service relies
  mainly on the reliability of transactions.

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Overall Conclusion

• The Court will tackle the subject again and
  perform a new audit in 2004
• Several public or semi-public institutions have
  wished to obtain more information about the UIS
  Internal Control System, which appears as a
  pioneer.