Authority for and development of management control procedures
Under the government’s Accounting Act, which specifies the institutional framework for developing and providing accounting regulations and standards, Parliament has authorised the Minister of Finance to stipulate the rules of government accounting. It is therefore the responsibility of the Minister of Finance to develop the principles of government accounting practice, including management control. The Minister of Finance has thus issued rules instructing the different ministries and government agencies to set up their own regulations for each organisation’s accounting practices, including management control. On the basis of these general principles, each ministry or government agency must develop its own rules of accounting practice and management control and is obliged to implement them.
The Accounting Act and the regulations issued by the Minister of Finance are published in the Danish Official Journal. The rules governing the individual ministries and government units are public, in keeping with the Danish Freedom of Information Act.
The principles on which the mandatory accounting practices and management controls in the Danish government sector are based are very flexible. This is necessary, as the regulations must be followed both by institutions with very complex economic tasks and structures and thousands of civil servants, such as the Ministry of Defence, and by government agencies with a simple structure, very few employees, and small expenditures.
On the one hand, it may seem dangerous to give the individual ministries the right to stipulate the rules governing their accounting practice.2 On the other hand, the Auditor General’s Office has
reported no empirical evidence of abuse on this basis. In fact, ministries and government agencies appear more inclined to follow accounting regulations that they themselves have established.
As the problem of fraud is a significant one for the European Communities’ agriculture policy, it has received particular attention in terms of management control. As a result, the general European guidelines on management control (see Introduction chapter of this volume) include a supplement on standards for auditing irregularities stemming from fraud. To prevent irregularities and fraud, it is imperative that there should be effective management control both at Community and national level.
Role of central agencies
A government agency reporting to the Ministry of Finance provides accounting services for a large part of the government sector. At present, the Ministry of Finance does not monitor the implementation of government accounting practice and management controls. Each minister is responsible for setting up the necessary management controls and monitoring their effectiveness.
In its work, the Office of the Auditor General evaluates the effectiveness of management control systems. Important observations about missing or inefficient management control systems are reported to the Public Accounts Committee. The criticism contained in the audit reports suggests, to some extent, what best practice should be. For this reason, the Auditor General’s reports, along with the remarks of the Public Accounts Committee, are widely circulated in the government sector. At the moment, no guidance on best practice has been explicitly formulated either by the Minister of Finance or by the Auditor General.
Comparison with INTOSAI guidelines
The general and detailed standards for management control contained in the INTOSAI Guidelines (I, paras. 4 and 5) have not been specifically incorporated into the Danish legislation on government accounting. However, most of the elements can be found in the legislation and in regulations on government accounting. The detailed standards (documentation, recording, authorization), in particular, are part of the government’s accounting legislation and of government agencies’ internal regulations on accounting procedures.
INTOSAI’s general standards concern management’s attitude towards management control (supportive attitude, integrity, and competence). They are, therefore, somewhat imprecise in nature, and it is difficult to identify them in the government’s accounting legislation. In practice, they are used by the Auditor General when monitoring management control in Danish government agencies.
Monitoring and evaluation of management control systems
No special government unit is assigned to evaluate management control in Denmark. It is management’s responsibility to evaluate the effectiveness of the management control system through its internal audit. This is clearly stipulated in the agreement on internal auditing made between the Auditor General and the minister in charge of the government unit.
Monitoring and evaluating the performance of management control is one technique used by the Auditor General’s Office when carrying out the financial audit of state accounts.
In the area of agriculture administration, both the European Commission and the European Court of Auditors carry out evaluations of Denmark’s management control systems.
Resources, skills, and training for implementation of management control
Denmark has no general arrangements for ensuring that management and staff have the necessary resources, skills, and training for operating effective management control systems. Instead, specific arrangements are made on an ad hoc basis in the largest government agencies. It is thought best to have specific arrangements suited to each government sector. Flexibility and cost effectiveness are also advanced as arguments for the decentralised training arrangements.