This report has identified the following major issues in the public sector financial accountability of the Kyrgyz Republic: 1) weak internal controls in several areas such as treasury, budget implementation, procurement, human resources, accounting and reporting as evidenced by large amounts o f illegal unintended expenditures, embezzlements and other financial offences reported by the external auditor
2) weak cash management as the treasury cash rations on a day-to-day basis, which creates uncertainty for budget institutions in implementing their plans
3) absence of a legal basis for internal audit in the public sector
4) weak capacity in the C A for carrying out effective financial audits and focusing attention on the basis of risk assessment
5) weak capacity in line ministries to undertake systematic budgeting exercise
6) budget monitoring is limited to monitoring of fiscal targets as little attention is paid to assessment of program effectiveness
6) lack of systematic management accounting and weak capacity in departmental management to absorb and use management accounting data in decision making and management processes
7) weak capacity in the parliamentary committees to provide effective legislative oversight over the executive
and 8) inadequate accountability arrangements for public enterprises. Key Recommendations offered in the short term involve: 1) strengthening internal controls and the treasury cash management function
2) establishing daily reconciliation of consolidated district treasury payment requests
3) reconciling daily revenue collections
and 4) granting authority to the Chamber of Accounts (CA) to perform interim post audits. In the long term the Government should: 1) enact the Law on Public Sector Internal Audit and build internal audit capacity
2) establish effective internal audit structures in the line ministries
3) prepare rules and methodology for conducting internal audits in the public sector
4) provide extensive training
5) require internal auditors to carry out detailed assessments of internal controls
6) require the CA to certify the year-end financial statements of the government
7) make the process of appointment of the Chairman of the CA transparent
8) discontinue the special means provisions
and 9) clearly define the accountability of public enterprises.