The concept of public internal financial control (PIFC) describes the overall consolidated system established by government ministries and state administration bodies for controlling, auditing and reporting on the use of financial resources. It involves ex ante approval, through sampling and reporting techniques, as well as ex post internal audit systems, including the need to constantly feed back findings and recommendations from both systems, with the aim of providing management with a tool for assuring economy, efficiency and effectiveness in the use of its financial resources.

PIFC consists of three basic concepts:
· managerial responsibility and accountability for the sound financial management and control of national and EU budgetary funds;
· functionally, but also politically independent, internal audit capabilities;
· centralised harmonisation unit (CHU), responsible for developing and harmonising methodologies and guidelines for implementing both control and audit systems throughout the public sector, including quality assessment via on-the-spot checking that guidelines are properly followed-up.
A comprehensive PIFC structure establishes a coherent system of internal financial controls and sound management irrespective of the origin of financial means, which may come from national and/or international sources.

In Croatia, the Ministry of Finance - Directorate for Harmonization of Internal Audit and Financial Control (CHU) has started in 2003 to develop a PIFC system in line with EU practice. To support the project, the Ministry of Finance will provide methodological guidance to government agencies and will coordonate the overall process.

In Croatia, the Ministry of Finance has already undertaken important reforms in the PIFC area, further progress is needed to meet all EU requirements related to the Chapter 32. Financial Control. In particular, the European Partnership lists the following priorities with regard to public internal financial control:
· develop a policy for the establishment of a PIFC system;
· establish or reinforce public internal control functions through the provision of adequate staff, training and equipment, including functionally independent internal audit units;
· establish effective procedures for the detection, treatment and financial, administrative and judicial follow-up of irregularities affecting the Communities’ financial interests;
· develop a coherent legislative framework and efficient mechanisms for monitoring, controlling and auditing public income and expenditure;
· develop effective mechanisms for communicating to the Commission about irregularities affecting the Communities’ financial interests, and establish the necessary co-ordination methods.