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MECHANISMS FOR IDENTIFYING FINANCIAL RISKS AND IMPLEMENTING
EFFECTIVE REMOTE CONTROL
Abdullaev Mehriddin Razzoqovich
Doctor of Phylosophy in technical Sciences(PhD)
The Accounts Chamber of the Republic of Uzbekistan
Fayziev Shavkat Ismatovich
doctor of technical sciences (DSc),docent
The Account Chamber of the Republic of Uzbekistan
Atoev Asliddin Ekhtiyorovich
The Account Chamber of the Republic of Uzbekistan
Abstract:
This article proposes an effective information systems architecture for identifying and
managing financial risks in remote monitoring of budget spending.
Keywords:
budget funds, risk analysis, information systems, artificial intelligence technologies,
big data.
Introduction.
Effective spending of state budget funds and establishment of strong financial
control over them is considered a priority for every country, and for developing countries, this
direction is highly relevant, because their economic and social development in many cases
depends on how budget funds are managed. By ensuring financial transparency and certainty,
these countries will be able to effectively channel domestic resources.
Budgetary funds are of great importance in developing countries for the development of
infrastructure, improving the quality of social services, and financing projects in the fields of
education and health. However, insufficiently functioning financial control mechanisms or
corruption in these countries can lead to the misuse of funds. Therefore, the introduction of
digitalization and remote risk detection technologies is an urgent task for developing countries.
In developing countries, effective management of budget funds is particularly important, as there
are limited financial resources, and their misuse can slow down the overall development of the
country. Ensuring financial transparency in these countries also helps to increase the confidence
of external financiers (international organizations and donor countries).
Financial control and transparency are also important in developed countries. Proper
management of budget funds, through their effective use, not only improves the quality of life of
citizens of the state, but also allows to maintain a strong position in global economic processes.
Also, a strong system of financial control plays an important role in preventing corruption in
developed countries.
The mechanism of financial control and remote risk management is of common importance for
developed, developing and underdeveloped countries and serves for the economic development,
social stability and welfare of society of each country.
Targeted spending of budget funds and strengthening of financial control are based on the
following reasons:
1. Increasing economic efficiency
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If public funds are properly directed, they will have a positive effect on the economy, creating
the basis for domestic currency circulation, job creation and investment growth. Effective
financial control prevents misallocation of resources.
2. Reducing corruption
Fighting corruption and ensuring financial transparency is one of the important factors in
increasing the efficiency of public administration. Reliable control of budget funds significantly
reduces the risk of corruption.
3. Transparency and accountability of state resources
The fact that the public has information about the spending of state budget funds strengthens
trust in the state. This serves to strengthen the social agreement between society and the state.
4. Identify and prevent risks
Timely identification and prevention of risks to state budget expenditures is a key part of
effective financial management.
Appropriate to carry out the following activities in connection with the identification and
management of remote risks :
1. Strengthening financial control through digitization
It is necessary to fully digitize the budget management processes in state institutions. By this:
• Complete and automated control of financial transactions is provided.
• An opportunity to analyze data in real time is created.
• Errors and intentional illegal actions will be detected quickly.
2. Improvement of financial monitoring system
It is proposed to use artificial intelligence (AI) technologies to monitor the spending of state
budget funds:
prediction through machine learning algorithms .
• Reduce human errors by automating manual processes.
• Automatic analysis of illegal foreign financial access.
3. Introduction of remote control mechanisms
Creation of remote control capabilities based on private information technologies:
• Transfer all financial reports of government institutions to a unified electronic platform.
• Controlling the process of any financial transactions through blockchain technologies.
4. Improvement of the legal and regulatory framework
• Creation of modern legislation regulating financial control processes.
• Establishing specific requirements to increase the accountability of bodies using state budget
funds.
5. Education and training
It is necessary to develop and introduce special educational programs to improve the skills of
employees working in the field of state financial control. It helps promote not only technical
knowledge but also ethical standards.
Digitization of financial control, development of remote risk detection mechanisms and
improvement of public funds management will serve to strengthen financial discipline in society,
increase transparency and ensure economic stability. Effective cooperation between the state, the
public and the private sector is important in this regard.
the above , in order to ensure the effective management and transparency of state budget funds, it
is necessary to develop an integrated, unified control and management mechanism between the
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existing databases of ministries and agencies. Through this system, transparency of financial
processes will be increased, deficiencies will be eliminated in time and law violations will be
prevented.
To develop a single control and management mechanism:
1. Creating a single control and management platform
• It is necessary to connect the financial databases of each ministry and office to a single
electronic system.
• This system creates the possibility of centralized control and analysis of data.
• The transparency and reliability of each data source is automatically checked.
It is important to pay attention to the fact that, in order to compare the financial databases of the
ministry and the office, it is necessary to agree on the common keys that connect this information
to each other, and it is necessary to clearly define the owners of the collected information,
thereby preventing the repeated collection of the same type of information in 2 or more
ministries and offices that are not compatible with each other.
2. In order to control the completeness and reliability of the data, it is necessary to constantly
implement the following actions.
• In the process of receiving data from ministries and departments via API, monitor the provision
of agreed data in the prescribed manner.
• Checking the completeness and correctness of information during internal audit activities
conducted in ministries and agencies.
• Identify gaps and errors in the data provided by automatically comparing data collected from
ministries and departments in a centralized manner.
The implementation of these proposals will not only increase the efficiency of the financial
control mechanism in terms of digitization, but also help to strengthen the general transparency
of public administration and public trust.
In addition, "Risk management" committees should be established in ministries and departments,
and the following should be defined as the main tasks of these committees.
The purpose and main tasks and functions of the committee
The purpose of the Committee's establishment is to establish and improve the effectiveness of
internal control systems in the activities of the Ministry, to prevent financial and other risks, to
assist in the management, review, identification, elimination and control of risks (risks), to create
a risk management system in the Ministry and ensure its effective functioning.
The committee performs the following activities:
- Makes recommendations on approaches to the development of the Ministry's activity and risk
management strategy, financial risk standards;
- controls the implementation of risk and financial management strategy, compliance with risk
standards;
- prepares reports on compliance with risk management culture;
– Organizes work in collaboration with the Ministry's internal audit service and supervises the
work of the head of the internal audit service.
The main tasks of the committee:
ensuring that internal audit services develop and update a list of identified financial, operational,
and internal control risks related to the system's operations and the achievement of target
indicators;
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ensuring compliance with legal requirements on public procurement and eliminating identified
risks;
effective organization of internal audit services to identify and eliminate risks;
Analyze the causes of risks at the end of each quarter and discuss in detail the work carried out
by internal audit services to prevent and eliminate their consequences;
preparation of proposals for the elimination of conflicts that allow the emergence of risks in
normative legal documents and the practice of law enforcement, and the improvement of
relevant norms;
setting forward-looking directions to prevent risks;
The main functions of the committee:
- Considers the main goals and strategy of the Ministry, implementation of indicators, financing
procedures;
- discusses the risk acceptance strategy for certain types of general and specific risks and
develops recommendations to the minister on these issues and issues of determining risk
standards;
- The Ministry constantly monitors the risk management system;
- examines the proposals of supervisory bodies, external audit companies regarding the
improvement of internal control and ministry risks;
- reviews the quarterly reports of the Ministry and internal audit and internal control (compliance)
services in its system;
- annually revises and updates the policy of the Ministry in the field of risk management;
- Monitors compliance with the Ministry's risk management policy by the heads of the Ministry
and all departments and all employees of the Ministry.
- Control over the implementation of the risk and financial management strategy of the Ministry,
control over compliance with the requirements of the internal documents of the Ministry, which
regulate the management of certain risks of the Ministry
(for example, payment, loan, foreign
debt, market, operational, reputation risk, etc.)
Rights and obligations of the committee
The committee has the following rights:
- To request the necessary information and documents from the Ministry and its system
organizations in order to fulfill the tasks assigned to the Committee
(based on a written request)
;
- if necessary, to invite the internal audit service of the Ministry and other responsible employees,
supervisory bodies and independent experts to the meetings of the Committee.
The Committee regularly receives information and reports from the heads of the internal audit
service and other departments on the current state of risks, compliance with risk standards, and
mechanisms for reducing the level of risks.
The committee performs the following duties:
- Reporting to the Minister on the activities of the Committee at least twice a year;
- Timely notify the Minister of deficiencies in the Ministry's risk management and work to be
done, risks that are likely to affect the Ministry or exist in its activities, and the status of their
elimination;
- to perform the tasks assigned to the Committee by these Regulations;
- Maintain the confidentiality of information and documents obtained in the course of the
Committee's activities and prevent their dissemination;
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- Comply with the requirements of the Law of the Republic of Uzbekistan "On Personal Data",
not to disclose personal data and to provide such data in accordance with legislative acts.
It should be noted that the above proposals were reflected in the Decree of the President of the
Republic of Uzbekistan No. PF-100 dated July 10, 2024 "On additional measures to strengthen
financial control over the use of budget funds" based on the mechanism presented below.
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