Experiences of Audits of the European Commission in the Region of Saxony-Anhalt Mechthild v. Maydell Head of the Audit Authority for the Region of Saxony-Anhalt for the ERDF and the ESF Brindisi, June 10 – 11, 2010

Allocation of Structural Funds according to Art Allocation of Structural Funds according to Art. 18–24 Council Regulation No. 1083/2006 Europe 350 Billions EUR Federal Republic of Germany 25,5 Billions € (16 Billions € EU-SF+ 9,5 Billions € ELER) Saxony-Anhalt 3,4 Billions € (2,6 Billions EU-SF + ca. 0,7 Mrd. Billions ELER)

Objective of the Audit of DG Regio To Obtain Assurance on the Functioning of Systems 2007– 2013 through Review of the Work of the Audit Authority on the Legal Base provided by Article 72/2 of Council Regulation No. 1083/2006

Clear Definition, Allocation and Separation of Functions Key Requirement I Clear Definition, Allocation and Separation of Functions Verification that the AA is adequately staffed Verification that there is a clear Definition and Attribution of Audit Work Verifictaion that the AA is fully independent

Adequate System Audits Key Requirement II Adequate System Audits to verify whether the AA Methodology provide for correct selection of Audit Priorities – Systems, OPs etc (Risk Assessment) to verify whether the AA Methodology provide for an Assessment of the Systems Key Elements to verify whether the AA Methodology provide for a Determination of Assurance Level gained from the Systems and to verify whether the AA Methodology provide for a Determination of Technical Parameters of the Sampling

Key Requirement II cont. Adequate System Audits to verify whether the AA Methodology was correctly applied (adequate coverage of Bodies and Key Elements, correct Conclusions taken etc.) to verify whether the Audit Strategy was complied with to verify the Quality and Reliability of the Audit Work – Compliance with International Auditing Standards (including sufficient Audit Trail of Work carried out) to obtain a reasonable Assurance that the AA Methodology was correctly applied i.e. the Work carried out by the AA provides sufficient appropriate Basis to conclude on the Functioning of the Systems and Conclusions reached by the AA are adequate and correspond to the Audit work carried out

Modules Module 1: Review of Organisation and Audit Methology of the AA Module 2: Review of Working Documents from System Audits Module 3: Re-Performance of System Audits Module 4: Re-Performance of Sample Audits

Scope The entire Enquiry over the years 2009 and 2010 covers the review of the Organisation, Procedures, Methodology and the Planning and Execution of the Audit Work carried out by the AA for the ERDF The Enquiry began with a Desk Review of our Documentation (Audit Manual) related to the Organisation and Methodology in Summer 2009 In October 2009 the Auditors came to Saxony-Anhalt to follow-up on any open Questions from the Desk Review and to review on the Spot the Working Documents related to 3 System Audits carried out by our delegated Audit Body „PS EFRE“

Limitation of Scope In one Case the Auditors of DG Regio could assess the Conclusions reached by the AA only to a limited extent since the Conclusions discussed on-spot from the observed System Audit were only preliminary and an Audit Report was not yet available The Key Requirement „Adequate System Audits“ will only be fully assessed by the Commission after the planned Re-performance of System Audits by the DG Regio Auditors has taken place (Summer 2010)

Findings I Planning Planning of Individual System Audits was not documented The Auditors recommend the Completion of our Audit Manual with a Template for an Audit Plan in Line with International Audit Standards

Audit Evidence: Control Tests Findings II Audit Evidence: Control Tests Control Tests should enable the Auditor to verify whether the Key Controls identified for the System have functioned efficiently and consistently over the Period audited We had to revise our System Audits Methodology to ensure full Compliance with International Standards on Auditing

Findings III Audit Evidence: Scope Limitations The Auditors critisized our Assessment of Key requirement 7 (Measures of Prevention and Correction) as „well funcioning“ when we had not yet carried out any Project Audits. The Auditors recommend that this Limitation of Scope should be explained in the Audit Reports and adequately reflected in the overall Evaluation of the Systems

Findings IV Quality of Individual System Audits The Auditors considered the Quality and Depth of Analysis of our System Audits not satisfactory and have asked us to review all our System Audits carried out in 2009 to ensure that the Quality and Depth of the Audit Work is adequate and in full compliance with International Standards of Auditing

Findings V Reporting The Auditors citicized that neither in our Audit Strategy nor in our Audit Manual had we included indicative Schedules/Time Limits for conducting System Audits, issuing Audit reports and Follow-ups The Model System Audit Report should also include a Description of the Scope of Audit as well as of the System audited

Findings VI Quality Control / Review The Auditors claimed that Quality Control Procedures within the „PS EFRE“ were not documentated and recommended to provide appropriate Tools to be used in perfoming and documentating Control Procedures (i. e. checklists)

Conclusions In the former Periods the Application of International Standards of Auditing had also been included in the Council Regulations but not followed to the extent requested by the Commission now The Quality and Depth of Audits have to improve Documentation in Form of Manuals, Model Reports and Checklists has become vital

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