THE BULGARIAN EXPERIENCE IN APPLYING THE REVISED GUIDELINES Certification Audit of the European Agricultural Funds Executive Agency THE BULGARIAN EXPERIENCE IN APPLYING THE REVISED GUIDELINES Ms Sevelina Ignatova– Director, Directorate “Audit Work” June 2018

Development of the Certification function 2000-2016 Certification Audit of the European Agricultural Funds Executive Agency Development of the Certification function 2000-2016 2000-2006 Pre-accession SAPARD Programme – Public Authority 2007-2015 – EAGF and EAFRD – Private companies, selected trough procurement procedure 2016 onwards - Public Authority-CAEAF, designated through Council of Ministers Decree

Allocation 2014-2020 (mln. euro) Certified expenditure (mln. euro) Certification Audit of the European Agricultural Funds Executive Agency CAEAF Capacity Total number of staff – 30 at present (22 in the beginning) Audit staff – 24 at present (16 in the beginning) Allocation 2014-2020 (mln. euro) EAGF 5 336 RDP 2 339 EMFF 88 Total 7 763 Certified expenditure (mln. euro) FY EAGF EAFRD 2016 726 129 2017 797 194 Work done - IACS FY Parcels Animals (No of B) 2017 2 147 10 B 2018 834 14 B

Certification Audit of the European Agricultural Funds Executive Agency CAEAF Capacity More than 60 % with international audit certificates: CIA,CGAP, CCSA, CRMA, CFSA, CICA, CFE, ongoing certification for ACCA and CISA Different expertise – internal/external audit, EU funds audit and control, EU funds management, legal experts, engineer Operational Programme “Good governance” 2014-2020 project for capacity building and equipment supply, esp. helpful since we perform all the work ourselves, including OTSCs November 2017 onwards – Audit Authority for the European Maritime and Fisheries Fund, designated trough Council of Ministers Decree

FY 2017 – application of the old Guidelines Certification Audit of the European Agricultural Funds Executive Agency FY 2017 – application of the old Guidelines Risk assessment 4 Matrices for Assessment for the ICS per population; Risk model used based on analyses of the risks identified for each measure/scheme. Set confidence level as follows:   ERR IRR IACS Non-IACS EAGF 80% 85% 75% EAFRD

FY 2017 – application of the old Guidelines (continued) Certification Audit of the European Agricultural Funds Executive Agency FY 2017 – application of the old Guidelines (continued) Sampling approach MUS conservative approach, no stratification for operational transactions Non-statistical approach for compliance testing and non-operational transactions – systematic choice by random selection Use of specialized software for data analysis Arbutus Analizer for both - defining the sampling size for statistical sampling and choosing the sample units for the random selection

FY 2017 – application of the old Guidelines (continued) Certification Audit of the European Agricultural Funds Executive Agency FY 2017 – application of the old Guidelines (continued) Work done in numbers Operational transactions: Non-operational: EAGF   IACS Non-IACS Compliance testing 15 Substantive testing 123 ( S1 121) 93 ( S1 79) EAFRD   IACS Non-IACS Compliance testing 15 Substantive testing 123 ( S1 121) 101 ( S1 93) Compliance/Substantive testing for EAGF and EAFRD IACS Non-IACS Execution of payments 15 Accounting for payment Advances and securities N/A 20 Debt management 65

FY 2018 – adoption of the new methodology Certification Audit of the European Agricultural Funds Executive Agency FY 2018 – adoption of the new methodology Risk assessment - I 4 Matrices for Assessment for the ICS per stratum/population for Audit objective 2; 2 Matrices for Assessment for the ICS per stratum/population for Audit objective 1; Risk model used based on analyses of the risks identified for each process Findings from ECA, EC and CB audits; Cases of irregularities, (suspected) fraud, including conflict of interest; Key changes in personnel; Significant changes in legislation and/or IT systems compared to previous financial year

FY 2018 – adoption of the new methodology (continued) Certification Audit of the European Agricultural Funds Executive Agency FY 2018 – adoption of the new methodology (continued) Risk assessment - II Use of plan for rotation of controls for a 3-year period All high risk processes, and 50 % of Medium risk processes, and 20 % of Low risk processes will be audited annually; Use of dual-purpose testing; Use of two separate samples – one for each audit objective Confidence level set for Audit objective 1 - 60 % for EAGF and 70% for EAFRD; Confidence level set for Audit objective 2 - 80 % for EAGF IACS and 70 % EAGF non- IACS; 80 % for EAFRD IACS/non IACS;

FY 2018 – adoption of the new methodology (continued) Certification Audit of the European Agricultural Funds Executive Agency FY 2018 – adoption of the new methodology (continued) Sampling approach MUS standard approach, no stratification for operational transactions Pilot sample for all populations and two-period sample for non-IACS populations Non-statistical approach for compliance testing and non- operational transactions – systematic choice by random selection Use of specialized software for data analysis Arbutus Analizer for both - defining the sampling size for statistical sampling and choosing the sample units for random selection

FY 2018 – adoption of the new methodology (continued) Certification Audit of the European Agricultural Funds Executive Agency FY 2018 – adoption of the new methodology (continued) Work to be done in numbers Audit objective 1: Audit objective 2: *Due to lack of historical data for standard-deviation of the errors for the population in past periods, we used a pilot sample of 35 items Compliance/Substantive testing EAGF EAFRD Execution of payments 30 Accounting for payment Advances and securities As per Strategy/GL2 Debt management EAGF   IACS Non-IACS Compliance testing 15 Substantive testing 35* (119) 35* EAFRD   IACS Non-IACS Compliance testing 15 Substantive testing 35* (77) 35*

Sampling Unit Beneficiary/Claim for IACS Certification Audit of the European Agricultural Funds Executive Agency Sampling Unit Beneficiary/Claim for IACS Reduction of work load Administrative checks – approx. 20 % reduction (246 transactions for FY 2017 versus 196 for FY 2018) OTSCs documentation verification Reduction of travelling costs Approx. 70% reduction - 191 OTSCs for FY 2017 versus 58 for FY 2018

Certification Audit of the European Agricultural Funds Executive Agency Challenges IRR for IACS – how shall the CB report the incompliances found during the administrative checks (not taken into account in the IRR calculation as per GL2); IRR for the EAFRD Non-IACS - combining and interpreting the results from two sample approaches – MUS conservative (FY 2017) and MUS standard (FY 2018); Need for methodology to implement two period stratified sample for non-IACS schemes; Annexes 4 and 14 of Guideline 3 – presentation of information for IACS (claim or transaction level); KAC for checking Audit objective 1 – execution of payments, accounting and advances and securities?

We warmly embrace … The new content of Guideline 3 Certification Audit of the European Agricultural Funds Executive Agency We warmly embrace … The new content of Guideline 3 More comprehensive Better structured – audit objective 1 (at Fund level) and audit objective 2 (at population level) Clear distinction between the opinion given on the annual accounts on one hand and the legality and regularity of expenditure respectively the opinion on the MD on the other hand The idea for IT audits

Special thanks to DG AGRI; Certification Audit of the European Agricultural Funds Executive Agency Special thanks to DG AGRI; Our colleagues from other CBs for the dedicated exchange of experience and methodology sharing.

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Thank you for your attention Certification Audit of the European Agricultural Funds Executive Agency Thank you for your attention