SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Control and Audit Nicholas Martyn DG Regional Policy Unit I2 Control and audit of the ERDF

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Context (1) Commission responsible for:  Implementation of the budget having regard to the principles of sound financial management – Article 274 of Treaty  Application of clearance of accounts or financial correction procedures to enable Commission to assume final responsibility for the budget – Article 53.5 of Financial Regulation  For Structural Funds ensuring that Member States have smoothly functioning management and control systems – Article 38.2 of Regulation 1260/1999

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Context (2) Member States responsible for:  Cooperating to ensure sound financial management – Article 274 of Treaty  Ensuring financial control of operational programmes – Article 38.1 of Regulation 1260/1999  Implementing all requirements of Regulations 1260/1999 and 438/2001 on management and control

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Relevant national authorities / bodies  Managing authority  Paying authority  Independent “checking” body  Independent “winding up” body  Intermediate bodies

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Key components of the control system  Procedures to verify the delivery of products and services co-financed and the reality of expenditure clamed and to ensure compliance with applicable national and Community rules. [Art. 4 of Reg. 438/2001]  Procedures to certify the statements of interim and final expenditures. [Art. 9 of Reg. 438/2001]  Procedures to verify the effectiveness of the managing and control systems. [Art. 10 of Reg. 438/2001]  Procedures to issue declarations on winding-up of the assistance. [Art. 15 of Reg. 438/2001]

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Management and control systems: key principles  Clear definition of functions  Clear allocation of functions  Adequate separation of functions  Control of satisfactory performance of functions (Art. 3 of Reg. 438/2001)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Control responsibilities of Managing Authority  Verifying correctness of co-financed operations  Checking payment claims and authorising payment  Preventing/detecting/correcting irregularities  Systems for gathering reliable information ensuring proper accounts  The audit trail (Art. 34 of R.1960/1999; Art. 3, 4 and 7 of R.438/2001)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Verifications by Managing Authority  Delivery of products/services co- financed  Reality of expenditure claimed  Compliance with national and Community rules [eligibility rules (R.448/2004), state aid, public procurement, environment, equality of opportunity, publicity …]  Existence of supporting documents (Art. 4 and 7 of Reg. 438/2001)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Control responsibilities of Paying Authority  Certify statements of expenditure (Art. 9 of R. 438/2001)  Keep a record of recovery orders (can also be kept by MA) and report annually on state of recoveries (Art. 8 of R. 438/2001)  Repay recoveries (and interest) (Art. 8 of R. 438/2001)  Ensure final beneficiary is paid as soon as possible [Art. 32(1) of Reg. 1260/1999]  Make available to the Commission the detailed (computer) records on payments to beneficiaries (can also be done by MA) (Art. 18 of Reg. 438/2001; Annex IV to the said Reg.)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit requirements [Chapter IV of Reg. 438/2001]  Verify the effectiveness of the management and the control systems (System audits)  Verify expenditure on a sample of operations (minimum 5%)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Systems audit  Coverage of each main authority and intermediate body  Examination of management and control systems  Control of performance of functions  Check on compliance with Community rules  Assurance that the system works

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Sample checks on operations  Independence of auditors  5% of total eligible expenditure  Representative sample of operations  Risk factors taken into account  Verify effectiveness of management and control systems  Verify expenditure declarations at various levels  Spread the implementation of the controls (Art. 10, 11 and 12 of Reg. 438/2001)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Winding up declaration  Independent body  Internationally accepted audit standards  Based on systems examination, on checks already carried out and, when necessary, on further sample checks  Reasonable assurance that certified statement of expenditure is correct (Art. 16 of Reg. 438/2001)

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Legal base for Commission audits of Structural Funds Article 38.2 of Regulation 1260/1999: Commission officials or servants may carry out on the spot checks including sample checks on operations financed by the Funds and on management and control systems. Article 6 of Regulation 438/2001: Commission shall satisfy itself on compliance of systems descriptions and undertake reviews of operations of systems on regular basis.

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit strategy and planning  Audit strategy document  Risk assessment for each audit area – Fund, period  3 year rolling strategy  Priorities and actions  Allocation of resources  Annual audit programme

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Methodology  Structural Funds Audit Manual – December 2003  Enquiry Planning Memorandum: assessment of risks, fixing objectives, detailed methodology, checklists  Mission planning memorandum: specific risk assessment, detailed work plan

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Types of audit  Desk checks on systems descriptions  Systems audits on the spot  Project/financial audits  Desk checks of closure statements  Closure audits

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Objectives of audits  To provide assurance to authorising officer on set up and functioning of management an control systems in Member State  To verify accuracy of expenditure declared  To provide basis for financial corrections to ensure exclusion of irregular expenditure But also ….  To provide basis for collaboration with national authorities for improvements to rectify identified weaknesses

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit programme for ERDF  30 auditors DG REGIO unit I.2  Framework contract with private audit firm  Audits on closure of programmes  6 audits DG REGIO  23 audits private audit firm  Audits on programmes  50 audits DG REGIO  17 audits private audit firm