Regional Policy Management and control systems Draft Delegated Act Franck Sébert, DG Regional and Urban Policy, Head of Unit C1 TWENTY-FOURTH MEETING OF THE EXPERT GROUP ON DELEGATED AND IMPLEMENTING ACTS FOR THE EUROPEAN STRUCTURAL AND INVESTMENT FUNDS – 17 December

Regional Policy Outline Draft Delegated Act - Adequate audit trail (former Fiche 17B; Article 31 of the DA); -Use of data collected during audits carried out by the Commission (former Fiche 17B; Article 32 of the DA); - Scope and content of audits of operations and audits of accounts and the methodology for the selection of the sample of operations (former Fiche 17F; Articles 33, 34, 35 of the DA); - Financial corrections (former Fiche 17G; Articles 36 and 37 and Annex IV of the DA). 2

Regional Policy Adequate audit trail Use of data collected during audits carried out by the Commission Articles 31 and 32 Only editorial changes compared to version expert group 30 October 3

Regional Policy Scope and content of audits of operations and audits of accounts Methodology for the selection of the sample of operations Articles 33, 34 and 35 Main changes to Fiche 17 F 4

Regional Policy Article 33 Audit of operations - §33(2): Audits may be carried out on the basis of electronic documents or documents made available by the MA The audits of operations shall be carried out on the basis of supporting documentation and records held by the beneficiary or otherwise made available to the audit authority in accordance with the Article 140 of the CPR [on availability of documents]. - §33(3)(c): Audits cover outputs and results underpinning payments (simplified costs) - §33(4): On-the-spot verifications cover physical implementation of the operation and any of the aspects mentioned in paragraph 3, where applicable. 5

Regional Policy Article 34 Methodology for the selection of the sample of operations - Specific situation where the statistical approach is not possible at the beginning of the period: sentence deleted - §34(7): Treatment of negative sampling units: to be audited separately - §34(8): Proportional control arrangements according to Article 148(1) CPR: no need for scope limitation (inherent to regulation) - § 34(14): Add definition of total error rate: on the basis of the results of the audits of operations for the purpose of the audit opinion and control report, the AA shall calculate a total error rate, which shall correspond to the sum of the projected random errors and, if applicable, systemic errors and uncorrected anomalous errors, divided by the population 6

Regional Policy Article 35 Scope and content of the audits of accounts - Revised drafting §35(6)(b): Amounts withdrawn, recovered, to be recovered and recoveries presented in the accounts are based on justified decisions by the responsible MA or CA - Drafting §35(6)(d) on amounts paid to financial instruments and advances of State aid paid to Beneficiaries aligned to text of CPR 7

Regional Policy Financial corrections Fiche 17G split in 2 Articles (36 and 37) o Article 36: detailed rules concerning the criteria for determining serious deficiencies o Article 37: criteria for applying flat rates or extrapolated financial corrections and criteria for establishing the level of financial correction 2 tables in Annex o Key requirements of management and control systems o Classification for the determination of the effective functioning of the system (4 categories) 8

Regional Policy Article 36 Criteria for determining serious deficiencies in the functioning of the system - Key requirements listed in Annex IV o Main key requirements identified (3, 4, 5, 9, 12 and 13) NEW: audit trail (KR5) added o Order slightly modified to present key requirements by body (MA, CA, AA) - Effective functioning of the system assessed on the basis of 4 categories set out in Annex IV Where the assessment concludes that category 3 or 4 with regard to any of the main key requirements or with regard to two or more of the other key requirements, it shall be considered that there is a serious deficiency. 9

Regional Policy Article 37 Criteria for applying flat rates or extrapolated financial corrections and criteria for establishing the level of financial correction - §37(3): Criteria for determining the level of flat rate correction are simplified - Criteria on vulnerability of the systems to fraud deleted (Key requirement on effective implementation of proportionate anti-fraud measures) - §37(4): Reference to the criteria for each rate of correction (moved from the table in fiche 17G) 4 level of flat rate financial corrections: 5%, 10%, 25%, 100% 10

Regional Policy Article 37 Criteria for applying flat rates or extrapolated financial corrections and criteria for establishing the level of financial correction - §37(7): Proportionality: certain degree of flexibility in the application of flat rates in exceptional cases, where the use of flat rates would be disproportionate. - §37(8): The rate of correction shall be doubled in case of repeated offenses (same serious deficiency). 11