1. The Audit Authority The Netherlands 2007-2013 Meeting AA Italy June 10th 2010
Harry L. Jansen RE RA
Projectleader ERDF
Italy June 10th 2010

2. Organisational Chart Ministry of Finance
Italy June 10th 2010

3. Dutch AA organisation Dutch Audit Authority 3 Teams: EFDF: 20 persons
ESF: 7 persons (and 7
hired through ESForg)
EFF: 2 people
2 Lawyers
Italy June 10th 2010
Italy June 10th 2010

4. Dutch Audit Authority is responsible for ERDF (€ 830 million)
ESF (€ 830 million)
EFF (€ 50 million)
Italy June 10th 2010
Italy June 10th 2010

5. Structural Funds in the Netherlands Situation 2000 -2006
For the SF : each internal audit department responsible for the audit of ‘their funds’;
2006: Audit of the European Commission: yellow cards all over.
: auditors of the ministry of Economic Affairs, Internal Affairs and Agriculture plus hired accountants had to audit a sample of projects ( ). The managing authorities had to ascertain their work by means of the checklists of the EC;
: still finalizing project expenditures (n+2) for the winding up of the programmes
Rijksauditdienst - Audit Authority
Italy June 10th 2010

6. Structural Funds in the Netherlands Situation 2007 - 2013
The programmes :
Four operational programmes ERDF (with a co-ordination unit in the ministry of Economic Affairs) For each OP a managing authority and some intermediate bodies (€ 830 million)
One ESF programme (co-ordination within a special agency
(€ 830 million) (
One EFF programme (co-ordination within the ministry of Agriculture)
(50 million)
One Certifying Authority for all SF and EFF (within Ministry of Agriculture)
One Audit Authority for all SF and EFF (within Ministry of Finance)
Rijksauditdienst - Audit Authority
Italy June 10th 2010

7. Tasks of the AA Compliance assessments + opinion (art.71)
(Art. 71 (2) 1083/2006 and Art / annex XII + Guidance note on Compliance Assessment
Audit strategy (Art. 62 (1) c 1083/2006 and Art / annex V + COM guidance note)
Systems Audits (Art. 62 (1) a 1083/2006)
Audits of operations (Art. 62 (1) b 1083/2006, Art / annex IV)
Annual Control report and annual opinion
(Art. 62 (1) d (i) 1083/2006, Art. 18 (2) 1828/ annex VI) and (Art. 62 (1) d (ii) 1083/2006, Art. 18 (2)+(4) 1828/ annex VII)
Independance and supervision of other audit bodies (Art. 62 (3) 1083/2006, Art. 23 b+d 1828/2006 )
Audit standards (Art. 62 (2) 1083/2006)
(Partial) closure declaration
(Art. 62 (1) d (iii) + Art /2006, Art. 18 (5) 1828/ annex IX) and (Art. 62 (1), Art. 18 (3) 1828/ annex VIII)
Rijksauditdienst - Audit Authority
Italy June 10th 2010

8. Single Audit / Single Information
Already many years a joint audit with DG Budget established
ESF: working towards a contract of confidence as we speak;
EFF: in the fall of 2010 again working towards the same
ERDF: in the spring of 2011 the same
Rijksauditdienst - Audit Authority
Italy June 10th 2010

9. Starting activities AA 2007 - 2008
Start in 2007 with a group of 10 people, all of them only part-time being involved in the audit of SF- in the beginning;
Compilation of the group: Several of them certified accountants & IT-auditors, 2 lawyers (also certified auditors) and an internal co-ordinator;
activities: audit strategies ; compliance assessments; developing audit approach and programmes; participating in many consultative structures;
Not responsible in any way for old programming periods.
Rijksauditdienst - Audit Authority
Italy June 10th 2010

10. Situation 2008-2009 Finalizing Compliance Assessments (art.71) late;
New period Management Authorities not fully operational due to n+2
old period and national action plan;
No expenses declared to the Commission;
IT-systems not yet fully developed and operational.
Rijksauditdienst - Audit Authority
Italy June 10th 2010

11. Compliance assessment
Build up to Audit Opinion (1)
steps for audit opinion
6th step
Audit opinion
5th step
Annual control report
4th step
Audit on operations
3rd step
System audits
2nd step
Audit strategy
1st step
Compliance assessment
Rijksauditdienst - Audit Authority
Italy June 10th 2010

12. Compliance assessment
Build up to Audit Opinion (2)
steps for audit opinion
6th step
Audit opinion
5th step
Annual control report
4th step
Not performed
Audit on operations
3rd step
Partially performed
System audits
2nd step
Audit strategy
1st step
Compliance assessment
Rijksauditdienst - Audit Authority
Italy June 10th 2010

13. Elements of Assurance or Confidence
Improvements
Does not
work
work
minor
some
substantial 1 2 3 4
Conclusion / score
95%
35%
25%
15% 5%
System audits
90%
80%
70%
Audits of operations
60%
Rijksauditdienst - Audit Authority
Italy June 10th 2010

14. Issuing Annual Audit Opinion possible??
Dilemma for the Dutch Audit Authority (also being CPA’s) was if it would be possible to issue an annual audit opinion in this situation with its limitations?
or: Is a sound basis established for issuing the opinion.
In our view the answer is YES.
How?
By defining a detailed scope limitation
and
limiting our opinion to the quality of the M&C systems as far as covered by the audit on KR’s (meaning that in principle the process up to and including project selection and approval was covered)
Analysing the work carried out (quality and quantity)
Rijksauditdienst - Audit Authority
Italy June 10th 2010

15. Basis for audit work ! Risk assessment from compliance assessments;
Audit strategy;
Audit program for system audits (perhaps at Homologue);
complying with ISA’s (i.e. 315,330,520,E 3000);
Sampling both as means of selection and within audits;
Testing (procedures, control, …….. etc.);
Re-performance;
Inspection;
……..
Rijksauditdienst - Audit Authority
Italy June 10th 2010

16. Conclusion by key requirement on the basis of the assessment criteria
Systems audit
steps for assessment
- covers the systems audits - conclusions - the compliance with the key regulatory requirements
4th step
Overall conclusion
Conclusion by authority: - audit authority - certifying authority/IB’s - managing authority/IB’s
3rd step
- adressed to services EC
- by national AA’s
- AA : 4 KR’s - CA : 4 KR’s - MA : 7 KR’s Annex II 3 summary tables = the framework for reaching an overall opinion
Conclusion by key requirement on the basis of the assessment criteria
2nd step
Assessment criteria non- compliance = - a risk of irregular expenditure over-reimbursement
- AA : 15 AssCr - CA : 12 AssCr - MA : 23 AssCr Annex I the KR’s + relevant AssCr
1st step
Rijksauditdienst - Audit Authority
Italy June 10th 2010
Systems Audit

17. Scope Limitation and Score
ERDF
ESF
EFF
KR 1
KR 2
KR 3
KR 4
KR 5
KR 6 (IT)
KR 7 (follow up)
Not:
Other KR’s IT CA
Follow up
Score: 3
Score: 1
Score: 2
Rijksauditdienst - Audit Authority
Italy June 10th 2010

18. From Score to Opinion Unqualified With minor limitation
With major limitation
Adverse
Rijksauditdienst - Audit Authority
Italy June 10th 2010

19. Issued Opinion ERDF ESF EFF Opinion with major limitation
KR 1
KR 2
KR 3
KR 1
KR 2
KR 3
KR 4
KR 5
KR 1
KR 2
KR 3
KR 6 (IT)
KR 7 (follow up)
Opinion with
major limitation
(in the formulated opinion is indicated that “substantial”
improvements are required).
Unqualified opinion
(Score 1 =
unqualified opinion)
Unqualified opinion
(from score 2 to unqualified opinion using an adjustment based on professional judgement).
Score: 3
Score: 1
Score: 2
Rijksauditdienst - Audit Authority
Italy June 10th 2010

20. Position of the Commission
ERDF:
annual control report and opinion: accepted
ESF:
EVF:
additional explanation asked and answered
Rijksauditdienst - Audit Authority
Italy June 10th 2010

21. Top 5 of findings EU25 Not eligible expenditure Other irregularities
Missing or incomplete supporting documents
Infringement of rules related with public procurement
Failure to respect other regulations / contract conditions NL
Not eligible expenditure
Infringement of rules related with public procurement
Missing or incomplete supporting documents
Incorrect accounts
Infringement of declared overhead costs
Rijksauditdienst - Audit Authority
Italy June 10th 2010

22. Plus 3 more for the Netherlands
extra rules plus rules which were not in line with the interpretation of the Regulations were implemented, but not applied irregularities
Many discussions about additionality of projects ((semi-) government tasks/employees) displacement of funding already in place is not eligible!
VAT compensated by VAT compensation fund: not eligible.
Rijksauditdienst - Audit Authority
Italy June 10th 2010

23. Plus a new horizontal issue arrising: State Aid
Why is state aid such a topic?
Many Court-procedures about State Aid; more attention paid to the principle of Common market: state aid distorts the free competition in the EU.
+ Credit crisis question: How to arrange the co-financing money? (Jasmine, Jeremie & Jessica, venture capital funds, WorldBank, EIB, IMF.
Less private money in the market, so structural fund projects will be co-financed with (more) public money.
Regulation has impact. State aid = a horizontal subject!
Rijksauditdienst - Audit Authority
Italy June 10th 2010

24. Compliance assessment
Current audit period
steps for audit opinion
6th step
Audit opinion
5th step
Annual control report
4th step
All performed
Audit on operations
3rd step
System audits
2nd step
Audit strategy
1st step
Compliance assessment
Rijksauditdienst - Audit Authority
Italy June 10th 2010

25. Dilemma’s this years annual opinion
How to ensure AA wide unity of performance;
ERDF: Not one central Management Authority, but
4 regional MA’s of which one with 4 Intermediate Bodies;
What to do when during project audits the materiality limit (2%) is reached;
How to extrapolate results from the sample;
How to derive a total score from many individual project
audits;
How do the results of both system audits and project audits
influence the annual opinion.
Rijksauditdienst - Audit Authority
Italy June 10th 2010

26. Thank you for your attention
Rijksauditdienst - Audit Authority
Italy June 10th 2010