1. AUDITING COHESION AND STRUCTURAL FUNDS IN SLOVENIA Nataša Prah Ljubljana, 20.11.2014 

2. 1.Audit Authority 2.Auditing Cohesion and Structural Funds 3.Frequent findings 2 INTRODUCTION

3. 3 Audit Authority

4. Basis:  Legal framework (EC Regulations, National Regulations)  Guidelines EC (methodology, content of report, financial corrections,…)  Audit Strategy for the whole period and its confirmation by EC Work of AA:  System Audits  Audits of operations Results of AA work:  Audit Opinion, accompanied by  Annual Control Report 4 Auditing Cohesion and Structural Funds

5. System Audits:  Selection of the bodies who will be the subject of system audit review, on the basis of risk assessment  Evaluation of audited bodies for each financial year, using the methodology with key requirements 5 Auditing Cohesion and Structural Funds

6. Key requirements (MA/IB): 1.Clear definition, allocation and separation of functions between and within the managing authority / intermediate body/ies 2.Adequate procedures for the selection of operations 3.Adequate information and strategy to provide guidance to beneficiaries 4.Adequate management verifications 5.Adequate audit trail 6.Reliable accounting, monitoring and financial reporting systems in computerized form 7.Necessary preventive and corrective action where systemic errors are detected by the audit 6 Auditing Cohesion and Structural Funds

7. Key requirements for CA: 1.Clear definition, allocation and separation of functions between and within the certifying authority / intermediate body/ies 2.Adequate audit trail and computerized system 3.Adequate arrangements for the certification of expenditure to be reliable and soundly based 4.Satisfactory arrangements for keeping an account of amounts recoverable and for recovery of undue payments 7 Auditing Cohesion and Structural Funds

8. System audits results:  Brief report on the system audit performed (no opinion): draft report, replay of the auditee, final report,  Findings and recommendations,  Evaluation of the system as a whole and definition of the assurance gained from the system influencing the sample size. 8 Auditing Cohesion and Structural Funds

9. Audits of operations:  Statistical sampling,  Selection of the operations (cca 70 to 80 per financial year),  Performing audits of operations. 9 Auditing Cohesion and Structural Funds

10. Audit of operation (areas covered): 1.Selection of the operation; 2.Operation performance; 3.Eligibility of expenditures; 4.Public Procurement; 5.Audit trail and keeping the documents; 6.Irregularities and reimbursements; 7.Information and publicity rules; 8.Compliance with the Community policies. 10 Auditing Cohesion and Structural Funds

11. Audits of operations results:  Brief report of each audit of operation (no opinion) :  Draft report,  Auditee reply,  Final report.  Possible findings on irregular expenditure. 11 Auditing Cohesion and Structural Funds

12. Audit opinion and Annual Control Report:  Summary of findings from system audits and audits of operations,  Error evaluation in accordance with the sampling method,  Comparison of the Most likely error with the materiality (tolerable error),  Expressing an audit opinion, taking into account overall conclusions  Submitting an opinion and ACR to EC till 31.12.N+1 for the year N,  Acceptance and confirmation of the ACR by EC. 12 Auditing Cohesion and Structural Funds

13. Audits of operations: 1.Fraud suspicions 2.Public Procurement irregularities 3.Irregularities related to selection of operation 4.Irregularities related to performance 5.Ineligible expenditure 6.Insufficient audit trail 7.Incompliance with information and publicity rules 8.Incompliance with Community policies 13 Frequent findings

14.  Fraud suspicions:  Double financing of the same equipment – related parties  Issuing fictive invoices (equipment prices!)  Purchase of the old equipment instead of the new one (equipment prices!)  Non-existence of the investment 14 Frequent findings

15.  Public Procurement irregularities:  Improper procurement procedure  Non-respecting the rules related to submission deadlines and types of publicity  Annexes for additional work  Irregularities related to selection of operation:  Non-respecting the entrance criteria from the tender 15 Frequent findings

16.  Irregularities related to performance:  Improper selection of the supplier  Equipment foreseen was not delivered  Relevant changes of investments approved  Ineligible expenditure:  Wrong calculation of labour costs  Wrong calculation of depreciation Frequent findings 16

17.  Reimbursements of discounts not paid  Reimbursements of invoices which are not in compliance with the contract  Reimbursements of invoices already reimbursed in other projects  Reimbursements of invoices for advance payments  Reimbursements of invoices after the expiring period  Reimbursements of ineligible costs  Non-economic use of assets 17 Frequent findings

18.  Insufficient audit trail  No proofs of payment execution  No proofs of services implemented  Offsetting: not sufficient proofs  Incompliance with information and publicity rules  No signs on the investments or tangible assets of EC co- financing 18 Frequent findings

19.  Incompliance with Community policies  Incompliance with the State Aid Rules 19 Frequent findings

20.  Reactions in case of irregularities found:  Who finds irregularities  Who is responsible for corrective measures  Withdrawal of the funds requested from the Statement of expenditure  Debtors ledger 20 Frequent findings

21.  QUESTIONS  COMMENTS ? THANK YOU FOR YOUR ATTENTION 21