1. CENTRAL EUROPE PROGRAMME 2007-2013 FLC systems and Control & Audit requirements within the CENTRAL EUROPE Programme Seminario tecnico sul sistema nazionale di controllo di primo livello e sulla gestione finanziaria di progetto Treviso, 20 th May 2011 Luca FERRARESE JTS CENTRAL EUROPE Programme

2. CENTRAL EUROPE PROGRAMME 2007-2013 Contents 1.General principles 2.First Level Control in practice 3.Specific aspects of CENTRAL EUROPE 4.Common problems of FLC 5.Conclusions

3. 1. General principles Facts and figures (2011) The Programme eligible area is: Austria, Czech Republic, Germany (part), Hungary, Italy (part), Poland, Slovakia, Slovenia. The Programme budget is 298 M€ total cost, with an ERDF contribution of 246 M€. Up to date, the Programme has allocated more than 82% of the available funds to 94 projects (after three calls). More than 1.000 partners are already involved, represented by public institutions, public equivalent bodies, privates (commercial and non commercial), international organizations.

4. 1. General principles Applicable rules Regulations of the Structural Funds Horizontal rules EU rules National legislation Internal/institutional rules National rules Programme documents Programme rules In case of discrepancies, the stricter rule applies!

5. 1. General principles Applicable rules – Programme documents CENTRAL EUROPE Operational Programme; Application Manual (call specific); Implementation Manual; Control & Audit Guidelines. Additional documents are available (fact-sheets, templates, FAQ, etc.) but they are for information purposes only and they have no legal value.

6. 1. General principles Management and Control System The Management and Control System gives a clear and solid framework for a sound financial management: at transnational level with rules and procedures set up for all phases of the Programme lifetime, e.g.: project selection, monitoring, payment, audit, etc. at national level with a control system able to verify the existence of the projects, the soundness of the expenditure, the compliance with EU and national rules. First Level Control Art. 16 Reg. (EC) no. 1080/2006

7. The actors Programme Projects

8. Checks performed by the controllers: What? The delivery of the products and services co-financed; The reality of the expenditure claimed; The eligibility of the expenditure according to Community, Programme and National rules; The compliance of the expenditure with Community rules; The adequacy to the purpose of implementing the operation; The existence and effective functioning of an accounting system on the level of each partner FLC is based on originals of the documents supporting the expenditure, which must be annulled 2. First Level Control in practice

9. Checks performed by the controllers: How and Where? FLC checks are performed as:  Desk checks of the documents foreseen for each budget line, according to the Control & Audit Guidelines and to the national specific audit requirements;  On-the-spot checks performed by the controllers at the premises of the Partners. For decentralized systems of the CENTRAL EUROPE area, at least two on-the-spot checks are mandatory for each Partner (1 st Progress Report and at least once more before project closure). 2. First Level Control in practice

10. Documentation of the FLC work (audit trail) At the end of the validation process, the controllers deliver to the partners the following documents:  Confirmation of control in original, including a table with a breakdown of the validated expenditure  Internal control report  Control checklist The templates of these documents are provided as annexes to the Control & Audit Guidelines (available on www.central2013.eu – “Implementing a project” section, also as word files). www.central2013.eu

11. 2. First Level Control in practice

13. 3. Specific aspects of CE Budget lines Within CENTRAL EUROPE, the project budget is organized in the following budget lines: 1.Staff costs 2.Administration costs 3.External expertise 4.Travel and Accommodation 5.Meetings and Events 6.Promotion costs 7.Equipment 8.Investments 9.Other costs

14. 3. Specific aspects of CE 1. Staff costs – calculation for part-time staff in project The calculation of the hourly cost has to be based on real worked hours. Where not provided by national eligibility rules, the calculation of daily/hourly rate must be based on following formula: Gross salary + Social Charges X Project worked days/hours Total real working days/hours The formula must be applied on an annual basis. Timesheets must provide the full time record of the employee Examples in Fact-sheet no. 01/2011.

15. 3. Specific aspects of CE 2. Administration costs – Calculation of indirect costs A transparent calculation method is to be used. No lump- sums, flat rates or arbitrary keys are allowed. Indirect costs must be based on real costs and eligible expenditure. Where not defined by national eligibility rules, the following calculation key has to be used: hL / hT hL = project working hours (as reported under staff costs); hT = total actual worked hours of the partner institution

16. 3. Specific aspects of CE 7. Equipment Main characteristics: Purchase of IT equipment & software for office use only Office Furniture (where strictly necessary) Equipment under this budget line is not to be linked to any investment and has to be necessary for successfully running the project. Depreciation basis

17. 3. Specific aspects of CE 8. Investments Main characteristics: Costs related to financing infrastructure and construction works (ex-novo or adaptation of already existing structure). Purchase of physical objects not falling within the equipment budget line. Depending on the nature of the investment, all applicable compulsory requirements (including the respect of environmental policies) must be fulfilled.

18. 3. Specific aspects of CE Focus on public procurement Applicable to all budget lines where the purchase of external services and/or goods occurs. Applicable also to private partners within CENTRAL EUROPE! Irrespective of thresholds, transparent and fair conditions for competing on the common market have always to be ensured in all cases of purchase of goods and services, as well as the ordering of public works (EU Treaty).

19. 3. Specific aspects of CE Focus on public procurement

20. 3. Specific aspects of CE Focus on public procurement – In –house subcontracting The following requirements must be fulfilled: The public body awarding the contract must exert on the “in house” society an analogous control to that exercised upon its own internal services (no participation of a private enterprise to the society, even if in a minority share) The “in house” society must carry out the main part of its tasks for the awarding public body. Costs of the contracted company belong to the external expertise budget line. Costs of the contracted company must always be charged on a real-costs basis, thus without any profit margin!

21. 4. Common problems/mistakes Staff costs Misunderstandings in the definition of full-time vs. part-time staff. Calculation of hourly rate for staff working part of its time for the project:  Formula is not applied on an annual basis and/or with planned instead of actual total hours;  Correction based on actual real worked hours not carried out in time (should be done in the next possible period).

22. Indirect administration costs Where not defined by national rules, the hL/hT key based on real worked hours is not used; Items are included under the wrong budget line. Travel and meeting costs Travel and meeting costs are validated although the travel/meeting did not yet take place; Full validation of daily allowances even if the lunch/dinner is not paid (e.g. lunches/dinners offered within events). 4. Common problems/mistakes

23. Public procurement Section F) (public procurement) of the Control Checklist is not duplicated in case more than one contract is checked. Poor or no information on the public procurement procedure included in section F). All questions in section F) are answered as YES, while some of them are not applicable. No procedure is applied (neither bid-for-three) and no or weak justification is provided by the controller. 4. Common problems/mistakes

24. 5. Conclusions Basis for a proper validation of expenditure Have a strong knowledge of EU, national, Programme rules/procedures (which may vary in different Programmes); Base the validation work on on-the-spot checks whenever possible; Organize a solid and reliable audit trail (for CE, document keeping until December 2022); Remember that checklist templates are only a support to your professional judgment; Be aware of the responsibilities you are taking when confirming the eligibility of expenditure!

25. Main sources EU legislation http://eur-lex.europa.eu/it/index.htm European Regional Development Fund (ERDF) http://ec.europa.eu/regional_policy/funds/feder/index_it.htm CENTRAL EUROPE documents http://www.central2013.eu INTERACT Information sources (FLC compendium) http://www.interact-eu.net/flc/first_level_control/213/3094 CENTRAL EUROPE PROGRAMME 2007-2013

26. THANK YOU! luca.ferrarese@central2013.eu www.central2013.eu