1. REPUBLIC OF TURKEY PRIME MINISTRY Undersecretariat of Treasury REGIONAL COMPETITIVENESS OPERATIONAL PROGRAM (RCOP) Ankara, 27 June 2012 AUDIT AUTHORITY

2. Our presentation consists of three parts: Section 1: Objectives and Scope of our Audit Section 2: Audit Activities Carried Out For the Period of 01 October 2010 – 30 September 2011 Section 3: Audit Activities to be Carried Out for the Period of 01 October 2011 – 30 September 2012

3. Objectives and Scope of our Audit

4. The AA is responsible for the verification of the effective and sound functioning of the management and control systems. AA also verifies the reliability of accounting information provided to the European Commission. For this purpose, AA carries out sub-systems audit and audit of operations.

5. Objectives and Scope of the Audit (Cont.) AA prepares reports for each sub-system audit and audit of operations. AA also prepares Annual Audit Activity Report (AAAR) and Annual Audit Opinion (AAO) and submits these reports to EC, CAO and copies to the NAO at the end of each year.

6. In our audits; The material levels for the findings were determined as;  Minor  Intermediate  Major according to the effect on IPA Implementing Unit Management and Control System. Classification of Findings

7. Audit Activities Carried Out For the Period of 01 October 2010 – 30 September 2011

8.  Follow-up of the previous year's findings  Subsystem Audits o Quality Assurance and Control o Monitoring  Audit of Operations  Verification of the changes in the management and control systems  Follow up of the previous and current year’s findings Audit Activities For the Period of 01 October 2010 – 30 September 2011

9. We audited subsystems of “Quality Assurance and Control” and “Monitoring” and we had 3 MINOR-LEVEL findings, 2 of which are from “Monitoring” and 1 is from “Quality Assurance”. We classified our findings according to COSO model: 1 of our findings falls under the “Control Activities” component and 2 of them is in “Monitoring” component. Among these 3 findings, 1 of them which is in “Monitoring” is closed and the other 2 are currently open. Subsystem Audits

10. We carried out an operational audit between June-September 2011. We audited 32.116.818 EURO expenditure (92.8 % of the total expenditure declared to the Commission). 32 million Euros of this amount belongs to the “Greater Anatolia Guarantee Facility” operation. Audit of Operations

11. Verification of the changes in the MCS In addition to sub-system audits that are performed during the year, Audit Authority gives special attention to the changes in the Management and Control Systems. The AA’s assessment of the completeness of the changes, i.e. whether all changes are correctly communicated to the NAO, The AA assessed the NAO’s role in assessing and approving the changes, The AA assessed the impact of the changes to the design and the effective functioning of the MCS, In this context, the significant changes in the management and control systems and impact assessment of the changes by AA were given in AAAR

12. We also performed a follow-up of the findings stated in the previous year's Annual Audit Activity Report and of the findings of current year audits. Final Follow-up

13. Annual Audit Activity Report: We prepared an AAAR for the period between 1 October 2010 - 30 September 2011 at the end of 2011. In this report we summarized all the weaknesses we had found in the management and control systems in the implementation of RCOP. Annual Audit Opinion: We also prepared an Annual Audit Opinion on whether the management and control systems function effectively and conform to the requirements of relevant regulations We submitted these reports to EC, CAO and copied to the NAO. Reporting

14. SECTION 3 Audit Activities to be Carried Out for the Period of 01 October 2011 – 30 September 2012

15.  Follow-up of the previous years' findings  Subsystem Audits o Risk Management (including irregularity management) o Financial Management (including payment and accounting)  Audit of Operations for the end of 2011  Verification of the changes in the management and control systems  Follow up of the previous and current years` findings Audit Activities to be Carried Out for the Period of 01 October 2011 – 30 September 2012

16. Current Status of our Audit Findings TotalAddressedOpen/PA 2010 Findings 231112 2011 Findings 413

17. Distribution of The Audit Findings According to The COSO Model and Material Level MinorIntermediateMajor Material Level COSO Model OpenClosedOpenClosed- Control Environment (12) 34 14- Planning and Risk Management (1) 1- --- Control Activities (3) 2- 1-- Monitoring (5) 11 21- Communication (6) 22 2-- Total 97 65-

18. THANK YOU FOR YOUR ATTENTION. REPUBLIC OF TURKEY The Board of Treasury Controllers Audit Authority Ergül HALİSÇELİK Ali ÇALIŞKAN Senior Tresury Controller Treasury Controller e-mail:ergul.haliscelik@hazine.gov.tr e-mail:ali.caliskan@hazine.gov.tr