SEVENTEENTH MEETING OF THE EXPERT GROUP ON DELEGATED AND

1. 2014-2020 Management and control systemsFranck Sébert, DG Regional and Urban Policy, Head of Unit C1 SEVENTEENTH MEETING OF THE EXPERT GROUP ON DELEGATED AND IMPLEMENTING ACTS FOR THE EUROPEAN STRUCTURAL AND INVESTMENT FUNDS – 4 October 2013

2. OutlineDraft Delegated Acts Scope and content of audits of operations and audits of accounts and the methodology for the selection of the sample of operations (Article 116(7)new of CPR; Fiche 17 F): Adequate audit trail (Article 114(9) of CPR; Fiche 17 B) Use of data collected during audits carried out by the Commission (Article 116(7) of CPR; Fiche 17 B)

3. Scope and content of audits of operations Audits of operations will be carried in respect of each accounting year (1 July N-1 to 30 June N), the first one ending on 30 June 2015. • Timelines\Audit Work timeline2.doc Different options to draw the sample and carry out the audit work: • Timelines\Audit Worktimeline 3.doc

4. Scope and content of audits of operations The audits of operations shall verify in particular that operation: • meets the OP selection criteria • has not been physically completed /fully implemented before the beneficiary's application for funding • has been implemented in line with approval decision • fulfils applicable conditions on its functionality and use or the objectives to be attained;

5. Scope and content of audits of operations The audits of operations shall verify that: • the expendituredeclared to the Commission corresponds to accounting records or other records on outputs and services delivered, • and to supporting documentation required to demonstrate an adequate audit trail[CA->MA->beneficiaries] Useful for audit of accounts!

6. Scope and content of audits of operations The audits of operations shall verify that : • the expenditure declared by / payment requests from the beneficiary is in compliance with applicable law as defined in Article 2 of the CPR • the public contribution has been paid to the beneficiary (Article 122 of the CPR)

7. Methodology for the selection of the sample of operations The samples of operations to be audited will be selected based on statistical sampling methods. The sample will cover operations in relation to one or several operational programmes (OP) covered by a common MCS. The sample unit is the operation.

8. Methodology for the selection of the sample of operations When conditions for proportional control foreseen in Article 140(1) of the CPR apply: the audit authority may exclude from the population to be sampled the items concerned. In case the operation concerned has already been selected in the sample, the audit authority may replace the items concerned, using the appropriate sampling techniques.

9. Methodology for the selection of the sample of operations When the population of operations is too small for statistical sampling (i.e. between 50 and 150 operations as per the current guidance), distinct projects/contracts/actions within operations or the beneficiaries' payment claims may be used as sample units to allow for the use of statistical sampling.

10. Methodology for the selection of the sample of operations If this still does not allow a sufficient population to use statistical sampling, a non-statistical sampling method may be used under the following conditions fixed in the CPR: • based on the audit authority’s professional judgement • in duly justified cases and • in accordance with international audit standards,

11. Methodology for the selection of the sample of operations In case of non-statistical sampling, a minimum coverage is compulsory: at least 5% of operations for which expenditure has been declared to the Commission during the accounting year and 10% of the expenditure declared (in the payment applications). These are minimum targets. In any event, the sample size must be sufficient to enable the audit authority to draw a valid audit opinion.

12. Audits of accounts Objective: to provide reasonable assurance on the completeness, accuracy and veracity of the amounts declared in the accounts, taking into account, in particular, the results of the systems audits and of the audits on operations. => A substantial part of the workwasdonethrough system audits / control testingat CA level and substantive testing (audits of operations).

13. Audits of accounts For the purpose of the audit opinion, the accounts are reputed to give a true and fair view when: the AA was able to verify that all elements required under Article 128 are included in the accounts and correspond to the information made available by all relevant authorities / bodies and beneficiaries. To this end, the AA verifies, based on the accounts to be provided to it by the CA in due time, that:

14. Audits of accounts (a) The total amount of eligible expenditure entered into the CA's accounting systemsreconciles with the expenditure (and the corresponding public contribution) included in payment applications submitted to EC for the relevant accounting year; => desk/arithmeticalchecks + analysis of explanations on divergences.

15. Audits of accounts (b) The amounts withdrawn and recovered, the amounts to be recovered and the irrecoverable amounts presented in the accounts correspond to amounts entered in the CA's accounting systems, are based on financial corrections and are supported by afinal audit or control report andcorresponding decisions to correct. => Done during control testing. Final checks based on corrections made by CA after 31 July, including on last audit results.

16. Audits of accounts (c) expenditure excluded from the accounts because it is subject to an on-going • assessment of its legality and regularity. (d) The amounts of pre-financing paid to Fin. Instr. and advances of State aid correspond to the information available at CA/MA level and are supported by payments made to beneficiaries. => Done during control testing. Final checks based on corrections made by CA after 31 July, including on last audit results.

17. Functions of the audit authority Adequate audit trail (Article 114(9) of CPR; Fiche 17 B): Main changes to text presented on 16 July. Use of data collected during audits carried out by the Commission (Article 116(7) of CPR; Fiche 17 B): No changes.

18. Thank you for your attention!