Control and Audit
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Control and Audit Nicholas Martyn ([email protected]) DG Regional Policy Unit I2 Control and audit of the ERDF. Context (1). Commission responsible for: Implementation of the budget having regard to the principles of sound financial management – Article 274 of Treaty

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Control and Audit

NicholasMartyn([email protected])

DG Regional Policy

Unit I2Control and audit of the ERDF

Brussels 13 June 2005


Context (1)

Commission responsible for:

  • Implementation of the budget having regard to the principles of sound financial management – Article 274 of Treaty

  • Application of clearance of accounts or financial correction procedures to enable Commission to assume final responsibility for the budget – Article 53.5 of Financial Regulation

  • For Structural Funds ensuring that Member States have smoothly functioning management and control systems – Article 38.2 of Regulation 1260/1999

Brussels 13 June 2005


Member States responsible for:

Cooperating to ensure sound financial management – Article 274 of Treaty

Ensuring financial control of operational programmes – Article 38.1 of Regulation 1260/1999

Implementing all requirements of Regulations 1260/1999 and 438/2001 on management and control

Context (2)

Brussels 13 June 2005


Relevant national authorities / bodies

  • Managing authority

  • Paying authority

  • Independent “checking” body

  • Independent “winding up” body

  • Intermediate bodies

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Key components of the control system

  • Procedures to verify the delivery of products and services co-financed and the reality of expenditure clamed and to ensure compliance with applicable national and Community rules. [Art. 4 of Reg. 438/2001]

  • Procedures to certify the statements of interim and final expenditures. [Art. 9 of Reg. 438/2001]

  • Procedures to verify the effectiveness of the managing and control systems. [Art. 10 of Reg. 438/2001]

  • Procedures to issue declarations on winding-up of the assistance. [Art. 15 of Reg. 438/2001]

Brussels 13 June 2005


Management and control systems: key principles

  • Clear definition of functions

  • Clear allocation of functions

  • Adequate separation of functions

  • Control of satisfactory performance of functions

    (Art. 3 of Reg. 438/2001)

Brussels 13 June 2005


Control responsibilities of Managing Authority

  • Verifying correctness of co-financed operations

  • Checking payment claims and authorising payment

  • Preventing/detecting/correcting irregularities

  • Systems for gathering reliable information ensuring proper accounts

  • The audit trail

    (Art. 34 of R.1960/1999; Art. 3, 4 and 7 of R.438/2001)

Brussels 13 June 2005


Verifications by Managing Authority

  • Delivery of products/services co- financed

  • Reality of expenditure claimed

  • Compliance with national and Community rules [eligibility rules (R.448/2004), state aid, public procurement, environment, equality of opportunity, publicity …]

  • Existence of supporting documents

    (Art. 4 and 7 of Reg. 438/2001)

Brussels 13 June 2005


Control responsibilitiesof Paying Authority

  • Certify statements of expenditure(Art. 9 of R. 438/2001)

  • Keep a record of recovery orders (can also be kept by MA) and report annually on state of recoveries (Art. 8 of R. 438/2001)

  • Repay recoveries (and interest) (Art. 8 of R. 438/2001)

  • Ensure final beneficiary is paid as soon as possible [Art. 32(1) of Reg. 1260/1999]

  • Make available to the Commission the detailed (computer) records on payments to beneficiaries (can also be done by MA)

    (Art. 18 of Reg. 438/2001; Annex IV to the said Reg.)

Brussels 13 June 2005


Audit requirements[Chapter IV of Reg. 438/2001]

  • Verify the effectiveness of the management and the control systems (System audits)

  • Verify expenditure on a sample of operations (minimum 5%)

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Systems audit

  • Coverage of each main authority and intermediate body

  • Examination of management and control systems

  • Control of performance of functions

  • Check on compliance with Community rules

  • Assurance that the system works

Brussels 13 June 2005


Sample checks on operations

  • Independence of auditors

  • 5% of total eligible expenditure

  • Representative sample of operations

  • Risk factors taken into account

  • Verify effectiveness of management and control systems

  • Verify expenditure declarations at various levels

  • Spread the implementation of the controls

    (Art. 10, 11 and 12 of Reg. 438/2001)

Brussels 13 June 2005


Winding up declaration

  • Independent body

  • Internationally accepted audit standards

  • Based on systems examination, on checks already carried out and, when necessary, on further sample checks

  • Reasonable assurance that certified statement of expenditure is correct

    (Art. 16 of Reg. 438/2001)

Brussels 13 June 2005


Legal base for Commission audits of Structural Funds

Article 38.2 of Regulation 1260/1999:

Commission officials or servants may carry out on the spot checks including sample checks on operations financed by the Funds and on management and control systems.

Article 6 of Regulation 438/2001:

Commission shall satisfy itself on compliance of systems descriptions and undertake reviews of operations of systems on regular basis.

Brussels 13 June 2005


Audit strategy and planning

  • Audit strategy document

    • Risk assessment for each audit area – Fund, period

    • 3 year rolling strategy

    • Priorities and actions

    • Allocation of resources

  • Annual audit programme

Brussels 13 June 2005


Methodology

  • Structural Funds Audit Manual – December 2003

  • Enquiry Planning Memorandum: assessment of risks, fixing objectives, detailed methodology, checklists

  • Mission planning memorandum: specific risk assessment, detailed work plan

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Types of audit

  • Desk checks on systems descriptions

  • Systems audits on the spot

  • Project/financial audits

  • Desk checks of closure statements

  • Closure audits

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Objectives of audits

  • To provide assurance to authorising officer on set up and functioning of management an control systems in Member State

  • To verify accuracy of expenditure declared

  • To provide basis for financial corrections to ensure exclusion of irregular expenditure

    But also ….

  • To provide basis for collaboration with national authorities for improvements to rectify identified weaknesses

Brussels 13 June 2005


Audit programme for ERDF - 2005

  • 30 auditors DG REGIO unit I.2

  • Framework contract with private audit firm

  • Audits on closure of 1994-99 programmes

    • 6 audits DG REGIO

    • 23 audits private audit firm

  • Audits on 2000-2006 programmes

    • 50 audits DG REGIO

    • 17 audits private audit firm

Brussels 13 June 2005


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