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 nicholas martyn nicholas martyn cec eut dg regional policy

Control and Audit

NicholasMartyn([email protected])

DG Regional Policy

Unit I2Control and audit of the ERDF

Brussels 13 June 2005


Context 1

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


Context 2

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

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

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

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

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

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 responsibilities of paying authority

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

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%)

Brussels 13 June 2005


Systems audit

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

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

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

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 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

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

Brussels 13 June 2005


Types of audit

Types of audit

  • Desk checks on systems descriptions

  • Systems audits on the spot

  • Project/financial audits

  • Desk checks of closure statements

  • Closure audits

Brussels 13 June 2005


Objectives of audits

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

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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