Infrastructure Development in
Romania
Workshop
INSTRUMENTE STRUCTURALE IN ROMANIA
Project Life Cycle
by
W J McCoubrey
BSc CEng FICE FIEI FIHT FIAE
Transport & Infrastructure Consultant
Email: billy.mccoubrey@nireland.com
INSTRUMENTE STRUCTURALE IN ROMANIA
EU Commission
Audits carried out by EU
Commission Control Units
Certification of all expenditure
CSF Financial Control
Fund Unit
Paying Authority
Control Checks on Cohesion
Fund Expenditure and Systems
– Articles 9.1 (a) and (b),
10 and 11
Ministry of Finance
Internal Audit Unit
System Audits by Internal
Audit Units at each level
throughout cascade – Article
9.1 (a)
Certification of all expenditure
Managing Authority
Cohesion
Fund
Financial
Controls
Ministry of Finance
Level 3
Responsible for completing Form B3
Certification of all expenditure
DoELG/MoT
Intermediate Bodies
ESB/MET
Level 2
Responsible for completing Form B2
NRA/MoE
Certification of all expenditure
Final Beneficiaries
Level 1
Structure of financial controls to
Responsible
for
completing Form B1
comply with Commission Regulations (EC) 1386/2002
RDO / Councils
-Article 9.1(a) and 9.1(b) and the Protocol on
INSTRUMENTE STRUCTURALE IN ROMANIA
Internal Audit (IA) co-operation
Project Stages
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1 - Concept
2 - Preparation
3 - Application
4 - Evaluation - Funding Appraisal
5 - Decision - Approval for Cohesion Fund
6 - Selection and Award of Contract
7 - Contract Supervision
8 - Payments
9 - Modifications
10 - Project Closure and Audit
INSTRUMENTE STRUCTURALE IN ROMANIA
Eligibility Issues
• General rules – open to interpretation
• Commission Decision
– defines total CF assistance limit and period of eligibility
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Transparency
Expenditure incurred in eligibility period
Eligibility of expenditure
Public Authority employees
Land purchases
– limited to maximum 10% of project eligible expenditure
INSTRUMENTE STRUCTURALE IN ROMANIA
Eligibility Issues (2)
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•
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Treatment of Financial & other charges
Operating costs
Information & publicity measures
Car parks
Computerised management & monitoring
systems
INSTRUMENTE STRUCTURALE IN ROMANIA
Land Issues - Ireland
• Land purchases
– limited to maximum 10% of project eligible expenditure
– typically 25 -30% of overall project cost
– M50 SCRM; major disagreement with auditors
» time period
» land not used for project
» robustness of systems for monitoring and audit trail
– initial decision was to exclude land from eligibility claims
– revised to now include land that has been directly used
» only within boundaries of project
» only payments made to landowners within eligibility
period
» excludes interest payments from CF claim
INSTRUMENTE STRUCTURALE IN ROMANIA
M50
Southern
Cross
Route
Motorway
Land Use
INSTRUMENTE STRUCTURALE IN ROMANIA
M1 Lissenhall-Balbriggan
• Commission Decision C (2000) 3518
– Period covered 07/07/2000 – 31/12/2004
– Decision covers expenditure during eligible
period to value of € 41,485,702 with 85%
funding being € 35,262,847 maximum
– Expenditure covered – construction costs of
9.8km of main line, motorway including
earthworks, pavement, drainage and fencing.
– Elements of structures, interchanges, side
roads and land acquisition not assisted
INSTRUMENTE STRUCTURALE IN ROMANIA
M1 Lissenhall-Balbriggan
• Commission Decision C (2000) 3870
– 15 October 2003; Amended original decision
– Decision covers expenditure during eligible
period to value of € 62,134,212 with 85%
funding being € 52,814,080 maximum
– Expenditure covered – building and
construction costs of provision of elements of
structures, interchanges, side roads,
earthworks, pavement, drainage ,fencing and
land acquisition of mainline motorway
INSTRUMENTE STRUCTURALE IN ROMANIA
Land Acquisition example
INSTRUMENTE STRUCTURALE IN ROMANIA
The FIDIC Rainbow
• The Red book
Construction
• The Yellow book
Plant and Design-Build
• The Silver book
EPC Turnkey Projects
• The Green book
Short Form of Contract
INSTRUMENTE STRUCTURALE IN ROMANIA
Contract Selection
STRAIGHTFORWARD
PROJECT
no
EMPLOYER DESIGN
no
CONTRACTOR DESIGN
fixed price – lump sum
little employer involvement
no major unforeseen risks
DISCUSS IN DETAIL
Employer’s requirements
with the Contractor and
negotiate an appropriately
modified FIDIC contract
no
no
INSTRUMENTE STRUCTURALE IN ROMANIA
Plant and/or
high unforeseen
risks
Stage 8 – Payments
• Financial Control
– IB assists FB with claims and payments
• Payment of Contract Claim
– FB responsibility, funds from IB
• Eligibility of Claim
– handled by IB FCU
• Drawdown of Cohesion Funding
– twice yearly by IB to Paying Authority
– all funds lodged in Treasury
– IB authorised to make payments direct to FB
INSTRUMENTE STRUCTURALE IN ROMANIA
EU Commission
EU Commission Control Units
Payment of CF Expenditures
Financial Control Unit
Passed to
Treasury
Internal Audit Unit
Paying Authority
Treasury Account
Assembles all funds needed for
Project Expenditure
Claim from EU (twice per year)
Ministry of Finance
System Audits by Internal
Audit Units at each level
throughout cascade – Article
9.1 (a)
Managing Authority
Ministry of Finance
Level 3
Cohesion
Fund
Finance
Flows
IB Draws down
payment due
within contract
limits
Intermediate Bodies
ESB/MET
Level 2
Authorises Payment due
DoELG/MoT
Certification of all expenditure
NRA/MoE
Final Beneficiaries
Contract Claim paid to Contractor
Level 1
Makes payment to Contractor
RDO / Councils
Project Contractor
I N S T R U M E N T EClaim
S T from
R U Contractor
CTURALE IN ROMANIA
Stage 9 – Modifications
• Variations of Price
– on materials for > 2 years contracts
• Modifications to quantities or scope
– to be avoided where possible
– > 10 % probably requires new Decision
INSTRUMENTE STRUCTURALE IN ROMANIA
Stage 10 – Project Closure and
EU Audit
• Completion of the contract
• Project closure
• Archival of documentation
– Minimum of 3 years after Project closure
– Can be as much as 7 years for Audit
• EU Audit
– Regulation compliance
– Eligibility issues
– Financial corrections – loss of funding
INSTRUMENTE STRUCTURALE IN ROMANIA
EU Audit in Ireland
• Cohesion I
– N4 Collooney / Sligo, Stage II
(CF No. 94.07.65.004)
• Cohesion II
– No audit reports available
• Only 3 projects reported on
– all under review
– € 11 million financial correction, claimed wrong
form of contract as price variation inappropriate
– € 750.000 still under discussion of which € 100.000
issues relating to use of transport on 2 sites
INSTRUMENTE STRUCTURALE IN ROMANIA
Infrastructure Development in Romania
Workshop Issues
• Maximising Grant Assistance
– Project selection
– Eligibility of expenditure
• Delivery - Earning Grant
– Contract selection
– Contract administration
• Ensuring Grant is Certified and Retained
– Audit trail
– Project closure
– Archiving documentation
INSTRUMENTE STRUCTURALE IN ROMANIA