How the Commission will gain
assurance on Structural Fund
expenditure in the 2007-13
programme period
DG REGIO - Directorate I - Audit
1
Introduction
• Elements of assurance
Increased assurance should result from:
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new elements in the regulations for the 2007-13 period
the implementation of the Action Plan towards an Integrated Internal
Control Framework
the recommendations made by the IAS
the work done in the current period to improve systems in the Member
States
New features:
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clearer definition of the roles and responsibilities
alignment of audit standards and reporting
dissemination of good practices
monitoring system to record progress of Action Plan implementation
and IAS recommendations
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Introduction
• Assurance sources
Sources:
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guarantees obtained during the programme negotiations
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ex ante assessment of the compliance of the design of the management
and control systems
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certification of expenditure, and information about irregularities and the
withdrawal and recovery of funding
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Commission audit work and the power to interrupt or suspend payments
and to apply financial corrections
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Member States’ audit work and the reporting of the results with a formal
annual opinion
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declarations by the audit authority at partial and final closure
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Guarantees of previous
periods
• Good governance
– establishment of system architecture before programme
approval (Article 36)
– involvement of auditors in the negotiations (guidance and
advice)
– aim: eliminate and/or rectify existing weaknesses in current
systems
– capitalizing on work done in 2006 concerning "Action 13:
analysis of the present controls at sector and regional level and
the value of existing statements and declarations"
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Compliance assessment
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Legal basis: Article 70
Nature: ex ante - before first interim payment application or at the latest within
12 months of programme approval
Content:
– description of the management and control system
– independent assessment of compliance of systems design
Scope:
– general principles of the management and control system
– designation of the programme authorities
– capacity of the programme authorities to perform their functions, such as
– verifications of legality and regularity by MA
– certification of expenditure by CA
– delivery of an annual audit opinion by AA
Commission auditors examine the reports and monitor the implementation of
corrective measures (if needed)
Commission will not make interim payments until it is satisfied that there is an
unqualified opinion on which it can rely
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CA - Certification of
expenditure
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Legal basis: Art 60
Scope: certify the expenditure it declares to the Commission for
reimbursement as accurate
Aim: to provide assurance that the first-level checks by management,
the foundation of the entire control system, have been properly carried
out.
Commission initiatives:
– proposal for the MAs to make a declaration in the annual
implementation report (outcome pending)
– notes on good practice in first-level management checks (action
14a) and in performance of the certification function for the current
period (relevant also for 2007-13)
– clarified and rationalized rules on the reporting of irregularities,
recoveries and withdrawals of expenditure from co-financing (aim:
to enable the Commission to make better use of the information
provided)
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Commission instruments
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Commission's systems audits
– starting in 2008
– work among the 2 DGs will be coordinated under joint audit
strategy, results will be shared
– IAS recommendations (“Issues to be considered”, 3) and action 9 of
Action Plan shall ensure high standard of work
– progress report on coordination of the audit process (IAS
recommendation)
Interventions with a financial consequence
– these may take the form of
• payment interruption (Article 89) (power lies with the
Authorizing Officers by delegation)
• payment suspension (Article 91)
• financial corrections (Article 100)
– these powers provide assurance that if there is evidence of
irregularities corrective measures can be applied to avoid financial
loss to the EU budget
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Audit work of Member States
Strengthening of Single Audit approach
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Concept: Member States' activity is seen as an integral part of the control
system)
Additional requirements to be introduced:
– designation for each programme of a responsible audit authority (Article 58)
– the submission of an audit strategy which is subject to approval by the
Commission services (Article 61)
– annual audit opinion (Article 61) based on common standards laid down in
the Commission regulation (Action 16c)
Other Commission initiatives
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bringing forward the submission of the annual control report and audit opinion by
six months to the end of the year to ensure that the results of national audit work
are available for the AAR process
standardizing the content of annual control reports (etc. inclusion of a
requirement to report error rates found)
updating the Structural and Cohesion Funds audit manuals (Action 14b)
introducing into the regulations the obligation on Member States having more
than one audit authority to designate a central coordinating body for audit
matters (outcome pending)
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Audit opinion at partial and
final closure
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legal basis: Article 61
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it requires an audit opinion to be provided at the closure of a
programme
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the provision of an audit opinion shall lay a formal responsibility on the
audit authority for all audit work carried out and it should strengthen the
level of assurance provided
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partial closure: new possibility (Article 86a)
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it can be applied for expenditure up to the end of a given year in the
course of the programme period,
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aim: reduce the burden on the audit authority at the end of the
programme period
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an audit opinion for at partial closure will also be required
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Audit in the Commission
• Audit Practice (1)
– Systems audits based on risk analysis.
Objective: provide audit opinion on the functioning of MCS in the MS
Risk analysis:
– By MS, fund, programme. Result: risk score for each programme,
selection of MMSS/programmes to be audited
– Coordination audit service ./. geographical unit
– Coordination audit service ./. other SF DGs (common audit strategy
and planning)
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Audit in the Commission
• Audit Practice (2)
Desk work:
• Examination of systems descriptions from MS
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Examination of audit reports + annual reports from MS
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Audit reports from other SF DGs and ECA
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Annual coordination meetings (financial control)
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Closure statements (at closure)
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Audit in the Commission
• Audit Practice (3)
On-spot work:
• Systems audits
- systems review
- project audits
- audit opinion on functioning of systems
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Closure audits
- reliability of closure statement
- eligibility of expenditure declared (project sample)
- audit opinion on reliability of closure statement and on eligibility of
expenditure declared
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Audit in the Commission
• Systems Review
Key findings:
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Winding-up body: rights and access to information; methodology/scope;
follow-up
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Audit services (Art. 10 R. 438/2001): methodology; scope;
formalisation; follow-up
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Paying Authority: functional independence; quality and scope of checks
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MA/intermediary bodies: project selection procedures; Article 4 checks;
audit trail; monitoring tools; follow-up of audit findings
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Audit in the Commission
• Substantive testing
Main checks:
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Selection of funding applications
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Verification of expenditure declared: original invoices, supporting
documents (ex. bills of quantities), payment proof, book-keeping
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Other Community policies: public procurement; publicity; environment;
state-aid
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Compliance with requirements of OP/SPD and national rules for
funding
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Physical examination (visit) of project
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