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CONTROL & AUDIT REQUIREMENTS What project promoters cannot ignore about INTERREG IVB NWE project management

Audit Requirements The Basics Table of contents • First level control – the basics • Who will/can be your first level controller? • Role of the LP controller • The Audit Trail • Control of the Payment Claim – what and when? • Summary of the checks to be made • Other controls • Public procurement – the basics

Audit Requirements The Basics First Level Control – the basics What? Audits of all project expenditure It entails: • verification of the delivery of the products and services co-financed = it has been paid and received • verification of the traceability of the expenditure declared = there is an invoice or other document with probative value • verification of the compliance of such expenditure with Programme, Community and national rules as well as with Subsidy contract and Application Form = it is eligible When? During project implementation; each time before submitting a payment claim Compulsory For the 2007-2013 programming period

Audit Requirements The Basics Who will/can be your controller? • Two possible systems: centralised or decentralised • Differences: • Who proposes the controller • Who bears the costs • Time pressure • Responsibility to inform about the project and Programme; EU rules

Audit Requirements The Basics Who will/can be your controller? Compulsory For the 2007-2013 programming period

Audit Requirements The Basics Who will/can be your controller? • The main requirement is independency from project management, finance and activities. • Other requirements are set by MS: • Background • Experience • Language skills • Knowledge in Structural funds regulations • (…) • These requirements are listed per Member State in the Project Handbook (guidance note n°19) Compulsory For the 2007-2013 programming period

Audit Requirements The Basics Who will/can be your controller? • For the decentralised systems, the approval of the controller will in most cases be made using a form to be filled in by the partners and the controller. • Professional skills and experiences in audit and EU funded projects • Sufficiency of the controller’s knowledge in the English language • Independence of the controller: • If external: what is the basis for the work (contract); is the controller registered; is the controller obliged to a professional code of conduct or other rules? • If internal: is their independence regulated by law or other rules; to which person does he answer? Independence of mind,… • Knowledge of Programme documents, audit trail, timeframe. Compulsory For the 2007-2013 programming period

Audit Requirements The Basics Role of the Lead Partner controller • Regulation (EC) 1080/2006 (Article 20): • The Lead Partner shall: • lay down the arrangements for its relation with the partners participating in the project in an agreement (i.e. sound financial management) • be responsible for ensuring the implementation of the entire project • ensure that all the project expenditure presented has been incurred for the purpose of implementing the project and corresponds to the Application Form • verify that all project expenditure presented has been validated by the controllers • be responsible for transferring the ERDF contribution to the partners

Audit Requirements The Basics Role of the Lead Partner controller Implications: The LP controller: • checks the expenditure of all partners against the approved Application From. • checks whether it fits with the budget planning (avoid exceeding 120%) • verifies that the partners’ expenditure is in line with what was agreed within the partnership (importance for the controller to read the partnership agreement, the subsidy contract; to know the internal procedures,…) • verifies the validations by the controller • verifies that the controllers are those approved by the MS • verifies that the controllers’ signature is backed by checklists,… • checks that all copies are available at Lead Partner premises • verifies that the ERDF contribution has been paid to the partners

Audit Requirements The Basics The Audit trail • What? All accounting documents related to the Project. • Approved Application Form, Subsidy Contract, Partnership Agreement • Relevant project correspondence (financial and contractual) • Progress Reports, Payment Claims, Partners controllers’ confirmations (and checklists/control reports) • Bank account statements proving the reception and the transfer of ERDF • Invoices of all expenditure declared in the Payment claims • Bank account statements / proof of payment for each invoice • Method used by all partners outside the EURO-zone for converting national currency into EUR • Staff costs: information on actual annual working hours, labour contracts, payroll documents and time records of personnel working for the project

Audit Requirements The Basics The Audit trail • What? • List of subcontracts and copies of all contracts with external experts and/or service providers • Calculation of administrative costs, proof and records of costs included in overheads • Documents relating to public procurement, information and publicity • Public procurement notes, terms of reference, offers/quotes, evaluation, order forms, contracts • Proof of delivery of services and goods: studies, brochures, newsletters, minutes of meetings, translated letters, participant lists, travel tickets, etc.), • Record of assets, physical availability of equipment purchased in the context of the project.

Audit Requirements The Basics The Audit trail In what form? Original documents (at partner level), but also photocopies (at Lead Partner level), microfiches or electronic versions of original documents. Where? The Lead Partner is responsible for storing all relevant documentation for all partners and all sub-partners. They must be filed separately, even if this leads to a dual treatment of accounts. Importance of Partnership Agreement ! How long? It is essential that all documents and accounting records be kept available for a period of three years following the closure of the Programme, that is 31st December 2021. Projects that cannot provide sufficient documentation risk losing their ERDF grant.

Audit Requirements The Basics Control of the Payment claim • What? • One sheet per partner + Summary + Investment sheet • One controller declaration per partner • On the summary sheet, LP controller signs for the whole claim, on the basis of all received declarations • When to control? Example: • Closure of accounts at partner level: end July • Documents to the project controller: end August • Documents to the LP (controller): end September • Documents to the JTS: end October • -> Maximum for the whole process : 3 months (Article 16 of 1080/2006)

Audit Requirements The Basics Summary of the checks to be made • The financial information in the claim is accurately stated • That all claimed costs are eligible; they have been incurred for the purpose of implementing the project and correspond to the activities agreed between the partners (in line with Article 20 of Regulation (EC) 1080/2006), they are necessary for the implementation of the action plan and incurred and paid after the start date of the project. They comply with applicable national eligibility rules (e.g. national budgetary law), the provisions in the Subsidy Contract, the eligible costs section of the NWE Project Handbook, the NWE Project Control and Audit Guidelines.

Audit Requirements The Basics Summary of the checks to be made • The maintenance of an adequate and reliable accounting system and the maintenance of the audit trail within the project. All claimed expenditure has been actually paid out, is supported by invoices or accounting documents of equivalent probative value. In case of staff costs, direct costs, overheads and in-kind contributions, the necessary evidence exists in the form of timesheets, listings of costs or formula descriptions and costs calculation. This expenditure (except in-kind contributions) includes only actually paid out costs (for staff costs: gross salary, employers costs). The partner maintains either a separate accounting system or an adequate accounting code for all transactions related to the project.

Audit Requirements The Basics Summary of the checks to be made • The reality of "deliverables" (services, works, supplies, etc.) against plans, invoices, acceptance documents, experts' reports, and, where appropriate, on the spot. The controller is asked to report on these on-the-spot checks. Where these on-site controls for physical investments are not exhaustive, but performed on a sample basis, the report shall identify the controls carried out and describe the sampling method.

Audit Requirements The Basics Summary of the checks to be made • That the Community rules have been applied with, including all applicable procurement rules (the implementation of all stages of the relevant procurement procedure is properly documented), the applicable publicity and information requirements, the rules on equal opportunities and protection of the environment. • That all inputs for the partner’s individual Payment Claims were certified by an independent controller who has been approved by the relevant national/regional approbation or control body. All national/regional specific control and audit requirements have been respected.

Audit Requirements The Basics Other controls • Site visits by the JTS • Fulfils the Managing Authority obligation to verify the operations on-the-spot (Article 13 of Regulation (EC) 1828/2006). • What ? to learn from the project • to verify the management system (incl audit trail) • to see deliverables • When ? once during the project lifetime • Who? Visited: Lead Partner + other partners • Visitors: JTS staff (Project Dvpt + Finance + Com) • National Auditor and National Authority • Outcome: Site visit report

Audit Requirements The Basics Other controls • Second Level Control • What? Audits organised at Programme level by the Member States under direction of the Audit Authority. • Who will audit? The audits will be performed by an external audit firm, under supervision of the Audit Authority and the national auditors. • Who will be audited? A sample will be defined each year. The sample will be based on partners’ claimed expenditure on a yearly basis. The sample will represent 10-15% of the total expenditure claimed at Programme level. The Lead partners of the partners selected will be audited as well. • -> the chances for a project to be controled is higher than under IIIB!

Audit Requirements The Basics Other controls • When?

Audit Requirements The Basics Other controls • Certifying Authority’s quality controls • The Certifying Authority will perform audits, normally once a year, on a different Member State each time. • Commission and Member States checks • The Commission, in cooperation with the Member States, can perform on-the-spot checks on projects cofinanced by the ERDF, with a minimum of one day’s notice. • IIIB Experience: one Commission audit during the Programme lifetime, with two phases. • The National Authorities can also perform on-the-spot checks at partner level on demand of either the JTS/MA or on its own initiative

Audit Requirements The Basics Most frequent control errors under IIIB • Public procurement! • Claiming of costs not attributable to project • Double financing • Overheads miscalculations • No invoices/supporting documents • Claiming of recoverable VAT and other recoverable charges • Publicity • Revenues not declared

Audit Requirements The Basics Public Procurement • Procurement rules are COMPLEX! • If you have DOUBTS about the application of procurement rules, get in touch with a LEGAL ADVISOR.

Audit Requirements The Basics Public Procurement: lessons learnt • One of the main findings in the IIIB period was lack of compliance with public procurement (lack of evidence, not respecting procedure, no evaluation grids…). • During DG Regio audit, 53% of the findings were related to breech of public procurement rules. • The Commission applies a flat rate correction to any breech – up to 100% of the total cost of the contract.

Audit Requirements The Basics Public Procurement: IVB basics • National Rules apply – rules vary significantly from one Member State to another • European threshold applies for ALL tenders above €206,000 • Lead Partner is responsible for ensuring that public procurement is respected by the entire partnership • All documents must be retained (publication of tender, evaluation grid) • Selection procedure must be retained • The procedure cannot be changed in mid-course

Audit Requirements The Basics Public Procurement: EU rules • EU Directives apply to contracts to the following types of contracts: • Works • Services • Supply Contracts

Audit Requirements The Basics Public Procurement: EU rules • From €133,000 for service/supplies contracts except for research and development contracts as specified Annex IIA of European Directive 2004/18. • From €206,000 for service/supply contracts in category 8 of Annex IIA of European Directive 2004/18.

Audit Requirements The Basics Public Procurement: EU rules • For contracts valued less than the above mentioned thresholds, other procedures may apply according to national legislation. National rules have to be closely consulted as they may vary from country to country and decisions may be made on a case-by-case basis.

Audit Requirements The Basics Public Procurement: National rules • For ALL contracts, other procedures may apply according to national legislation. The correct procedure is often decided on a case-by-case basis in each country. Therefore, national rules have to be closely consulted as they vary from country to country.

Audit Requirements The Basics Public Procurement: Regulations (1) • EU regulations that apply are : • Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors • Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts • Commission Directive 2005/51/EC of 7 September 2005 amending Annex XX to Directive 2004/17/EC and Annex VIII to Directive 2004/18/EC of the European Parliament and the Council on public procurement (Text with EEA relevance)

Audit Requirements The Basics Public Procurement: Regulations (2) • EU regulations that apply are : • Directive 2005/75/EC of the European Parliament and of the Council of 16 November 2005 correcting Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts • Commission Regulation (EC) No 1564/2005 of 7 September 2005 establishing standard forms for the publication of notices in the framework of public procurement procedures pursuant to Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council • New thresholds enter into force from 1st January 2008. These thresholds are laid out in Regulation (EC) 1422/2007 of 4 December 2007.

Audit Requirements The Basics Public Procurement: National rules • Germany: http://www.bmwi.de/BMWi/Navigation/Wirtschaft/Wirtschaftspolitik/oeffentliche-auftraege.html • France: http://djo.journal-officiel.gouv.fr/MarchesPublics/ • Ireland: http://www.fpp.ie/ • Luxembourg: http://www.mtp.etat.lu/ • United Kingdom: http://www.ogc.gov.uk/procurement.asp • Belgium : http://www.belgium.be/fr/ • The Netherlands: http://www.minez.nl/content.jsp?objectid=140472

Public procurement The Basics THANK YOU FOR YOUR ATTENTION

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