SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY...

SEMINAR on the EEA Financial Mechanism

THE EUROPEAN COMMISSION

DIRECTORATE-GENERAL

REGIONAL POLICY

Brussels 13 June 2005

Audit of the Cohesion Fund

Lena Andersson Pench

([email protected])

DG Regional PolicyUnit I3: Control and audit of Cohesion Fund and ISPA,

relations with national control bodies



DIRECTORATE-GENERAL

REGIONAL POLICY


Topics

Audit approach

Execution on the spot

Follow-up

Typical problems identified in Cohesion Fund project audits

Useful websites



DIRECTORATE-GENERAL

REGIONAL POLICY


Audit approach

Audit strategyLegal base Separate enquires for system- and project auditsEU 4 and EU 10 Representative - risk based



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REGIONAL POLICY


Audit approche- CF

Large (>€10m) infrastructure projects in the environment and transport sectors

Higher co-financing rate (85%)

Audit trail simpler (one final beneficiary)

Smaller number high value transactions

Examine all main contracts; works, services and supply

Public Procurement therefore of greater importance – Community Directives

MS required to audit 15% of total eligible expenditure



DIRECTORATE-GENERAL

REGIONAL POLICY


Audit approach

Proportionate concentration of audits between MS and regions taking into account estimated level of funding

Balance between types and sizes of projects in both sectors

Different bodies in charge of management and implementation of projects should be covered Risk based: follow up of audits –link to system audits



DIRECTORATE-GENERAL

REGIONAL POLICY



DG REGIO Audit staff Contracted external staff Typical mission last one week with two auditorsMember State notified six weeks in advance, no surprisesAudit methodology

Eligibility of expenditure Audit trail Public Procurement Publicity and Information measures



DIRECTORATE-GENERAL

REGIONAL POLICY



Day 1: Opening meeting: present objectives of the audit mission, start visiting key agencies

Day 2-4: Visit of key agencies, implementing agency Interview key personnelPossible on-the-spot visit of the project

Day 5 Closing meeting: preliminary audit findings



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REGIONAL POLICY


Execution: Expenditure

Commission project decision and Commission Regulation (EC) No 16/03 laying down rules on eligibility of expenditure

Use the claims submitted to the Commission as the basis for checking the audit trail

Reconcile the last interim payment request with the supporting accounting records

Check (substantive testing)– Eligibility of expenditure (e.g.: eligibility period, category of expenditure)–Invoice, certification, bank transfer



DIRECTORATE-GENERAL

REGIONAL POLICY


Execution:Audit trail

A sufficient audit trail : (a) reconciliation of the summary amounts certified to the Commission with the individual expenditure records and supporting documents held at the various administrative levels and by implementing bodies;

(b) verification of the allocation and transfer of the available Community and national funds;

(c) verification of the correctness of the information supplied on the execution of the project in accordance with the terms of the granting decision and the objectives assigned to the project.



DIRECTORATE-GENERAL

REGIONAL POLICY


Audit trail (CF) projectCOMMISSION

expenditure

Paying authority

expenditure

Intermediate body

20.000

20.000

expenditure

Final beneficiary

20.000

Invoices Invoices Invoices

expenditure

Implementation agency20.000



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REGIONAL POLICY


Execution: Public procurement

Why ? Essential part of internal market; transparency, equal treatment, non-discriminationAudit of correct p.p.p. forms an integrated part of all type of audit enquiries for ERDF and CFHigh risk area based, previous audit findings, separate enquiry under way in EU 10



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REGIONAL POLICY


Execution: Public procurement

Common rules of advertising: pre-notice and notice publication in O.J., length of tender period, award notice to be published. Delays depend on the chosen procedure.

Common rules of participation: criteria for selection of offers, rejection of abnormally low tenders.

Common rules of award of contracts: award of contracts: lowest price only or the most economically advantageous offer taking into account price and quality. Additional works due to unforeseen circumstances should not exceed 50% of the amount of the main contract.



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REGIONAL POLICY


Execution-public procurement

What criteria are used in award of contracts ?

Review bases for awarding points to tendered ?

Is the most economically advantageous tender chosen for each lot?

Are the procedures written down in a manual of procedures?

Is the procurement notice published in advance in the OJ ?

Is the co-financing noted in the public contract notices?



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REGIONAL POLICY


Follow up

Report sent within three months to MS

Reply by MS within two months

Evaluation of reply -final opinion by the Commission within two months which may include proposals of financial corrections; individual, flat rate or extrapolated



DIRECTORATE-GENERAL

REGIONAL POLICY


Follow up

Either the Member State agrees with observations and file can be closed after making the corresponding financial correctionOr the Member State does not agree in which case a bilateral hearing will be organised between the two parties in order to find a common position



DIRECTORATE-GENERAL

REGIONAL POLICY


Audit findings: Public procurement

No publication in the OJEU of the tender notice

Award of contract without tender procedure

Contracts concluded by direct award

Illegal criteria used in award of contract

Geographical bias



DIRECTORATE-GENERAL

REGIONAL POLICY


Audit findings: Public procurement

Lack of tender documentation

Automatic exclusion of ‘abnormally low tenders’ without asking for justification

Use of a mathematical formula in the award of contracts which favours bids close to the average of all bids received and which effectively excludes cheaper bids from the award process

The price element is not used in the evaluation of tenders

Error in the tender evaluation procedure (eg. calculation error)

Doubtful justification for awarding "additional works" to the same contractor in case of unforeseen circumstances



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REGIONAL POLICY


Audit findings: ineligible expenditure

Expenditure incurred before the initial eligibility date

Expenditure incurred after the final date for eligibility

Purchase of land already in public ownership

Car parks

Categories of expenditure not specifically covered by the Commission Decision



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Audit findings -publicity measures

No standard model of a billboard Billboard not in compliance with Commission Regulation 621/94No mention of the CF co-financing in the brochures, press releasesEuropean emblem not included in the brochures



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REGIONAL POLICY


Useful websites

http://europa.eu.int/comm/regional_policy/

http://www.cc.cec/budg/lex/en/http://europa.eu.int/comm/europeaid/

index_en.htmhttp://europa.eu.int/comm/

internal_market http://simap.eu.int/EN/pub/src/

welcome.htmhttp://www.eca.eu.int/EN/menu.htmhttp://www.theiia.org/iia/index.cfm



DIRECTORATE-GENERAL

REGIONAL POLICY


Conclusions

Lessons learned from audits of Cohesion Fund projects

Link to EEA Financial Mechanism-risk of overlapping?

Thank you for your attention!

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