The Audit of subsidies by the Court of Audit. Spain.

The Audit of subsidies by The Audit of subsidies by the Court of Audit.the Court of Audit.

Spain.Spain.

TRIBUNAL DE CUENTAS. SPAIN.TRIBUNAL DE CUENTAS. SPAIN. 22

1. 1. The general legal framework that The general legal framework that regulates regulates subsidies in Spain is the following one:subsidies in Spain is the following one:

- - General Act on subsidies, of 17.11.2003.General Act on subsidies, of 17.11.2003.

- Regulation that develops the Act, of 21.7.2006.- Regulation that develops the Act, of 21.7.2006.

- Budgetary General Act of 26.11.2003.- Budgetary General Act of 26.11.2003.


2. 2. Also, the calls of most subsidies Also, the calls of most subsidies establish the conditions of entry or rules establish the conditions of entry or rules (particulars conditions that regulate how (particulars conditions that regulate how to to obtain, manage, justify and control).obtain, manage, justify and control).


3.3. As it can be observed, As it can be observed, this legal framework this legal framework is very recent.is very recent.

4.4. Previously to year 2003, the regulation of Previously to year 2003, the regulation of subsidies was concise, presenting numerous subsidies was concise, presenting numerous legal gaps that outlined serious problems for legal gaps that outlined serious problems for the audit.the audit.


5.5. In fact, the need of a new legal framework In fact, the need of a new legal framework was shown in an Audit Report of the Court was shown in an Audit Report of the Court on subsidies to the professional training of on subsidies to the professional training of workers and in a Motion, both submitted to workers and in a Motion, both submitted to the Spanish Parliament. the Spanish Parliament.


6.6. Subsidy concept in the Act on subsidies.Subsidy concept in the Act on subsidies.It is understood for subsidy all money orders carried out It is understood for subsidy all money orders carried out

by the public Administrations or by the organizations and by the public Administrations or by the organizations and

other public entities dependent of them, in favour of public other public entities dependent of them, in favour of public

or private people or entities, and that fulfils the following or private people or entities, and that fulfils the following

requirements:requirements:

a) That the delivery is carried out without the a) That the delivery is carried out without the

beneficiaries' direct consideration.beneficiaries' direct consideration.


b)b) That the delivery is subject to the execution That the delivery is subject to the execution

of a of a certain objective, a project, carrying out an certain objective, a project, carrying out an

activity or activity or the adoption of a singular behaviour already the adoption of a singular behaviour already

carried carried out or to be developed. The beneficiary has to out or to be developed. The beneficiary has to

fulfil fulfil the material and formal obligations that had the material and formal obligations that had

been been settled down.settled down.

c)c) That the project, the action, behaviour or That the project, the action, behaviour or

financed financed situation has for object the development of an situation has for object the development of an

activity activity of public utility or social interest or the of public utility or social interest or the

promotion of a promotion of a public purpose.public purpose.


7. 7. They are not included in the scope of They are not included in the scope of application of the Law on subsidies:application of the Law on subsidies:

a) The monetary contributions among different a) The monetary contributions among different

public public Administrations, as well as between the Administrations, as well as between the

Administration Administration and the entities and other dependent and the entities and other dependent

public entities of public entities of these ones, allocated to finance the these ones, allocated to finance the

activity of each activity of each entity globally in the environment entity globally in the environment

characteristic of its characteristic of its competencies. In these cases it is of competencies. In these cases it is of

application that application that stipulated in a specific way in their stipulated in a specific way in their

regulations.regulations.


b) Neither they will be included in the scope of b) Neither they will be included in the scope of

application of this law the monetary contributions that in application of this law the monetary contributions that in

concept of contributions, either ordinary or concept of contributions, either ordinary or extraordinary, extraordinary,

carry out the entities that integrate the carry out the entities that integrate the local local

Administration in favour of certain associations.Administration in favour of certain associations.


8.8. In accordance with the Law on Subsidies In accordance with the Law on Subsidies don't have character of subsidies:don't have character of subsidies:

a)a) The benefits of the System of the Social The benefits of the System of the Social

Security.Security.

b)b) The assistance pensions for the elderly in The assistance pensions for the elderly in

favour of favour of the Spaniards non-residents in Spain, in the the Spaniards non-residents in Spain, in the

terms terms settled down in their regulations.settled down in their regulations.

c)c) The assistance benefits and the economic The assistance benefits and the economic

subsidies subsidies in favour of Spaniards non-residents in Spain, as in favour of Spaniards non-residents in Spain, as

well well as the benefits in favour of those affected by the as the benefits in favour of those affected by the

AIDS AIDS virus and the handicapped.virus and the handicapped.


d)d) The benefits in favour of those affected by The benefits in favour of those affected by

certain certain illnesses, (specified in the Law itself).illnesses, (specified in the Law itself).

e)e) The pensions of the civil servants, and other The pensions of the civil servants, and other

pensions (acts of terrorism, etc…).pensions (acts of terrorism, etc…).

f)f) The benefits recognized by the Salary The benefits recognized by the Salary

Guarantee Guarantee Fund.Fund.


g)g) Fiscal benefits and benefits in the payments Fiscal benefits and benefits in the payments

to the to the Social Security System.Social Security System.

h)h) The official credit, but not in the cases when The official credit, but not in the cases when

the the public Administration subsidizes the borrower the public Administration subsidizes the borrower the

whole whole or part of the interests or other considerations of or part of the interests or other considerations of

the the credit operation.credit operation.


9.9. The following cases are excluded of the The following cases are excluded of the scope of application of this law:scope of application of this law:

•• The prizes that are given without the The prizes that are given without the beneficiary's beneficiary's previous application. previous application.

•• Subsidies foreseen in the Electoral legislation.Subsidies foreseen in the Electoral legislation.

•• Subsidies foreseen in the law for the Financing of Subsidies foreseen in the law for the Financing of the the Political Parties.Political Parties.

•• Subsidies to the parliamentary groups of the Subsidies to the parliamentary groups of the Spanish Spanish Parliament's Chambers, of the regional Parliament's Chambers, of the regional Assemblies and Assemblies and to the political groups of the to the political groups of the municipalities.municipalities.


10.10. Subjective elements. Subjective elements.

a) a) Awarding bodiesAwarding bodies..

In accordance with the current legislation effective in In accordance with the current legislation effective in Spain these are the public Administrations. It is Spain these are the public Administrations. It is understood for public Administrations to the effects of the understood for public Administrations to the effects of the legislation of subsidies:legislation of subsidies:

1) The General State Administration.1) The General State Administration.2) The entities that integrate the local 2) The entities that integrate the local

Administration.Administration.3) The Administration of the Autonomous 3) The Administration of the Autonomous

Communities Communities (Regions).(Regions).

The subsidies awarded by public bodies linked to any of The subsidies awarded by public bodies linked to any of the public Administrations.the public Administrations.


b) b) BeneficiaryBeneficiary..

It will have the consideration of beneficiary of subsidies It will have the consideration of beneficiary of subsidies the public or private person or legal entity that must carry the public or private person or legal entity that must carry out the activity that based their granting or that it is in the out the activity that based their granting or that it is in the situation that legitimates their granting.situation that legitimates their granting.

It will also be considered the beneficiary's condition, the It will also be considered the beneficiary's condition, the groups of public or private natural persons or legal groups of public or private natural persons or legal entities, partnerships or any other type of economic unit entities, partnerships or any other type of economic unit that, even lacking of legal status, can carry out the that, even lacking of legal status, can carry out the projects, activities or behaviours or be in the situation that projects, activities or behaviours or be in the situation that brings about the granting of the subsidy.brings about the granting of the subsidy.


c) c) Collaborating EntityCollaborating Entity..

It is that one that acts in name and on behalf of the It is that one that acts in name and on behalf of the awarding body.awarding body.

It delivers and distributes the public funds to the It delivers and distributes the public funds to the beneficiaries when it is settled down this way in the beneficiaries when it is settled down this way in the regulations, or it cooperates in the administration of the regulations, or it cooperates in the administration of the subsidy not including the previous delivery and subsidy not including the previous delivery and distribution of the funds received by the collaborating distribution of the funds received by the collaborating entity. These funds will never be considered part of their entity. These funds will never be considered part of their assets.assets.


The Act on Subsidies regulates who will be able to be The Act on Subsidies regulates who will be able to be collaborating entity.collaborating entity.

They should be public or private legal entities that gather They should be public or private legal entities that gather the conditions of solvency and effectiveness that are the conditions of solvency and effectiveness that are settled down. The Act also regulates their obligations.settled down. The Act also regulates their obligations.


11.11. The beneficiary's obligations.The beneficiary's obligations.

a) To complete the objective, to execute the project, to a) To complete the objective, to execute the project, to carry out the activity or to adopt the behaviour that bases carry out the activity or to adopt the behaviour that bases the granting of the subsidy. the granting of the subsidy.

b) To justify before the awarding body or the collaborating b) To justify before the awarding body or the collaborating entity, to have fulfilled the requirements and conditions, as entity, to have fulfilled the requirements and conditions, as well as the realization of the activity and the execution ofwell as the realization of the activity and the execution of the purpose that determined the granting of the subsidy.the purpose that determined the granting of the subsidy.


c) To undergo the monitoring to be made by the awarding c) To undergo the monitoring to be made by the awarding body or the collaborating entity, as well as any other body or the collaborating entity, as well as any other control that can carry out the competent control organs, control that can carry out the competent control organs, both national and EU ones, contributing with as much both national and EU ones, contributing with as much information as required.information as required.

d) To communicate to the awarding body or the d) To communicate to the awarding body or the collaborating entity the obtaining of other subsidies, aids, collaborating entity the obtaining of other subsidies, aids, revenues or resources to finance the subsidized activities. revenues or resources to finance the subsidized activities.

This communication will be made as soon as it is known This communication will be made as soon as it is known and, in any event, previously to the justification of the and, in any event, previously to the justification of the application given to the funds received.application given to the funds received.


e) To demonstrate, previously to be dictated the proposal e) To demonstrate, previously to be dictated the proposal of granting resolution, that tax obligations and Social of granting resolution, that tax obligations and Social Security System contribution have been accomplished as Security System contribution have been accomplished as determined by the regulations.determined by the regulations.

f) To have the accounting books, registers and other f) To have the accounting books, registers and other documents properly audited in the terms demanded by documents properly audited in the terms demanded by the applicable legislation to the beneficiary in each case, the applicable legislation to the beneficiary in each case, as well as others accounting statements and specific as well as others accounting statements and specific registers demanded by the subsidies regulations, with the registers demanded by the subsidies regulations, with the purpose of guaranteeing the appropriate monitoring.purpose of guaranteeing the appropriate monitoring.


g) To keep the documents justifying the application of the g) To keep the documents justifying the application of the received funds included the electronic documents, as long received funds included the electronic documents, as long as they can be object of checking and control as they can be object of checking and control performances.performances.

h) To adopt the established spreading measures in the h) To adopt the established spreading measures in the applicable legislation. applicable legislation.

i) To proceed to the refund of the funds received in the i) To proceed to the refund of the funds received in the cases foreseen in the law.cases foreseen in the law.


12. 12. Obligations of the Collaborating Entity.Obligations of the Collaborating Entity.

a) a) To give the beneficiaries the funds received from the To give the beneficiaries the funds received from the awarding body in accordance with the criteria settled awarding body in accordance with the criteria settled down in rules (call) of the subsidy and in the agreement down in rules (call) of the subsidy and in the agreement signed with the awarding body.signed with the awarding body.

b) To check the execution and effectiveness of the b) To check the execution and effectiveness of the conditions or decisive requirements for the subsidy, as conditions or decisive requirements for the subsidy, as well as the execution of the activity and the achievement well as the execution of the activity and the achievement of the purpose that determined the award of the subsidy.of the purpose that determined the award of the subsidy.


c) To justify the delivery of the funds received before the c) To justify the delivery of the funds received before the awarding body and to provide the justification presented awarding body and to provide the justification presented by the beneficiaries.by the beneficiaries.

d) To undergo the monitoring that regarding the d) To undergo the monitoring that regarding the administration of these funds the awarding body can administration of these funds the awarding body can perform, as well as any other that can carry out the perform, as well as any other that can carry out the competent control bodies, both national and EU ones, competent control bodies, both national and EU ones, contributing with all required information.contributing with all required information.


13.13. Objective element.Objective element.

The objective element of subsidies and aids are the public The objective element of subsidies and aids are the public funds provided.funds provided.


14.14. The management of subsidies.The management of subsidies.

It must be carried out in agreement with the following It must be carried out in agreement with the following principles: principles:

a) Publicity, transparency, concurrence, a) Publicity, transparency, concurrence, objectivity, objectivity, equality and non discrimination. equality and non discrimination.

b) Effectiveness in the execution of the objectives b) Effectiveness in the execution of the objectives fixed fixed by the awarding body. by the awarding body.

c) Efficiency in the allocation and use of the c) Efficiency in the allocation and use of the public public resources.resources.

These principles have remained substantially unaffected These principles have remained substantially unaffected after the legal change that took place recently.after the legal change that took place recently.


15.15. To perform these principles.To perform these principles.

The conditions of entry or rules for the awarding of The conditions of entry or rules for the awarding of subsidies are settled down in a regulation (generally in the subsidies are settled down in a regulation (generally in the official call itself) that usually has annual character and official call itself) that usually has annual character and that it will sum up as minimum the following items:that it will sum up as minimum the following items:

a) Definition of the object of the subsidy.a) Definition of the object of the subsidy.

b) Requirements that the beneficiaries will gather b) Requirements that the beneficiaries will gather for for obtaining of subsidy, and the way and deadline obtaining of subsidy, and the way and deadline for the for the applications to be presented.applications to be presented.


c) Conditions of solvency and effectiveness that c) Conditions of solvency and effectiveness that must must gather bodies that act as collaborating entities.gather bodies that act as collaborating entities.

d) Procedure of awarding the subsidy. d) Procedure of awarding the subsidy.

e) Objective criteria of awarding the subsidy and, e) Objective criteria of awarding the subsidy and, if it is if it is the case, weighting assessment of them. the case, weighting assessment of them.

f) Individualized amount of the subsidy or criteria f) Individualized amount of the subsidy or criteria for for their establishment.their establishment.


g) The bodies entitled to carry out the procedure g) The bodies entitled to carry out the procedure of of awarding the subsidy and the deadline for the awarding the subsidy and the deadline for the resolution resolution to be notified. to be notified.

h) The books and specific accounting registers to h) The books and specific accounting registers to guarantee the appropriate justification of the guarantee the appropriate justification of the

subsidy.subsidy.

i) Deadline and justification procedure to be i) Deadline and justification procedure to be followed by followed by the beneficiary or by the collaborating the beneficiary or by the collaborating entity of the entity of the execution of the purpose for which the execution of the purpose for which the subsidy was subsidy was provided and the application of the funds provided and the application of the funds received.received.


j) Guarantee measures, if it were the case, in j) Guarantee measures, if it were the case, in favour of favour of the awarding body (constitution means and the awarding body (constitution means and cancellation cancellation procedure).procedure).

k) Possibility to make prior advance payments k) Possibility to make prior advance payments and and advance payments, as well as the regime of advance payments, as well as the regime of guarantees guarantees that the beneficiaries should provide.that the beneficiaries should provide.

l) Circumstances that, as consequence of the l) Circumstances that, as consequence of the alteration alteration of the conditions considered for the of the conditions considered for the allocation of the allocation of the subsidy, may lead to modify the subsidy, may lead to modify the resolution.resolution.


m) Compatibility or incompatibility with other m) Compatibility or incompatibility with other subsidies, subsidies, aids, revenues or resources for the same aids, revenues or resources for the same purpose, purpose, coming from any Administrations or public coming from any Administrations or public or private or private national entities, or from the European national entities, or from the European Union or Union or international entities.international entities.

n) Approaches for graduation of the possible n) Approaches for graduation of the possible non-non- fulfilments of conditions for to the awarding of the fulfilments of conditions for to the awarding of the

subsidies. These criteria will be applicable to subsidies. These criteria will be applicable to establish establish the quantity that finally the beneficiary must the quantity that finally the beneficiary must receive or receive or the amount to be refunded according with the amount to be refunded according with the principle the principle of proportionality.of proportionality.


16.16. Necessary contents of the calls for Necessary contents of the calls for subsidiessubsidies

a) If the conditions of entry or rules are not a) If the conditions of entry or rules are not included in included in the call itself, this will indicate the the call itself, this will indicate the regulation that regulation that establishes them and where they establishes them and where they are published.are published.

b) Budgetary credits to which the subsidies have b) Budgetary credits to which the subsidies have to be to be charged and its maximum or estimated total charged and its maximum or estimated total amount. amount.

c) Object, conditions and purpose of the granting c) Object, conditions and purpose of the granting of the of the subsidy.subsidy.


d) Statement if the granting is made by means of d) Statement if the granting is made by means of a a regime of competitive concurrence.regime of competitive concurrence.

e) Requirements to apply for the subsidy and the e) Requirements to apply for the subsidy and the way of way of proving them.proving them.

f) Indication of the proper bodies to manage the f) Indication of the proper bodies to manage the award award procedure.procedure.

g) Deadline for applications.g) Deadline for applications.

h) Term of resolution and notification.h) Term of resolution and notification.


i) Documents and information that the application i) Documents and information that the application should enclose.should enclose.

j) If it were the case, possibility of redefining the j) If it were the case, possibility of redefining the applications.applications.

k) Indication about whether the resolution can be k) Indication about whether the resolution can be or not or not appealed.appealed.

l) Assessment criteria of the applications.l) Assessment criteria of the applications.

m) Means for notification or publication.m) Means for notification or publication.


17.17. The regulation of the agreements of The regulation of the agreements of collaboration.collaboration.

a) An agreement of collaboration will be settled a) An agreement of collaboration will be settled down down between the awarding body and a collaborating between the awarding body and a collaborating entity in entity in which the conditions and obligations assumed by which the conditions and obligations assumed by this this will be regulated.will be regulated.

b) The agreement of collaboration will not be b) The agreement of collaboration will not be valid for valid for more than four years, although it might be more than four years, although it might be foreseen its foreseen its modification and its extension by mutual modification and its extension by mutual agreement of agreement of the parts. However the total length of the the parts. However the total length of the agreement agreement cannot exceed of six years.cannot exceed of six years.

Nevertheless, when referring to aids for loans, Nevertheless, when referring to aids for loans, the the validity of the agreement can be extended until validity of the agreement can be extended until the total the total cancellation of the loans.cancellation of the loans.


c) Minimum content of the agreement of c) Minimum content of the agreement of collaboration collaboration (comments).(comments).

d) When the regions or the municipalities act as d) When the regions or the municipalities act as collaborating entities, the State Administration or collaborating entities, the State Administration or

their their public entities will settle down agreements with public entities will settle down agreements with hem. In hem. In them, it will be lay down: the requirements for the them, it will be lay down: the requirements for the

allocation and delivery of the funds, the allocation and delivery of the funds, the justification justification criteria and the rendering of accounts.criteria and the rendering of accounts.

Likewise, and in the same terms, it will be done Likewise, and in the same terms, it will be done when when the General State Administration or their public the General State Administration or their public entities entities act as collaborating entities regarding subsidies act as collaborating entities regarding subsidies granted granted by the Autonomous Communities (regions) or the by the Autonomous Communities (regions) or the

municipalities.municipalities.


e) When the collaborating entities are people e) When the collaborating entities are people subject to subject to private law, they will be selected previously private law, they will be selected previously by means of by means of a procedure subjected to the principles of a procedure subjected to the principles of publicity, publicity, concurrence, equality and non-concurrence, equality and non-discrimination and the discrimination and the collaboration will be settle collaboration will be settle down by means of an down by means of an agreement, unless due to the object agreement, unless due to the object of the collaboration of the collaboration it is of full application the legislation it is of full application the legislation of public of public procurement.procurement.

The contract will necessarily include the The contract will necessarily include the minimum minimum contents of an agreement of collaboration, contents of an agreement of collaboration, as well as as well as what is mandatory according with the what is mandatory according with the regulations of the regulations of the public procurement public procurement andand it will it will mention the rest of the mention the rest of the obligations imposed to the obligations imposed to the collaborating entities by this collaborating entities by this law.law.


18.18. Classification of subsidies.Classification of subsidies.

The most used ones appear below: The most used ones appear below:

a) a) According to their budgetary applicationAccording to their budgetary application..

1. Ordinary subsidies. They are those dedicated 1. Ordinary subsidies. They are those dedicated to fund to fund operations related to beneficiary's ordinaryoperations related to beneficiary's ordinaryoperation.operation.

2. Capital subsidies. They are those dedicated to 2. Capital subsidies. They are those dedicated to funding real investments.funding real investments.


b) b) According to the awarding procedureAccording to the awarding procedure..

1. 1. Not subject to concurrenceNot subject to concurrence. The specific . The specific regulation regulation establishes the concrete addressee of the establishes the concrete addressee of the subsidy, so subsidy, so that an only one interested in the procedure that an only one interested in the procedure will exist. will exist.

2. 2. Subject to concurrenceSubject to concurrence. The regulation doesn't . The regulation doesn't establishes the concrete addressee of the establishes the concrete addressee of the

subsidy, so subsidy, so that a plurality will exist of interested ones in that a plurality will exist of interested ones in the the procedure. procedure. In turnIn turn, they can be:, they can be:


I) I) Of non competitive concurrenceOf non competitive concurrence. It is not . It is not necessary to necessary to make a selection among the interested make a selection among the interested ones. Funding ones. Funding anyone of them is independent of anyone of them is independent of the other ones, either the other ones, either because the budgetary credit is because the budgetary credit is enough for all the enough for all the possible beneficiaries, or because possible beneficiaries, or because the beneficiaries are the beneficiaries are entitled for a subjective right entitled for a subjective right previous to its granting.previous to its granting.

Both these subsidies and those ones where there Both these subsidies and those ones where there is not is not concurrence (1 and 2.I)) are denominated of concurrence (1 and 2.I)) are denominated of direct direct awardingawarding..

II) II) Of competitive concurrenceOf competitive concurrence. When it becomes . When it becomes necessary to establish a selection among the necessary to establish a selection among the applicants, because the allocation of one of them applicants, because the allocation of one of them

or to or to state an amount of the subsidy, excludes or limits state an amount of the subsidy, excludes or limits the the right to the other ones.right to the other ones.


c) c) According to the moment of the grantingAccording to the moment of the granting..

1. Ex ante1. Ex ante. In them, the elements that make up the . In them, the elements that make up the subsidy are: a statement of commitment of future subsidy are: a statement of commitment of future

performance and the approval of a program-commitment.performance and the approval of a program-commitment.

The ex ante subsidies can be, attending to the The ex ante subsidies can be, attending to the payment payment moment, post-payables or pre-payables.moment, post-payables or pre-payables.


I) I) Pre-payablesPre-payables. When the beneficiary receives . When the beneficiary receives the the funds before justifying its use. Therefore the funds before justifying its use. Therefore the justification justification cycle is not closed with the payment, but cycle is not closed with the payment, but rather a last rather a last justification of the funds will have to be made justification of the funds will have to be made or of the or of the attainment of the purpose.attainment of the purpose.

II) II) Post-payablesPost-payables. When the beneficiary receives . When the beneficiary receives the the funds after justification of the expenditure or of funds after justification of the expenditure or of the the attainment of the purpose.attainment of the purpose.


2. Ex post2. Ex post. The subsidy is granted for an activity . The subsidy is granted for an activity already carried out that the applicant declares already carried out that the applicant declares

certain in certain in the request.the request.


19.19. The Spanish legal framework that The Spanish legal framework that regulates the audit performance of the regulates the audit performance of the Court of Audit as regards control of Court of Audit as regards control of subsidies is the following one:subsidies is the following one:

a)a) The The Spanish ConstitutionSpanish Constitution settles down in its article settles down in its article 136.1 that “The Court of Audit is the supreme body 136.1 that “The Court of Audit is the supreme body charged with auditing the State's accounts and financial charged with auditing the State's accounts and financial management, as well as those of the public sector.”management, as well as those of the public sector.”

b)b) This exercise is summed up, in the This exercise is summed up, in the Court of Audit Court of Audit Organic ActOrganic Act 2/1982, in the 2/1982, in the Court of Audit Functioning ActCourt of Audit Functioning Act 7/1988 and in the 7/1988 and in the Act on SubsidiesAct on Subsidies..


1.1. The Court of Audit Organic Law, points out in The Court of Audit Organic Law, points out in its its section 4.2 that “The Court of Audit is responsible section 4.2 that “The Court of Audit is responsible for for auditing subsidies, credits, guarantees or other auditing subsidies, credits, guarantees or other public public sector aids received by natural persons or legal sector aids received by natural persons or legal

entities”.entities”.

2.2. The Court of Audit Functioning Act, 7/1988:The Court of Audit Functioning Act, 7/1988:

I. Establishes that the Court will carry out the I. Establishes that the Court will carry out the exam exam and confirmation of the accounts that should and confirmation of the accounts that should render render the beneficiaries of subsidies. But the current the beneficiaries of subsidies. But the current Law Law on Subsidies has established that each on Subsidies has established that each beneficiary beneficiary will render its accounts before the awarding will render its accounts before the awarding body body (of the public sector) when it justifies the (of the public sector) when it justifies the subsidy. subsidy. Later on, the awarding body integrates this Later on, the awarding body integrates this

information in the accounts that it renders information in the accounts that it renders to the to the Court of Audit.Court of Audit.


II. This Act also regulates the procedure for II. This Act also regulates the procedure for auditing auditing the subsidies. It is necessary to highlight that the subsidies. It is necessary to highlight that the the content of the exam “shall cover both a content of the exam “shall cover both a check as to check as to the correct application of the sums to the the correct application of the sums to the purpose purpose for which they were intended as well as the for which they were intended as well as the

accounting results” (article 38).accounting results” (article 38).

3. 3. The General Act 38/2003, on Subsidies, The General Act 38/2003, on Subsidies, regulates regulates this control function, both regarding the this control function, both regarding the beneficiaries beneficiaries and the collaborating entities.and the collaborating entities.


c)c) To be able to develop this function, it should be To be able to develop this function, it should be highlighted the duty of collaborating with the Court of highlighted the duty of collaborating with the Court of natural persons or legal entities beneficiaries of subsidies natural persons or legal entities beneficiaries of subsidies settled down in article 7 of the Court of Audit Organic Law settled down in article 7 of the Court of Audit Organic Law 2/1982, and in the Court of Audit Functioning Act 7/1988.2/1982, and in the Court of Audit Functioning Act 7/1988.


d)d) The audit of subsidies by the Court has generally been The audit of subsidies by the Court has generally been carried out on the accounts rendered by the public carried out on the accounts rendered by the public awarding body and not on the performance of the recipients awarding body and not on the performance of the recipients of the aid.of the aid.

But, this traditional modality of performing the audit function But, this traditional modality of performing the audit function as regards the control of subsidies has experienced in the as regards the control of subsidies has experienced in the last few years a radical turn because, besides the control of last few years a radical turn because, besides the control of the accounts rendered, the Court has passed to analyze:the accounts rendered, the Court has passed to analyze:


–– The managementThe management of the subsidies by the of the subsidies by the awarding body awarding body

–– The The justificationjustification presented by the beneficiaries, presented by the beneficiaries, and and

–– The achievement of the purposes for which those The achievement of the purposes for which those subsidies were grantedsubsidies were granted..


e)e) Lastly, the INTOSAI audit standards settle down that: Lastly, the INTOSAI audit standards settle down that:

• The Supreme Audit Institution should have the • The Supreme Audit Institution should have the widest widest possible authorization to control the use of possible authorization to control the use of subsidies subsidies carried out with public funds.carried out with public funds.

• If the purpose or the control demands it, this • If the purpose or the control demands it, this should should extend to the whole of the operations of the extend to the whole of the operations of the subsidized subsidized institution, especially if the subsidy itself or in institution, especially if the subsidy itself or in proportion proportion to the revenues or the institution to the revenues or the institution beneficiary's financial beneficiary's financial situation is considerably high.situation is considerably high.

• The unfair employment of the subsidy funds • The unfair employment of the subsidy funds should should mean the refund obligation.mean the refund obligation.


20.20. The audit of subsidies.The audit of subsidies.

a) It varies significantly if it is auditing subsidies granted in a) It varies significantly if it is auditing subsidies granted in regime of competitive concurrence or not.regime of competitive concurrence or not.

b) In the first ones it is more diffuse the perception of the b) In the first ones it is more diffuse the perception of the control on the part of the beneficiary and, therefore, the control on the part of the beneficiary and, therefore, the fraud can be higher.fraud can be higher.


c) Phases and characteristics of the audit: c) Phases and characteristics of the audit:

1) In the control of subsidies it can be 1) In the control of subsidies it can be distinguished the distinguished the three typical phases of all audit three typical phases of all audit procedures: planning, procedures: planning, execution of field work and execution of field work and report.report.

2) There are not different characteristics as for the 2) There are not different characteristics as for the form form with regard to other audit works, unless for the with regard to other audit works, unless for the specificity specificity of the object of the control.of the object of the control.


3) In fact in the object of the control it is where, in 3) In fact in the object of the control it is where, in my my opinion, the auditor should be more ambitious.opinion, the auditor should be more ambitious.

This way, without stopping to verify the financial This way, without stopping to verify the financial aspects aspects and the legal aspects, the auditor should express and the legal aspects, the auditor should express an an opinion on whether the objectives have been opinion on whether the objectives have been reached reached according with the principles of efficiency according with the principles of efficiency and economy.and economy.


21. 21. An example.An example.

Audit of subsidies granted for the development of Plans Audit of subsidies granted for the development of Plans related to training actions to improve the professional related to training actions to improve the professional capacity of workers.capacity of workers.


a) It is important to keep in mind that.a) It is important to keep in mind that.

1. In this concrete case, the administration of 1. In this concrete case, the administration of subsidies subsidies (not included the granting) was made (not included the granting) was made through a through a collaborating entity.collaborating entity.

2. The subsidized actions were co-financed by 2. The subsidized actions were co-financed by the ESF.the ESF.

3. The moment when the Report was approved 3. The moment when the Report was approved and it and it was sent to the Parliament was previous to the was sent to the Parliament was previous to the

procedure and approval of the current Act on procedure and approval of the current Act on Subsidies Subsidies of 2003. But the results to that I will refer of 2003. But the results to that I will refer continue being continue being of full interest.of full interest.


b) Main results:b) Main results:

1. 1. Results related with the performance of theResults related with the performance of the Collaborating Entity (C.E.)Collaborating Entity (C.E.)..

I. The funds received to be managed produced I. The funds received to be managed produced yields yields that the C.E. considered, improperly, own that the C.E. considered, improperly, own revenues and revenues and it even paid for them Company tax.it even paid for them Company tax.

II. Due to the voluntary resignation of some of the II. Due to the voluntary resignation of some of the managers, the C.E. paid compensations that managers, the C.E. paid compensations that

were were not foreseen in their contracts, and were charged not foreseen in their contracts, and were charged to the to the funds of the subsidies, as operating costs.funds of the subsidies, as operating costs.


III. The members of the C.E. (a Foundation) that III. The members of the C.E. (a Foundation) that participated in the process of assessment of the participated in the process of assessment of the applications, in turn, they also received applications, in turn, they also received

subsidies. They subsidies. They also participated in their justification also participated in their justification and in their control.and in their control.

IV. The C.E. only revised justifying receipts for a IV. The C.E. only revised justifying receipts for a value value similar to the amount of each subsidy granted, similar to the amount of each subsidy granted, without without analyzing, in each case, all the receipts of the analyzing, in each case, all the receipts of the whole whole subsidized activity (performance). This would subsidized activity (performance). This would have have allowed them:allowed them:

• To validate the conditions in which the • To validate the conditions in which the subsidy subsidy was granted.was granted.

•• To check the % of the subsidized activity To check the % of the subsidized activity (performance), since they were co-financed (performance), since they were co-financed

by the by the E.U. (ESF).E.U. (ESF).


V. The C.E. didn't carry out confirmations on V. The C.E. didn't carry out confirmations on whether whether the workers were registered in the Social Security the workers were registered in the Social Security System, neither if they were really employed in the System, neither if they were really employed in the companies that appeared in the justifying documentation.companies that appeared in the justifying documentation.

VI. In the call for funding it didn't appear the VI. In the call for funding it didn't appear the indication indication that subsidies would be granted in regime of that subsidies would be granted in regime of competitive competitive concurrence. However they were granted this concurrence. However they were granted this way.way.


VII. In the cases that a refund was demanded to VII. In the cases that a refund was demanded to a a beneficiary, the C.E. did not demanded him the beneficiary, the C.E. did not demanded him the delay delay interests, what has supposed a damage for the interests, what has supposed a damage for the public public funds.funds.

VIII. In the accounting of the C.E. the figured VIII. In the accounting of the C.E. the figured subsidies subsidies were recorded for the granted amounts. In were recorded for the granted amounts. In the cases in the cases in that there was difference between this that there was difference between this amount and the amount and the really committed, the differences really committed, the differences were not annulled. were not annulled. This way, idle resources were This way, idle resources were generated.generated.


2. 2. Results related with the performances of the Results related with the performances of the beneficiaries of subsidiesbeneficiaries of subsidies..

I. The Foundation (C.E.) accepted, as a I. The Foundation (C.E.) accepted, as a justification of the application of the awarded justification of the application of the awarded subsidies, what they subsidies, what they called “notice of charge” that were the beneficiary's called “notice of charge” that were the beneficiary's mere mere declaration of the costs in that it had incurred, declaration of the costs in that it had incurred, without providing the corresponding vouchers. This without providing the corresponding vouchers. This prevented the C.E. from carrying out verifications to prevented the C.E. from carrying out verifications to demonstrate demonstrate whether the presented justification was whether the presented justification was true and correct.true and correct.


II. In some cases of beneficiaries that had II. In some cases of beneficiaries that had received received more than a subsidy, the Court detected that more than a subsidy, the Court detected that some some invoices were presented more than once, that is invoices were presented more than once, that is to say to say that served to justify more than a subsidy. This that served to justify more than a subsidy. This fact was fact was reported to the Prosecutor’s Office, for the reported to the Prosecutor’s Office, for the possible possible offence existence. offence existence.

III. The Spanish Court checked cases of III. The Spanish Court checked cases of beneficiaries beneficiaries that had received several public subsidies that had received several public subsidies and that the and that the total amount of all of them was higher than total amount of all of them was higher than the cost of the cost of the subsidized activity.the subsidized activity.


IV. In some cases, the beneficiaries assigned IV. In some cases, the beneficiaries assigned costs of costs of their operation structure, higher than the real their operation structure, higher than the real ones or in ones or in an excessive amount, keeping in mind the an excessive amount, keeping in mind the proportion proportion between the subsidized activity and the between the subsidized activity and the beneficiary's beneficiary's total activity.total activity.

V. Some groups of expenses had percentage V. Some groups of expenses had percentage limits on limits on the total cost and it was proven that, in the total cost and it was proven that, in occasions, the occasions, the incurred costs had been not well incurred costs had been not well classified in order to classified in order to justify a higher cost of the justify a higher cost of the subsidized activity.subsidized activity.


VI. In general, in the justifying documentation VI. In general, in the justifying documentation there there were no justifying vouchers proving that the were no justifying vouchers proving that the workers workers had attended the subsidized training actions had attended the subsidized training actions (courses). (courses). This way the C.E. paid subsidies without This way the C.E. paid subsidies without checking if it checking if it was according to the number of students was according to the number of students (workers) that (workers) that the beneficiary stated. In some cases the the beneficiary stated. In some cases the final amount final amount of the subsidy had to be calculated in of the subsidy had to be calculated in accordance with accordance with the number of assisting workers.the number of assisting workers.

VII. The subsidized courses were free. However, VII. The subsidized courses were free. However, the the Court found cases in which the beneficiaries Court found cases in which the beneficiaries charged charged different amounts to the students (workers).different amounts to the students (workers).


VIII. The Court found that the risk of collection of VIII. The Court found that the risk of collection of undue undue quantities to the workers attending to the training quantities to the workers attending to the training

actions was higher when actions was higher when thethe beneficiaries of beneficiaries of subsidies subsidies contracted with private training centers the contracted with private training centers the performance performance of the subsidized training activities, of the subsidized training activities, because the because the beneficiaries had not established appropriate beneficiaries had not established appropriate controls controls on the free character of the actionson the free character of the actions..


3. 3. Results related with the efficiency, Results related with the efficiency, effectiveness and effectiveness and economy of the performances of economy of the performances of the C.E. and of the the C.E. and of the beneficiariesbeneficiaries. .

I. Neither the C.E. neither the beneficiaries of I. Neither the C.E. neither the beneficiaries of subsidies subsidies defined indicators to establish the degree of defined indicators to establish the degree of execution execution of the different training plans.of the different training plans.


II. Neither the C.E. neither the beneficiaries could II. Neither the C.E. neither the beneficiaries could determine, through the follow up and the determine, through the follow up and the

evaluation that evaluation that they carried out, the global they carried out, the global efficiency of the training efficiency of the training Plans since they could not Plans since they could not quantify the generated quantify the generated benefits, neither to detect benefits, neither to detect faults neither the measures faults neither the measures that could be applied in that could be applied in future training actions to be future training actions to be organized.organized.

III. Neither the C.E. neither the beneficiaries have III. Neither the C.E. neither the beneficiaries have concrete data on the results obtained through the concrete data on the results obtained through the training of the workers such as: increase of training of the workers such as: increase of competitiveness of their company or their competitiveness of their company or their

professional professional promotion in their company, or outside it.promotion in their company, or outside it.


IV. Although it was obligatory, the Court checked IV. Although it was obligatory, the Court checked that that only less than 20% of the Plans (of training only less than 20% of the Plans (of training courses) courses) were preceded of an assessment about the were preceded of an assessment about the training training needs of the sector in which that training was needs of the sector in which that training was provided. provided.

V. The system followed by the C.E. has permitted V. The system followed by the C.E. has permitted that that the same type of training action had been the same type of training action had been subsidized subsidized with very different costs to different with very different costs to different beneficiaries. This beneficiaries. This makes us think that in the cases of makes us think that in the cases of higher costs an higher costs an overvaluation might have taken overvaluation might have taken place.place.

The Audit of subsidies by the Court of Audit. Spain.

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Transcript of The Audit of subsidies by the Court of Audit. Spain.