Financial Management and Auditing

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• Financial Management and Auditing
• First Level Controls
• 3rd round operations
• Rostock, 03.02.2005
• Elise Oukka

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Certification of expenditure
Confirmation by an independent auditor
Qualified, meaning familiarised with accounting
and ERDF rules, especially the rules concerning
eligible expenditure
Independent from the operations activities and
finances (independent organisational unit)
External or internal!
AUDIT GUIDELINES!
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Certification of expenditure
Procedure

• Recorded verifications of individual operations
  on the spot (including a
• complete breakdown of expenditure and
  invoices)
• The records state
• - the work done
• - the results of the verification
• - the measures taken in respect of
  discrepancies
• (e.g. expenses not eligible, expenses not
  covered and/or
• not documented, etc.)
• When not checking 100 of the expenditure, but
  performed on a sample,
• the used sampling method must be clearly
  described and documented
• Internal audit report

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Confirmation by an independant auditor
1. For this report the total paid and certified
expenditure amounts to ____.
2. The general eligibility rules have been
observed, including, but not limited to
rules governing the eligibility of expenditure,
in particular COM 1685/2000, amended by
COM 448/2004, rules described in Approval
Letter and Subsidy Contract (including Annexes),
rules concerning co-financing activities
from the ERDF, rules on state aid, etc.
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What to be done

• Have invoices been paid out during the current
  reporting period and are the
• payments documented?

• Is the expenditure reported under External
  expertise mentioned in the
• approved application?

• Is the expenditure reported under Other
  mentioned in the approved application?

• Is the expenditure reported under Investments
  mentioned in the approved
• application?

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Confirmation by an independent auditor
- Products purchased must be physically available
- Is the delivery clearly documented?
- Exchange rate based on

1. daily calculation (the date of paying the invoice)

• average rate (e.g. monthly rate set by the
  Commission) of
• the month the invoice was paid

1. fixed dates (30.06./31.12.)

1. average monthly exchange rate of the last month
   of reporting period, as set by the Commission

• The operation must choose one of the options
  (a), (b), (c) or (d) and use that for
• the entire operation period

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Confirmation by an independent auditor
3. Receipts and payments are accurately recorded
in the operations accounting system, assets are
correctly recorded and amounts are correctly
reflected in demands for payment. The necessary
audit trail exists for all activities, providing
evidence in the form of contracts, invoices and
payment records. In case of staff costs, direct
costs, overheads and in-kind contributions, the
necessary evidence exists in a form of
timesheets, listings of costs or formula
descriptions and cost calculations (COM
438/2001, amended by COM No 2355/2002).
What to be done

• To check the set up and maintenance of an
  adequate and reliable accounting
• system and audit trail for the operation

- See (EC) 438/2001
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Confirmation by an independent auditor
4. Services, supplies and works have been
procured on the basis of proper call for
tenders, sound controls have been exerted over
the opening of the tenders and all tenders
have been fully evaluated before the final
decision has been made on service provider,
supplier or works contractor.
What to be done
- Check the documentation, EU national
regulations
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Confirmation by an independent auditor
5. Progress made has been fully and fairly
reflected in the report. On the spot there
is evidence that the reported activities have
taken place, delivery of services and goods,
and works are in progress or have been
completed.
What to be done
- Crosscheck reported expenditure vs. operation
activities.
- Are products and services delivered necessary
for the implementation of the approved
actions?

• Is there any expenditure reported that incurred
  before the approval of the
• operation by the Steering Committee (with the
  exception of preparation costs)?

- Is the delivery clearly documented?
- Are products/goods purchased physically
available?
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Confirmation by an independent auditor
6. The partners have complied with Community
rules on publicity, information, equal
opportunities, protection of environment and
any other Community policy.

• All inputs for progress report received from
  partners were
• certified by an independent auditor.

8. The operation's activities have started and
are implemented in accordance with the
stipulations of 5 (1) of the Subsidy Contract.
What to be done
- What is the date when the first operation costs
incurred?
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FIRST LEVEL CONTROLS Country specific
requirements
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Country specific requirements
Centralised 1st level controls New Member
States Latvia, Lithunia, Poland, Slovakia,
Slovenia, Czech Republic, Hungary, Malta, Cyprus
Estonia for the operations starting as of
January 2005 obligatory, for the others a
possibility Old Member States Greece, Italy,
Portugal Implications for the operations
potential delays with the reports!
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Country specific requirements
Other specific requirements Austria Austrian
project partners have to indicate the name and
function of the independent auditor using the
specific form send it for approval to the
Austrian Federal Chancellery.
The most updated information, please check the
Programme web site Country specific information