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1 Control procedures: EC Audits European Commission RTD.A.4 External audits Maurizio Dal Toso Mira Training Workshop on Audit Tunis 22/10/2010 logo.

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Presentation on theme: "1 Control procedures: EC Audits European Commission RTD.A.4 External audits Maurizio Dal Toso Mira Training Workshop on Audit Tunis 22/10/2010 logo."— Presentation transcript:

1 1 Control procedures: EC Audits European Commission RTD.A.4 External audits Maurizio Dal Toso Mira Training Workshop on Audit Tunis 22/10/2010 logo

2 2 Topics EC Audit in FP7 1.When? 2.Who can carry out an audit 3.What is verified in an audit? 4.How is it verified? Audit Procedures 5.Which are the supporting documents for the audit? 6.Which are the obligations of the beneficiaries? 7.Audit Reports, implementation & follow-up

3 3 1-Audit : when? Article II.22 of ECGA – Financial audits and controls: “The Commission may, at any time during the implementation of the project, and up to five years after the end of the project, arrange for financial audits to be carried out”. Article II.23 of ECGA - Technical audits and reviews: “The Commission may initiate a technical audit or review at any time during the implementation of the project and up to up to five years after the end of the project.” ….

4 4 DG RTD-A.4 2-Audits: Who? Audits by EC auditors (RTD-A.04) Approx. 1/3 of audits Specific audits (follow-up, requests, …) Audits by Contracted firms (RTD-A.05) Approx. 2/3 of audits Supervision of the audit by EC services Article II.22 of ECGA – Financial audits and controls 3. Audits may be carried out by: The Commission (its own departments – including OLAF – or by any of its duly authorised representatives (including external auditors appointed by the Commission). The European Court of Auditors (by its own departments or by any of its duly authorised representatives).

5 5 Audit tools: audit types (1) SelectionPurpose Corrective audits Specific risk profiles Focus on top beneficiaries (50% of the budget) Flexible in view of peculiarities present in the populations of different RDGs/EAs Wide audit coverage Identify and correct errors in the most cost-effective way possible ‘Clean’ min. 50% of budget from systematic material errors Long-term prevention of issues found (‘fixing the future’) Fraud detection and prevention Other types (system, scientific/ technical, FUSION…) On request or pre-selected Verify compliance with certified methodologies Identify and correct systemic problems Provide additional assurance on specific parts of the budget Complement scientific audits The FP7 Audit Strategy

6 6 Audit tools: audit types (2) SelectionPurpose Representative audits Monetary Unit Sampling (MUS) methodology (95% confidence level, 2% expected error rate, 5% materiality threshold = sample size 161) Financial statements as sampling unit Samples from the whole population of each RDG/EA Determine the amount of error present in the population Representative error rate Contribute to the Declaration of Assurance of the AOD * Corrective as well as representative The FP7 Audit Strategy

7 7 Topics EC Audit in FP7 1.When? 2.Who can carry out an audit 3.What is verified in an audit? 4.How is it verified? Audit Procedures 5.Supporting documents for the audit 6.Obligations of the beneficiaries 7.Internal strategy concerning audits 8.Audit Reports

8 8 Technical audits – what is verified? Technical review is performed at the project level by Project Officers and/or external experts to give external advice to the Commission Article II.23 of ECGA - Technical audits and reviews …The aim of a technical audit or review shall be to assess the work carried out under the project over a certain period, inter alia by evaluating the project reports and deliverables relevant to the period in question. Such audits and reviews may cover scientific, technological and other aspects relating to the proper execution of the project and the grant agreement.

9 9 Financial audits – what is verified? Article II.22 of ECGA – Financial audits and controls: … “Such audits may cover financial, systemic and other aspects (such as accounting and management principles) relating to the proper execution of the grant agreement.

10 10 Topics EC Audit in FP7 1.When? 2.Who can carry out an audit 3.What is verified in an audit? 4.How is it verified? Audit Procedures 5.Supporting documents for the audit 6.Obligations of the beneficiaries 7.Internal strategy concerning audits 8.Audit Reports

11 11 Audit Cycle Audit Strategy & Selection Planning & Preparation Examination on site Reporting & Audit Closure Implementation of Audit Results

12 12 Audit Cycle - Timeline Audit Strategy & Selection Planning & Preparation Examination on site Reporting & Audit Closure Implementation of Audit Results 3 months1-3 months

13 13 13 Audit on-the-spot – Preparation Selection of ContractsSelection of Contracts Initial contact by the responsible auditor approx. 2 month before examination on site to agree on dates and logistics Collection of audit information (internal and external) Formal AnnouncementFormal Announcement including detailed annex on information and documentation to be provided: –prior to the audit examination on site –at the time of the audit examination

14 14 Examination on site Opening meeting Analysis of Systems in place Test of systems and substantive evidence Closure meeting Assessment after on site visit Usually within 4-5 working days (one week)(…) General info on: organisation projects financial administration internal control system Clarification on audit agenda for further days Analysis of documents and explanation received and collection of audit evidence Discussion of preliminary findings and observations Indication of further audit procedure Audit Process Handbook

15 15 5-Supporting documents for the audit Article II.22 of ECGA – Financial audits and controls In order to permit a complete, true and fair verification that the project and the grant are (have been) properly managed and performed, beneficiaries are required to: keep the originals, or in exceptional cases, where the national legislation accepts or contemplates this possibility, duly authenticated copies – including electronic copies – of all documents relating to the grant agreement for up to five years from the end of the project. ensure that the Commission's services, and/or any external body(ies) authorised by it, have on-the-spot access at all reasonable times, notably to the beneficiary's offices where the project is being carried out, to its computer data, to its accounting data and to all the information needed to carry out those audits, including information on individual salaries of persons involved in the project. They shall ensure that the information is readily available on the spot at the moment of the audit and, if so requested, that data be handed over in an appropriate form. make available directly to the Commission all the detailed data that it may request, ensure that the rights of the Commission and the European Court of Auditors to carry out audits are extended to the right to carry out any such audit or control on any third party whose costs are reimbursed in full or in part by the EC contribution, on the same terms and conditions.

16 16 6-Beneficiaries' obligations Article II.22 of ECGA – Financial audits and controls In order to permit a complete, true and fair verification that the project and the grant are (have been) properly managed and performed, beneficiaries are required to: keep the originals, or in exceptional cases, where the national legislation accepts or contemplates this possibility, duly authenticated copies – including electronic copies – of all documents relating to the grant agreement for up to five years from the end of the project. ensure that the Commission's services, and/or any external body(ies) authorised by it, have on-the-spot access at all reasonable times, notably to the beneficiary's offices where the project is being carried out, to its computer data, to its accounting data and to all the information needed to carry out those audits, including information on individual salaries of persons involved in the project. They shall ensure that the information is readily available on the spot at the moment of the audit and, if so requested, that data be handed over in an appropriate form. make available directly to the Commission all the detailed data that it may request, ensure that the rights of the Commission and the European Court of Auditors to carry out audits are extended to the right to carry out any such audit or control on any third party whose costs are reimbursed in full or in part by the EC contribution, on the same terms and conditions.

17 17 Topics EC Audit in FP7 1.When? 2.Who can carry out an audit 3.What is verified in an audit? 4.How is it verified? Audit Procedures 5.Supporting documents for the audit 6.Obligations of the beneficiaries 7.Audit Reports, implementation & follow-up 8.Audit strategy

18 18 18 Quality control Quality check on audit report forQuality check on audit report for –Coherence –Completeness –Correctness –Compliance with the Audit Handbook Audit Steering CommitteeAudit Steering Committee

19 19 Reporting and Closure of the Audit Transmission of Draft audit report (after internal consultations) for comments by the audited organisation –Usually based on the preliminary conclusions –Delay (30 days) to provide comments to the draft –Letter of representation Consideration of comments and finalisation of the audit report Closure of the audit by formal letter indicating the further procedures on the implementation of audit results END OF THE AUDIT

20 20 Implementation of Audit Results

21 21 General Financial adjustments administred by the operational EC service in charge of the project management (decentralised) Besides adjustments, possibility of liquidated damages Consideration of serious audit findings (i.e. high adjustments) in future project and contract negotiations

22 22 Implementation of Results: Cases No findings Financial Adjustment (Only) qualified recommendation Non-systematic finding identified Systematic finding identified Implementation finalised Correction of future payments or recovery by the responsible financial services Extrapolation of audit results Follow-up Audit

23 23 Implementation of Results – Systematic Finding The implication of this type of error is that the contractor is not complying with his contractual obligation in a systematic way. Assumption: –Can imply that all currently open and closed contracts under the same framework program (FP) are affected and might need to be (retrospectively) adjusted Impact: –Contractor will be asked to reconsider all financial statements handed in under the same FP and where necessary recalculate and revise the statements

24 24 Implementation of Results – Extrapolation procedure I Common decision of all Research DGs which are concerned by having contracts with the organisation audited. –However, decentralised follow-up of implementation of results Detailed formal Letter of Closure of the Audit indicating procedures to be followed and including a list of contracts subject to extrapolation (consolidated for all Research DGs) 45 days delay to hand in revised financial statements or appropriate explanations on the listed contracts Follow-up audits

25 25 Implementation of Results – Extrapolation procedure I Common decision of all Research DGs which are concerned by having contracts with the organisation audited. –However, decentralised follow-up of implementation of results Detailed formal Letter of Closure of the Audit indicating procedures to be followed and including a list of contracts subject to extrapolation (consolidated for all Research DGs) 3 months delay to hand in revised financial statements or appropriate explanations on the listed contracts Follow-up audits

26 26 Audit tools: extrapolation Systematic errors Extrapolation Steering Committee RDG common decision Joint RDG projects list Audit closure Extrapolation process start Implementation by operational directorates NON Systematic errors Audit closure Implementation by operational directorates FP7 Audit Strategy

27 27 RTD Audits 16 Contractors have been audited: FrameworkContractorSum of Audited costsSum of Adjustments%Extrapolation FP5F , ,55-28,91% I23.778, ,07-100,00% FP5 Total , ,62-36,44% FP6A ,0377,000,01% B , ,8610,34% C , ,99-1,14% D , ,200,17% E , ,001,60% F , ,74-2,01%X G , ,551,85% H ,000,000,00% I , ,97-2,07%X J55.616, ,41-4,16% K ,53708,930,04%X L , ,390,14% M ,38-30,82-0,01% N , ,020,70% O ,67252,490,02%X FP6 Total , ,510,05% FP7P , ,06-0,17% FP7 Total , ,06-0,17% Grand Total , ,17-0,09%

28 28 ADDITIONAL INFORMATION FP6 / FP7 Audit certification policy website FP7 Certification FAQs ftp://ftp.cordis.europa.eu/pub/fp7/docs/faq-certification_en.pdf And in case of doubts, don't forget: RESEARCH HELPDESK Guidance notes on FP7 audit certification

29 29 Any Questions? at least one……..!!!!!

30 30 The End DG RTD-A.4

31 31 Topics EC Audit in FP7 1.When? 2.Who can carry out an audit 3.What is verified in an audit? 4.How is it verified? Audit Procedures 5.Supporting documents for the audit 6.Obligations of the beneficiaries 7.Audit Reports, implementation & follow-up 8.Audit strategy


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