1. ESPON 2013 Programme 3 rd Financial Managers Seminar Brussels 19 May 2010

2. Audit trail Mélanie Donjon, Financial Expert, ESPON CU

3. Audit trail (1) What is audit trail for ? (Regulation definition – Objectives and principles) An adequate Audit trail shall allow: the aggregation of amounts certified to the Commission to be reconciled with the detailed accounting records and supporting documents held by the different bodies involved in the procedure (from the beneficiaries up to the CA); the verification of payment of the correct public contribution to the beneficiary; the verification of application of the selection criteria established by the monitoring committee for the operational programme; follow-up for each operation the technical specifications and financing plan, documents concerning the grant approval, documents relating to public procurement procedures, progress reports and reports on verifications and audits carried out; Important: Documents have to be made available at least until 2020!

4. Audit trail (2) Which documents must be stored? (list not exhaustive) From the contracting procedure Approved Application Form and annexes and the resubmitted AF if any; Subsidy Contract and annexes; Partnership Agreement(s) and annexes; From the project monitoring Relevant project correspondence (contractual, financial and content related); Meeting agenda, notes, meeting minutes, signed presence lists,... From the project financial reporting Project/Partner Progress Reports; Control certificates, control checklists and control reports; All supporting documents of expenses reported in progress reports Bank account statements proving the reception of funds and the transfer of Programme funds to partners

5. Audit trail (3) Staff costs: labour contracts, pay slips, payroll documents and time sheets of personnel working for the project, calculation of hourly rates by person, information on workable days,... Travel expenditures and accommodation: travel agency invoices, passenger receipts, flight/train/bus tickets, hotel/restaurant invoices, taxi coupons, meeting invitation, meeting agenda, participant’s lists,... Administration costs: distinction of direct and indirect general costs, proof and records of costs included in overheads, calculation of allocation key of indirect administrative costs,... Equipment (if foreseen in AF): records of assets, physical availability of equipment purchased in the context of the project,... External services: list of subcontracts and copies of all contracts with external experts and/or service providers, documents relating to all steps of public procurements: information and publicity; public procurement note, terms of reference, offers/quotes, order form, contract, external service provider invoices, proof of delivery of services and/or goods, studies, brochures, newsletters,....

6. Second level Financial Control Mélanie Donjon, Financial Expert, ESPON CU

7. Management and control system (1) European Commission Certifying Authority Managing Authority Audit Authority European Court of Auditors Group of Auditors External Auditor EY Monitoring Committee FLC LP PP2 PP3 PP4 FLC Second Level Audit System audits on MA/CA and audits of operations on LP/PP/FLC Audits of EC Audits of ECA First Level Financial Control Under MS/PS responsibilities

8. Management and control system (2) Stakeholders of the control system Certification of expenses Quality controls Audits (2 nd level, EC and ECA) Final beneficiariesSelf-control FLC under resp. of MS/PS First Financial Level Control ESPON CU on behalf of the MA CU desk review on progress report/project monitoring MA Quality controls on operations Certifying Authority Payment and Certification toward EC CA Quality controls on operations Member States/Partner States MS / PS quality control of FLC External auditor under resp. AA System audits Audit of operations European Commission EC audits EU Court of Auditor ECA audits The table below presents the controls made and the authority in charge:

9. Second Level Audit Audit Body: Inspection Générale des Finances, Ministry of Finance in Luxembourg, supported by the Group of Auditors (GoA) Audit work is implemented by an external audit firm (Ernst & Young) from end of 2008 until 2015. Audit work performed on behalf of the Audit Authority: System audit on central authorities (MA,CU,CA) done in 2009 and if requested by the AA at a later stage; Audit of operations on beneficiaries (LP,PP,FLC) from 2010 until 2015, reports to be delivered by 30 June of each year; Annual control reports and opinions preparation (synthesis of work performed) approved by AA and GoA and submitted by the AA by 31 December each year from 2009 until 2015.

10. Audit of operations (1) Focus of the audit of operations is put on: The compliance with Community and national rules, in particular public procurement; The respect of the selection criteria for the operational programme for the operation under discussion and the implementation of the operation in accordance with the approval decision; The correspondence of the expenditures declared by the beneficiary to the accounting records and supporting documents held by the beneficiary; The payment to the final beneficiary of the public contribution

11. Audit of operations (2) Methodology: Started in January 2010 until 2015, carried out each year by the external audit firm on behalf of the AA assisted by the GoA; Operations controlled in year n are operations paid and certified in year n-1, selected on sample basis by the AA. Sample approved December of year n-1 for audits to be carried out as from January of the year n Selected projects and partners will be informed by the CU during January of the year n Audit of operations to be carried out until end of March year n In principle, the LP and 1 randomly selected partner involved for each project covering expenses paid and certified in year n-1 Information in advance, clear and complete communication to the LP/PP selected – documents, participants, dates, visits on the spot – contradictory procedure

12. Audit of operation vs. MA quality checks Audit of operation Who? EY on behalf of AA and GoA What for? Efficiency of the management and control system, detect irregularities, ineligible expenditures When? From January until March On which basis? Sample (random) on expenditures paid and certified on year n-1 to the EC How? Interviews of LP,PP,FLC and exhaustive review of supporting documents (financial and activity) What? Expenditures declared in progress reports, paid and certified Quality checks by MA/CU Who? CU on behalf of MA What for? Information to beneficiaries, improvement of the management and control system, prevention When? Throughout the year On which basis? Risk analysis performed by the MA/CU on basis of desk review performed on progress report How? Interviews of LP,PP,FLC (if necessary) and review of key supporting documents (not exhaustive) What? The management and control system in place from Application Form until the programme funds transfers.