1. Management and control systems Franck Sébert, DG Regional and Urban Policy, Head of Unit C1
FOURTEENTH MEETING OF THE EXPERT GROUP ON DELEGATED AND
IMPLEMENTING ACTS FOR THE EUROPEAN STRUCTURAL AND INVESTMENT
FUNDS – 16 July 2013

2. Outline Functions of the managing authority:
model for the management declaration (Article 114 of CPR); (IA)
rules concerning arrangements for the audit trail (Article 114 of CPR regulation); (DA)
Functions of the audit authority:
models for the audit strategy, the audit opinion and the control report (Article 116 of CPR); (IA)
use of data collected during audits carried out by Commission officials (Article 116 of CPR)
Criteria for financial corrections (Article 136 (6) of CPR and Article 20 (4) of CPR); (DA)

3. Outline
For the purpose of today's meeting we will see separately the blocks on implementing acts and delegated acts IA
model for the management declaration (Article 114 of CPR)
models for the audit strategy, the audit opinion and the control report (Article 116 of CPR) DA
rules concerning arrangements for the audit trail (Article 114 of CPR regulation)
use of data collected during audits carried out by Commission officials (Article 116 of CPR)
Criteria for financial corrections (Article 136 (6) of CPR and Article 20 (4) of CPR)

4. Outline
For the purpose of today's meeting we will see separately the blocks on implementing acts and delegated acts IA
model for the management declaration (Article 114 of CPR)
models for the audit strategy, the audit opinion and the control report (Article 116 of CPR) DA
rules concerning arrangements for the audit trail (Article 114 of CPR regulation)
use of data collected during audits carried out by Commission officials (Article 116 of CPR)
Criteria for financial corrections (Article 136 (6) of CPR and Article 20 (4) of CPR)

5. Functions of the managing authority – Management declaration (IA)
New element that did not exist in the period
Main goal: increase the accountability of the MA in ensuring an effective management and control system.
- Content based on article 59(5) of the Financial Regulation
- Takes account of all available audit results, obligations under article 114 and effective functioning of management and control system so as to appropriately treat any irregularity discovered during the year
- Further details to be provided in annual summary of final audit reports and controls carried out

6. Functions of the managing authority – Management declaration (IA)
The management declaration confirms that, in the opinion of those in charge of the management of the funds:
(i) the information in the accounts is properly presented, complete and accurate,
(ii) the expenditure was used for its intended purpose and in accordance with the principle of sound financial management
and
(iii) the control systems put in place functioned effectively to give the necessary guarantees concerning the legality and regularity of the underlying transactions.

7. Functions of the AA - models for the audit strategy, the audit opinion and the control report (IA)
The Audit strategy sets out
- the audit methodology taking account of internationally accepted auditing standards
- the sampling method for audits on operations and
- the planning of audits : systems audits, audits on operations, review of the accounts
in relation to the current accounting year and the two subsequent accounting years
Annual updates

8. Functions of the AA - models for the audit strategy, the audit opinion and the control report (IA)
Audit opinion on whether:
√ Accounts give a true and fair view
√ Expenditure for which reimbursement has been requested from the Commission is legal and regular
√ Control systems put in place function properly.

9. Functions of the AA - models for the audit strategy, the audit opinion and the control report
Novelty :
- The opinion shall also state whether the audit work puts in doubt the assertions
made in the management declaration.
- Possibility to refer to limited / significant impact of qualifications to align to Commission's audit opinions
- Possibility to express an emphasis of subject-matter
- Disclaimer of opinion in exceptional cases

10. Functions of the AA - models for the audit strategy, the audit opinion and the control report
The control report sets out
- Changes in the management and control systems (MCS)
- Changes to the audit strategy
- Details on the sampling methodology used, including in case of non-statistical sample used in case of small populations, and on the calculation of the projected error rate

11. Functions of the AA - models for the audit strategy, the audit opinion and the control report
The control report sets out
- the main findings of the audits carried out : systems audits, audits on operations, audits on accounts, audits of complementary risk based sample (if any), including deficiencies found in the MCS and the proposed and implemented corrective actions;
- Corrections including at flat rate to bring down the error rate down the materiality level
- Other information such as subsequent events, fraud suspicions …

12. Outline
For the purpose of today's meeting we will see separately the blocks on implementing acts and delegated acts IA
model for the management declaration (Article 114 of CPR)
models for the audit strategy, the audit opinion and the control report (Article 116 of CPR) DA
rules concerning arrangements for the audit trail (Article 114 of CPR regulation)
use of data collected during audits carried out by Commission officials (Article 116 of CPR)
Criteria for financial corrections (Article 136 (6) of CPR and Article 20 (4) of CPR)

13. Functions of the managing authority – Audit trail (DA)
Criteria for an adequate audit trail by OP:
Similar requirements to those required under Article 15 of Regulation (EC) No 1828/2006
(a) it permits the aggregate amounts certified to the Commission to be reconciled with the detailed accounting records and supporting documents held by the certifying authority, managing authority, intermediate bodies and beneficiaries as regards operations co- financed under the operational programme;

14. Functions of the managing authority – Audit trail (DA)
(b) it permits verification of payment of the public contribution to the beneficiary;
(c) it permits verification of the application of the selection criteria established by the monitoring committee for the operational programme;

15. Functions of the managing authority – Audit trail (DA)
(d) it contains in respect of each operation, as appropriate:
√ 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.

16. Functions of the managing authority – Audit trail (DA)
- Managing authority to keep record of location of supporting documents and grant access for inspection
Novelty:
- Financial instruments: it includes data on support granted to individual recipients
- Takes account of electronic data exchange between beneficiaries and programme authorities (article 112(3) CPR)

17. Functions of the AA - use of data collected during audits carried out by Commission officials (DA)
The rules on the use of data collected in the context of Commission audits are the same
as those laid down in Article 37 of Regulation (EC) No 1828/2006.

18. Criteria for the level of financial corrections under Article 136(6) (DA)
- Levels of flat rate corrections not set in the regulatory framework in
- Based on the Commission Decision of on the approval of guidelines on the principles, criteria and indicative scales to be applied in respect of financial corrections made by the Commission under Articles 99 and 100 of Council Regulation (EC) N° 1083/2006 of 11 July 2006.

19. Criteria for the level of financial corrections under Article 136(6) (DA)
-To protect the EU budget and restore a situation where all expenditure declared for co-financing is in compliance with EU and national law
- Level of correction to be assessed on individual cases but not always feasible; use of extrapolation or flat rate corrections as well
- Flat rate corrections to be proportionate to the seriousness of the irregularity or deficiency identified / risk of loss for the EU budget / frequency, and extent of the deficiency / vulneraiblity to fraud

20. Criteria for the level of financial corrections under Article 136(6) (DA)
- Based on infringement(s) to key requirements of systems, as described in Articles 62, 112, 114, 115, 116 of the CPR (= main items to be audited under systems audits)
- Proportionate rates: 5%, 10%, 25%, 100%
- But lower rates possible if the fixed rates are disproportionate
- Flat rate can be increased in case of repeated breaches.

21. Thank you for your attention!