1. Presentation of the REA ex-post Audit processes
Marie Curie Monitoring Action and Information Days
Barcelona, June 9th-11th 2010
Rita, BULTYNCK-LEPOUDRE
Unit A.2 - Finance
Presentation of the REA ex-post Audit processes

2. Today’s agenda Presentation REA Audit processes and procedures
Preparation
Execution
Follow up
Presentation about Marie Curie Actions financial rules
General financial rules for Marie Curie Actions
Details on actions
Questions & Answers

3. Ex-post Audit of grants beneficiaries
The REA may, at any time, during the contract, and up to five years after the end of the project, arrange for audits to be carried out.
Technical review
Technical scientific audit
Financial audit
Audits may be carried out either by REA staff or by private audit firms mandated by the REA.
An Annual Audit Plan has been established in line with the FP7 general audit strategy.
Technical Audits can be performed at the same time as financial audits 3

4. Aims The aim of the ex-post financial audits is
verifying contractor’s compliance with the financial contractual provisions,
assessing the legality and regularity of the transaction, underlying the implementation of the Community budget.
reviewing of some relevant systems of internal controls of the Contractor in order to assess whether it is adequate and sufficient to ensure that costs incurred by the Contractor on EC-research funded projects are correctly allocated to those specific projects and recorded as such in the accounting records.

5. Contracted audit firms Ex post Audits by REA auditors
Audits: In-house / Outsourced
Ex post Audits by
Contracted audit firms
Approx. 80% of audits
i.e. representative selection and audits of top beneficiaries
Supervision of the audit process by REA services
Consistency with Research family audits
Ex post Audits by REA auditors
Approx. 20% of audits
Mostly used for risk based audits, for which a specific audit programme tailored to the identified risks is required
Specific audits (follow-up, requests, …)
Consistency with Research family audits
AUDIT ON REQUEST:
Performed by auditors on Operational units requests
Could be triggered by irregularities during project implementation

6. Audit Cycle Audit Strategy & Selection Implementation
of Audit Results+EXTRAPOLATION
Planning & Preparation
Reporting &
Audit Closure
Examination on site

7. Preparation: audit of selected beneficiary
Selection of Grant agreements
Based on various criteria
Creation of audit file
Gathering of info from:
- REA operational services
- external sources; e.g. internet 7

8. Preparation: Audit on-the-spot
Initial contact by the responsible auditor approx. 1-2 month before examination on site to agree on dates and logistics
Formal letter to announce the audit including detailed annex on information and documentation to be provided

9. Planning & Preparation: Information requested
Detailed annex to announcement letter includes precise list of information to be provided either
Prior to the audit examination on site (by mail)
At the time of the audit examination
Most relevant information in the early preparation are the detailed project accounts matching the total as claimed in the financial statements (Form C)
Exact information requests to be provided in advance also depending on the individual project (s) and audit scope

10. Usually within 4-5 working days (one week)
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
Interviews

11. Reporting and Closure of the Audit
Transmission of Draft audit report (after internal consultations and quality control) for comments by the audited organisation
Usually based on the preliminary conclusions
Delay (30 days) to provide comments to the draft
Consideration of comments and finalisation of the audit report
Closure of the audit by formal letter indicating – where appropriate - the further procedures on the implementation of audit results

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

13. Follow-up: liquidated damages
Financial penalty due for overstatement of expenses, unjustified financial contribution received from the Commission/REA
Only due for the reporting period under question
When due, has to be paid together with the unjustified financial contribution
Will be claimed by the mean of Recovery orders issued by REA

14. A long process (up to 2 years)
The extrapolation
A long process (up to 2 years)
Initiation
Decision
Management
Launch
Implementation
Follow-up
Monitoring
45 days / 3 months
+ additional deadline
Final Audit report
The auditor submits the
extrapolation request
ESC meeting
Extrapolation decision
Eventual
follow-up audit
Audit closing phase
Contract selection
Audit closure
Letter of conclusions sent
Extrapolation start
Reception of revised cost
statements &
supporting documents
Adjustments
Recoveries

15. Main findings leading to extrapolation (FP6)1
VAT included in the cost charged
VAT 2
Other taxes included on a systematic basis
Taxes 3
Incorrect calculation of overheads
Overhead 4
Other Ineligible items included (like sales/marketing costs/bonuses)
Ineligible 5
Average vs. actual costs
Average vs Actuals 6
Budgeted, standard, estimated or fixed rates used instead of actual costs
Budgeted/standard/estimated 7
Adjustment in productive hours calculation
Prod. Hours 8
Unreliable/missing timesheets/ alternative evidence used
Timesheets 10
Wrong depreciation method used/no depreciation applied
Depr. Method 11
Wrong calculation method used
Calc. Method 12
Unjustified change in direct costs model
Change Ind. Costs 13
Other reasons (i.e. double charging, no supporting docs, not for project, outside project period)
Other 14
Wrong exchange rate
Exch. Rate 15
Owner manager costs estimated/not substantiated
Owner Mgr. 16
Marie Curie flat rates vs. actual cost issue
MC flat rates 17
Lack of reconciliation of costs claimed/weaknesses internal control
No reconciliation 18
Non declaration of interest on pre-financing
Interest Pre. Financ.

16. Muchas Gracias ! Rita Lepoudre - Bultynck Head of Unit Finance
 Research Executive Agency
COV2  15/132,  1049 Brussels
( )