1. REPUBLIC OF TURKEY PRIME MINISTRY Undersecretariat of Treasury REGIONAL COMPETITIVENESS OPERATIONEL PROGRAM (RCOP) Ankara, 22 November 2011 AUDIT AUTHORITY

2. Our presentation consists of three parts. Section 1: Objectives and Scope of our Audit Section 2: System Audit For the Period of 01 October 2009 – 30 September 2010 Section 3: Audit Activities Carried Out For the Period of 01 October 2010 – 30 September 2011

3. SECTION 1 Objectives and Scope of our Audit

4. Objectives and Scope of The Audit Audit Objectives of the Audit Authority is to verify;  The effective functioning of the management and control systems,  The reliability of accounting information provided to the European Commission, In this respect Audit Authority shall give an opinion to the Commission, the Competent Accrediting Officer (CAO) and the National Authorising Officer (NAO)

5. In our audits; The material levels for the findings were determined as;  Minor  Intermediate  Major according to the effect of IPA Implementing Unit Management and Control System. Classification of Findings

6. SECTION 2 System Audit For the Period of 01 October 2009 – 30 September 2010

7. II) System Audit For the Period of 01 October 2009 – 30 September 2010 We had carried out a System Audit in the IPA Implementing Unit of The Ministry of Science, Industry and Technology. for the period covering the dates 01.10.2009-30.09.2010. The scope of the System Audit is; 1. Control the IPA Unit whether the Accreditation Criteria has maintained or not, 2. Control the system which is established according to the Accreditation Criteria, 3. Follow-up of Previous Years’ Audit Activity

8. Audit Findings We had 10 INTERMEDIATE-LEVEL findings and 13 MINOR-LEVEL findings. We performed follow-up according to the action plan of the auditee related with our findings. We found that 5 intermediate and 7 minor level findings are currently open.

9. Distribution of The Audit Findings According to The COSO Model and Material Level MinorIntermediateMajor Material Level COSO Model OpenClosedOpenClosed Control Environment (12) 34 14- Planning and Risk Management (1) 1- --- Control Activities (2) 1- 1-- Monitoring (2) -- 11- Communication (6) 22 2-- Total 76 55-

10. SECTION 3 Audit Activities Carried Out For the Period of 01 October 2010 – 30 September 2011

11.  Follow-up of the previous year's findings  Verification of the changes in the management and control systems  Subsystem Audits o Quality Assurance o Monitoring  Audit of Operations  Follow up of the previous and current years` findings Audit Activities For the Period of 01 October 2010 – 30 September 2011

12. We audited subsystems of “Quality Assurance” and “Monitoring” and we had 3 MINOR-LEVEL findings, 2 of which are from “Monitoring” and 1 is from “Quality Assurance”. We classified our findings according to COSO model: 1 of our findings falls under the “Control Activities” component and 2 of them is in “Monitoring” component. Among these 3 findings, 1 of them which is in “Monitoring” is closed and the other 2 are currently open. Subsystem Audits

13. We carried out an operational audit between June-September 2011. We audited 32.116.818 EURO expenditure (92.8 % of the total expenditure declared to the Commission). 32 million Euros of this amount belongs to the “Greater Anatolia Guarantee Facility” operation. Audit of Operations

14. We also performed a follow-up of the findings stated in the previous year's Annual Audit Activity Report and of the findings of current year sub-system audits. We found that; - 5 intermediate and 7 minor level findings from 2010 - 2 minor level findings from the 2011 subsystem audits Are currently open. Final Follow-up

15. The decree law numbered 635 published in the Official Gazette on 8 June 2011 restructured the Ministry of Industry and Trade (MoIT) by establishing the Ministry of Science, Industry and Technology (MoSIT) and the Ministry of Customs and Trade. In parallel with the restructuring of the Ministry, with a new Ministerial Consent there has been some positive changes regarding the management and control systems in the RCP-CID. We will give the summary of these changes and make assessment in our Annual Audit Activity Report prepared at the end of December 2011. Changes in the Management and Control Systems

16. Annual Audit Activity Report: At the end of December 2011 we will prepare an Audit Activity Report for the period between 1 October 2010 - 30 September 2011. In this report we will summarize all the weaknesses we have found in the management and control systems in the implementation of RCOP. Annual Audit Opinion: We will also prepare an Annual Audit Opinion on whether the management and control systems function effectively and conform to the requirements of relevant regulations We will submit these reports to EC, CAO and copy to the NAO. Reporting

17. THANK YOU FOR YOUR ATTENTION. REPUBLIC OF TURKEY The Board of Treasury Controllers Audit Authority Ergül HALİSÇELİK Ali ÇALIŞKAN Selçuk Erdal GÜNAL Senior Tresury Controller Treasury Controller Junior Treasury Controller e-mail:ergul.haliscelik@hazine.gov.tr e-mail:ali.caliskan@hazine.gov.tr e-mail:selcuk.gunal@hazine.gov.tr