Report about controlling activity and its results in the programme in 2013 TOP Monitoring Committee Meeting

Mangement and Control system Common ground : international standard Control of the supporting systemGovernment control European Court of Auditors European Commission Second level control Certifying Authority – Directorate General for Audit of European Funds (DGAEF) External audit State Audit Office of Hungary Government control Government Control Office Government internal financial control system: Internal audit Authentication – first level control Certifying Authority Managing Authority Intermediate Body Process built-in, prior, follow- up and management control

European Commission October, 2012 – Horizontal public procurement audit n o 2012/HU/REGIO/J2/1161/1 regarding the management and control system of Hungary Observation: Discriminatory selection criteria – Compulsory requirement for registration with the Hungarian Chamber of Engineers at the tender submission stage for TOP EC has obligated the Hungarian authorities to eliminate and avoid this practice in the future, as well as to implement an amount of 5% correction of overhead.

European Commission Base of the correction: Every expense item contained in the expense certifications already submitted to the EC and also in the contracts signed before 1 st February 2013 and exceeded the EU thresholds. The expense items which are to verify in the future and are contained in the contracts signed before 1 st February 2013, exceeded the EU thresholds and submitted during the eligibility period. Correction: All together 296 contracting agreement / contract of services are concerned, the total value is 1060,4 billion HUF (EU: 835,2 billion HUF, its 5% is 41,8 billion HUF)

European Commission September – Horizontal public procurement audit n o 2013/HU/REGIO/C2/1199/1 (TOP-SIOP) regarding the management and control system Subject of monitoring: 20 contracting agreement / contract of services Presently: data service phase

Activity of DGAEF in 2013 The aim of the system control of 2012 To determine whether the changes and the operation of the management and control system of TOP correspond with the law and internal regulations, as well as the elements and the procedures of the system ensure the legitimate and proper utilization of the support. To check the realization of the suggestions of the system controls from the previous years. 24 test projects has been selected in the interest of testing the procedures, controls and the correspondence to the requirements and aims of the system control.

Activity of DGAEF in 2013 The result of the system control of 2012 In the 4-grade system used for the classification of the Operational Programmes TOP has got the „level 2, it operates but some amendments are reqiured” classification. The control has not revealed any severe, systemic error which would influence the community funding. The system control has not been specified any financial corrections to be implemented. The DGAEF has specified the setting up of irregularity procedure concerning the system control only in one case.

Activity of DGAEF in 2013 Sampling procedures in 2013 Based on risk assessment, 22 projects has been selected for sampling control. Submitting of 13 draft reports is in progress, Concering 8 out of 9 submitted draft reports no irregularity has been occured, in 1 case the paying of amount of 1890 HUF loss of interest payment has been ordered.

Controls of external authorities – TOP 2013 State Audit Office of Hungary -Control of the discharge of Underlying control to offer an opinion on the bill of the budget of Follow-up inspection of the investment process of Metro line 4 Hungarian State Treasury -Regularity and targeted audits on behalf of NDA -Fact-finding missions and investigations -Audit of authentication reports

Inspections of NDA’s Internal Audit – TOP 2013 The number of the inspections carried out by NDA’s Internal audit: 4 Control of the implementation of the tasks during the maintenance period, Control of the operation of the modified SLA system and the follow-up control of the annual report of 2012, Practice of the control of the market price at the intermediate bodies and the inspection of its methodology, The transparency follow-up control of the beneficiaries gained support in the programming period of accoring to the 50. § (1) c) point of CXCV. law on state budget of 2011.

On-the-spot verifications By MA: level C – Periodically – In case of selected projects based on risk assessment By IB’s Engineering Deperment: level B – Based on annual planning, each project is verified at least once a year (during implementation and maintenance as well) – In case of selected projects based on risk assessment By a supervising engineer, as an external expert: level A – Based on annual and monthly planning, during the construction phase weekly, planning and feasibility study are prepared monthly adjusted to the cooperations. During the maintenance period at least once a year. – In case of each live TOP projects

TOP MA – verification level „C” 1/2013. Director-General Instruction of the on-the-spot verification level „C” Goals: To follow-up the adequate progress of the supporting contract of the investments, to ensure the regularity of the use of public funds, to correct promptly the dificiencies identified. Numbers of the verifications: 36 on-site verifications level „C” in 2013: - 13 road projects, - 21 railway projects - 2 projects for the transport reconstrucion of the Buda Castle District Irregularity procedures: 2 procedures are in progress, in case of 2 procedures no irregularity has occured.

Thank you for your attention. TOP Monitoring Committee Meeting