SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit of the Cohesion Fund Lena Andersson Pench DG Regional Policy Unit I3: Control and audit of Cohesion Fund and ISPA, relations with national control bodies

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Topics  Audit approach  Execution on the spot  Follow-up  Typical problems identified in Cohesion Fund project audits  Useful websites

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit approach  Audit strategy  Legal base  Separate enquires for system- and project audits  EU 4 and EU 10  Representative - risk based

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit approche- CF  Large (>€10m) infrastructure projects in the environment and transport sectors  Higher co-financing rate (85%)  Audit trail simpler (one final beneficiary)  Smaller number high value transactions  Examine all main contracts; works, services and supply  Public Procurement therefore of greater importance – Community Directives  MS required to audit 15% of total eligible expenditure

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit approach  Proportionate concentration of audits between MS and regions taking into account estimated level of funding  Balance between types and sizes of projects in both sectors  Different bodies in charge of management and implementation of projects should be covered  Risk based: follow up of audits –link to system audits

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution on the spot  DG REGIO Audit staff  Contracted external staff  Typical mission last one week with two auditors  Member State notified six weeks in advance, no surprises  Audit methodology  Eligibility of expenditure  Audit trail  Public Procurement  Publicity and Information measures

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution on the spot Day 1:  Opening meeting: present objectives of the audit mission, start visiting key agencies Day 2-4:  Visit of key agencies, implementing agency  Interview key personnel  Possible on-the-spot visit of the project Day 5  Closing meeting: preliminary audit findings

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution: Expenditure Commission project decision and Commission Regulation (EC) No 16/03 laying down rules on eligibility of expenditure  Use the claims submitted to the Commission as the basis for checking the audit trail  Reconcile the last interim payment request with the supporting accounting records  Check (substantive testing) – Eligibility of expenditure (e.g.: eligibility period, category of expenditure) –Invoice, certification, bank transfer

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution:Audit trail  A sufficient audit trail : (a) reconciliation of the summary amounts certified to the Commission with the individual expenditure records and supporting documents held at the various administrative levels and by implementing bodies; (b) verification of the allocation and transfer of the available Community and national funds; (c) verification of the correctness of the information supplied on the execution of the project in accordance with the terms of the granting decision and the objectives assigned to the project.

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit trail (CF) project

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution: Public procurement  Why ?  Essential part of internal market; transparency, equal treatment, non-discrimination  Audit of correct p.p.p. forms an integrated part of all type of audit enquiries for ERDF and CF  High risk area based, previous audit findings, separate enquiry under way in EU 10

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution: Public procurement  Common rules of advertising: pre-notice and notice publication in O.J., length of tender period, award notice to be published. Delays depend on the chosen procedure.  Common rules of participation: criteria for selection of offers, rejection of abnormally low tenders.  Common rules of award of contracts: award of contracts: lowest price only or the most economically advantageous offer taking into account price and quality. Additional works due to unforeseen circumstances should not exceed 50% of the amount of the main contract.

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Execution-public procurement  What criteria are used in award of contracts ?  Review bases for awarding points to tendered ?  Is the most economically advantageous tender chosen for each lot?  Are the procedures written down in a manual of procedures?  Is the procurement notice published in advance in the OJ ?  Is the co-financing noted in the public contract notices?

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Follow up  Report sent within three months to MS  Reply by MS within two months  Evaluation of reply -final opinion by the Commission within two months which may include proposals of financial corrections; individual, flat rate or extrapolated

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Follow up  Either the Member State agrees with observations and file can be closed after making the corresponding financial correction  Or the Member State does not agree in which case a bilateral hearing will be organised between the two parties in order to find a common position

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit findings: Public procurement  No publication in the OJEU of the tender notice  Award of contract without tender procedure  Contracts concluded by direct award  Illegal criteria used in award of contract  Geographical bias

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit findings: Public procurement  Lack of tender documentation  Automatic exclusion of ‘abnormally low tenders’ without asking for justification  Use of a mathematical formula in the award of contracts which favours bids close to the average of all bids received and which effectively excludes cheaper bids from the award process  The price element is not used in the evaluation of tenders  Error in the tender evaluation procedure (eg. calculation error)  Doubtful justification for awarding "additional works" to the same contractor in case of unforeseen circumstances

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit findings: ineligible expenditure  Expenditure incurred before the initial eligibility date  Expenditure incurred after the final date for eligibility  Purchase of land already in public ownership  Car parks  Categories of expenditure not specifically covered by the Commission Decision

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Audit findings -publicity measures  No standard model of a billboard  Billboard not in compliance with Commission Regulation 621/94  No mention of the CF co-financing in the brochures, press releases  European emblem not included in the brochures

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Useful websites y/ ex_en.htm et htm

SEMINAR on the EEA Financial Mechanism THE EUROPEAN COMMISSION DIRECTORATE- GENERAL REGIONAL POLICY Brussels 13 June 2005 Conclusions  Lessons learned from audits of Cohesion Fund projects  Link to EEA Financial Mechanism-risk of overlapping? Thank you for your attention!