1 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Coordination between the Commission and the Audit Authorities of the Member States ( Application of Article 73 of Council Regulation (EC) No 1083/2006) Jean-Pierre Jochum President of the CICC Audit Authority FRANCE Jean-Pierre Jochum President of the CICC Audit Authority FRANCE

2 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Introduction  Coordination over the period  Provisions for  A few ideas to follow up Conclusion

3 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 INTRODUCTION The aim of this presentation is to provide an overview of coordination efforts over the period And, within the new regulatory framework, to look at what should be retained and how the ‘‘single audit’’ could work

4 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October COORDINATION OVER THE PERIOD A. Rules 1. COORDINATION OVER THE PERIOD A. Rules

5 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October Member States had to: - inform the Commission about the organisation of the authorities and the management systems in place; - carry out system audits and audits of operations; - submit an annual control report to the Commission; - issue a closure declaration through an independent body when each assistance was wound up.

6 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The Commission and the Member States had to: - coordinate audit plans, methodology and implementation on the basis of bilateral arrangements; - hold an annual bilateral meeting at least once a year, to examine and assess: the results of audits; any observations made by other control bodies; the financial impact of irregularities detected and the measures already taken or which would be taken to correct them.

7 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Po 1. COORDINATION OVER THE PERIOD 1. COORDINATION OVER THE PERIOD B. The contract of confidence

8 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The Member States undertook to: - establish an audit strategy; - submit system audit reports to the Commission and the Court of Auditors; - submit the Article 13 annual control report, drawn up according to a standard model. This report had to be signed or countersigned by the winding-up body; the Commission had to provide its observations on the report by the first bilateral meeting after receipt of the report, at the latest.

9 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Before the contract of confidence was concluded, the Commission had to: have received sufficient guarantees concerning the compliance of systems; have approved the audit strategy. The Commission undertook to restrict its audit activity to establishing that the audit strategy had been implemented effectively, and that the annual reports and winding-up statement were reliable. To ensure that the strategy was implemented effectively and that Article 13 reports were reliable, the Commission could carry out audit activities, in particular: - assessing the work of national audit and control bodies and the winding-up body; - participating in the audit activities of national audit and winding-up bodies.

10 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Beyond those activities mentioned, the Commission said it did not itself intend to carry out audits and controls but it could ask a Member State to carry out an audit on one or more specific operations and, in the event of indications suggesting that serious irregularities or failings had not been detected or had not been subject to adequate corrective measures, it could carry out any audit activity that it deemed necessary to ensure that the conditions of the contract of confidence were still satisfied. With regard to closure, the Commission did not intend to carry out detailed checks of the declaration submitted in relation to matters covered by the Article 13 reports.

11 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The contract was thus based on the Commission’s confidence in the national audit activities. It took matters in hand: - where audit activities did not conform to the audit strategy it had approved; - where annual control reports were not reliable; - where audit activities were not effective, i.e., when they failed to detect serious irregularities or failings. However, the national authorities also had to prove that they were capable of taking corrective measures, which falls outside the competence of the auditor.

12 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October COORDINATION OVER THE PERIOD C. Best practices France has not signed the contract of confidence: it has therefore not benefited from the reduction in the Commission’s audit activities. However, the winding-up body has established an audit strategy, written its Article 13 reports in accordance with the model and submitted its system audit reports. Furthermore, together with the Commission, it has implemented practices which have facilitated the work of both parties. However, the winding-up body has established an audit strategy, written its Article 13 reports in accordance with the model and submitted its system audit reports. Furthermore, together with the Commission, it has implemented practices which have facilitated the work of both parties.

13 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Genuine review of the audit plans, leading to the workload of the different programmes being shared or joint audits being carried out (possibly sharing the fieldwork) Follow-up of the audits carried out by the other party This could only be based on an agreement on observations and recommendations (sometimes after intense discussions); this mutual understanding has been facilitated by joint audits This agreement also enables to identify the points which will need to be checked again during closure Regular dialogue on the assurance obtained following audits (when the Commission receives system audit reports from the CICC and at annual bilateral meetings)

14 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October PROVISIONS FOR A. The general framework

15 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The audit authority or an independent body (no longer the Member State) must assess system descriptions and issue a compliance assessment. The audit authority must establish an audit strategy. It is responsible for carrying out system audits and checking operations under the required conditions. In addition to the control report, which it must draw up in accordance with a standard model, it issues an opinion on the functioning of the systems each year. In addition to the closure declaration, it may issue partial closure declarations. The main requisites of the contract of confidence (audit strategy, model for the annual control report) are now obligations.

16 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The Commission bases its assurance on the following (in accordance with Article 72 of Regulation (EC) No 1083/2006): - system description and compliance assessment documents; - annual control reports and annual opinions; - its own audits; - audits carried out at its request.

17 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October PROVISIONS FOR B. Cooperation between the Commission and the audit authority (Article 73(1))

18 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 It is stated that the aim of cooperation is to "make the best possible use of resources and to avoid unjustified duplication of work". This includes provisions relating to: - coordination of audit plans and methodologies; - bilateral meetings with a broader scope (exchange of views on other issues relating to the improvement of the management and control systems). In addition, immediate exchange of views on the results of system audits, which would require submission of the respective audit reports. Clearly, only the final reports following the contradictory procedure may be submitted by the audit authority. The best practices in place for (consultation on audit plans, exchange of views on the assurance obtained regarding systems) can therefore continue.

19 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October PROVISIONS FOR C. The “single audit” (Article 73(2) to (4)) Provisions based on the annex to the contract of confidence, but with an extra condition added

20 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 In determining its own audit strategy, the Commission may choose to base its assurance: - on the opinions issued by the audit authority, although it may also carry out its own audits; - or to reply principally on the annual opinion on the effective functioning of systems issued by the audit authority.

21 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The Commission may rely principally on the annual opinion where: - the description of the system and the compliance assessment are without reservations, or where reservations have been withdrawn following corrective measures; - the audit strategy is satisfactory; and - reasonable assurance has been obtained that the systems function effectively on the basis of the results of audits by the Commission and the Member State. To reach such a conclusion, audits must have previously been carried out. It is also necessary that the results of these audits allow reasonable assurance to be given regarding the effective functioning of the system. It is therefore not enough that the audit authority’s results and conclusions are reliable.

22 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 If these conditions are met, the Commission may decide that it will only carry out its own on-the-spot audits only: - if there is evidence to suggest shortcomings in the system affecting expenditure declared to the Commission in a given year; - and if the relevant annual opinion was issued without reservations regarding these shortcomings (i.e., if the work of the audit authority did not detect these shortcomings or if the annual opinion did not draw the correct conclusions). It is therefore necessary that the work and conclusions of the audit authority are reliable. "Confidence" must therefore be re-examined every year, since every year there could be discrepancies between the annual opinion and evidence obtained by the Commission suggesting the existence of shortcomings.

23 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 This issue is complex. - The audit authority’s work and conclusions must, obviously, be reliable but this reliability can be challenged every year, which also seems legitimate, if shortcomings affecting certified expenditure have not been detected or highlighted. - On the other hand, in order to grant "confidence", the Commission must have previously obtained reasonable assurance that the system functions effectively. It is therefore not enough that the audit authority’s work and conclusions are reliable. The entire "single audit" provision hinges on the interpretation given to the term "effective" in relation to the functioning of the system.

24 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October WHICH IDEAS TO FOLLOW UP?

25 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Conditions: in addition to the conditions relating to the compliance assessment and the audit strategy, which are clear, - reliability of the work and conclusions of the audit authority; - assurance given on the effective functioning of the system, on the basis of audits carried out previously by the Commission and the audit authority.

26 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 A solution? - the basis: the first annual opinion which is complete, i.e., based both on system audits and on audits of operation carried out at a national level, complemented by Commission audits. This opinion would of course also have to be reliable. - Two possible situations:. Functioning of the system does not raise any reservations, reasonable assurance is obtained by the Commission: no problem.. The annual opinion includes reservations, but sets out the action plans implemented, together with a timetable. Can it be said in this case that the system functions effectively, given that it detected shortcomings and will correct them? A fortiori, it can be said that the system functions if the action plans have been completed when the annual opinion is issued.

27 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 The key to the "single audit" provision lies in the answer to this question: if the answer is "yes", an effective system is one that detects errors and shortcomings and corrects them, in which case Article 73 can be applied in its entirety; if not, it would be difficult to do this. This answer is not straightforward: no doubt every case will have to be examined individually. The annual bilateral co-ordination meeting should be the occasion to reach a decision, after consultation.

28 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 CONCCONCLUSIONLUSION CONCLUSION This is just one idea, but it is one that is "reasonable", given that perfection is not possible and what is expected of a system is that is should be able to detect errors and correct them.

29 Homologues Group Meeting Slovenia, October 2009 Republika SlovenijaEuropean Union Ljubljana, October 2009 Thank you for your attention Tel :