1. Financial Implementation of the Assistance from the Structural Funds and the Cohesion Fund of the EU Sylvia Indjova Head of Certifying Authority Director of National Fund Directorate Ministry of Finance Operational Programme “Technical Assistance” European Regional Development Fund NSRF MONITORING COMMITTEE THIRD MEETING 28 NOVEMBER 2008

2. CONTENT  Role of the National Fund in the management of Structural and Cohesion Funds of the EU (SCF):  Role and responsibilities  Administrative capacity  Management and control system of the NF  Certification of expenditure and funds received from the EC  Cashflow and payments  Financial Implementation – general information  Financial Implementation by OPs  Irregularities  Forecasts and Reporting to the EC

3. ROLE OF THE NFD IN THE MANAGEMENT OF STRUCTURAL AND COHESION FUNDS  Single Certifying Authority (CA) for all Operational programmes under the Structural and Cohesion Funds  Certifying Authority for:  Schengen Facility  European Economic Area Financial Mechanism  IPA Cross-Border Programs on EU external borders (Turkey, Serbia, FYROM)  Intermediate body of the Certifying Authority for the OP Fisheries Sector Development;  Body responsible for receiving funds under SCF from the EC and transferring them to the MAs/IBs

4. KEY RESPONSIBILITIES  Certification of expenditure to the European Commission  Requesting and receiving funds from EU and the state budget  Transferring the funds for project implementation

5. ADMINISTRATIVE CAPACITY  The Certifying Authority has a clear structure, regulated with an approved functional characteristic, based on division of responsibilities  CA has one of the lowest rates of staff turnover in the sector while leading a determined policy of keeping the experience and expertise gained during the pre-accessional period  The number of personnel of the directorate has been increased to 75 persons, with a Council of Ministers’ Decree № 152 dated 02.07.2008. Some of the recruitment competitions have concluded successfully, while others are still running  Staff recruitment is based on detailed staff-needs analysis  A high level of staff competence is being kept as the staff training is based on training needs analysis  The CA is a Beneficiary on projects under OP “Technical Assistance” in order to support the implementation of its functions, provision of consultations, documents preparation, staff training, etc.

6. ESTABLISHED FINANCIAL MANAGEMENT AND CONTROL SYSTEM OF THE NATIONAL FUND  The procedures applied are based on risk management and COSO principles  Use of a clear, detailed procedures manual incl. a procedure for its modification  Use of detailed checklists with several levels of control, four-eyes principle  Applying a double signature system of the bank accounts  Single SAP - based accounting system has been used for a long time as a basis for certification of expenditure to the Commission  The IT systems are secure with a well regulated access

7. CERTIFICATION OF EXPENDITURE  Until now the Certifying Authority has not certified any expenditure to the EC, because a prerequisite for certification is the presence of a positive audit opinion on the compliance of the systems with the requirements of art. 58-62 of Regulation 1083/2006, which must be accepted by the European Commission.

8. AND FUNDS RECEIVED FROM THE EC  Until now only pre-financing payments have been received from the EC amounting to 367 926 955 euro under all Operational Programmes financed under EU Structural Funds (ERDF and ESF) and Cohesion Fund

9. PRE-FINANCING PAYMENTS RECEIVED FROM THE EC Fund I Advance (2007) II Advance (2008) Funds received by OP (euro) Funds received (euro) % % European regional Development Fund 160 256 611 1. OP Competitiveness of the Bulgarian Economy 19 757 6642% 29 636 4973% 49 394 161 2. OP Regional development 27 221 6712% 40 832 5063% 68 054 177 3. OP Technical Assistance 965 9302% 1 448 8953% 2 414 826 4. OP Transport 7 376 1952% 11 064 2923% 18 440 487 5. OP Environment 8 781 1842% 13 171 7763% 21 952 960 European Social Fund 59 272 993 1. OP Human resources Development 20 635 7832% 30 953 6743% 51 589 457 2. OP Administrative capacity 3 073 4142% 4 610 1223% 7 683 536 Cohesion fund 148 397 351 1. OP Environment 25 684 1572,5% 41 094 6514% 66 778 808 2. OP Transport 31 391 7472,5% 50 226 7964% 81 618 543 Total received 367 926 955

10. ORGANISATION OF PAYMENTS  The funds are kept at the Bulgarian National Bank (BNB) and the payment process is effected through the single account system of BNB.  The System for Electronic Budgetary Payments (SEBRA) is used for monitoring the cashflow and managing the limits for payment.  The actual payments are effected through the automated system for electronic banking of BNB.

11. PAYMENT PROCESS SCF Flow of funds Account Ten digit code in SEBRA + account MA OP SCF EURO NF EC SCF BGN NF SCF BGN transit NF SCF co-fin BGN transit NF SCF BGN NF (limits) 100 % Account ЕС % Co-fin % Beneficiary Limit without approval of payments Limit without approval of payments Co- financing BGN NF Limit with approval of payments Account MA OP Account Beneficiary Limit without approval of payments MA OP Limit with approval of payments Beneficiary

12. ORGANISATION OF THE PAYMENT PROCESS Main principles:  Sufficiency and effectiveness of controls (limits for payment, double signature)  Minimizing the number of transactions  Optimizing the reporting between the parties involved in compliance with the current legal framework

13. GENERAL FINANCIAL IMPLEMENTATION OP / Fund Budget - EC Budget – nat. cofin. Received from EC Paid as per 14 Nov 2008* ЕС Nat. cofin. Total mil. euro OP “Transport” / ERDF and CF1 624,5379,0100,10,60,10,7 OP “Environment” / ERDF and CF1 466,4334,388,7000 OP “Regional Development” / ERDF1 361,1240,268,10,80,10,9 OP “Competitiveness” / ERDF987,9174,349,4000 OP “Technical Assistance” / ERDF48,38,52,40,60,10,7 OP “Human resources” / ESF1 031,8182,151,63,20,63,8 OP “Administrative capacity” / ESF153,727,17,78,71,510,3 TOTAL6 673,61 345,6367,913,92,416,3 *With EC and national budget sources through NF

14. OP “TRANSPORT”  Budget – 2 003.5 mil. euro, of which  Community assistance – 1 624.5 mil. euro (CF and ERDF)  National co-financing – 379 mil. euro  Approved 2 Requests for funds from MA to NF for  598 825 euro as advance payments  60 946 euro as final payments  Total – 659 771 euro  Paid by MA:  560 805 euro (ERDF)  98 966 euro national co-financing  Total – 659 771 euro

15. OP “ENVIRONMENT”  Budget – 1 800.7 mil. euro, of which  Community assistance – 1 466.4 mil. euro (CF and ERDF)  National co-financing – 334.3 mil. euro  Approved 1 Request for funds from MA to NF for  74 365 euro as advance payments  4 166 евро as final payments  Total – 78 531 euro  As per 14.11.2008 no payments have been effected by the MA under the programme

16. OP “REGIONAL DEVELOPMENT”  Budget – 1 601.3 mil. euro, of which  Community assistance – 1 361.1 mil. euro (ERDF)  National co-financing – 240.2 mil. euro  Approved 2 Requests for funds from MA to NF for 896 826 euro as advance payments  Paid by MA :  762 302 euro (ERDF)  134 524 euro national co-financing  Total – 896 826 euro

17. OP “COMPETETIVENESS”  Budget – 1 162.2 mil. euro, of which  Community assistance – 987.9 mil. euro (ERDF)  National co-financing – 174.3 mil. Euro  As per 14.11.2008 no requests for funds have been received from the MA under the programme in the NF  As per 14.11.2008 no payments have been effected under the programme by MA

18. OP “TECHNICAL ASSISTANCE”  Budget – 56.8 mil. euro, of which  Community assistance – 48.3 mil. euro (ERDF)  National co-financing – 8.5 mil. euro  Approved 3 Requests for funds from MA to NF for  1 916 771 euro as advance payments  222 102 euro as interim payments  29 532 euro as final payments  Total – 2 168 405 euro  Paid by MA:  593 355 euro (ERDF)  104 710 euro national co-financing  Total – 698 065 euro

19. OP “HUMAN RESOURCES DEVELOPMENT”  Budget – 1 213.9 mil. euro, of which  Community assistance – 1 031.8 mil. euro (ESF)  National co-financing – 182.1 mil. euro  Approved 4 Requests for funds from MA to NF for  5 865 959 euro as advance payments  43 991 euro as interim payments  Total – 5 909 950 euro  Paid by MA:  3 200 380 euro (ESF)  564 773 euro national co-financing  Total – 3 765 153 euro

20. OP “ADMINISTRATIVE CAPACITY”  Budget – 180.8 mil. euro, of which  Community assistance – 153.7 mil. euro (ESF)  National co-financing – 27.1 mil. euro  Approved 9 Requests for funds from MA to NF for  7 188 629 euro as advance payments  4 288 420 евро as interim payments  Total – 11 477 049 euro  Paid by MA:  8 747 784 euro (ESF)  1 543 727 euro national co-financing  Total – 10 291 511 euro

21. IRREGULARITIES  The Certifying Authority reports regularly to OLAF, AFCOS and the EC on the cases of irregularities which have been subject to administrative or judiciary follow-up, or lack of irregularities, as per the requirements of Section 4 of regulation 1828/2006.  Based on the information received from the MAs for the last quarter of 2007 and for the first two quarters of 2008, the Certifying Authority has informed OLAF, AFCOS and the EC that no irregularities have been detected for the said period for all OPs. The information for the third quarter of 2008 was received in October – November and is being processed as per the relevant procedures and deadlines.

22. REPORTING FORECASTS AND REPORTING TO THE EC  In compliance with art. 76, p.3 of regulation 1083/2006, the Certifying Authority has prepared and transmitted to the Central co- ordination unit of the SCF (MEUF Directorate, MF) for transmission to the EC a forecast for the expected payment applications for the current and following financial year for all OPs.  In compliance with art. 20 of Regulation 1828/2006, the Certifying Authority has sent to the EC Annual statements on withdrawn and recovered amounts and pending recoveries for all OPs.

23. THANK YOU FOR YOUR ATTENTION! FINANCIAL IMPLEMENTATION OF THE ASSISTANCE FROM THE STRUCTURAL FUNDS AND THE COHESION FUND OF THE EU