1. CONTROL & AUDIT REQUIREMENTS
What project promoters cannot ignore about INTERREG IVB NWE project management

2. Table of contents Audit Requirements First level control – the basics
Who will/can be your first level controller?
The Audit Trail
Control of the Payment Claim – what and when?
Other controls
Public procurement – the basics
Two important things to know:
FLC has been delegated to MS (csq: systems vary from one partner to another)
FLControllers must be approved before any payment can be made to projects

3. Who will/can be your controller?
Audit Requirements
The Basics
Who will/can be your controller?
Two possible systems: centralised or decentralised
Differences:
Who proposes the controller
Who bears the costs
Time pressure
Responsibility to inform about the project and Programme; EU rules
Who proposed the controller: centralised CH-WALL-IE-LUX
Who bares the costs: LUX-CH-WALL = free of charge for the partner

4. Audit Requirements Approval of project at PSC
The involved MS control bodies contact the relevant partners and inform them of their FLC procedure (name and contact details of controller, timeframe and deadlines, necessary documents, etc.).
Partners from MS with a decentralised First Level Control system
The involved MS approbation bodies contact the relevant partners and inform them of their FLC procedure (shortlist of approved controllers, timeframe and deadlines).
The partners send the information back to the MS approbation body
The MS assesses the provided information and checks if all criteria are fulfilled.
The partner’s controller qualifications are satisfying
The partner’s controller qualifications are not satisfying
The MS approbation body sends a certificate that confirms the controller to the partner (JTS in copy)
The involved MS approbation bodies contact the relevant partners and inform them of their FLC procedure (form to be filled in and signed by partner and controller, timeframe and deadlines)
The partners send the information back to their MS approbation body
The JTS informs the involved MS control bodies of the partners’ contact details
The JTS informs the involved MS approbation bodies of the partners’ contact details
The Basics
Partners from MS with a centralised First Level Control system
Who proposed the controller: centralised CH-WALL-IE-LUX
Who bares the costs: LUX-CH-WALL = free of charge for the partner

5. Who will/can be your controller?
Audit Requirements
The Basics
Who will/can be your controller?
Member State
Who’s doing the centralised control?
Who’s doing the decentralised control?
Who’s approving controller in decentralised system?
Ireland
Southern & Eastern Regional Assembly
Luxembourg
Ministère des Finances, direction du Contrôle financier
Belgium – Wallonia
Ministère de la Région Wallonne, DRI, Service comptabilité
Switzerland
Staatssekretariat für Wirtschaft SECO
Compulsory For the programming period

6. Who will/can be your controller?
Audit Requirements
The Basics
Who will/can be your controller?
Member State
Who’s doing the control in a centralised system?
Who’s doing the control in a decentralised system?
Who’s approving controller in decentralised system?
Netherlands
Internal or external; public or private
Exceptions
VROM
Belgium – Flanders
Agency for Economy – Division Europe
Belgium – Brussels Region
Ministry of the Brussels Capital Region, Secrétariat Général
Compulsory For the programming period
The Netherlands: exception = In case the beneficiary is a non-public organisation with a ERDF budget of more than € ,- the final payment claim needs to be certified by an external certified controller.

7. Who will/can be your controller?
Audit Requirements
The Basics
Who will/can be your controller?
Member State
Who’s doing the control in a centralised system?
Who’s doing the control in a decentralised system?
Who’s approving controller in decentralised system?
France
Internal or external; Public or private (public procurement)
Région Nord-Pas-de-Calais, Direction Europe
Germany
Internal or external; Public or private responding to MS regulation
Ministry of Finance
Baden-Wuerttemberg
(UBS) UK
To be chosen on a shortlist provided by Communities and Local Government
Communities and
Local Government -
European Policy and
Programmes Division
Compulsory For the programming period
France: Should a private external controller be selected, the project partner will have to abide by the public procurement rules. In that case, the Région Nord Pas de Calais will propose a terms of reference model to the project partners to facilitate the tender procedure.

8. Who will/can be your controller?
Audit Requirements
The Basics
Who will/can be your controller?
The main requirement is independency from project management, finance and activities.
Other requirements are set by MS:
Background
Experience
Language skills
Knowledge in Structural funds regulations
(…)
These requirements are listed per Member State in the Project Handbook (guidance note n°19)
Compulsory For the programming period

9. Who will/can be your controller?
Audit Requirements
The Basics
Who will/can be your controller?
For the decentralised systems, the approval of the controller will in most cases be made using a form to be filled in by the partners and the controller.
Professional skills and experiences in audit and EU funded projects
Sufficiency of the controller’s knowledge in the English language
Independence of the controller:
If external: what is the basis for the work (contract); is the controller registered; is the controller obliged to a professional code of conduct or other rules?
If internal: is their independence regulated by law or other rules; to which person does he answer? Independence of mind,…
Knowledge of Programme documents, audit trail, timeframe.
Compulsory For the programming period

10. Poll: first level control
Audit Requirements
The Basics
Poll: first level control
Who has already declared their first level controllers?
Who has received an answer from the approbation bodies?
Was any proposal rejected?
Compulsory For the programming period

11. The Audit trail Audit Requirements
The Basics
The Audit trail
What? All accounting documents related to the Project.
Approved Application Form, Subsidy Contract, Partnership Agreement
Relevant project correspondence (financial and contractual)
Progress Reports, Payment Claims, Partners controllers’ confirmations (and checklists/control reports)
Bank account statements proving the reception and the transfer of ERDF
Invoices of all expenditure declared in the Payment claims
Bank account statements / proof of payment for each invoice
Method used by all partners outside the EURO-zone for converting national currency into EUR
Staff costs: information on actual annual working hours, labour contracts, payroll documents and time records of personnel working for the project

12. The Audit trail Audit Requirements What?
The Basics
The Audit trail
What?
List of subcontracts and copies of all contracts with external experts and/or service providers
Calculation of administrative costs, proof and records of costs included in overheads
Documents relating to public procurement, information and publicity
Public procurement notes, terms of reference, offers/quotes, evaluation, order forms, contracts
Proof of delivery of services and goods: studies, brochures, newsletters, minutes of meetings, translated letters, participant lists, travel tickets, etc.),
Record of assets, physical availability of equipment purchased in the context of the project.

13. The Audit trail Audit Requirements
The Basics
The Audit trail
In what form? Original documents (at partner level), but also photocopies (at Lead Partner level), microfiches or electronic versions of original documents.
Where? The Lead Partner is responsible for storing all relevant documentation for all partners and all sub-partners. They must be filed separately, even if this leads to a dual treatment of accounts.
Importance of Partnership Agreement !
How long? It is essential that all documents and accounting records be kept available for a period of three years following the closure of the Programme, that is 31st December Projects that cannot provide sufficient documentation risk losing their ERDF grant.

14. Control of the Payment claim
Audit Requirements
The Basics
Control of the Payment claim
What?
One sheet per partner + Summary + Investment sheet
One controller declaration per partner
On the summary sheet, LP controller signs for the whole claim, on the basis of all received declarations
When to control? Example:
Closure of accounts at partner level: end July
Documents to the project controller: end August
Documents to the LP (controller): end September
Documents to the JTS: end October
-> Maximum for the whole process : 3 months (Article 16 of 1080/2006)

15. Other controls – JTS Site visits
Audit Requirements
The Basics
Other controls – JTS Site visits
Fulfils the Managing Authority obligation to verify the operations on-the-spot (Article 13 of Regulation (EC) 1828/2006).
What ? to learn from the project
to verify the management system (incl audit trail)
to see deliverables
When ? once during the project lifetime
Who? Visited: Lead Partner + other partners
Visitors: JTS staff (Project Dvpt + Finance + Com)
National Auditor and National Authority
Outcome: Site visit report
Site visits: the JTS will visit every project during its lifetime. The project manager and finance manager need to be present. Ideally, so would the controller of the Lead Partner.

16. Other controls – Second level controls
Audit Requirements
The Basics
Other controls – Second level controls
What? Audits organised at Programme level by the Member States under direction of the Audit Authority.
Who will audit? The audits will be performed by an external audit firm, under supervision of the Audit Authority and the national auditors.
Who will be audited? A sample will be defined each year. The sample will be based on partners’ claimed expenditure on a yearly basis. The sample will represent 10-15% of the total expenditure claimed at Programme level. The Lead partners of the partners selected will be audited as well.
-> the chances for a project to be controled is higher than under IIIB!
Second level control:
The audit authority is the French “Commission Interministérielle de Coordination des Contrôles des actions cofinancées par
les Fonds Structurels”.
the probability for a project to be involved in such controls highly increases compared to the previous period:
1/ the percentage that will be checked over the period increases (from 5% to 10-15%)
2/ the selection will be made at partner level, not at project level. The Lead Partner of each selected partner will be audited as well.

17. Other controls – Second level controls
Audit Requirements
The Basics
Other controls – Second level controls
When?
January (each year)
Sample is defined
January - February
Partners selected are informed
February – April
Controls take place
May – June
Contradictory phase

18. Other controls – Third level controls
Audit Requirements
The Basics
Other controls – Third level controls
Certifying Authority’s quality controls
The Certifying Authority will perform audits, normally once a year, on a different Member State each time.
Commission and Member States checks
The Commission, in cooperation with the Member States, can perform on-the-spot checks on projects co-financed by the ERDF, with a minimum of one day’s notice.
IIIB Experience: one Commission audit during the Programme lifetime, with two phases.
The National Authorities can also perform on-the-spot checks at partner level on demand of either the JTS/MA or on its own initiative
Commission checks: on the basis of the IIIB experience, one Commission audit during the Programme lifetime with 2 phases:
1/ one phase at the JTS premises (control of the Programme management and control systems)
2/ second phase: on-the-spot checks by 7 selected projects in 6 Member States (3 partners per project)

19. Most frequent control errors under IIIB
Audit Requirements
The Basics
Most frequent control errors under IIIB
Public procurement !
Claiming of costs not attributable to project
Double financing
Overheads miscalculations
No invoices/supporting documents
Claiming of recoverable VAT and other recoverable charges
Publicity
Revenues not declared
List based on the findings of the IIIB second level control audit reports.
Claiming of costs not attributable to project: costs linked to activities that are not approved in the AF
Double financing: either the project receives other EU funds (Programme Framework,…) or submits the invoice twice
Overheads miscalculations: flat rates
No invoices: either not official (hand written, without any logo, date, description) or not kept
Claiming of recoverable VAT and other recoverable charges: i.e. Dutch VAT or national government schemes like tax deduction for hiring unemployed.
Public procurement: not respecting national rules
Publicity: i.e. taking the NWE and EU logo off once the investment works are finished; claiming costs for printing a book that doesn’t carry the NEW and EU logo.
Revenues: i.e. a seminar where an entrance fee is asked but not deduced from the total seminar costs.

20. Public Procurement Audit Requirements Procurement rules are COMPLEX!
The Basics
Public Procurement
Procurement rules are COMPLEX!
If you have DOUBTS about the application of procurement rules, get in touch with a LEGAL ADVISOR.
List based on the findings of the IIIB second level control audit reports.
Claiming of costs not attributable to project: costs linked to activities that are not approved in the AF
Double financing: either the project receives other EU funds (Programme Framework,…) or submits the invoice twice
Overheads miscalculations: flat rates
No invoices: either not official (hand written, without any logo, date, description) or not kept
Claiming of recoverable VAT and other recoverable charges: i.e. Dutch VAT or national government schemes like tax deduction for hiring unemployed.
Public procurement: not respecting national rules
Publicity: i.e. taking the NWE and EU logo off once the investment works are finished; claiming costs for printing a book that doesn’t carry the NEW and EU logo.
Revenues: i.e. a seminar where an entrance fee is asked but not deduced from the total seminar costs.

21. Public Procurement: lessons learnt
Audit Requirements
The Basics
Public Procurement: lessons learnt
One of the main findings in the IIIB period was lack of compliance with public procurement (lack of evidence, not respecting procedure, no evaluation grids…).
During DG Regio audit, 53% of the findings were related to breech of public procurement rules.
The Commission applies a flat rate correction to any breech – up to 100% of the total cost of the contract.
List based on the findings of the IIIB second level control audit reports.
Claiming of costs not attributable to project: costs linked to activities that are not approved in the AF
Double financing: either the project receives other EU funds (Programme Framework,…) or submits the invoice twice
Overheads miscalculations: flat rates
No invoices: either not official (hand written, without any logo, date, description) or not kept
Claiming of recoverable VAT and other recoverable charges: i.e. Dutch VAT or national government schemes like tax deduction for hiring unemployed.
Public procurement: not respecting national rules
Publicity: i.e. taking the NWE and EU logo off once the investment works are finished; claiming costs for printing a book that doesn’t carry the NEW and EU logo.
Revenues: i.e. a seminar where an entrance fee is asked but not deduced from the total seminar costs.

22. Public Procurement: IVB basics
Audit Requirements
The Basics
Public Procurement: IVB basics
National Rules apply from the first euro – rules vary significantly from one Member State to another
European threshold applies for ALL tenders above €193,000 (€125,000 in some cases) and €4,845,000 for public works
Lead Partner is responsible for ensuring that public procurement is respected by the entire partnership
All documents must be retained (publication of tender, evaluation grid)
Selection procedure must be retained
The procedure cannot be changed in mid-course
List based on the findings of the IIIB second level control audit reports.
Claiming of costs not attributable to project: costs linked to activities that are not approved in the AF
Double financing: either the project receives other EU funds (Programme Framework,…) or submits the invoice twice
Overheads miscalculations: flat rates
No invoices: either not official (hand written, without any logo, date, description) or not kept
Claiming of recoverable VAT and other recoverable charges: i.e. Dutch VAT or national government schemes like tax deduction for hiring unemployed.
Public procurement: not respecting national rules
Publicity: i.e. taking the NWE and EU logo off once the investment works are finished; claiming costs for printing a book that doesn’t carry the NEW and EU logo.
Revenues: i.e. a seminar where an entrance fee is asked but not deduced from the total seminar costs.

23. Public Procurement: EU rules
Audit Requirements
The Basics
Public Procurement: EU rules
EU Directives apply to contracts to the following types of contracts:
Works
Services
Supply Contracts
All relevant EU and national regulations are listed in Guidance note 15
Keep the threshold in mind when granting an extension!
List based on the findings of the IIIB second level control audit reports.
Claiming of costs not attributable to project: costs linked to activities that are not approved in the AF
Double financing: either the project receives other EU funds (Programme Framework,…) or submits the invoice twice
Overheads miscalculations: flat rates
No invoices: either not official (hand written, without any logo, date, description) or not kept
Claiming of recoverable VAT and other recoverable charges: i.e. Dutch VAT or national government schemes like tax deduction for hiring unemployed.
Public procurement: not respecting national rules
Publicity: i.e. taking the NWE and EU logo off once the investment works are finished; claiming costs for printing a book that doesn’t carry the NEW and EU logo.
Revenues: i.e. a seminar where an entrance fee is asked but not deduced from the total seminar costs.

24. THANK YOU FOR YOUR ATTENTION
Public procurement
The Basics
THANK YOU FOR YOUR ATTENTION