1. Financial Management and Auditing First Level Controls 3 rd round operations Rostock, 03.02.2005 Elise Oukka

2. Confirmation by an independent auditor External or internal! AUDIT GUIDELINES! Qualified, meaning familiarised with accounting and ERDF rules, especially the rules concerning eligible expenditure Independent from the operation‘s activities and finances (independent organisational unit) Certification of expenditure

3. Recorded verifications of individual operations on the spot (including a complete breakdown of expenditure and invoices) The records state: - the work done - the results of the verification - the measures taken in respect of discrepancies (e.g. expenses not eligible, expenses not covered and/or not documented, etc.) When not checking 100% of the expenditure, but performed on a sample, the used sampling method must be clearly described and documented Internal audit report Procedure

4. 2. The general eligibility rules have been observed, including, but not limited to rules governing the eligibility of expenditure, in particular COM 1685/2000, amended by COM 448/2004, rules described in Approval Letter and Subsidy Contract (including Annexes), rules concerning co-financing activities from the ERDF, rules on state aid, etc. 1. For this report the total paid and certified expenditure amounts to €____. Confirmation by an independant auditor

5. - Is the expenditure reported under “Investments“ mentioned in the approved application? - Is the expenditure reported under “Other“ mentioned in the approved application? - Have invoices been paid out during the current reporting period and are the payments documented? - Is the expenditure reported under “External expertise“ mentioned in the approved application? What to be done:

6. - The operation must choose one of the options (a), (b), (c) or (d) and use that for the entire operation period - Products purchased must be physically available - Exchange rate based on: a)daily calculation (the date of paying the invoice) b)average rate (e.g. monthly rate set by the Commission) of the month the invoice was paid c)fixed dates (30.06./31.12.) d)average monthly exchange rate of the last month of reporting period, as set by the Commission - Is the delivery clearly documented? Confirmation by an independent auditor

7. 3. Receipts and payments are accurately recorded in the operation’s accounting system, assets are correctly recorded and amounts are correctly reflected in demands for payment. The necessary audit trail exists for all activities, providing evidence in the form of contracts, invoices and payment records. In case of staff costs, direct costs, overheads and in-kind contributions, the necessary evidence exists in a form of timesheets, listings of costs or formula descriptions and cost calculations (COM 438/2001, amended by COM No 2355/2002). What to be done: - See (EC) 438/2001 - To check the set up and maintenance of an adequate and reliable accounting system and audit trail for the operation Confirmation by an independent auditor

8. 4. Services, supplies and works have been procured on the basis of proper call for tenders, sound controls have been exerted over the opening of the tenders and all tenders have been fully evaluated before the final decision has been made on service provider, supplier or works contractor. What to be done: - Check the documentation, EU & national regulations Confirmation by an independent auditor

9. - Is there any expenditure reported that incurred before the approval of the operation by the Steering Committee (with the exception of preparation costs)? - Are products and services delivered necessary for the implementation of the approved actions? - Crosscheck reported expenditure vs. operation activities. What to be done: - Is the delivery clearly documented? - Are products/goods purchased physically available? Confirmation by an independent auditor 5. Progress made has been fully and fairly reflected in the report. On the spot there is evidence that the reported activities have taken place, delivery of services and goods, and works are in progress or have been completed.

10. 6. The partners have complied with Community rules on publicity, information, equal opportunities, protection of environment and any other Community policy. 7.All inputs for progress report received from partners were certified by an independent auditor. 8. The operation's activities have started and are implemented in accordance with the stipulations of § 5 (1) of the Subsidy Contract. What to be done: - What is the date when the first operation costs incurred? Confirmation by an independent auditor

11. FIRST LEVEL CONTROLS Country specific requirements

12. Centralised 1 st level controls New Member States: Latvia, Lithunia, Poland, Slovakia, Slovenia, Czech Republic, Hungary, Malta, Cyprus Estonia: for the operations starting as of January 2005 obligatory, for the others a possibility Old Member States: Greece, Italy, Portugal Implications for the operations: potential delays with the reports!

13. Country specific requirements The most updated information, please check the Programme web site; „Country specific information“ Other specific requirements Austria: Austrian project partners have to indicate the name and function of the independent auditor using the specific form & send it for approval to the Austrian Federal Chancellery.