1. AUDIT INTERREG LP Seminar on Financial Management and Auditing: Financial Reporting from auditors perspective Kirsi Toivanen Manager, Audit Turku, Finland 12 th November, 2004

2. 2 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Background Audit of NeLoC-project Project ended in February 2004 CMS (Centre for Maritime Studies) was the Lead Partner (LP) for the project CMS was responsible for drawing up an activity report and a financial report of the whole project to JS In order to do this separate activity reports and financial reports were received from all other partners involved in NeLoC-project

3. 3 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Background When the project started two possible ways of organising the Financial Management System were considered The LP Pool Model where all invoices and all money transactions would have been entered into the bookkeeping of LP Lead Partner / Project partner model where each partner enters their invoices and transactions in their own bookkeeping, draws up own Progress Reports and has own auditor to check the reports

4. 4 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Background The Project Manager and the auditor had several discussions at that time to decide which model would be most appropriate both advantages and disadvantages were considered finally the latter model was chosen the possible difficulties in deducting the VAT in the LP Pool Model some partners insisted on having their own bookkeeping It is important that the auditor of each Project partner will be contacted in the early stage of the project in order to have discussions with him / her all the way through the project.

5. 5 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Methodology How does the auditor proceed? What will be checked? Does the auditor have his/her own checklists? Are own audit reports generated? As CMS had the Lead Partner role in the project the audit of the Financial report could be divided into two sections: the audit of reports of other partners and the audit of costs generated by CMS Separate checklists have not been used but practically almost all the issues in the Guidelines for auditing of BSR INTERREG III B projects have been handled at some stage

6. 6 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Methodology The audit of reports of other partners. The procedures performed included among others to check that all reports have been audited check that the costs from the partner reports have been correctly transferred to the summary files that include the whole project check that budgets have not been exceeded The audit of CMS. The procedures performed included among others to check that costs are eligible and belong to activities reported check that costs have been paid during the reporting period

7. 7 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Methodology check that budget has not been exceeded check that the allocation between work packages is logical check that the allocation between budget lines is logical reconcile the bookkeeping of the project (Excel-file) to the original bookkeeping of Turku University No separate reports have been issued but possible observations have been discussed with the Project Manager

8. 8 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Experiences What were the main problems/questions arising during the audit? What were noticed to be the most common mistakes in the reports? In the beginning of the project main questions were related to the selection of the model as stated above As the model had been selected the questions were related to what is eligible and what is not what is the starting date for the project what to do when budgets include mistakes Some projects have had budget over-runs costs have been deducted by the Lead Partner

9. 9 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Experiences Personnel costs As the persons involved in the project may vary from time to time it is very important to keep proper records of what different persons have done during the period they have been engaged in the project These papers shall be part of the material that auditor receives If the person is not involved in the project full-time the calculation principles behind used percentages of total salary shall be part of the material Invoices Proper explanations shall be written on invoices to clearly show the eligibility

10. 10 © 2004 KPMG Wideri Oy Ab, the Finnish member firm of KPMG International, a Swiss cooperative. All rights reserved Good practices The project manager keeps auditor well informed of the relevant issues Auditor is included in email posting lists Things are considered together Questions are asked both ways Reports are prepared carefully and the calculations are clear Copies of all invoices are attached to the calculations Copies of general ledger are attached

11. 11 Presenters contact details Kirsi Toivanen KPMG Finland +358 (2) 273 2720 kirsi.toivanen@kpmg.fiwww.kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2004 KPMG Wideri Oy Ab, the member firm of KPMG International, a Swiss cooperative. All rights reserved.