1. 1 Polish SAI (NIK) experience in the field of EU funds Piotr Szpakowski Najwyższa Izba Kontroli Prague, 6-8 November 2006

2. 2 Main points of the presentation status of EU funds status of EU funds audit criteria audit criteria preparation of audit/audit work preparation of audit/audit work audited areas - directions of NIK audit activity audited areas - directions of NIK audit activity examples of EU funds audits examples of EU funds audits case study case study

3. 3 Status of EU funds in Poland: EU funds are public funds in accordance with national law (Act on public finance) EU funds are public funds in accordance with national law (Act on public finance) EU funds are transferred to Poland on the basis of international agreements EU funds are transferred to Poland on the basis of international agreements

4. 4 Audit criteria legality - compliance with law, regulations and internal documents; legality - compliance with law, regulations and internal documents; sound management (economic efficiency) – compliance with the rules of effective management ; sound management (economic efficiency) – compliance with the rules of effective management ; efficacy - fulfilment of objectives efficacy - fulfilment of objectives integrity - performance of duties with due care, consciously and in due time integrity - performance of duties with due care, consciously and in due time Audit criteria depend on status of entity

5. 5 Audit criteria NIK audits activity of the organs of government administration, the National Bank of Poland, state legal persons and other state organisational units, regarding legality, sound management, efficacy and integrity NIK audits activity of the organs of government administration, the National Bank of Poland, state legal persons and other state organisational units, regarding legality, sound management, efficacy and integrity Audit of local self-government activity regarding legality, sound management and integrity Audit of local self-government activity regarding legality, sound management and integrity Audit of activity of other organisational units and business operators, referred to in Article 2 paragraph 3 of Act on the SCC, is conducted with regard to legality and sound management, to the extent to which they satisfy financial obligations towards the state Audit of activity of other organisational units and business operators, referred to in Article 2 paragraph 3 of Act on the SCC, is conducted with regard to legality and sound management, to the extent to which they satisfy financial obligations towards the state

6. 6 Types of NIK audits Scope of audits: Regularity Regularity Performance Performance Comprehensive Comprehensive Type of audits: Planned Planned Ad hoc Ad hoc

7. 7 Stages of audit 1.Preparation of audit (audit plan, audit programme) 2.Audit activity in entities (audit protocol) 3.Elaboration of audit results (post-audit statement) 4.Presentation of results to the Parliament (pronouncement on the audit results) 5.Publication of audit report

8. 8 Preparation of audit audit plan adopted by NIK’s Board (operational, annual) – order of Parliament or its organs (committees), requests of Prime Minister or President of Poland and NIK’s own initiative audit plan adopted by NIK’s Board (operational, annual) – order of Parliament or its organs (committees), requests of Prime Minister or President of Poland and NIK’s own initiative audit programme (including audit objectives, scope, schedule, legal and economics analysis, audit questionnaire, detailed methodology, requirements for auditors, etc) audit programme (including audit objectives, scope, schedule, legal and economics analysis, audit questionnaire, detailed methodology, requirements for auditors, etc)

9. 9 Sources of data audit results (NIK’s previous audits, internal audits, others) audit results (NIK’s previous audits, internal audits, others) information given by other bodies (e.g. Parliament) and entities on NIK’s request in order to prepare the audit information given by other bodies (e.g. Parliament) and entities on NIK’s request in order to prepare the audit meetings and interviews in entities, cooperation with other units (exchange the information on audit plans with Ministry of Finance and Managing Authorities) meetings and interviews in entities, cooperation with other units (exchange the information on audit plans with Ministry of Finance and Managing Authorities) Monitoring Committees, Committee of Audit and Control Monitoring Committees, Committee of Audit and Control press releases press releases

10. 10 What do we take into account? Stage of implementation of programme/project Stage of implementation of programme/project Total amount of money Total amount of money Subject Subject Status of auditee Status of auditee Organization Organization Segregation of responsibilities Segregation of responsibilities Complexity of procedures Complexity of procedures Process of authorization and supervision Process of authorization and supervision Accountability Accountability Number/experience/training of staff Number/experience/training of staff

11. 11 Audit work study of regulations, manuals, documents study of regulations, manuals, documents questionnaires and/or confirmation questionnaires and/or confirmation inquiries/ interviews inquiries/ interviews inspection/observation inspection/observation analysis of project files analysis of project files review of work done by others review of work done by others substantive testing substantive testing

12. 12 NIK audit activity areas 1.Regularity of using EU funds, including effectiveness of actions undertaken for optimal use of these funds 2.Building institutional capacity of public administration to effective participation of Poland in the European Union 3.Adaptation to EU standards

13. 13 Examples of NIK audits in the area: Regularity of using EU funds 1.Using EU pre-accession funds as regards PHARE Social and Economic Cohesion Programme (April 2005) 2.Using of the public funds for the programmes concerning reduction of unemployment, including EU pre-accession funds (May 2005) 3.Implementation of the Framework Programme for European Research & Technological Development (May 2005) 4.Audits on the state budget execution in the years 2004 - 2005 – part 84 “EU own resources” (May 2005) 5.Implementation of projects co-financed from the structural funds under the regional contacts (report expected in March 2007)

14. 14 Examples of NIK audits in the area: Building institutional capacity of public administration to effective participation of Poland in the EU 1.Preparation of public administration for acquisition and implementation of structural funds (March 2004) 2.Preparation of public administration for implementation of the Cohesion Fund (April 2005) 3.Preparation of public administration to entering the Schengen Zone (report expected in January 2007)

15. 15 Examples of NIK audits in the area: Adaptation to EU standards 1.Harmonisation of the Polish law with requirements of the membership in the EU and of the organisational level of units responsible for European integration (July 2002) 2.Functioning of internal financial control of EU pre- accession funds (March 2002) 3.Functioning of internal control system for the structural funds (May 2006)

16. 16 Systematic errors Particular stages of the programme were completed after the deadline (programming stage, implementing stage) Particular stages of the programme were completed after the deadline (programming stage, implementing stage) Procedures and guidelines were not applied or are too complex Procedures and guidelines were not applied or are too complex Delays in establishing laws and regulations Delays in establishing laws and regulations Problems in adjusting institutions – not clear segregation of responsibilities, lack of experienced personnel, fluctuation of staff Problems in adjusting institutions – not clear segregation of responsibilities, lack of experienced personnel, fluctuation of staff Not effective cooperation between institutions involved in implementation of the programme Not effective cooperation between institutions involved in implementation of the programme

17. 17 Other irregularities detected by NIK EU funds in a few cases were spent not in accordance with their assignment EU funds in a few cases were spent not in accordance with their assignment requirements of sound management were not fulfilled requirements of sound management were not fulfilled other irregularities: other irregularities: falsification of documentation, falsification of documentation, failure to keep accounting books and durable equipment record, failure to keep accounting books and durable equipment record, failure in fulfilling professional duties failure in fulfilling professional duties

18. 18 Case study Audit: Performance (output/effectiveness) of the Structural Funds programmes (…) Audit: Performance (output/effectiveness) of the Structural Funds programmes (…) Please discuss and find the answers on following issues: objectives of audit objectives of audit scope of audit scope of audit key areas key areas risks risks

19. 19 Thank you very much for your attention and cooperation