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Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

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Page 1: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Franck Sébert European Commission

DG Employment, Social Affairsand Equal Opportunities

Page 2: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Commission guidance note– Issued in April/May 2008 and finalised

21 May in COCOF

– To assist managing authorities (MA) and their intermediate bodies (IB)

– Key control requirement to prevent errors and fraud

Page 3: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Article 60 of Regulation (EC) N°1083/2006 details the functions of the managing authority

Art. 60 (b) part 1: “The managing authority (MA) shall be responsible (…) for verifying that the co-financed products and services are delivered and that the expenditure declared by the beneficiaries for operations has actually been incurred and complies with Community and national rules (…).”

Legal basis - Council regulation

Page 4: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Legal basis-Implementing rules

Article 13 (2) of Regulation (EC) N° 1828/2006:

The verifications (…) shall cover administrative, financial, technical and physical aspects of operations, as appropriate.

Page 5: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Legal basis-Implementing rules Article 13 (2) of Regulation (EC) N° 1828/2006:

Verifications shall ensure that the expenditure declared is real, that the products or services have been delivered in accordance with the approval decision, that the applications for reimbursement by the beneficiary are correct and that the operations and expenditure comply with Community and national rules. They shall include procedures to avoid double-financing of expenditure with other Community or national schemes and with other programming periods.

Page 6: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Legal basis-Implementing rulesArticle 13 (2) of Regulation (EC) N°1828/2006:

Verifications shall include the following procedures:

(a) administrative verifications in respect of each application for reimbursement by beneficiaries

(b) on-the-spot verifications of individual operations

Page 7: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Legal basis-Implementing rules

Article 13(3) of Regulation (EC) N°1828/2006:

Where on-the-spot verifications (…) are carried out on a sample basis (…) the managing authority shall keep records describing and justifying the sampling method and identifying the operations or transactions selected for verification.

Page 8: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Main themes

General observations on the objective, scope and organisation of management verifications

Administrative verifications

On-the-spot verifications

European Territorial Cooperation (ETC)

Page 9: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Main themes

General observations on the objectives, scope and organisation of management verifications

Administrative verifications

On-the-spot verifications

European Territorial Cooperation (ETC)

Page 10: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Scope of management verifications

Should cover administrative, financial, technical and physical aspects of operations

Include verifications on the reality, substance and effectiveness of projects: - products or services delivered in accordance with approval decision, - outputs are checked against specifications…

Verification of compliance with Community and national rules

Page 11: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Scope of management verifications

Specific issues including respect of compliance with Community policies detailed in section 3 of guidance note

3.1 Public Procurement3.2 Environment3.3 State aid schemes3.4 State aid3.5 Financial engineering instruments3.6 Revenue generating projects3.7 Durability of operations3.8 Equality and non-discrimination

Page 12: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Organisational aspects

Management verifications vs

- selection of operations

- implementation of operation as beneficiary

Distinct from audits under/by Audit Authority

Require appropriate staff level and expertise for both administrative and on-the-spot verifications

May be outsourced but with strict supervision

Page 13: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

A strategy to manage risks

Strategy for controls- PREVENTIVE ACTIONS- DOCUMENTARY VERIFICATIONS- ON THE SPOT VERIFICATIONS

4 aspects covered as appropriate

NOT ZERO ERROR BUT RISKS UNDER CONTROL

Page 14: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Main themesGeneral observations on the objective, scope and

organisation of management verifications

Administrative verifications in respect of each application for reimbursement by beneficiaries

On-the-spot verifications

European Territorial Cooperation (ETC)

Page 15: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Administrative verifications

– Desk-based, documentary verifications

– All payment applications (interim / final) have to be verified

– Before declaring expenditure to level above and before certification of expenditure to Commission by CA

– Some horizontal aspects checked once for all (in first claims or at closure of operation)

Page 16: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Administrative verificationsExamination of progress report

Examination of expenditure claim

Examination of requested supporting documentation :

– (lists of) receipts / invoices– lists of outputs– lists of participants and timesheets– etc.

Page 17: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Administrative verifications

Aim to verify (inter alia):

– Correctness of claim

– No double funding

– Eligibility period of expenditure declared

– Compliance with grant decision / contract

– Existence of adequate audit trail

– Compliance with eligibility rules, publicity requirements, EC policies…

Page 18: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Efficient & effective verifications

Efficient only if grant decision / contract absolutely clear : clear definition of operation, expected outputs, financing plan, eligibility rules, administrative (reporting) obligations of beneficiary…

Training for verification staff on risk factors, methodology, legal and accounting principles, eligibility rules…

Verifications should be documented in each operation file : checklists duly completed and signed by staff

Page 19: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Efficient & effective verifications

– All claims / all key documents to be verified

– Huge volume of supporting documents held by beneficiary? Possibility to focus verifications on samples of items, based on risk factors:

• type of beneficiary / of operation• value / type of expenditure items• type of physical progress indicators• past experience …

– Can be complemented by random sample– Good practice to register risk factors and

methodology in writing (can be part of checklist)

Page 20: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Efficient & effective verifications

MA may also modulate the extent of its own administrative verifications by taking into account control procedures in place at beneficiary level

(public organisations / audit certificates)

BUT

does not replace / substitute MA/IB verifications

Page 21: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Main themesGeneral observations on the objective, scope and

organisation of management verifications

Administrative verifications in respect of each application for reimbursement by beneficiaries

On-the-spot verifications of individual operations

European Territorial Cooperation (ETC)

Page 22: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Objectives of on-the-spot verifications

Reality of operations, delivery of products or services in accordance with terms of reference, physical progress as reported

Technical and physical aspects of operation

Administrative capacity of beneficiary and/or project infrastructure (eg training infrastructure)

Page 23: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Objectives of on-the-spot verifications

Compliance with publicity requirements

Expenditure declarations against accounting reality (but not a complete financial audit)

Existence of adequate audit trail

Page 24: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Organisation of on-the-spot verifications

Sampling - risk oriented, complemented by random

Sampling method documented and records of selected operations and transactions kept

(Short) written report in the operation file

Page 25: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Timing of on-the-spot verifications Normally when project well under way (physical

and financial progress)

Operations of intangible nature (ESF type): during project implementation to attest reality of activity

Multiannual operations : at various occasions, with initial visit to ensure preventive effect; final visit after completion of investment

With / without prior notice to beneficiary

Page 26: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Main themesGeneral observations on the objective, scope and

organisation of management verifications

Administrative verifications in respect of each application for reimbursement by beneficiaries

On-the-spot verifications of individual operations

European Territorial Cooperation (ETC)

Page 27: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

European Territorial Cooperation

– Complex structure involving combinations of Member States / Regions and / or non-Member States

– Controllers appointed in each MS to carry out verifications / each MS responsible

– Good practice - sharing results with lead beneficiary controller

Page 28: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Management verifications, Audit Trail

and link with certification of expenditure

Page 29: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Provide adequate information to CA for purpose of certification

MA basic source of information for certification

MA to keep a complete audit trail for each operation, as defined in article 15 of regulation No1828/2006

Single file per operation reflecting this full audit trail

Files ready at any moment for verifications by CA or audits by AA, EC, ECA

Page 30: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Provide adequate information to CA for purpose of certification

At start up

MA to inform CA on description of control systems, procedures, manuals and check lists used; strategy to monitor risk, risk analysis, methodology for sampling (on the spot verifications )

Page 31: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Provide adequate information to CA for purpose of ceritification

ThenPeriodical report to CA on procedures effectively

operated by MA and IB

Report may include list of checks, coverage, detected irregularities and types, corrections made through administrative and on-the-spot verifications

Keep lists of operations declared for partial closure

Page 32: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

Relations MA / CA

– Good practice: formal declaration by MA to CA at each expenditure claim

– Need for full cooperation and transparency with CA; respect decision of CA not to certify expenditure at this stage

– Accompany each claim of expenditure by information requested by CA

– If claim sent back in full or partially, provide timely information requested by CA

Page 33: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications KEY POINTS

FOR MANAGING AUTHORITIES

Page 34: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

KEY POINTSCarry out programme risk assessment, develop a strategy

for managing risks. This is the reference point for intensity of verifications, sampling...

Focus on actions to prevent errors – information and advice to beneficiaries, access to information, capacity-building and training for beneficiaries, clear defined operations and financing plans, training...

Focus on outputs and not just procedures – monitor and review results of control system – is there evidence of good management of risk?

Page 35: Management verifications Franck Sébert European Commission DG Employment, Social Affairs and Equal Opportunities

Management verifications

KEY POINTSProvide guidance, information, technical support and

advice to staff in charge of management verifications – standardised manuals and checklists - training – create information networks

Do the same for intermediate bodies

Carry out regular self-assessment and regularly review work performed by IB (quality review)

Document all control activity in individual files for perfect audit trail