BMW Regional Assembly - Operational Programme '07 - '13, 8.5 Financial Management and Control Arrangements

8.5 Financial Management and Control Arrangements

Without prejudice to the Commission’s responsibility for implementing the general budget of the European Union, Ireland shall take responsibility in the first instance for the financial control of assistance.

Financial management and control will involve a series of interlocking certification and verification operations across different tiers of management. In accordance with Article 71 (1) of the General Regulation, within twelve months of the approval of the Operational Programme, the Irish authorities will submit to the Commission a description of the systems, covering in particular the managing and certifying authorities and intermediate bodies, the audit authority and any other bodies carrying out audits under its responsibility. This description will be accompanied by a report setting out the results of an assessment of the setting up of the systems and giving an opinion on their compliance with Articles 58 to 62. The specific roles and responsibilities of these different tiers are outlined in the paragraphs below.

Role of Certifying Authority

The Department of Finance has been designated as the Certifying Authority to certify declarations of expenditure and applications for payment before they are set to the Commission.

In accordance with Articles 61 and 74(2) of the General Regulation and article 26 of the implementation regulation, the Certifying Authority will be responsible for:

a) drawing up and submitting to the Commission certified statements of expenditure and applications for payment ;

b) certifying that:

i) the statement of expenditure is accurate, results from reliable accounting systems and is based on verifiable supporting documents,

ii) the expenditure declared complies with applicable Community and national rules and has been incurred in respect of operations selected for funding in accordance with the criteria applicable to the Programme and complying with Community and national rules;

c) ensuring for the purposes of certification that it has received adequate information from the Managing Authority on the procedures and verifications carried out in relation to expenditure included in statements of expenditure;

d) taking account for the purposes of certification of the results of all audits carried out by or under the responsibility of the Audit Authority;

e) maintaining accounting records in computerised form of expenditure declared to the Commission;

f) keeping an account of amounts recoverable and of amounts withdrawn following cancellation of all or part of the contribution for an operation. Amounts recovered shall be repaid to the general budget of the European Union, prior to the closure of the Operational Programme by deducting them from the next statement of expenditure.

Role of Managing Authority

The Managing Authority will have primary responsibility for the correctness of management and implementation of those operations under the Operational Programme financed by Cohesion Policy (Article 60). It is responsible for gathering reliable information, and for ensuring that proper accounts are kept, that the operations are correct and that Community rules are complied with.

The Managing Authority will establish internal controls to ensure sound financial management of EU co-financed expenditure. The tasks of financial management and general management of the Operational Programme will be carried out by separate sections/units within the Managing Authority. The Managing Authority will ensure that the Intermediary Bodies and Beneficiaries are fully informed of their responsibilities in relation to financial management of EU co-financed expenditure. It will ensure compliance with Community rules in relation to public procurement. Subject to any guidance which may issue from the Certifying Authority, the Managing Authority will undertake appropriate spot checks of source documentation supporting payment claims which are co-funded before authorising each expenditure claim and forwarding it to the Certifying Authority.

Role of Intermediary Bodies

The Intermediary Bodies will be responsible for submitting eligible expenditure in the format (both electronic and hard copy) required by the Certifying Authority to the Managing Authority in order for payment claims to be prepared for submission to the Certifying Authority.

The Intermediary Bodies will be responsible for ensuring that all payment claims for Structural Fund expenditure, submitted by Beneficiaries, are supported by receipted invoices and audit documents, and that a clear audit trail exists. They will also be responsible for ensuring in respect of co-financed Interventions/projects, that only eligible expenditure actually incurred is submitted to the Managing Authority. The Intermediary Body is responsible for certification of all expenditure incurred by Beneficiaries.

Audit Authority

The ERDF Financial Control Unit, functionally independent of the Managing Authority and Certifying Authority has been designated as the Audit Authority will be responsible for verifying the effective functioning of the management and control system. The Control Unit will be responsible for random audit checks of Fund-related expenditure within Departments, Intermediary Bodies and Beneficiaries. The expenditure audited before the closure of the Operational Programme will be not less than 5% of the total expenditure declared by beneficiaries for operations.

In accordance with articles 62 and 74(2) of the general regulation and article 26 of the implementation regulation, the Audit Authority shall be responsible in particular for:

a) ensuring that audits are carried out to verify the effective functioning of the management and control system of the Operational Programme;

b) ensuring that audits are carried out on operations on the basis of an appropriate sample to verify expenditure declared;

c) by 31 December each year from 2008 to 2015:

i) submitting to the Commission an annual control report setting out the findings of the audits carried out during the previous 12 months period ending on 30 June of the year concerned in accordance with the audit strategy of the Operational Programme and reporting any shortcomings found in the systems for the management and control of the OP. The first report to be submitted by 31 December 2008 shall cover the period from 1 January 2007 to 30 June 2008. The information concerning the audits carried out after 1 July 2015 shall be included in the final control report supporting the closure declaration referred to below;

ii) issuing an opinion, on the basis of the controls and audits that have been carried out under the responsibility of the Audit Authority, as to whether the management and control system functions effectively, so as to provide a reasonable assurance that statements of expenditure presented to the Commission are correct and as a consequence reasonable assurance that the underlying transactions are legal and regular.

iii) submitting, where applicable, under Article 88, a declaration for partial closure assessing the legality and regularity of the expenditure concerned;

d) submitting to the Commission at the latest by 31 March 2017 a closure declaration assessing the validity of the application for payment of the final balance and the legality and regularity of the underlying transactions covered by the final statement of expenditure, which shall be supported by a final control report.

The Audit Authority will ensure that the audit work takes account of internationally accepted audit standards. The diagram at Annex6 outlines the certification and verification procedures to be put in place and specifies where responsibility lies.

Eligibility of Expenditure

In accordance with Article 56, expenditure on co-financed Interventions is eligible for Community support only where it is incurred for operations decided on by the Managing Authority or under its responsibility, in accordance with criteria fixed by the Monitoring Committee.

New expenditure, added at the moment of the modification of the Operational Programme shall be eligible from the date of the submission to the Commission of the request for modification of the Operational Programme.

The rules on the eligibility of expenditure shall be laid down at national level subject to the exception provided in the ERDF Regulations. They cover the entirety of the expenditure declared under the Operational Programme.

The starting date for the eligibility of expenditure for the Operational Programme is 1 January 2007. Expenditure incurred before then is not eligible for support under this Operational Programme.

Receipt of payments

Payments are made by the Commission (who notifies the Certifying Authority) at OP level to the Exchequer Account in the Central Bank. The competent authority for receiving ERDF payments is the Department of Finance.

Payment to beneficiaries

In the case of structural funds, financing is usually transferred via the normal vote accounting system through the intermediary department/agency to the beneficiary.

Beneficiaries

The Beneficiaries will be responsible for ensuring that only actual eligible expenditure incurred, and expenditure which comes under the terms of the project as approved by the Intermediary Body, is certified. They will be required to ensure that a clear audit trail exists in relation to EU funds and that all claims are supported by receipted invoices or, where this cannot be done, by accounting documents of equivalent probative value.

Irregularity Reporting

Within two months following the end of each quarter, the Certifying Authority will report to the Commission any irregularities which have been the subject of a primary administrative or judicial finding, in accordance with Article 28 of the Implementation Regulation. In addition, any procedures instituted in respect of irregularities previously reported will also be notified within two months of the end of each quarter in accordance with Article (30) of the Implementation Regulation.

Use of euro

All amounts set out in the Operational Programme, certified statements of expenditure, payment applications and expenditure reports will be denominated in euro. The euro will be used for all grant letters of offer, project approvals, and payment claims in respect of EU co-financed expenditure (Article 81).

Electronic Data Transfer

The Irish Authorities will provide relevant documentation and information for inputting into the computer system established by the Commission for the purpose of permitting the secure exchange of data between the Commission and each Member State. The Commission and the authorities designated by the Member State and the bodies to which that task has been delegated shall record into the computer system for data exchange the documents for which they are responsible in the format required and update them.

The costs of interfacing between the common computer system for data exchange and the national, Regional and local computer systems and any costs of adapting national, Regional and local systems to the requirements under the General Regulation will be eligible under Technical Assistance under Article 46 of that Regulation.

A computerised system is being developed in the Department of Finance for this purpose. The system will be used to monitor all EU co-financed expenditure. Data will be inputted by the Intermediary Bodies and mechanisms are being developed to support data transmission from these bodies.

The Irish Computer System is designed to support Programming, financial and physical monitoring and the making and monitoring of payments. It is based on a client/server application giving Government Departments and the Managing Authorities access to a central database. All required financial and physical progress information, appropriately codified, including annual reports, to enable the European Commission to fulfill its responsibilities under the appropriate Cohesion Policy Regulations, will be relayed electronically to the Commission by the Managing and Certifying Authorities, as appropriate. The frequency of electronic transmission will conform to the management requirements as agreed between the Commission and the Managing Authority and the Department of Finance.

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