manual on the spot checks

8/20/2019 Manual on the spot checks

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Ex post on-the-spot checks of grants

ADMIN A3 – training Unit


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Training developed for the European Commission by DEMOS!!!demosfr

"this training manual complies !ith EM#S rules"

ADMIN A.3. – Ex post on-the-spot checks of grants

$

Developed for the European Commission by Demos


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TABLE O !ONTENT"#. INT$ODU!TION....................................................................................3

%% #ims and &rame!ork'%$ De(nitions'

%. "U!!IN!T DIA&$AM.............................................................................3$% #greement and annexes'$$ )Deliverables*'$' Documentary Check'$+ Selection of the OSCs'$, reparation for the OSC mission'$. Execution of the OSC mission'$/ OSC Mission 0eports'$1 &ollo!-up to the OSC mission'

3. !ONT$OL BA"I"..................................................................................3'% 2egal bases ''$ 3hy conduct controls4''' 3hat is being controlled4''+ The )auditable* character of a pro5ect'', The various aspects of the control6''. 3hat 7ualities are expected from an auditor4'

'. T ()E" O !ONT$OL.............................................................................3+% The types of control6'

*. "U!!IN!T DIA&$AM.............................................................................3,% Synthetic diagram of the various preparatory operations6'

+. "ELE!TION AND $I","..........................................................................3.% The selection of the pro5ects that must be sub5ect to an OSC'.$ 0egistration of agreements8missions'.' Types of &inancing'

. O"! ILE..........................................................................................3/% Composition of the OSC (le'/$ Content of the OSC (le'

. !ONTA!T".........................................................................................31% 9nternal contacts'1$ :uestionnaire to the bene(ciary'

/. ANAL("I" O INO$MATION....................................................................3#0. )LAN...............................................................................................3

%;% OSC plan'%;$ 3hy a list and an OSC plan4'##. )$ELIMINA$( O)E$ATION".....................................................................3

%%% Contact !ith the bene(ciary'%%$ Mission lan'%%' Con(rmation to the bene(ciary'%%+ Starting date for the OSC'%%,


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%+$ 0eminder of the importance of non-verbal language'#*. T1E INTE$2IE".................................................................................3

%,% Conducting an intervie!'

#+. E2IDEN!E..........................................................................................3%.% Evidence during the OSC'

#. DO!UMENTA$( !ONT$OL.......................................................................3%/% The documentary control'

#. ITEM" TO BE AUDITED...........................................................................3%1% 0ecurring points during the OSC'%1$ Sta= costs'%1' Overheads'%1+ Travel and living expenses'%1, Consumer and e7uipment goods'%1. >#T'

%1/ 9nterest on pre-(nancing'%11 Sub-Contracting'%1? 9neligible costs'

#/. MI""ION $E)O$T"...............................................................................3%?% 9ntroduction'%?$ Structure of the mission reports'%?' @oti(cation to the bene(ciary'

%0. OLLO-U) AND O)E$ATION...................................................................3$;% The need for a follo!-up'$;$ The stages'

%#. ANNE4E #. E4T$A!T" O !ON2ENTION MODEL AND ANNE4E"...........................3Ob5ectives of the audit'

0eference Arant #greement and budget line' The bene(ciary BBBBBBBBB8BBBB of BBBBBB' The partners ' The grant agreement'

%%. INDIN&".......................................................................................3 The BBBBB co-ordinator BBB BBBBB' The BBBB partner8#ssisting pro5ect co-ordinator BBBB' The BBBB BBBBBBBBB 'BBBBBBBBBB'

The BBBBBBBBBB'29M9T#T9O@ O& COSTS TO %%; O& TE


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#. INT$ODU!TION

#.# AIM" AND $AMEO$,

◊ AIM OF THE TRAINING COURSE

This manual serves as a training reference for Ex ost On-the-Spot Check of Arants organised by the European Commission

The aim of the training is to teach participants to conduct an on-the-spotcheckF to outline best practice and to establish a common reference basisthat can be used by the various people in the European Commission !ho

must carry out these missions !ith the bene(ciaries of grants given by theCommission for the execution of pro5ects This course is designed forbeginners !ho have little experience of conducting controls

The material covered by this course is primarily aimed at ex post controllersbut could also be useful at an ex ante level for veri(ers

The on-the-spot check mission acts as a complement assurance to thedocumentary checks carried out in the Commission oGces Hex ante controlsIsee point %$ De(nitionJ

◊ AIM OF THE OSC MISSION

To check the validity of Community (nancingF in other !ords6

• To check the adherence by the bene(ciary to their agreements !ith theCommission and in relation to Community legislation

• To check the reliability and validity of the documentary evidence received atthe Commission

◊ OSC TRAINING FRAMEWORK

The training frame!ork is limited to direct expenditure control missions only The follo!ing are not included in this training6- the control of shared management H!ith member statesJF for !hich speci(cprocedures exist- the selection of the pro5ects that must undergo an on-the-spot check- system auditing

This training is therefore limited to the control of direct Community (nancingFnamely6

• The control of the pro5ects or subsidy extensions•

The control of a current action HsometimesJ or of a completed action


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◊ INFORMATION SOURCES

Most of the information and documents come from di=erent DAs HE#CF 0TDF

MareJF DA udgetF the 3ebsite and oGcial publications of the EC The author thanks the EC oGcials responsible for the OSC !ho gave himaccess to this information

#.% DEINITION"

◊ GRANTS

9n accordance !ith #rticle %;1 of Council 0egulation %??,8$;;. of %' Dec$;;.F grants are direct (nancial contributions covered by the EC budgetFgranted freely !ith a vie! to (nancing6

aJ either an action to promote the achievement of an ob5ective that falls!ithin the frame!ork of a European


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oth are part of the control chain of the Commission @ote thatthe ex post control are not part of the (nancial circuit


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%. "U!!IN!T DIA&$AMefore going into the detail of the method and the practice of the OSCF here is a

brief presentation that makes it possible to situate the various administrative and(nancial stages in the life of a pro5ect6


?


Signing of the

agreement

Production of

‘‘deliverables’’ Technical implementation

reportsFinancial implementation

reports (cost statement)

OSC documentary

control

Selection ofproects for the

OSC

!andomPast e"perience

Follo#ing a re$uest%ndices

Preparation of the

OSC mission

OSC implementation

Opening& closing

and other

meetings'

stablishing acorrelation bet#een the

O'S'C' and thedocumentsevidence of

the beneficiary

*ission reports+etter of conclusion to the

beneficiary

Follo#,up

procedures


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%.' "ELE!TION O T1E O"!"

The (nancial units of the DAs establish lists of pro5ects that !ill be sub5ect to anOSC These controls are more thorough than the documentary controls carriedout in the oGces of the EC >arious selection methods are possible

%.* )$E)A$ATION O$ T1E O"! MI""ION

Once the pro5ects have been selectedF preparation for the missionF in thecountries and premises of the bene(ciaries takes place This involves variousstages such as the establishment of a (leF the analysis of informationF thecontrol planF etc

%.+ E4E!UTION O T1E O"! MI""ION

This is mainly a matter of gaining from the bene(ciary all of the information anddocuments that might support or refute the information on costs that !astransmitted to the EC through the CS #ctually going to the premises of thebene(ciary may make it possible to obtain more information through meeting!ith the people responsible for the pro5ect and the various parties involved andby examining the bene(ciaryLs organisation hysical material controls are of course also possible

%. O"! MI""ION $E)O$T"

This is a key element in any OSC mission The mission reports are for the bene(ciary and the EC They summarise thecontrols conductedF laying emphasis on any observed dysfunctions on the partof the bene(ciary and may suggest !ays to improve the monitoring of thepro5ect9deallyF the reports must be produced 7uickly upon the return of the OSCmission 3ithout a mission reportF ho!ever succinctF there is the risk thatmonitoring and corrective action may not take placeeep in mind that the report must be "usable" by the #OSD 9n case of (ndingsproving ineligible expendituresF the facts must be clearly stated in order to helpthe #OSD to act in conformity !ith #rt /% of &0 "% Establishment of an amountreceivable is the act by !hich the authorising oGcer by delegation or sub-delegation6

HaJ veri(es that the debt existsIHbJ determines or veri(es the reality and the amount of the debtIHcJ veri(es the conditions in !hich the debt is due

%. OLLO-U) TO T1E O"! MI""ION

&ollo!ing the OSC missionF various types of action are possibleF such as theconditional acceptance of supporting evidence Hpending additional documentsJFthe payment by the EC of additional sumsF recovery of sums paid in excess bythe ECF etc


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3. !ONT$OL BA"I"

3.# LE&AL BA"E"

Lega;


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3.3 1AT I" BEIN& !ONT$OLLED=

The expenditure linked to direct Community (nancingF ie6

• the control of grantsI• the control of the use of the operating contributions

The control is conducted on6• current actions HsometimesJI• completed actions Hthis is the most fre7uent caseJ

Le>e; of ex post contro;s6 depending from the culture of the DAF professionalbackground of the person in charge and possible economy of scaleF ex post can

be realised on bene(ciaries Hseveral pro5ectsJF pro5ects or transactions Hpaymentintermediate or (nal I clearance of pre-(nancingJ

Every controller should keep in mind some points part of a legal adviceH


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&urthermoreF account must be taken of the fact that the execution of an OSCincurs a certain costF !hether this OSC is applied to an interim payment or a(nal report The cost of the OSC must be set against the results that !e can

reasonably expect from it#s a corollaryF pro5ects !hich involve ma5or risksF or for !hich Communitysupport is the highestF must be given priority considerationro5ects of lesser (nancial importance must notF ho!everF be automaticallyremoved from the batch of pro5ects to be controlledF because these maypresent intrinsic risks Hrecurring bene(ciaryF geographical locationF moreprecarious management riskF etcJ

The OSC procedure on the basis of interim payments must therefore only beretained in cases of suspected poor management or doubt as to theachievement of the purpose of subsidisation&iles for !hich the activity reports and (nancial payments prescribed in the

terms of the subsidy grant agreement are not produced constitue high-risk (les They could be sub5ect to an OSC before the planned conclusion of the pro5ect

3.* T1E 2A$IOU" A")E!T" O T1E !ONT$OL8

The control concerns the follo!ing aspects of the (nanced pro5ect6

◊ CONTRACTUAL ASPECTS

ave the points provided for in the agreement Hand its annexesF !hich forman integral partJ really been properly observed4Example6 Article X.x.x The action and the eligibility period of the costscommence on ../../.... and end on ../../.... .

◊ REGULATORY ASPECTS

ave the points provided for in the various EC regulations and !hich arereferred to in the agreement been properly observed4Example for the expenses transferred from one category to another6Where the amounts transferred between contractors are less than 20% of thetransferors budgets or there is a change between categories of one partner !which does not a"ect the nature of the wor# to be carried out i.e. they willachie$e the tas#s identied in the technical annex& and does not exceed 20%of that contractors total budget' no prior appro$al is necessary but the

(ommission is to be informed.

Therefore if the amounts exceed $;F prior EC authorisation !ill benecessary

#nother example6 Tra$el and subsistence costs may be charged' but prior written appro$al ) is re*uired ) outside +urope ,the +- or an Associatedtate.

◊ FINANCIAL ASPECTS

ave the points provided for in the agreement concerning the (nancing

methods been properly observed4


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Example6 lausibility of the 1ustied costs' appropriate forms of supportinge$idence' etc.

3.+ 1AT 5UALITIE" A$E E4)E!TED $OM AN AUDITO$=

• They should be honest - in other !ordsF search for the facts and assess themfairly

• They should sho! loyalty by con(ning themselves to the sub5ect of thecontrol !ithout sho!ing favouritism

• They should be tactful and vigilantF so as monitor the e=ects of theobservations on people

• They should sho! cultural sensitivity by respecting local practices• They should be convinced - in other !ordsF keep the aim in mind and believe

in its usefulness


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'. T ()E" O !ONT$OL

'.# T1E T()E" O !ONT$OL8

Di=erent types of control exist Hsee belo!J @evertheless the eligibility control isthe one to realise

◊ T HE ELIGIBILITY CONTROL:

Checking that the expenditure complies !ith the stipulations of the#greement The latter may include )Special Conditions*F )Aeneral Conditions*and )#nnexes*

◊ T HE REGULARITY AUDIT :

Checking that the various operations or items of expenditure have been runin conformity !ith the regulations and proceduresExample6 Observance of the deadlines for the issue of documentsF

implementation or ob5ectivesExample6 9ssues of certain reportsF recordsF etcExample6 Cost Statements signed by authorised personsExample6 Depreciation period in relation to the type of material6 generallyF a

period of '. months is applied to computers and .; months forother types of material

◊ T HE MATERIALITY AUDIT :

Checking the existence of concrete supporting evidence for (nancing by theEC Example6 invoicesF timesheetsF sta=F goodsF stocksF etcChecking the validity of the documents presented

◊ T HE SYSTEMS CONTROL:

Transaction Controls versus Systems #udit

The OSC covered by this training course is a control of the operations and

supporting documents concerning the costs incurred !ithin the frame!ork of a pro5ect (nanced by the EC Essentially it is a check of individualtransactions P has this cost actually been incurred or not4

9t is not a detailed control of the accounting or organisational systems usedby the bene(ciary This is kno!n as a system audit Such a control is notcovered by this training course o!ever it !ould be useful for a personconducting an on-the-spot control to understand the di=erence

To a greater or lesser degree every organisation has a system of internalcontrol 9n larger organisations this !ill tend to be far more sophisticated

then in smaller organisations Examples of typical internal controls !ould besegregation of duties H+ eyes principleJF clearly documented policies and


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The -CCO./T%/0 S1ST*

The %/T!/-+ CO/T!O+ S1ST*

The control

environment

The control

procedures

The Internal Control System


procedures covering the processing of costsF proper revie! and authorisationof transactions During a systems auditF the auditor rather then checking theindividual transactions instead checks the internal control system 9f they feel

that the internal control system functions correctly then they feel that they!ill be able to place reasonable reliance on the numbers produced by thesystem 9n a control !e revie! only the transactions of the bene(ciary nottheir control system o!ever if during the course of an OSC you becomea!are that there may be systemic !eaknesses !ithin their 9C system Hforexample no segregation of dutiesJ this might inQuence the extent of thetransactions !e select for revie!

@ote that generallyF the only obligations of the bene(ciaries are to realise theaction and to provide (nancial statement and supportive documentsI usuallyno re7uirements exist about the !ay they have to organise themselves

The ob5ective of the control of the #ccounting System is to verify the formalstatus of the accounting systemF including the existence and e=ectiveness of

an internal control system

The internal control system is de(ned as all the policies and procedures adoptedby the managementF to assist in achieving managementLs ob5ectives of ensuringthe orderly and eGcient conduct of its businessF including adherence tomanagement policiesF the safeguarding of assetsF the prevention and detectionof fraud and errorF the accuracy and completeness of the accounting recordsFand the timely preparation of reliable (nancial information H9CF 9nternationalStandards on #uditing and 0elated Services no .J Such a system must of course be capable of supplying the information re7uired by the contract or theagreement


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The -CCO./T%/0 S1ST*

The %/T!/-+ CO/T!O+ S1ST*

The control

environment

The control

procedures

The Internal Control System


This de(nition given to the 9nternal Control System includes not only thosematters !hich are directly related to the accounting systemF but also the controlenvironmentF being the managementLs a!areness and concern about the control

systemF and the actual control procedures in place

# system audit of the accounting system !ill provide the controller !ith

evidence to assess !hether it is suitably designed to prevent materialmisstatements The control of the system is aiming at assessing the systemLse=ectivenessF in terms of its capacity to detect and correct misstatements


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*. "U!!IN!T DIA&$AM*.# " (NT1ETI! DIA&$AM O T1E 2A$IOU" )$E)A$ATO$( O)E$ATION"8


%?


-nalyse des

informationsdisponibles

-nalyse des


-nalyse des


-nalyse des


-nalyse des


Selection of thecontracts

-ctivities %ncome!esults

+ist of contracts

!egistration of thecontracts

stablishment of the

OSC dossier

%nternal contacts

-nalysis of the

available information OSC plan

The preparation phases for the OSC

Contact #ith the2eneficiary

*ission Plan *ission approval

Confirmation to the

2eneficiary 3 Planning -nnouncement letter

.pdate of the OSC

database


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+. "ELE!TION AND $I","

+.# T1E "ELE!TION O T1E )$O?E!T" T1AT MU"T BE "UB?E!T TO AN O"!

◊ NOTION OF RISK

The re7uirement for the selection of the pro5ects to be sub5ect to an OSC is(rmly linked to the notion of risk

eyond the general risks presented by a pro5ectF each DA can identifythe internal risk factors that are speci(c to itF and !hich it !ill have totake into account in order to develop its pro5ect selection policy andtherefore its planning for pro5ects !hich must undergo an OSC

The identi(cation of the main risk factors is essential to the planning for thecontrol programme This is a matter of6

( the inherent risk in the (eld Hthe risk of irregularity or a material error P forexampleF !hen an action is governed by very complex rulesF there can bea high risk of errorJ and

( the control risk Hpossibility that the controls make it possible neither toprevent nor to detect such errors or irregularitiesF particularly in the caseof poor 7uality or recent reorganisationJ

The aim of the control programmes must be both to focus on the (elds in!hich the risks are considered to be highest and to coverF in a balancedmanner over timeF the audit (eld

The follo!ing factors must be considered as indicators during the assessmentof the inherent risk levels6

• 0egulations6 The more complex the regulations governing the actionF the higher therisk error These errors may occur either due to the poor understanding orinterpretation of the regulationsF or o!ing to the erroneous application of

the rulesI

• Management methods6Divergences in management methodsF for example6 actions conducted bythird parties or agents may present a higher inherent risk than that causedby actions directly carried out by one single management authority Thegreater the number of stages in the management processF the higher therisk This is typically the case for pro5ects involving a coordinatorF co-bene(ciaries and possibly subcontractors


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The controlled entities may take measures to combat these inherent risksthrough the implementation of controls The auditor must proceed to an

assessment of the control risk before being able to identify the residual riskHrisk of non-detection of errors during the controlsJ 3hen the inherent risklevel is highF controls must be set in place in order to reduce the real risk of incorrect payments &or exampleF for pro5ects !ith very complex rulesF thebody responsible for the veri(cation and approval of re7uests is supposed toattach very special importance to the veri(cation of these re7uests # (eld!ith a high inherent risk mayF in factF present a lo! control risk if the systemsare particularly eGcient in terms of error identi(cation# risk analysis !ill put together several criteriaI the diversity of the dataavailable in the information system !ill be a constraint for theimplementation of a risk analysis

◊ T HE TYPES OF SELECTION

#lthough the selection rules are up to the DAsF some selection principles cannevertheless be stated here6

The strategy dedicated to the ex post control orients the selection mode 9fyou are focused on the detection and correctionF the selection should helpyou to put your strengths on the riskier pro5ectsI you !ill therefore put inplace a risk analysis

Due to the cost of an ex post controlF it is not possible to check %;; of

pro5ects # balance bet!een costs and bene(ts of controls should be foundand should take into account the deterrent e=ect

# periodic mission plan can be established 9t speci(es ho!F and ho! manyOSC missions must be selected

The list of pro5ects to be controlled can comprise both pro5ects retained on adirected basis and pro5ects retained on a random basis The proportion couldFfor instanceF be approximately /; and '; respectivelyF or be of any otherproportion deemed necessary according to the pro5ects managed by the DAsSelection of pro5ects purely on a random basis is not felt to give an optimumapplication of resources

9mportant remark6

0egardless of the selection methods usedF it is important to keep traces H(lesFdocumentsF etcJ of the !ay in !hich the selection !as made

• Directed selection

The determination of the batch is based on the analysis of the risk factorsFas described earlier o!everF complex (les or (les undermined by apresumption of serious risk are obviously also included in the OSCprogramme


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The three above-mentioned variables determineF for a given batch siReF thenumber of auditable organisations per E< Member State

On the basis of the number of auditable organisations per E< Member StateFa (rst random selection of the organisations to be audited is runF taking intoaccount each Member StateLs con(guration by type of contractors HigEnterprisesF igher Educational 9nstitutions and


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#s !ell as reimbursing actual costsF the Commission may pay either a )&lat0ate* or a )2ump Sum*

# )&lat rate* payment is to cover a speci(c category of costs Hie per diemsJ#lternatively a lump sum can be used to (nance a speci(c activity up toV$,F;;;

9n either case the amount must be established by ob5ective means and berevie!ed by the 0#O at least every $ years

@on pro(t K co-(nancing principle are veri(ed ex ante !hile (xing the rates The bene(ciary need not submit subse7uent proof


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(

. O"! ILE

.# !OM)O"ITION O T1E O"! ILE

3hen the OSC (le is being composedF care should be taken to gain information onthe content of the various documents that have an obvious e=ect on the grantagreement6

• The (nancial regulation• The basic instrument governing the agreement• The frame!ork agreement

The (nancial regulation

This is Council 0egulation HECF E


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.% !ONTENT O T1E O"! ILE

The documentation pertaining to the agreements !ill comprise copies of thefollo!ing documents Hif availableJ6

The call for proposals and the proposal that !as at the source of the grantagreementI

#ll other documents speci(c to your DAie C@& Contract @egotiation &orm HDA 0TDJ

• 9nformation sheet P Contract Management 9nformation &orm - on the pro5ect


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Example6

!ONT$A!T no.8

1 General n!"r#a$"n "n $%e &"n$ra&$

!ontact personAress

!ontractors interna;$E. ID.8N'B': I$ ( $%e re!eren&e a$$r)*$e+ ), $%e )ene-&ar, $" $%e .r"/e&$ n $%er a&&"*n$n0 (,($e#'

!ost


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#n OSC (le shall be established for each contract This (le consists of copies of several documents that can be held by di=erent OGcers !ho took part in thecontract negotiation or are taking part in its management and follo!-up

• The Contract6 The signed contract copy !ith annexes and the frame!orkagreementF if applicable

• #ny supplementary agreementI The signed agreement copy

• 0eceived noti(cations6#ccording to some standard contractsF the Contractor is obliged to notify the

Commission in !riting concerning certain matters

• ayment documentation 6&or the periodHsJ under examinationF including6

, Cost Statements - #ssociated )ank Statements* - rogress report approval - Travel approvals Hif anyJ - &inancial Summary sheets and - any 0ecovery Orders

• Contractor 0eportsDepending on the contractF the Contractor may be obliged to send to the

Commission reportsF such as eriodic rogress 0eportsF mid-term #ssessments0eports and &inal 0eports

• Summary of ayment# summary of payments by the CommissionF concerning time and amountF to beable to control that the distribution has been done !ithin the time limits9n case the contractor is a Co-ordinatorF include also a summary of paymentsmade by him to its associate contractors

• Correspondence !ith the Contractor of importance to the control

• #ny previous control reportsContact may also be taken !ith other Directorate Aenerals that perform controlsof contracts #ccount must also be taken of reports established by the Court of #uditorsF national control bodies or the contractorLs internal or external auditors

• #pprovalsCosts unforeseen during the negotiationF and hence not mentioned in theContract @egotiation &ormF may be have been approved at a later stage after a!ritten re7uest to the 0esponsible Scientist

• Company 0eports


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/. ANAL("I" O INO$MATION

#fter the #udit (le has been completedF an analysis is made on the availabledocuments The analysis concerns documents and information available !ithin theDA andF in some cases documents submitted to the DA by the contractor after a!ritten re7uest The purpose is to collect as much information about the contractoras possible in preparation for the controlF and to assemble information that !illenable the controller to assess the control areas and make decisions concerning theextent of the detailed control !ork

elo! is a list of control procedures that may assist as a guide in analysing theinformation available in the Control &ile

Contract• >erify that the contract copy is that of the signed Contract• >erify that the Supplementary #greement copy is that of the signed

agreement• >erify that the Contract and any Supplementary #greements are signed by

an authorised representative• >erify if any Signi(cant Speci(c ro5ect Costs are speci(ed in additional

documents of the contracts H#nnexesF etcJ• >erify if any Special Conditions or Speci(c #nnexes of the ro5ect are

speci(ed in the Contract

udget versus Cost Statements• Compare charges costs in Cost Statement !ith estimated costs in the udget

&or this analysisF a spreadsheet can be used• Compare planned e7uipment purchases according to udgetF !ith actual

purchases according to Cost Statements

eriodic rogress 0eports• 9f this point applies to the pro5ectF verify from the periodic progress reportHsJ

!ho has published Hor contributed toJ articles arising from the pro5ect• @ote planned meetings Hplace and dateJF to be compared !ith supporting

documents of travel and subsistence costs

Cost Statements• >erify that the Cost Statements are signed by authorised representatives• 0econcile the calculations HdepreciationF (xed contributions etcJ• >erify that e7uipment has not been purchased earlier that . months before

the start of the audit• >erify that no account has been taken of exchange gains or losses bet!een

the issues of the Cost Statement and the receipt of any payment• >erify the >#T and taxes status of the contractorF keeping in mind that if a

tax is not borne by the organisation Hthis normally applies only to >#T and tothose organisation registered for >#TJ Subse7uently verify that theorganisation recovers input >#T correctly and in particular verify that there

is no double recovery both from the nation state and from the Commission


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9f a tax is borne by the organisationF then Has per the above de(nitionJ it is acost and therefore eligible This applies to all indirect taxes including excisedutiesF stamp duties and to >#T #s regards >#T this normally refers to

organisations !ho are not registered and !ho cannot recover input >#Telse!here

• >erify that ma5or subcontracts have been sub5ect to prior approval of theCommission if re7uired

• >erify that the Commission has given prior approval for travel andsubsistence cost outside Member States and #ssociated States Hnot re7uiredfor !ork !ith participant in these StatesJ

• Ensure that account has been taken of any 0ecovery Orders issued in thepast concerning the contract in 7uestion


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#0. )LAN

#0.#O"! )LAN


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##. )$ELIMINA$( O)E$ATION"

##.#!ONTA!T IT1 T1E BENEI!IA$(

The )Contract Management 9nformation &orm* mentions the name of the personresponsible for preparing the )Cost Statements* This is normally the person!ho must be contacted to make an appointment This preliminary contact canbe by telephone

Decide on a (rst place and date for the initial meeting 9nform the bene(ciary of the aimsF the scope and the preparation necessary for the mission #lso specifythat the oGcer responsible for pro5ect management should be present duringthe control The provisions made by telephone shall be con(rmed in !ritingF

sub5ect to oGcial approval of the mission in the DA

##.%MI""ION )LAN

The Mission lan has to be attached to the application for mission approval Theplan should include information about( ContractorHsJ( ContractHsJ to be audited( Date for the mission( Date and time of departures8arrivals and Qight numbers( Day-by -day schedule !ith references to contractHsJ to be audited and

ersonHsJ to meetF

( Contact details

##.3!ONI$MATION TO T1E BENEI!IA$(

The arrangements are to be con(rmed to the Contractor in !riting # standardletter could contain the follo!ing6

( 0egulatory frame!ork and general aims of the mission( Envisaged dates( Contacts desired( @ame of the Commission oGcials involved and contact person at the

Commission( Alobal timing schedule and main !ork planned HoutlineJ

( Documents to be held available for the control Heg sta= registerF holidaysheetsF furniture inventoryF etcJ

The letter is approved and signed according to the procedures speci(c to theDAs

#n example of an announcement letter is attached under #nnexe ,

##.'"TA$TIN& DATE O$ T1E O"!

arring any rules speci(c to the DAsF !e can consider that as of the moment!hen the bene(ciary has been advised of the controlF the status of the

controlled subsidy changes from that of )ro5ect* to that of )


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can also consider the date of con(rmation to the bene(ciary as the startingdate for the OSC

##.*U)DATE O T1E DATABA"E

The database recording the trace of the controls can be updated by indicatingfor each audited agreementF according to the registration no allocated to it6

• that the control has moved from )pro5ect* status to )under !ay* status• the starting date for the OSC• persons responsible for the OSC• reason for the OSC HrandomF on re7uestF etcJ• !hich mission the audited subsidy is part of • etc


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#%. T$AN"MI""IBILIT(

)$IN!I)LE O T$AN"MI""IBILIT(

rinciple6 The OSC (leF the OSC plan and more generally all of thedocumentation must be organised in such a !ay that it must be possible for theentire (le to be easily used by another person ence the importance of notingdo!n any relevant information in !riting and of including it in the (le


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#3. $ELATIONAL A")E!T"

#3.#INT$ODU!TION

The aim of the OSC mission is to collectF in a positive climateF the informationneeded to draft a complete and indisputable audit report

9n generalF the approach is as follo!s6

◊ OPENING MEETING

The opening meeting is essential to easing the inevitable tension that occursduring controls of bene(ciaries

During this meetingF you must introduce yourselves to the others and situatethe frame!ork of the OSC mission The control must also be explained #reminder is given of the functions of the auditorF the aims and the auditplanning This is a time for becoming familiar !ith the basic information9t presents an important opportunity to gather information on the varriousaspects of the relationship maintained by the bene(ciary !ith theCommissionF in other !ords the accounting systemF internal controlsFagreementsF cost categoriesF ho! the pro5ect took placeF the diGculties !ith!hich the bene(ciary !as confrontedF the positive points of the pro5ectF etc

The presence of people such as the pro5ect leaderF the (nancial manager andthe internal auditorF !ho possess valuable informationF is therefore essential9t is necessary for the auditor to prepare carefully for this meetingF !ith the

help of a list of 7uestions or points to check in order to ensure the bestpossible meeting

◊ V ISIT

The visit on the one hand involves 7uestioning the appropriate people andthe assessment of the documents presented in the light of the agreementFthe standards andF on the other handF the practical veri(cation that actions!hich are actually implemented correspond to that !hich is !ritten in theprocedures and documents presented

◊ DELIBERATION This refers to deliberation on the part of the audit teamF !hich compiles anddiscusses the information gathered during the visitF the anomalies observed if there !ere anyF and the summary that !ill be sub5ect to control during theclosing meeting

◊ CLOSING MEETING

This is a meeting that allo!s you to take leave of the visited bene(ciary 9t isadvisable to be very cautious during this meetingF and reserve oneLsconclusions 9t can serve to resituate the conditions in !hich the control is

carried out and to prepare the conclusionsF !hich !ill be sent oGcially in!riting by the EC


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This meeting can serve to underline the positive points that !ere noted in thecourse of the OSC

#'. $ULE" O !ONDU!T

#'.#$EMINDE$ O T1E $ULE" O !ONDU!T

◊ GENERAL PRINCIPLE:

0espect for the external representation of the institution

◊ CODE OF CONDUCT

This code should be developed by the DAs and could cover the follo!ingpoints6( Description of the duties of the policy oGcers( 0espect for the operating procedures and the hierarchy of the audited

entity( 0espect for the !ork customs of the audited entity( @o original documents kept

◊ GENERAL RELATIONAL PRINCIPLES:

( #s far as possibleF establish a relationship based on trust Hthrough oneLs

relational 7ualitiesF by demonstrating oneLs skillsF etcJ( Stay calm and in control under all circumstances( #lso keep control over the execution of the mission( no! ho! to sho! adaptability according to the course of events

◊ IN THE CASE OF A PROBLEM

9n the case of a relational or operational problem or a legitimate suspicion6( #void any open conQict( 0efer the matter to the Commission hierarchy in the case of6

( suspicion or discovery of ne! problems implying an ad5ustment orrevision of the ob5ectives

( suspicion of fraud( ma5or relational problems( hindrances to the missionF preventing its smooth functioning and the

achievement of its aims

#'.%$EMINDE$ O T1E IM)O$TAN!E O NON-2E$BAL LAN&UA&E

@on-verbal language is important during the meetings or intervie!s !ith thevarious people representing the bene(ciary ay careful attention to it


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#*. T1E INTE$2IE"

#*.#!ONDU!TIN& AN INTE$2IE

During the missionF it !ill be necessary to conduct various intervie!s !ith thepeople representing the bene(ciaries The aim of these intervie!s is to ans!erthe 7uestions in the OSC plan that !as dra!n up prior to the visit 9n generalFthe intervie! could follo! the follo!ing scheme6

• 0ecap on the aimF• #sk closed 7uestions in order to target the ob5ective to be achievedI• #sk open-ended 7uestions using prepositions H!hatF !henF !hyF !hichF etcJF

in order to establish dialogue on the controlI

• Check that the observed facts tie in !ell !ith the aim to be achievedFother!ise note do!n the points observed and later6( Dra! the attention of the person responsible for the controlled persons to

the nonconformities observed( #nd take them into account in the audit reportF basing your argument on

tangible factsF !ithout rushingI• Make sure not to drift a!ay from the aim to be achievedF and if this occursF

refocus on the sub5ectI• #sk open-ended and comprehensible 7uestionsF other!ise reformulateI• Detect the follo!ing terms to check the rules of exception Hgenerally

speakingF it need beF if necessaryF !here appropriateF etcJ


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#+. E2IDEN!E

#+.#E2IDEN!E DU$IN& T1E O"!#t this stage in the OSC missionF a !ord should be said on the documentaryfactors that !ill support the observations made during the OSC or during theanalysis of the information that the auditor !ill have collected Thisdocumentation !ill be included in the (nal OSC (le

Documentation factors may include6

◊ INUIRIES

These can be in !riting or oral and involve the contractorLs personnel as !ell as

oGcers !ithin the Commission The reliability of evidence from in7uiriesdepends onF inter aliaF the informantLs competenceF experienceF independenceand integrity

◊ DOCUMENTATION

9n this senseF documentation means the auditorLs examination of theContractorLs documents and records Each transaction in the accounts shouldbe supported by at least one document

◊ PHYSICAL E XAMINATION

is an inspection or count of a tangible asset This type of evidence can be usedto verify the existence of e7uipment charged to the contract

◊ OBSERVATIONS

Compared to physical examinationF an observation test does not re7uiredetailed physical inspection or examination of documentationF and hence aperson other than the auditor may perform the observation test o!everF thisdoesnLt mean that the auditor should not make observations #u contraireFobservations are a natural element in any audit

◊ INSPECTION is a revie!F !ithout or !ith a very brief analysis Eg an inspection of theinternal control system !ould result in a descriptionF but !ithout an analysis of its proper operation or e=ectiveness #n inspection of a supporting document!ould be a control of its existenceF but !ithout an analysis of its reliability interms of the existence of the underlying actionF completenessF occurrence etc

◊ ANALYTICAL PROCEDURES

are evaluations of the relationship HratioJ bet!een (nancial dataF or (nancialversus non-(nancial dataF to identify areas re7uiring additional audit attention

The reasons for using analytical procedures are generally to understand the


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ContractorLs businessF his ability to (nance his part of the pro5ectF and toidentify possible misstatements in the (nancial data


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#. DO!UMENTA$( !ONT$OL

#.#T1E DO!UMENTA$( !ONT$OL

9f a documentary control proves necessaryF and taking account of the nature of the on-the-spot missions covered !ithin the frame!ork of this training courseFthe follo!ing guidelines may be applied6

( This control is carried out prior to the materiality auditsF !hich !ill bedetailed laterI

( Depending on the results of this analysisF determine the scope of themateriality audits according to the degree of reliability presented by thedescribed procedures

( Main phases in an systemic-type approach6( resentation by the control of the procedures usedF !ith the help of diagramsF sketchesF circuitsF etc

The preliminary 7uestionnaireF if sent to the bene(ciaryF may make itpossible to gain time here

( #ppraisal of the observance of the internal control principles( Conformity testing( 0isk assessment( #daptation8ad5ustment of the subse7uent materiality audits


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#. ITEM" TO BE AUDITED

#.#$E!U$$IN& )OINT" DU$IN& T1E O"!

◊ INTRODUCTION

During an OSCF it is often the same main cost categories that are remarkedupon Each category shall be examined in greater detail and the characteristicremarks shall be mentioned

#part from the normal documents that !ill be mentioned laterF any documentcan be used to help the auditor in their mission Example6 records of experienceF minutes of meetingsF reportsF etc

&or the study of documentsF intervie!s !ith sta=F visits to the premises and theinspection of machinesF there is al!ays a margin of interpretation that callsupon the good sense and experience of the auditor

2ike!iseF there are general rules or practices !hich are pointed out in this textFbut in order to conduct an OSC mission correctlyF reference must by all meansbe made to the agreement Hand its annexesJ signed !ith the bene(ciaries 9t isthe only reference frame!ork for the relationship bet!een the EC and thebene(ciary

$ight to access to pri>ate ata during control6

2egal basis6 Directives ?,8+. et $;;$8,1 and 0Wglement +,8$;;%

"Droits des ersonnes concernXes6 possibilitX dYinvo7uer lYexception de lYart$; % HbJ6 intXrZt (nancier des communautXsI consX7uence 6 informationHXventuellement di=XrXeJ sur cette limitation et la possibilitX de saisir lYEDS"

The E#TI• Check that the costs have indeed been covered throughout the eligibility

periodF basing your examination on the details of the invoices or on othersupporting documentsI


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This is an indication #ccount must be taken of the countryLs legislationF theindustrial sectorF the labour agreements in forceF etc

2ike!iseF the bene(ciary must be asked ho! many hours are !orked daily bythe various categories of sta=

9n their time calculationsF some bene(ciaries make a distinction bet!een thetime )!orked* and )productive* time )roductive* time excludes activities suchas training hoursF conferencesF seminarsF internal meetingsF studies on generalinformationF etc o!everF these activities are included in the time )!orked*

During the OSCF it is necessary to gain information on the prevailing practiceused by the bene(ciary6 do they normally use the notion of )!orked* or)productive* hours4 9t is this practice that !ill 5ustify the choice of one or the

other method in the Cost Statements

#s a ruleF ho!everF the ma5ority of bene(ciaries use the notion of )!orked*hours

The hours counted as having been spent on the pro5ect cannot exceed the totalnumber of )!orkable* hours for each person Other!iseF the bene(ciary !ouldbe recovering more than their real sta= costs assignable to the pro5ect

9t is clear that the bene(ciary may only count hours as spent on the pro5ectH!ith the exception of overtimeJ if indeed they really have been spent !orkingon the pro5ect

This point is often a!k!ard to checkF and it is one of the most important points!hen conducting an OSC The auditor must in this case call upon theirprofessional 5udgement to decide !hether the time used for the calculation isreasonable

◊ METHODOLOGY

This is a matter of checking the accuracy of the amounts included in the CostStatements !ith the documents available on the spotF on the premises of thebene(ciaryF in other !ords6

4) The attendance sheets Hor timesheetsJHit is generally re7uested that these be kept on a monthly basis andcerti(ed by an authorised personJ

5) The sta= register !ith the calculation of the monthly !ages6) The clocking-in systemF if it exists7) 9f possibleF the !age rate per sta= category8) The details of calculations by the social secretariat or by e7uivalent bodies9) 9n certain casesF the individual pay slips and bank account statements

proving that the amounts have really been paid by the bene(ciary

:) 9n certain casesF the employment contracts for the sta= involved in thepro5ect


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# detailed control method could be as follo!s6

Obtain a table HtimesheetJ for each person participating in the pro5ect !hichindicates all of the hours spent on the pro5ect and the applicable hourly !agerate Hon a periodic payment basis and on a cumulative basis6 generally annualJCheck the mathematical accuracy of the tableF and compare the totals !ith theCost StatementsObtain a copy of the pay register Hsometimes the calculations are made by abody external to the bene(ciaryJ sho!ing for each employee concerned the!age entitlementF the !age deductionsF the net !ageF the cost for theemployer during a given reference period Ha given monthF for exampleJ&or a given sample of personsF reconcile the pay register !ith the accounts of the (nancial accounting system

Obtain a copy of the taxes and charges retained on !ages Hsource6 socialsecretariat for instanceJ and bring them into line !ith the accounts of the(nancial accounting system&or one of t!o !age periodsF bring the net !age to be paid to some employeesinto line !ith the bank statements that mention the names of these employees

Calculation of the hourly !age rate0ecalculation of the hourly rate Hper person or per sta= categoryJ on the basisof the gross !age entitlement and the taxes and social security amounts to bepaid by the employer for the eligibility period This gross !age must be dividedby the hours paid for the eligibility periodCompare !ith the hourly rate given in the timesheets or the Cost Statements

2ook for and re7uest an explanation for ho! the di=erence has occurred#ssess !hether the !ages paid comply !ith the hierarchical level of theemployees participating in the pro5ectF or !ith the rules or ceilings set by theECF !here applicable

One method also consists in comparing the hourly rates used in one pro5ect!ith the hourly rates used in anotherF using the e7uivalent sta= category

9n Euros Seniorengineer

uniorEngineer

Technician

Aross yearly !age /;F;;;;; ,.F;;;;; +?F;;;;;

Calculation method for this!age4

EmployerLs social charges $+F,;;;; %?F;;;;; %/F;;;;;

ie ', '+ ', Taxes and charges on !ages +F$;;;; 'F'.;;; $F?+;;;

ie . . .#nnual !age charged ?1F/;;;; /1F'.;;; .1F?+;;

;

@umber of hours !orked6


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$%. days x /h $. min %F.;1h8year

%F.;1;; %F.;1;; %F.;1;;

ourly !age !orked +#.3 '.3 '%.

@umber of productive hours6%,, days x /h $. min %F%,+h8year

%F%,+;; %F%,+;;

%1? days x /h $. min %F+;/h8year

%F+;/;;

roductive hourly !age8pro5ect *.*3 +./0 '/.00


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Time spent&or a given sampleF research the hours indicated on the timesheets Do this by

referring to other documents HcontractsF clocking-in sheetsF etcJ or by askingdi=erent personsCheck the mathematical accuracy of the timesheets9n order to assess the )reasonable* character of the hours on the timesheetsFmake the comparison !ith documents indicating !ork volume such as the !orkplan of the pro5ectF a scienti(c report or pro5ect activities reportF theprogrammes of conferencesF minutes of meetingsF other publicationsF agendasFtravel and accommodation ticketsF correspondenceF mailF etc y setting thetimesheets against other documentsF it is possible to uncover incoherencies orerrors

The timesheets are generally re7uired to be kept on a monthly basis andcerti(ed by the pro5ect manager or by an authorised person The number of hours mentioned cannot of course exceed the normal hours!orked for the bene(ciary

0emarks6

4)


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the accounts at the end of the pro5ect They !ere distributed on a set basis ata rate of %; hours per monthF !hich seems reasonable to us*

Overall hourly statements !ere presented to us 3e received the speci(cdata for the pro5ect

The hourly rates are averages calculated by sta= category The calculation of hourly rates is based on the # systemF !hich only takes account of productive hours6 out of $%. days8year H%.;1 h8yearJF the engineers supply%,, days of productive !ork H%%,+ h8yearJ and the technicians supply %1?days of productive !ork H%+;/ h8yearJ

9n vie! of the diversity of the sta= categoriesF the hourly rates do notcorrespond to collective agreements The calculation of the hourly rates has

been made for the various sta= categories on the basis of pay sheets The results obtained !ere close to the declared hourly rates

◊ E XAMPLE OF COMMENTS

)The , sta= members do not have personal time-sheetsF but an overallmonthly statement records the cost of the hours !orked for each pro5ect 9n acompany !ith $ people !orking on 0 and ' others on F the executivesta= de(nitely implement a systematic check !ith their colleagues of actualattendance and the !ork carried out

The auditors therefore consider that the hours charged to the pro5ects arereal and can be paid for the employees*

This comment indicates that any type of evidence may be usedF and that youdo not absolutely have to search for a very speci(c documentF unless there issuspicion of fraud9t is a 7uestion of appraisal on the part of the auditor 2ike!iseF if all of thedocuments expected are producedF this does not mean that everything inthem must be accepted ere againF it is a matter of good sense andreference to standards that are either in !riting or taken from practice andobservation

◊ FREUENT ERRORS

The errors detected on the cost statements during an OSC generally stemfrom6• # poor understanding of the contractual clauses• &inancial and administrative management of the pro5ect by unsuitable

sta= • Encoding errors Eg6 $+ hours instead of $+; hours• Currency conversion errorsF eg6 A8E


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• Excessive number of hours that does not correspond to the internaldocuments

• @umber of hours declared in the pro5ect higher than the )!orked* number

of hours• Sta= employed on a short-time basis and recorded as full time on the

pro5ect• Sta= mentioned !ho do not !ork for the pro5ect• Sta= mentioned !ho are !orking on other pro5ects at the same time

Hsubsidised or notJ

#.3O2E$1EAD"

◊ DEFINITION

#lso called )indirect costs*F these )overheads* are costs that comprise all of

the general administrative costs directly linked to the pro5ect managementsuch as6

• communication costs HtelephoneF faxesF postal itemsF mailF etcJI• infrastructure costs HrentalF electricityF etcJ relative to the premises

being used to implement the pro5ectF in proportion to the use of thesesame premisesI

• costs incurred for oGce e7uipmentI• reproduction costs HphotocopiesJ

The reproduction costs for documents and publications areF depending on thecase in 7uestionF included under the "Subcontracting costs" or "Other costs"columns

The )Overheads* column may under no circumstances cover sta= costs orother costs already declared under other entries

The overheads !ill generally be calculated on the basis of a of the total of eligible costs This percentage is generally /F although it and the methodmay vary according to the type of agreement 0efer to the agreement and itsannexes to be certain

◊ DOCUMENTATION AND EVIDENCE

The amount of overheads is a Qat-rate sum # (nancial audit or the

submission of corroborative documentation !ill not be re7uired

0emark69f in the Cost Statements there are errors in the other columnsF the correctionof these errors must automatically lead to the correction of the amountsrecorded under overheads

#.'T$A2EL AND LI2IN& E4)EN"E"

◊ DEFINITION AND LIMITS

Only travel and living expenses that are directly linked to the pro5ectFconcerning precise activitiesF clearly identi(able and pertaining to the


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implementation of the pro5ect shall be considered as eligible They may coverthe expenses incurred by the persons or speakers participating inconferences or seminars

Travel and insurance costs are based on the real costs incurred The mosteconomical tari=s must be used

Travel insurance expensesF up to a reasonable amountF are eligible

@6 Expenses incurred by travel outside the countries of the European


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• 9t must be proven that the travel is necessary to the pro5ect Hrather thanbeing vaguely related to the sector concerned by the pro5ectJ

• Travel dates must clearly coincide !ith the dates and duration of the

meetings of conferences Hthere can be no additional hotel billsJ• 0ecoverable >#T is entered in the accounts

#.*!ON"UME$ AND E5UI)MENT &OOD"


Costs pertaining to the ac7uisition HpurchaseF leasing or rentalJ of e7uipmentand of other material are only eligible if they are essential to the realisation of the pro5ect

Aenerally speaking6

• The choice bet!een leasingF rental or purchase must be based on theleast expensive option The notion of )best value for money* applies

• E7uipment ordered orF better stillF delivered during the pro5ect eligibilityperiod is included 9t is important for the (nal price to be (xed in anindisputable manner

• The installationF maintenance and insurance costs linked to eligiblematerial and e7uipment may also be includedF in proportion to theallocation of the e7uipment to the pro5ect

The depreciation period and rules are calculated according to the customarypractice of the bene(ciary and the country in !hich they are based

The complete calculation to enter the e7uipment expenses in theaccounts is as follo!s6

H# 8 J x C x D

# duration in months during !hich the e7uipment has been used !ithinthe frame!ork of the pro5ect

depreciation periodC real cost of the material excluding >#TD percentage of use of the e7uipment on the pro5ect

Example6During the (rst year H%$ monthsJF the admissible costs for computere7uipment of a value of %;F;;; E


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The follo!ing are considered to be ineligible costs6

( return on capitalI( debts and servicing of debtI( provisions for losses or possible future debtsI( borro!ing ratesI( doubtful debtsI( conversion lossesI( costs declared and covered !ithin the frame!ork of another action or

!orking programme triggering Community subsidisationI( immoderate or ill-considered expenditure


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#/. MI""ION $E)O$T"

#/.#INT$ODU!TION• #ccording to the DAs or unitsF the OSC reports may be organised per mission

Hone mission comprising several pro5ectsF in the same geographical regionJFper pro5ect or per bene(ciary

• #ll systems are valid on the conditionF of courseF that it is possible to 7uicklyretrace !hich pro5ect or bene(ciary has been visitedF !hen and !hat theresults of the OSC !ere

9t is important to remember that the mission reports must be drafted as 7uicklyas possible upon returning from the OSC missionF failing !hich certain details

and nuances observed may be forgottenF even if notes !ere taken &urthermoreFa rapid reaction is necessary !hen the poor use of funds has been observed andit is necessary to recover unduly received amountsF or even to cease allocatingne! pro5ects to the bene(ciary

#/.%"T$U!TU$E O T1E MI""ION $E)O$T"

◊ SUMMARIES

# mission report could be composed of a summary of the mission !ith thename of the bene(ciaries visited y !ay of exampleF see a mission reportunder #nnexe

# presentation report from the bene(ciary makes it possible to situate thecontext of the pro5ects that !ere audited See an example of this report under

◊ E XECUTIVE SUMMARY

This is a concise summary including the ma5or points of the agreement andthe main remarksF particularly if too much has been received by thebene(ciary 9ts structure must be speci(ed according to the internalprocedures of the DAsy !ay of exampleF see t!o Executive Summaries under #nnexe

◊ DETAILED REPORT

The detailed report could contain the follo!ing points6( sub5ect and presentation( motivation( reference to possible signi(cant problems that may have hindered the

smooth functioning of the mission

#ccount of the controls6

Systems approach6( !eaknesses and scope


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( speci(c conclusions and recommendations

Operational controls Heligibility8regularity8materialityJ6( detail on errors and8or problems encountered( systemic character or other!ise of these problems( speci(c conclusions on the eligibility and receivability aspects( (nancial e=ects6 corrections or not H!ith possible extrapolationJ

8recovery8cut in support8amendment of the (nancial data

9n cases !here errors have been encounteredF they may be classi(edF asalready mentioned earlierF as6

( irregularitiesF !hich are intentional distortions in the CSI( errorsF !hich are unintentional mistakes or omissions in the CSI

( remarksF !hich are harmless observations that do not lead to (nancialad5ustments

Each irregularity or error may be given a !eighting6 %; for irregularitiesF % forerrorsF ;% for a remark This makes is possible to )7ualify* the control thathas been carried out #nd to give the pro5ect and the bene(ciary a )grade*that !ill be kept in the database and used to select future OSC missions Onthis sub5ectF see point [ The types of selection \

Aeneral Conclusions( Aeneral assessment6

( #pproval8re5ection8reservation !ith 5usti(cation

( #dditional information to be received( Summation of commercial papers and terms of collection( Summary of speci(c8general recommendations( #ctions to take by control !ith provisional timing( #nnouncement of a possible additional control envisaged( 3arning of a possible referral to the Court of #uditors Hfor information or

otherJ( 3arning of a possible referral to O2#& Hsuspicion of fraudJ

# standard report proposal is attached under #nnexe 9t includes a summary of the observationsF and can be used to generate a database of OSC missions#nother more literary report example can be found under #nnexe %;# table summing up the ineligible costs can also be producedF such as #nnexe

#/.3NOTII!ATION TO T1E BENEI!IA$(

y the time of the OSC conclusionF the bene(ciary has been orally informed of the conclusions that !ere dra!n by the auditors Certain corrections haveperhaps already been made in the meantime

9n any caseF the bene(ciary must be oGcially noti(edF especially if amendmentsor corrections are necessaryF or if (nancial ad5ustments are to be made#n example of a letter of conclusion can be found under #nnexe


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%0. OLLO-U) AND O)E$ATION

%0.#T1E NEED O$ A OLLO-U)#ll on-the-spot check missions and reports that result from them !ould beuseless if a follo!-up organisation or procedure !ere not established andrigorously respected

%0.%T1E "TA&E"

The follo!-up comprises the follo!ing stages6

◊ FOLLOW 2UP OF FINANCIAL IMPLICATIONS

These are taken from the report conclusions and include6( the launch of recovery procedures( the noti(cation of the various people involvedF the CommissionF possible

future ad5ustments to provide for

◊ RECEIPT OF ADDITIONAL INFORMATION

( 9f this has been re7uestedF make sure that the desired additional informationis received in due time

9t may be that the (nal results of the OSC depend on the receipt of documentsF and that !ithout these documentsF ad5ustments could take placeor sanctions be taken

( 0e-evaluation of the conclusionsF subse7uent to the receipt or not of additional information

( reparation and distribution of an additional report HnoteJ for the attention of the audited entity This !ill constitute the (nal conclusions

◊ SPECIFIC RECOMMENDATIONS

#fter the OSCF speci(c recommendations on the audited pro5ects may bemade 9n this caseF the follo!ing should be provided for6

( # follo!-up scheduleF according to the main character of therecommendations

( #ny information on the di=erent people involved in the Commission( The assessment of developments in the implementation of any subse7uent

actions to be undertaken( The extrapolation of the conclusions to other similar agreements or other

similar entities8bodies( Special follo!-up in the case of referral to O2#&

◊ GENERAL RECOMMENDATIONS

These may consist in the extrapolation of the conclusions to the very natureof the types of intervention and (nancing concernedF namely thecontinuationF rene!al or discontinuation of similar actions ased on the(ndingsF a research for potential systemic problem !ill be regularly done Thepotential problems !ill be transmitted to the #OSD concerned for acomplementary expertise

0egularlyF an activity report should be sent to #OD detailing the the controlcarried out P bene(ciaries selected 8 controlledI global resultsI speci(c cases


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and potentiel systemic problems This should be fed back in to the selectionprocess so as to enhance the criteria for selection

◊ FOLLOW 2UP TOOL

9t is necessary to systematise the follo!-up actions that stem from the on-the-spot checkF and to list them on a database that can be accessed by allthose involved in the (nancial and administrative control of the pro5ect6 thepro5ect managerF (nance managerF on-the-spot auditorF etc2ike!iseF it should be possible for those DAs !ho are likely to be interestedby the bene(ciaries audited by other DAs to have access to this information

• Ex )ost !ontro; NetJork HECnetJ6http688!!!cccec8budg8dgb8interdg8dgb-;1;-;1;]epc]enhtml

@et!ork open to ex post controllersI possibility to be registeredand to receive meeting re7uest Every DA having an ex postfunction has designated a representative

CurrentlyF discussions to arrive to a common de(nition Hin &renchJ applicablein all management modes6 "2e contr̂ le ex postF 7ui est optionnel et sXparX la fois de la vXri(cation ex ante et de lYinitiation dYune opXrationF a pour butdYaccro_tre lYassurance de lLordonnateur dXlXguX 7uant au bon usage desfonds communautaires dont la Commission la responsabilitX en vXri(ant labonne exXcution des opXrations dX5 (nancXes HpostXrieurement aupaiement intermXdiaire ou (nalJ au regard de la rXgularitX et de la conformitXainsi 7ue la bonne gestion (nanciWre Ces vXri(cationsF 7ui sont menXes surpiWces et8ou sur placeF peuvent Ztre organisXes par sondage sur la basedYune analyse de ris7ues H#rt +/+ des MEJ ou par Xchantillonnage alXatoireSur la base des constatations opXrXesF lYeGcacitX des composantes de lacha_ne de contr^le HAap assessment I communication du %'8;%8$;;. -SECH$;;.J +?8$J sera apprXciXe"


.;


https://mail.milieu.be/exchweb/bin/redir.asp?URL=http://www.cc.cec/budg/dgb/interdg/dgb-080-080_epc_en.htmlhttps://mail.milieu.be/exchweb/bin/redir.asp?URL=http://www.cc.cec/budg/dgb/interdg/dgb-080-080_epc_en.html


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On-the-spot Check Manual

#@@EBES


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%#. ANNE4E E4T$A!T" O !ON2ENTION MODEL AND ANNE4E"

EUROPEAN COMMISSIONXXXXXXXXXXX DG

Management of resourcesSystem audits & ex-post controls

!OMMENTED AUDIT $E)O$T

44444444 @ 4444444444–4444 – 44444444

Unit6 BBB8B8; articipating oGcials6

BBBBBBBBB DA8;;8;;BBBBBB DA8;;8;;

"es of the


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Ait $eport8444444444444@ 4444444444

4444 – 444444444444

EXECUTIVE SUMMARY

O


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;;;; for the BBBB partner This means a re5ection of V ;;;; On the date of issue of this commented reportF no additional information has been received bythe auditors

• The total incomeF after deduction of the amount covering the costs declared asnon-eligible by the CommissionF is not higher than the agreed minimum speci(ed in the Arant agreement

!onc;sions an $ecoFFenations8# 9f the bene(ciary !ould !ish to be eligible for future grants from the European

CommissionF he has to considerably improve its (nancial management in orderto be able to present a transparentF complete and correct declaration of expensesF ia by using conse7uently the correct booking codes per type of expense The reconciliation of the amounts declared !ith the accountancy andthe underlying supporting documents should be easily possible

% The bene(ciary should also be a!are that as the co-ordinator he is responsiblefor the (nancial reporting as a !hole The co-ordinator must re7uest from all thepartners detailed and speci(ed reporting supported by 5ustifying documents

3 The auditors recommend for the future to introduce signed presence lists for allmeetings of !hich the costs are declared

' On the basis of the available data and documentsF a number of declaredexpenses has to be re5ectedF namely from the partners6 see under &indings andthe tables in #nnexes % and + The total of re5ected expenses amounts to V;;;;;

* On the basis of these (ndings and correctionsF the (nal amount of admissiblegrant is ,;F'? of the total accepted cost6 ,;F'? of V ;;;;; G 000000.#s the European Commission already paid V ;;;;;;;F the auditors recommend

to recover G 0000000.


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Ait $eport844444 @44444–

4444 – 444444444

I!TR"#UCTI"!

OB?E!TI2E" O T1E AUDIT

The audit !as conducted to check the reality of the subsidiRed activitiesF theconformity !ith the conditions laid do!n in the grant agreementF and the realityFaccurateness and correct charging of the declared expenditure 9t !as also veri(ed!hether the declaration by the bene(ciary includes all the revenue generatedduring the period covered by the agreement or income deriving from other sources$EE$EN!E &$ANT A&$EEMENT AND BUD&ET LINE

This audit covered expenditure under Arant #greement BB8;;;;;8;;;;

HS9$;;;;;;J of ;;8;;8$;;;F signed !ith BBBBBBofBBBBB The sub5ect of theagreement is a (nancial contribution from the European Commission to theoperation entitled "BBBB PBBBBBB"F namely ,;F'?

The budget line used is ;-;;;;6 "BBBBBBBBBBB"T1E BENEI!IA$( 444444444@4444 O 444444

BBBBBBis maintained by the BBBBB oint #uthority for >ocational Training H BBBBJand the highest authority is exercised by the Aeneral #ssembly of the oint#uthorityF !ith the Executive oard operating under its authority The administrationof BBBBB is arranged as a public service belonging to the BBBBB having BBBBBBFselected by the Aeneral #ssembly of theBBBBBBB

The BBBBBBBB is an BBBBB of higher education originally founded in %1?+ 9n %?.;F

the BBBBB began to educate engineers and in %??. it has been incorporated inBBBBBB The BBBBB of BBBBB accounts for +; of BBBBBB total annual ne!students and has more than $;;; full time students 9t has foreign partners in $$di=erent countries around the globe 9ts aim is to internationaliRe and develop itseducation methods by co-ordinating and acting as a partner in several pro5ectsfunded by the European #T can be recovered so all declared expenses are Hto beJ >#T-excluded9nternal rules exist for travellingF use of mobile telephoneF planning andmanagement of pro5ects Htechnically and (nanciallyJ


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T1E )A$TNE$"

9nternationalBBBBBBBP elgium is #ssisting pro5ect co-ordinator as !ell as co-(nancing partner

+ transnational partnersF !ho also co-(nanced the pro5ect6

• BBBBBB

• BBBBBB

• BBBBBB

• BBBBBB

%' national8regional8local partnersF as participants to the activities6

- BBBBB

-BBBBB

-BBBBB

-BBBBB

T1E &$ANT A&$EEMENT

◊ SUB3ECT OF THE AGREEMENT

The application !as based on the Call for proposals BB8;;;8;; published on;;8;;8%??1 in the OGcial ournal C;;; p ;;-;; This pro5ect focuses on increasing female participation in information and computertechnology education and professions in selected regions of + participating E<countries These countries have a common denominator of a signi(cant shortage of BBBB The approach in BBB is to designF develop and pilot a program by !hich isattempted to inQuence pupils8teenagers8young adults in their education and careerselection through their teachersF tutors and parents The developed material andmethodology used is disseminated nationally and European!ide throughorganiRations involved in the pro5ect as Yest practices of e7ual opportunitiesenlightening actions among BBBB in EuropeY

◊DURATION

The period covered by the agreement is %$ calendar months starting ;;8;;8$;;$Only expenditure incurred during this period is eligible The actual !ork started inSeptember $;'; The bene(ciary received the grant agreement for signature in thebeginning of October $;';

◊ BUDGET

The estimated cost of the !ork programme !as V ;;;;F-#mount committed by the Commission 6 V ;;;;F- Hco-(nancing rate of ,;F'?JI thisis the maximum (nancial contribution from the Commission@o contingencies are accepted as part of the for!ard budget H#rt '% of the Arant#greementJ #ccording to the Call for roposals HBBBBBBJ "` a minimum of %, of the total acceptable pro5ect costs must be co(nancing in cash Contributions in kind


..



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can be taken into account up to a maximum of $, of the total acceptable pro5ectcosts"

◊

◊ FINANCIAL FLOW

#mounts paid by the Commission6

advance payment of ';6 V ;;;;advance payment of +;6 V ;;;;;(nal payment of V ;;;;;------------------------------------------------------------

in total6 V ;;;;;;;

◊ FINAL DECLARATION OF EXPENDITURE

The breakdo!nF per headingF of the expenditure is provided belo!61EADIN&" rovisional budget

as annexed to theagreement in V

Expenditure asdeclared by thebene(ciary in V

Expenditure asaccepted by theoperational unitbefore the audit

% Contributions inkind

;;;F- ;;;;;; ;;;;;

$ Sta= ;;;F- ;;;;;; ;;;;;' Travel ;;;F- ;;;;; ;;;;;+ Services ;;; ;;;; ;;;;;, #dministration ;;;- ;;;; ;;;;. Contingencies ;;;F- ;;;;F- ;;;;;F-/ Overheads ;;; ;;;;; ;;;;;TOTAL !O"T 00000 000000 0000000

The re5ection of V ;;;;;; sta= costs is because of the exceedence !ith more than%; of the budgeted amount The re5ection of V ;;;;; overheads is because theoverheads are limited to / of the total amount of eligible direct costs


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%%. INDIN&"

T1E 44444 !O-O$DINATO$ 444 44444 The auditors performed an in-depth check of a sample of the supportingdocumentation relating to the activities foreseen under the !ork programme Thefollo!ing observations arise6reliminary remar# %J The presentation of the documents did not easily allo! to make the link bet!een

the declaration sent to the CommissionF the accounts and the 5ustifyingdocuments The bene(ciary could often not indicate ho! the amounts declaredto the Commission had been calculated # considerable e=ort !as needed to linkthe declared amounts !ith the accounts and the auditors believe that thebene(ciary has attempted to reconstruct the declaration at the time of the audit

on the basis of the pro5ect costs indicated in the ledgerF in such a !ay to coverat least the amounts declared This !as not al!ays possible 9t must be clearthat this practice is not good (nancial management and unacceptable in future3here the costs declared !ere less than indicated in the ledgerF the auditorshave accepted the costs

eading 3 4 (ontributions in #ind$J #s contributions in kindF the bene(ciary declared sta= costs for !ork devoted to

the pro5ect but Unot paid by the European CommissionL The calculation of thevalue of this in kind !as done on the basis of the !orking hours of + persons onthe payroll of BBBBB and + persons HteachersJ employed by the BBBBB The!orking hours of the BBBBBB BBBB are included in the U3orking time recordL

Hsee eading Sta= costsJ The exact value could not be checked in thebookkeeping as these sta= costs !ere not booked on the BBBB-pro5ectF but arepart of the overall sta= costs of the bene(ciary or of the City of BBBB

eading 2 5 ta" costs'J &or the duration of the pro5ectF a U3orking time recordL !as presented enlisting

the persons !ho had !orked on the pro5ectF their tasks and the time devoted tothese tasks #s re7uired by BBBB la!F independent external service providershave to be put on the payroll for the duration of the service The salary costfound in the ledger booked on the BBB-pro5ect is V ;;;;; !hile V ;;;;F- hasbeen declared

eading 6 4 Tra$el+J # sample of supporting documents for travel and accommodation !as checked

and found to be correct &light tickets are booked through a travel agency calledBBBB and directly paid to it OftenF boarding passes are replaced by the use of areservation number and passport The split bet!een travel costs andaccommodation costs !as not al!ays precisely applied Hcodes ++$+ and ++$,J

The ledger enlists V ;;;;; travel and accommodation costs for the conference in une $;;%I V ;;;;F- has been declared The ledger enlists in total V ;;;; traveland accommodation costsI in total V ;;;;F- has been declared


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eading 7 4 er$ices

,J &or this headingF it !as extremely diGcult to reconcile the amounts declared!ith the ledger art of this !ork had to be continued after the on-the-spotcheck ThereforeF the number of samples taken from the supporting documents!as more limited than the usual sample dra!n by the auditors The auditors inpriority paid attention to the risk of double claiming of the same expenses Theauditors had re7uested the bene(ciary to send explanatory information on ho!the amounts declared on this heading have been composed The bene(ciary hassent shortly after the audit an Excel-sheet concerning the items 1aF 1bF 1cF 1dand %;d

.J 9tem 1 U9nformation dissemination costsL !as subdivided in + parts&or publications and printed matter other than for the conference Hitem 1aJF theauditors (nd in the ledger V ;;;;;; Hunder code ++;' except the amounts

booked on the conferenceJ !hile V ;;;; has been declared 9n the Excel-sheetFthe bene(ciary enlists bills Hall retrievable in the ledgerJ for a total of V ;;;;Conse7