Model for the Compliance Assessment Exercise

1. EUROPEAN COMMISSION
DG Regional Policy & DG Employment, Social Affairs and Equal Opportunities
EN
Guidance on Compliance
Assessment
Technical Group Meeting
Compliance
Assessment
Brussels, 27 March 2007

2. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Outline of the Presentation
 Introduction
 Legal Basis
 Time Limits
 Description of the Management and Control
Systems
 Planning
 Work to be carried out
 Report and Opinion on Compliance
Compliance
Assessment
Brussels, 27 March 2007 2

3. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Introduction
Purpose of the guidance note
– To provide practical guidance on:
• Who
• When
• How
– To propose a model report and a checklist
for the compliance assessment exercise
Compliance
Assessment
Brussels, 27 March 2007 3

4. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Legal Basis
 Art 71 (2) & (3) of Regulation (EC) 1083/2006
– A report giving an opinion on compliance with articles 58 to
62 should accompany the description of management and
control systems to be provided as per art 71 (1) of the
Regulation (EC) 1083/2006 and art 21 and annex XII of the
Regulation (EC) 1828/2006.
– Audit authority or a public or private body
• Functionally independent of the managing and certifying
authorities
• Take into account the internationally accepted audit standards
 Art 25 and annex XIII of Regulation (EC) 1828/2006
– Basis on which the Compliance Assessment body will base
the report and opinion
– Possibility to take into account results of the 2000-2006
period where the systems are essentially the same
– Model opinion (annex XIII)
Compliance
Assessment
Brussels, 27 March 2007 4

5. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Time Limits
 Before 1st interim application for payment or
within 12 months of the approval of the OP
 Phases:
– Reception of a definitive formal overall
description of the systems: key date and starting
point of the assessment
– First analysis to decide the work to be done
– Performance of the work, gathering information
and analysis of data (see below)
– Preparation and validation of the report, including
initial contradictory phase
– Submission of the system description, report and
opinion
Compliance
Assessment
Brussels, 27 March 2007 5

6. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Time Limits (Continued)
 Two possible outcomes:
– No reservations => the Commission has 2 months to
provide observations
– Reservations: submission of action plan, i.e. corrective
measures & timetable of implementation
• To be underlined: action plan submitted by the
bodies/authorities concerned by the reservation to the
Compliance Assessment body, but confirmation of the
implementation of the corrective measures by the Compliance
Assessment Body
• Upon Confirmation of implementation of the corrective
measures and withdrawal of reservations => the Commission
has 2 months to provide observations
– On absence of Commission observations within 2 months,
the report and opinion are deemed accepted.
Compliance
Assessment
Brussels, 27 March 2007 6

7. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Description of the Systems
 Different authorities responsible for different parts
– Managing authorities assume the responsibility for the
description of intermediate bodies under their supervision
– Certifying authorities assume the responsibility for the
description of intermediate bodies under their supervision
– The audit authority assumes the responsibility for all audit
bodies
 The Commission recommends the designation of a
coordinating authority, which will assume the
responsibility for the submission of the definitive
formal overall description
 Possibility to have a common description for more
operational programmes
– Common key elements
– Generally, common authorities
Compliance
Assessment
Brussels, 27 March 2007 7

8. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Planning
 Realistic planning needed taking into
account:
– Examination of the systems description
– Examination of relevant documents (laws,
circulars, manuals etc)
– Examination of the results of previous audits
– Examination of the IT and accounting systems
– Interviews with staff
– Adequate time for an initial contradictory
procedure
Compliance
Assessment
Brussels, 27 March 2007 8

9. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Planning (continued)
Possibility to assess IBs on a sample
basis
– Exceptional cases where there are
complex structures with numerous IBs
– Adequate risk analysis should be done
– IBs functioning under the same
administrative framework and exercising
similar functions
– Focus on responsibility of MA and/or CA
Compliance (control & supervision)
Assessment
Brussels, 27 March 2007 9

10. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Work to be carried out
 Overall objective of the exercise: to provide
an opinion
– Adequacy of the design of the systems and not
on their practical effectiveness
– Possibility to perform tests on the functioning of
the systems, but not required
 Checklist developed by the EC and
recommended
– Minimum level of analysis
– Can be expanded/enriched according to MS
needs/specificities
 Maintain a full audit trail of the work done
Compliance
Assessment
Brussels, 27 March 2007 10

11. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Work to be carried out (continued)
Flowchart of work
Checklist with detailed queries leading to a
conclusion for each authority/body
Report with conclusion for each authority/body
leading to an overall conclusion
Opinion based on the
overall conclusion
Compliance
Assessment
Brussels, 27 March 2007 11

12. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
Work to be carried out (continued)
 Where the audit authority is the Compliance
Assessment body:
– Declaration of Competence and Operational
Independence
• All relevant parts of the checklist completed taking into
account
– Internationally accepted audit standards
– Functional independence of the audit authority
– Other possibilities
• Assessment of the audit authority by different
departments
• Assessment of the audit authority by separate public or
Compliance private audit body
Assessment
Brussels, 27 March 2007 12

13. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
The report on compliance
 Introduction
– Objectives
– Body that draws the report
– How the functional independence is ensured
 Methodology
– Use of previous audit work
– Period where the work was performed
– Checklists/tools used
– Interviews with staff carried out
– Initial contradictory procedures
– Method used to assess the audit authority
– Conformity with internationally accepted audit standards
 Risk analysis (in order to better plan the work or in case of IBs
assessed on a sample basis)
– Identification of common systems
– Risk analysis by programme/system and link with work done
Compliance – Specific risk analysis for new elements/systems/authorities
Assessment
Brussels, 27 March 2007 13

14. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
The report on compliance (continued)
 Scope of the work
– System description
– Relevant documents
– Interviews with staff (criteria for selection of staff, extend of
interviews)
– Accounting and IT systems
– Use of other audit work
– Limitations on scope
 Result of the assessment
– Per authority
• Completeness of description
• Conclusion/shortcomings
• Priority axes affected
• Key/ancillary elements concerned
Compliance • Recommendations/corrective measures
Assessment
Brussels, 27 March 2007 14

15. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
The report on compliance (continued)
 Result of the assessment (continued)
– On general principles as referred to in article 58 of
Regulation (EC) 1083/2006
• Separation of functions
• Procedures to ensure the correctness and regularity of
expenditure
• Accounting, monitoring and financial reporting
• Procedures to ensure adequate audit trail
• Reporting of irregularities and accounting of recoveries
 Overall conclusion
– Overall conclusion with regard to compliance with articles
58 to 62
– Priority axis/axes concerned if there are reservations
– Corrective measures requested
Compliance – Follow up foreseen by the compliance assessment body
Assessment
Brussels, 27 March 2007 15

16. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
The opinion on compliance
 Unqualified:
– The systems are compliant with articles 58 to 62
of Regulation (EC) 1083/2006
 Qualified
– The systems are compliant with articles 58 to 62
of Regulation (EC) 1083/2006, but there are
reservations with regard to some aspects
 Adverse
– The systems are not compliant with articles 58 to
62 of Regulation (EC) 1083/2006 and there are
important reservations
Compliance
Assessment
Brussels, 27 March 2007 16

17. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
The opinion on compliance (continued)
Key elements of the systems
– Concern the main aspects of the systems
as set out in Regulation (EC) 1083/2006
(Articles 58 to 62)
– Indicative list in the guidance note on
compliance assessment
Ancillary elements of the systems
– Concern secondary aspects of the
Compliance systems
Assessment
Brussels, 27 March 2007 17

18. EUROPEAN COMMISSION
DG Employment, Social Affairs and Equal Opportunities & DG Regional Policy
EN
The opinion on compliance (continued)
Exercise appropriate professional
judgement:
– To assess the seriousness of the findings
– To make recommendations or to qualify
the opinion
The opinion should be consistent with
the individual conclusions.
Compliance
Assessment
Brussels, 27 March 2007 18

19. EUROPEAN COMMISSION
DG Regional Policy & DG Employment, Social Affairs and Equal Opportunities
EN
Thank you for your
attention!
Questions and Answers
Compliance
Assessment
Brussels, 27 March 2007