Structural Funds in Ireland Financial Management, Control & Audit - Ireland

Structural Funds in Ireland
Financial management,
control & audit - Ireland
Dermot Byrne
Head of Unit
ERDF (& Cohesion Fund) Financial Control Unit,

Ministry of Finance, Ireland
OPEN DAYS – Brussels, 13 October 2005

Overview
 Background to Structural Funds in Ireland 2000/06
 Current financial control and audit model in Ireland
 Contrast Interreg and ERDF structures
 Changes & challenges for future

Ireland 1985-2005
1985 2005
Debt/GNP ratio: 131% 30%
Unemployment: 18% 4.4%
 Population 4.04m – most rapidly expanding population in Europe

annual increase of 1.6% / EU average 0.3%
 Average GDP growth 1997-2003 = 7.6%

 GDP growth of 5% per annum in 2004, 2005
 Average EU 15 growth < 2.5%
 Per capita GDP second highest in Europe after Luxembourg

National Development Plan
2000-2006
Border, Midland & Western

Region (OBECTIVE 1)
Southern & Eastern Region

(OBJECTIVE 1 in transition)
National Development Plan 2000/06
Operational Programmes
EU Total
€m €m
Economic and Social Infrastructure 1,491* 26,020

Employment and Human Resources 901 14,200 (no ERDF)
Productive Sector 282 7,340
Southern & Eastern Region 572 5,380
Border, Midlands & Western Region 400 4,094
PEACE 106 141
Technical Assistance 5 10
3,757 57,185
* Includes approx. €570m from Cohesion Fund

ERDF Cascade Structure
Ireland
Paying
Ministry of Finance
Authority
Managing
Regional Assembly or Government Ministry
Authority
Intermediate
Government Ministry or Agency
Body
Local Authority or State Agency Final Beneficiary
Private firm receiving grant aid Final Recipient

Regulation 438/2001
Management & Control Systems Audit function

(Article 4) (Article 10)
Systems (structures & procedures) Independent verification of

to ensure the delivery of products (a) Management & Control Systems
and services co-financed by EU, (b) Expenditure declarations
ensure compliance with national
and Community rules (eligibility, in order to give an opinion/assurance
public procurement etc). Systems on the effectiveness of (a) M&C Systems
should include on-the-spot checks. and (b) accuracy of expenditure
declarations & supporting records.
ex-ante: ex-post:
authorisation, segregation of (a) Systems audits
duties, accounting, physical, (b) Minimum 5% verification (audit)
Including written procedures
ERDF Financial management,
control and audit structure
DG Regio Audit
ERDF Financial Paying Internal

Control Unit Authority Audit
Managing Internal
Authority Audit
Intermediate Internal
Body Audit
M5% verifications
Systems audits Final Beneficiary Internal

Audit
Final Recipient
(ERDF grant)
Key reporting relationships
DG Regio Audit Sponsor - Audit Partnership
ERDF Financial
Control Unit
Managing Paying
Authority Authority
Management of programme Certification of expenditure to the Commission

Summary - audit objectives
 Audit trail – complete and accurate supporting documentation at all levels
 Compliance with Eligibility Rules
 Compliance with Procurement rules
 Ensure adequate monitoring / cost control (Article 4 spot checks)
 Ensure that publicity / information requirements are met
 Comprehensive Procedures Manuals (including EU regulatory requirements)

Financial Control Unit
Structure and Key Activities
 Functionally independent of Paying Authority
 Legally supported by Statutory Instrument (Ministerial Directive)
 Co-funded by the European Union – 50% Technical Assistance
 Carries out sample checks – minimum 5% (ERDF)
 Responsible for planning, coordination & review of Systems Audits (ERDF)
 Body designated to issue declarations on winding up of assistance
 Administrative Agreement with DG Regio Audit / Internal audit units
 New development - “Contract of Confidence” with DG Regio

Contract of Confidence
 Single audit – “partnership” concept
 Audit strategy submitted to DG Regio (for Programme period, not just a year)
 Assurance on methodology and quality of audit in MS (e.g. risk assessment)
 Exchange of audit reports
 Annual report by MS Audit Authority
 Annual certification / Declaration of assurance
 Systematic feedback by the European Commission
 Facilitate reduced audit effort by EU audit services in Member State

Contrast: Interreg IIIB (NWE) v ERDF
Interreg IIIB (North West Europe) ERDF Ireland
European European
Commission Commission
Paying ERDF Paying Internal

Authority Financial Authority Audit
Control Unit (Min. of Finance)
Managing Managing Internal

Authority Authority Audit
(S&E Reg. Ass)
Joint Secretariat Intermediate Internal

(Lille) Body Audit
Internal
Lead Partner Irish Partner Final Beneficiary Audit
Interreg audit arrangements
 Member State is responsible for minimum 5% verifications …
 Expenditure declarations do not go through cascade structure (as ERDF)
 FCU has no direct access to Paying Authority / Managing Authority records
 Relies on information from PA / MA to facilitate audit of Partner in Ireland
 Southern & Eastern (S&E) Regional Assembly is liaison body in Ireland, but
 S&E Regional Assembly have no financial function (e.g. no Article 4 checks)

2007/13 – Challenges?
 Member State Audit Authority likely to be FCU
 Compliance Assessment Body likely to be FCU – review of proposed structures

and procedures at beginning of round + opinion as to adequacy
 If Structural Funds proportion is low, only national rules apply
 National audit strategy – basis for mutual confidence
 Adequate methodology
 Coordination of audit activity at central level in each MS (by who?)

Contact the FCU at:
ERDF Financial Control Unit

15 Lower Hatch Street,
Dublin 2
Ireland.
Phone: 353 1 639 6217

Fax: 353 1 639 6201
E-mail: eucontrol@finance.gov.ie
Annual Reports (1999 - 2004)

www.csfinfo.com (publications/annual reports)

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Structural Funds in Ireland

ERDF (& Cohesion Fund) Financial Control Unit,

OPEN DAYS – Brussels, 13 October 2005

 Background to Structural Funds in Ireland 2000/06

 Current financial control and audit model in Ireland

 Contrast Interreg and ERDF structures

 Changes & challenges for future

 Population 4.04m – most rapidly expanding population in Europe

 Average GDP growth 1997-2003 = 7.6%

 Per capita GDP second highest in Europe after Luxembourg

Border, Midland & Western

Southern & Eastern Region

Economic and Social Infrastructure 1,491* 26,020

* Includes approx. €570m from Cohesion Fund

Local Authority or State Agency Final Beneficiary

Private firm receiving grant aid Final Recipient

Management & Control Systems Audit function

Systems (structures & procedures) Independent verification of

ERDF Financial Paying Internal

Systems audits Final Beneficiary Internal

DG Regio Audit Sponsor - Audit Partnership

Management of programme Certification of expenditure to the Commission

 Audit trail – complete and accurate supporting documentation at all levels

 Compliance with Eligibility Rules

 Compliance with Procurement rules

 Ensure adequate monitoring / cost control (Article 4 spot checks)

 Ensure that publicity / information requirements are met

 Comprehensive Procedures Manuals (including EU regulatory requirements)

 Functionally independent of Paying Authority

 Legally supported by Statutory Instrument (Ministerial Directive)

 Co-funded by the European Union – 50% Technical Assistance

 Carries out sample checks – minimum 5% (ERDF)

 Responsible for planning, coordination & review of Systems Audits (ERDF)

 Body designated to issue declarations on winding up of assistance

 Administrative Agreement with DG Regio Audit / Internal audit units

 New development - “Contract of Confidence” with DG Regio

 Single audit – “partnership” concept

 Assurance on methodology and quality of audit in MS (e.g. risk assessment)

 Exchange of audit reports

 Annual report by MS Audit Authority

 Annual certification / Declaration of assurance

 Systematic feedback by the European Commission

 Facilitate reduced audit effort by EU audit services in Member State

Interreg IIIB (North West Europe) ERDF Ireland

Paying ERDF Paying Internal

Managing Managing Internal

Joint Secretariat Intermediate Internal

 Member State is responsible for minimum 5% verifications …

 Expenditure declarations do not go through cascade structure (as ERDF)

 FCU has no direct access to Paying Authority / Managing Authority records

 Relies on information from PA / MA to facilitate audit of Partner in Ireland

 S&E Regional Assembly have no financial function (e.g. no Article 4 checks)

 Member State Audit Authority likely to be FCU

 Compliance Assessment Body likely to be FCU – review of proposed structures

 If Structural Funds proportion is low, only national rules apply

 National audit strategy – basis for mutual confidence

 Coordination of audit activity at central level in each MS (by who?)

ERDF Financial Control Unit

Phone: 353 1 639 6217