First Class Support for Excellence in Research Marie Curie Monitoring Action and Information Days Barcelona, June 9th-11th 2010 Rita, BULTYNCK-LEPOUDRE

First Class Support for Excellence in Research

Marie Curie Monitoring Action and Information Days

Barcelona, June 9th-11th 2010 Rita, BULTYNCK-LEPOUDRE

Unit A.2 - Finance

Presentation of the REA ex-post Audit processes


Today’s agenda

1. Presentation REA Audit processes and procedures Preparation

Execution

Follow up

2. Presentation about Marie Curie Actions financial rules General financial rules for Marie Curie Actions

Details on actions

3. Questions & Answers

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• The REA may, at any time, during the contract, and up to five years after the end of the project, arrange for audits to be carried out.– Technical review– Technical scientific audit– Financial audit

• Audits may be carried out either by REA staff or by private audit firms mandated by the REA.

• An Annual Audit Plan has been established in line with the FP7 general audit strategy.

• Technical Audits can be performed at the same time as financial audits

Ex-post Audit of grants beneficiaries


Aims

• The aim of the ex-post financial audits is 1. verifying contractor’s compliance with the financial

contractual provisions, 2. assessing the legality and regularity of the

transaction, underlying the implementation of the Community budget.

3. reviewing of some relevant systems of internal controls of the Contractor in order to assess whether it is adequate and sufficient to ensure that costs incurred by the Contractor on EC-research funded projects are correctly allocated to those specific projects and recorded as such in the accounting records.


Ex post Audits by REA auditors

• Approx. 20% of audits • Mostly used for risk based

audits, for which a specific audit programme tailored to the identified risks is required

• Specific audits (follow-up, requests, …)

• Consistency with Research family audits

Audits: In-house / Outsourced

Ex post Audits by

Contracted audit firms

• Approx. 80% of audits • i.e. representative selection

and audits of top beneficiaries

• Supervision of the audit process by REA services

• Consistency with Research family audits

AUDIT ON REQUEST: Performed by auditors on Operational units requests Could be triggered by irregularities during project implementation


Audit Cycle

Audit Strategy & Selection

Planning & Preparation

Examination on site

Reporting &Audit Closure

Implementationof Audit Results+EXTRAPOLATION

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Preparation: audit of selected beneficiaryPreparation: audit of selected beneficiary

• Selection of Grant agreementsSelection of Grant agreements

Based on various criteriaBased on various criteria

• Creation of audit fileCreation of audit file

Gathering of info from:Gathering of info from:

-- REA operational servicesREA operational services

-- external sources; e.g. internet external sources; e.g. internet


Preparation: Audit on-the-spot

• Initial contact by the responsible auditor approx. 1-2 month before examination on site to agree on dates and logistics

• Formal letter to announce the audit including detailed annex on information and documentation to be provided


• Detailed annex to announcement letter includes precise list of information to be provided either– Prior to the audit examination on site (by mail)– At the time of the audit examination

• Most relevant information in the early preparation are the detailed project accounts matching the total as claimed in the financial statements (Form C)

• Exact information requests to be provided in advance also depending on the individual project (s) and audit scope

Planning & Preparation: Information requested


Examination on site

Openingmeeting

Analysis of Systems in place

Test of systemsand substantive

evidence

Closuremeeting

Assessmentafter on site

visit

Usually within 4-5 working days (one week) (…)

General info on:

• organisation

• projects

• financial administration

• internal control system

Clarification on audit agenda for further days

Analysis of documents and explanation received and collection of audit evidence

Discussion ofpreliminary findings andobservations

Indication of further audit procedure

Interviews


Reporting and Closure of the Audit

• Transmission of Draft audit report (after internal consultations and quality control) for comments by the audited organisation– Usually based on the preliminary conclusions– Delay (30 days) to provide comments to the draft

• Consideration of comments and finalisation of the audit report

• Closure of the audit by formal letter indicating – where appropriate - the further procedures on the implementation of audit results


Implementation of Results: Cases

No findings

Financial Adjustment

(Only) qualified recommendation

Non-systematicfinding identified

Systematicfinding identified

Implementation finalised

Correction of future payments or recovery by the responsible financial services

Extrapolationof audit results

Follow-up Audit


Follow-up: liquidated damages

• Financial penalty due for overstatement of expenses, unjustified financial contribution received from the Commission/REA

• Only due for the reporting period under question

• When due, has to be paid together with the unjustified financial contribution

• Will be claimed by the mean of Recovery orders issued by REA


The extrapolationThe extrapolation

Initiation ImplementationDecision Follow-up MonitoringManagement Launch

Final Audit reportThe auditor submits theextrapolation request

ESC meetingExtrapolation decision

Audit closing phaseContract selection

Audit closureLetter of conclusions sentExtrapolation start

Reception of revised coststatements &supporting documents

45 days / 3 months

+ additional deadline

AdjustmentsRecoveries

Eventual follow-up audit

A long process (up to 2 years)


1 VAT included in the cost charged VAT

2 Other taxes included on a systematic basis Taxes

3 Incorrect calculation of overheads Overhead

4 Other Ineligible items included (like sales/marketing costs/bonuses) Ineligible

5 Average vs. actual costs Average vs Actuals

6 Budgeted, standard, estimated or fixed rates used instead of actual costs Budgeted/standard/estimated

7 Adjustment in productive hours calculation Prod. Hours

8 Unreliable/missing timesheets/ alternative evidence used Timesheets

10 Wrong depreciation method used/no depreciation applied Depr. Method

11 Wrong calculation method used Calc. Method

12 Unjustified change in direct costs model Change Ind. Costs

13 Other reasons (i.e. double charging, no supporting docs, not for project, outside project period)

Other

14 Wrong exchange rate Exch. Rate

15 Owner manager costs estimated/not substantiated Owner Mgr.

16 Marie Curie flat rates vs. actual cost issue MC flat rates

17 Lack of reconciliation of costs claimed/weaknesses internal control No reconciliation

18 Non declaration of interest on pre-financing Interest Pre. Financ.

Main findings leading to extrapolation (FP6)Main findings leading to extrapolation (FP6)


Muchas Gracias !

Rita Lepoudre - Bultynck

Head of Unit Finance Research Executive Agency

COV2 15/132, 1049 Brussels ( +32-2-29613407)

[email protected]

Documents

First Class Support for Excellence in Research Marie Curie Monitoring Action and Information Days Barcelona, June 9th-11th 2010 Rita, BULTYNCK-LEPOUDRE