Guidelines for the organisation of control systems · Guidelines for the organisation of management and control systems a nd for the preparation of audit trails _____ 7 The application

MINISTERO DELL’ECONOMIA E DELLE FINANZE DIPARTIMENTO DELLA RAGIONERIA GENERALE DELLO STATO

ISPETTORATO GENERALE PER I RAPPORTI FINANZIARI CON L’UNIONE EUROPEA - IGRUE

MANAGEMENT AND CONTROL SYSTEMS FOR ASSISTANCE GRANTED UNDER THE

STRUCTURAL FUNDS FOR THE PERIOD 2000 – 2006 PURSUANT TO ARTICLE 38 OF THE EC

REGULATION No. 1260/99

Guidelines for the organisation of management and control systems and

for the preparation of audit trails

July 2001

Guidelines for the organisation of management and control systems and for the preparation of audit trails _____________________________________________________________________

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TABLE OF CONTENTS INTRODUCTION ......................................................................................................... 3

Purpose of the Guidelines .......................................................................................... 3 Contents of the Guidelines ......................................................................................... 4

SECTION A – GUIDELINES FOR THE ORGANISATION OF MANAGEMENT AND CONTROL SYSTEMS ........................................................................................ 5

1 Introduction and Objectives.................................................................................... 5 2 Reference regulations .............................................................................................. 6 3 Organisational principles at the foundation of the management and control system.................................................................................................................................... 8

3.1 Integration of management and control system components........................... 8 3.2 Separation of functions .................................................................................. 10 3.3 Risk assessment ............................................................................................. 10

4 Organisational models ........................................................................................... 11 4.1 Macro-structure .............................................................................................. 11 4.2 Routine management and control .................................................................. 16 4.3 Second- level control and intervention completion statement ........................ 19 4.4 Other controls................................................................................................. 20

SECTION B – GUIDELINES FOR THE PREPARATION OF AUDIT TRAILS ..... 21 1 Methodology ......................................................................................................... 21

1.1 Introduction and objectives ............................................................................ 21 1.2 Applied methodologies .................................................................................. 23 1.3 Description and charting of management and control processes ................... 26 1.4 Definition of filing practices.......................................................................... 29 1.5 Definition of accounting records.................................................................... 32

2 Proposal for the creation of an audit trail.............................................................. 34 2.1 Introduction.................................................................................................... 34

2.2 Presentation model............................................................................................. 34 2.3 Operating manual........................................................................................... 37 2.4 Audit trail management practices .................................................................. 39

3 Examples ............................................................................................................... 40 3.1 Example of audit trail for Class of Operation 1. CONSTRUCTION OF PUBLIC WORKS .................................................................................................................. 41 3.2 Example of audit trail for Class of Operation 2. PROCUREMENT OF GOODS AND SERVICES ............................................................................................................... 54 3.3 Example of audit trail for Class of Operations 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES .............................................................. 66

GLOSSARY ................................................................................................................ 79


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INTRODUCTION

Purpose of the Guidelines The European Council Regulation No. 1260/99 introduced major innovations in the procedures for the management and control of the interventions co-financed by the Structural Funds, in view of assuring higher effectiveness and transparency to the use of the financial resources available at national and Community levels. Pursuant to Article 38 of the above mentioned Regulation, member States are required to adopt a series of measures aimed at assuring that funds are used rationally, correctly and according to sound financial management principles (in compliance with Community policies and subject to the limits set forth in respect of the rules on eligible expenditure). In order to assure that the provisions of Article 38 of Regulation No. 1260/99 are complied with the implementing provisions of CSF 2000-2006 provide that the Ministry of the Treasury, Budget and Economic Planning, RGS Department - I.G.R.U.E., co-ordinate and direct the actions aimed at implementing management and control systems, also in view of their harmonisation, and that such Ministry supplies guidelines to the Management Authorities of programmes for the preparation of an appropriate audit trail able to detect and check all the elements connected to the implementing procedure of actions and/or projects. The purpose of this paper is to provide the Administrations concerned with guidelines in respect of the organisation and implementation of management and control systems, as well as the necessary instructions to determine and prepare the audit trail. This paper drafted in cooperation with Ernst & Young and Ecosfera is based on three different activities: a thorough study of national and Community rules, a “field” work in Public Administration Offices, and a procedural and organisational analysis; all of these activities were necessary to determine the “lowest common denominator” concerning management and control. The final purpose of this paper is to provide the Administrations entitled with Community intervention with easy and effective models and methodological references on which basis the bodies concerned may make their organisational, procedural and instrumental decisions. These guidelines also aim at highlighting the connections and inter-relations among the various activities connected with the management and control of EC programmes, in particular with reference to the financial, procedural and physical monitoring, in order to give users an integrated and consistent system for the management and control of the Structural Funds.


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Contents of the Guidelines This document includes two main sections and a glossary defining the key terms used in this paper. Section A aims and giving guidelines for the organisation of management and control systems for EC programmes. The models proposed were developed in consideration of the specific requirements of EC rules on management and control, and on the basis of the specific features of the organisational models developed, their evolution stages and, last but not least, their strategic and relational purposes. This paper focuses on the main features of organisational patterns and models underlying the financial control and management of the operations part- financed by the Structural Funds on the basis of past experiences connected with the management of EC funds, and the studies carried out with central and regional Administrations. In particular, Section A includes: � The reference rules and the organisational principles at the basis of the

management and control systems; � The proposed reference organisational models for the correct definition of

management and control systems of EU interventions.

Section B determines the guidelines for the development of Audit Trails according to the following points: • Description and charting of management and audit procedures (trails) referred to

the types of operations part- financed by the Structural Funds; • Definition of filing methods for the documents to be audited; • Definition of the accounting systems to be used to trace back, for each

management level, the aggregations of expenses incurred at lower levels. In order to define these guidelines, particular consideration was given to the correct detection of the synthesis level allowing to draw a standard flow which may be used by any managing/controlling administration. Section B also includes the operational procedure used to develop audit trails, together with practical examples referred to the main kinds of intervention.


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SECTION A – GUIDELINES FOR THE ORGANISATION OF

MANAGEMENT AND CONTROL SYSTEMS

1 Introduction and Objectives This section illustrates the guidelines for the organisation of management and control systems. Organisational approaches and demonstration models are shown below on the basis of the analysis carried out. The analysis highlighted how the specific organisational and procedural models adopted by the Public Administrations in charge of EU interventions were the main factors giving rise to the positive or negative performance that characterised the implementation of these programmes. The survey suggested that the adoption of one or the other model among the ones surveyed would depend on the typical characteristics of the forms of intervention managed, and on the degree of decentralisation of delegations/responsibilities achieved by the administration. To this basic evidence we should add a series of considerations useful to interpret the situation and to identify the desirable reference model. In the first place, it should be noted that central and local administrations have introduced adjustments arising from the need to meet the obligations imposed by EU regulations in different ways, at times even quite abruptly. This has happened with organisational and procedural schemes structured by function and sometimes by process, so that, in reality, every administration has adopted its own customised solutions, aimed basically at achieving financial effectiveness. However, in most cases the innovative effects on management system was not accompanied by or integrated into broader innovation schemes for administration and management systems, and for the organisational system in particular. It should also be noted that the need to generate and handle information flows (e.g. those related to monitoring, control and evaluation activities) has given a decisive thrust to the organisational evolution. Information flows proved to be fundamental factors for the proper management of operations in conditions of efficiency, cost-effectiveness, transparence and quality. The adoption of customised organisational solution was therefore also affected by the greater or lesser need to “provide information”. For these reasons, the following models do not aim at representing comprehensively the diversity of the existing organisational models and the scope of the solutions allowed by national and Community regulations. They are rather aimed at providing guidance about the criteria to follow in order to ensure the effectiveness of control systems and to set a homogeneous reference


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framework for a better understanding of the principles on the basis of the new procedures required by Community regulations. The following sections of this paper describe: � the reference regulations; � the organisational principles on which the management and control system is

based; � the guidance patterns proposed for the organisation of management and control

systems.

2 Reference regulations Pursuant to the political agreements reached during the Berlin European Council (March 24 and 25, 1999) and the approval by the European Parliament (May 6, 1999), the Council has formally adopted the new Structural Funds Regulation for 2000-2006 on June 21, 1999. The Structural Funds Regulation 2000-2006 has been simplified, with a new general regulation encompassing the principles shared by all Structural Funds (priority objectives, programming methods, financial management, evaluation and control) and new specific rules for individual Funds, concerning the respective fields of intervention. The reference regulations considered for the definition of the organisational principles underlying the definition of management and control systems for the period 2000-2006 are based on the EC Council Regulation no. 1260/1999 of June 21, 1999 laying down general provisions on Structural Funds, in particular: � Art. 32, ruling the payment procedures adopted by the European Commission and

the duties of the Paying Authority (interim payments, payments of final balance, etc.);

� Art. 34, ruling the activities to be carried out by the Managing Authority (efficiency and correctness of financed operations, gathering and forwarding of financial and statistic data, drawing up of the annual implementation report, etc.);

� Art. 38, laying down general provisions concerning the financial control by Member States;

� Art. 39, defining the conditions for which financial corrections are required, and the rules to assess their amount;

� Art. 40, laying down general provisions concerning ex-ante, mid-term and ex-post evaluations;

� Art. 41, laying down the specific criteria for the conduction of ex-ante evaluations;

� Art. 42, laying down the specific criteria for the conduction of mid-term evaluations;

� Art. 43, laying down the specific criteria for the conduction of ex-post evaluations;

� Art. 44, ruling the allocation of the performance reserve.


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The application of the statements provided in Regulation 1260/1999 was later defined by the EC Regulation no. 438/2001 concerning the management and control systems for the contributions granted within the framework of Structural Funds. The drafting of the guidelines has also taken into account the provisions already in EC Regulation no. 2064/97, in enforcement of EC Regulation no. 4253/88 concerning the financial controls carried our by Member States on the operations co-financed by Structural Funds for the period 1994-1999. The regulatory framework provided in the above-mentioned Regulations was completed with the consideration by the Commission on July 28, 2000 of the provisions set forth by the EC Regulation no. 1685/2000, concerning the eligibility of expenditure related to operations part- financed by Structural Funds. Regard has also been given to the principles stated in the Commission proposals concerning: � the procedure related to financial corrections of contributions granted within the

framework of structural Funds; � the principles, criteria and indicative percentages that the Commission Services

must apply to assess financial corrections pursuant to Article 39 § 3 of EC Regulation no. 1260/1999 and Regulation no. 448/2001.

The whole of rules introduced by the Community regulations is based on the definition of the key functions related to the management and control of co-financed operations: � Managing Authority; � Paying Authority; � Intermediate Bodies; � routine check (1st level); � sample check of operations (2nd level). The Managing Authority is responsible for all the operations included in an intervention, with special reference to the effectiveness and compliance of management and implementation and especially of the activities as per Article 34 of EC Regulation no. 1260/1999. An Intermediate Body is a public or private body or service acting under the responsibility of managing or paying authorities or performing tasks on their beha lf in relation to final beneficiaries or the bodies or firms carrying out operations (Art. 2 Reg. 438/2001). The Paying Authority is responsible for the processing, certification and submission of payment applications and the collection of payments from the Commission, and ensures that the final beneficiaries receive the amounts they are entitled to, as stated in Articles 9 and 32 of EC Regulation no. 1260/1999. If the Managing Authority and the Payment Authority coincide or are in the same organisation, an adequate separation of the respective functions should be provided (Articles 3 and 9 § 4, Reg. 438/2001).


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Routine check activities (first level) are carried out in parallel with intervention management and are represented by all those controls accompanying the activities of the Managing and Paying authorities and of intermediate bodies. Sample check activities (second level) are aimed at verifying the efficacy of the management and control systems implemented and, based on selective criteria and on a risk analysis, the statements of expenditure presented at the various levels involved (Art. 10 Reg. 438/2001). Such activity must refer to a significant sample of operations, corresponding to at least 5% of the total eligible expenditure. Sample check activities are also aimed at obtaining the completion statement as per Art. 38, § 1, letter f), of EC Regulation no. 1260/99. Such statement shall be drawn up by a person or department having a function independent of the designated managing authority, of the person or department of the Paying Authority in charge of the certification as per Art. 38, § 1, letter d), as well as of the intermediate bodies (Art. 15 Reg. 438/2001).

3 Organisational principles at the foundation of the management and control system The organisational principles at the foundation of the management and control system defined by the Community regulations refer to the following key elements of the system itself: � integration of management and control system components; � separation of functions; � risk assessment. 3.1 Integration of management and control system components The fundamental principle on which the management and control system should be based is the integration of the components involved in the implementation of co-financed initiatives: � management activities (programming, ordinary management, payment,

reporting, etc); � risk assessment; � routine check activities (1st level); � sample check activities (2nd level); � monitoring system.

These stages are summarised in the model given in Figure 1, showing the dynamics of the management and control system. It is a sequential procedure, where each component not only affects the subsequent one, but it is also a repeated and multi-directional procedure where each component may affect another, regardless of the sequence of the process.


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Figure 1 – Management and control system components

Management activities must ensure the effectiveness and correctness of the implementation and in particular of the activities stated in Art. 34 of EC Regulation 1260/99. Risk analysis is the activity that allows to identify and oversee those internal and external factors that may compromise the fulfilment of intervention objectives, with special reference to the objectives of sound financial management, which should consider strategic as well as management and financial risks. Strategic risks are linked to the definition of program guidelines, objectives and Community resources. Management risks are related to operational procedures for implementation (e.g. preliminary inquiries take too long, personnel is insufficient, etc.). Financial risks derive from a wrong use or loss of resources (e.g. wrong allocation of resources to a specific beneficiary, financial corrections, etc.). The organisation of management and control systems cannot be set up without a preventive risk analysis. Routine (1st level) check and sample (2nd level) check activities are described in paragraph 2 above. Under an organisational profile, the sample check of operations and the issue of the completion certificate (Art. 38, § 1, letter f) of EC Regulation 1260/99) may be entrusted to one or more persons, provided that: � control tasks are duly separated from operation implementation or payment tasks;

Sistema di monitoraggio

Monitoring system


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� the person or department in charge of issuing the completion certificate is functionally independent of the Managing Authority, the department or person from the Paying Authority in charge of the certifications as per Art. 38 § 1, letter d) of Regulation no. 1260/99, and of intermediate bodies (Art. 15 Reg. 438/2001).

Each Administration may also decide whether to perform sample checks directly or through independent bodies. Also, the issue of intervention completion certificates may be outsourced. In order to ensure the fulfilment of strategic objectives, a close integration of the components above is required, which may be obtained through the circulation of a correct information flow; in the case of Community programming, such circulation may be implemented by the monitoring system, represented by the information system in charge of the physical, financial and procedural monitoring of interventions. 3.2 Separation of functions Error and irregularity prevention activities and error detection and correction activities are among the main objectives of a management and control system. The Administration responsible for an intervention must adopt, through first- level control and management procedures, tailored actions aimed at preventing any error and irregularity. The body responsible for second- level control shall verify the overall reliability of the system and shall detect and report any deviations. The different objectives of the two activities mentioned above require an adequate separation of functions within the organisations concerned. Routine management/control activities and second-level control activities shall be distributed so as to ensure the adequate separation of tasks among the services/persons in charge of each activity. This separation of tasks should be planned in advance, with a view to creating a control/self-control mechanism, characterised by the distribution of activities across the various hierarchies of the organisation (each of which shall be provided with the tools apt to generate data to be used for the control of their own activities) and by the development of objectives and baselines to evaluate the performance and overall efficacy of the management and control system. 3.3 Risk assessment The correct operation of a management and control system cannot do without the assessment of risks by the body responsible for second- level control, to be used as a basis for the selection of the sample of operations to be controlled. The detection and assessment of the main risk factors is essential especially with reference to the need to establish the size and nature of the sample of operations to be tested for the reliability of the management and control system. For assessment purposes, risks may be classified as:


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• inherent risks of the management system • control risks, i.e. the possibility that a systematic control be unable to prevent or

detect errors or irregularities.

As a general rule, inherent risks are directly related to factors such as: � complexity of reference regulations; � plurality of management levels; � payments made on the basis of applications and/or self-certifications; � absolute value of the operation; � particular kinds of operations (e.g. Global Grants); � type and characteristics of the final beneficiary; � modest skills of management personnel. The acceptable inherent risk threshold should be valued based on a set of specific tests on the management and control system, aimed at verifying the degree of reliability of the routine controls for a significant sample of the operations carried out. Second- level control programmes must cover those kinds of operations involving potentially higher risks, considering the first- level controls implemented by the controlled body to reduce the risk thresholds. For instance, the control risk must be assessed in order to identify the residual risk and therefore to minimise the possibility of failing to detect undue payments.

4 Organisational models The following is a description of the results of the analysis and model extrapolation work done, that led to identify two main reference models for the management and control system organisation, referred to as Model A and Model B. These models are presented together with a description of their main components, namely: � macro-structure; � routine control and management; � second- level control and final expenditure certification; in order to favour a comparative reading of the specific key features of each model. These models should be considered as a reference while setting up a management and control structure meeting the provisions in Regulation no. 1260/1999 and Regulation no. 438/2001. 4.1 Macro-structure This section presents the two models studied. The first one, shown in figure 2, represents an organisation where the sample check of operations is clearly separated from routine management/control (first level) functions and vests with a Responsibility Centre (RC) under the control of the institutional management.


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The second model, shown in figure 3, is characterised instead by the fact that management, payment and second- level control functions lie within the same hierarchical level. Model A In this model, Paying Authority and Managing Authority functions are both entrusted to specific RCs, identified by Fund or by sector (Industry, Environment, Education, etc.), while second-level control functions are entrusted to a RC separate from and independent of the former ones. In particular, each of the first- level RCs responsible for the interventions financed have separate organisational units dealing respectively with the management and payment of the expenditures implemented through the Structural Funds. If there is more than one RC with management/payment functions, the overall co-ordination of the implementation should be ensured by an appropriate responsible body, belonging to the staff of the Institutional Management. This position must ensure the flow of “project” activities by means of appropriate organisational and procedural practices. In other words, the co-ordination body must have a real opportunity to affect the policy variables presided by each Managing/Paying Authority (scheduling, procedures, methodology, tools and IT support, etc.). In order to ensure the homogeneous control and separation of functions and hence to avoid the concentration of all management process stages, second- level control functions are clearly separated from management and payment functions and entrusted to an independent structure belonging to a separate RC. The practical experience suggests that this model usually suits better the organisational structures of Central State or Regional Administrations characterised by high degrees of decentralisation of delegations/responsibilities to the RCs. In general, this model is typical of those organisational structures where there is a strong correlation between management of operations and disbursement of financial resources.


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FIGURE 2 – MODEL A

Institutional managementInstitutional management

DEPARTMENT A(Managing and Paying

Authorities ERDF)

DEPARTMENT B(Managing and Paying

Authorities ESF)

DEPARTMENT C(Managing and Paying Authorities EAGGF)

COORDINATION OFCOMMUNITY PROGRAMMES

COORDINATION OFCOMMUNITY PROGRAMMES2nd LEVEL CONTROL2nd LEVEL CONTROL

Measuresupervisor

Monitoring & expenditure

reporting

Measuresupervisor


reporting

Measuresupervisor


reportingüSelection of beneficiariesüRoutine (1st level) project controlü Engagements Payment and authorisationüMonitoring data collection and forwardingü….

üSelection of beneficiariesüRoutine (1st level) project controlü Payment undertaking and authorisationüMonitoring data collection and forwardingü….


üMonitoring data collection and processingüFinancial flow managementüCo-ordination of programme accounting systemü….



üCheck of compliance with EU regulationsüVerification of management and control system effectiveness and accuracyüAccounting auditsüDeclaration at winding-up of the assistance

(art. 15 Reg. 438/2001)

üComplement preparation, co-ordination and implementationüDrawing up of annual implementation reportsü Partnership activitiesü Forwarding of monitoring data to Ministy of Economics and FinanceüExpenditure certification (art. 9 Reg. 438/2001)ü…..


DEPARTMENT A(Managing and Paying

Authorities ERDF)

DEPARTMENT B(Managing and Paying

Authorities ESF)

DEPARTMENT C(Managing and Paying Authorities EAGGF)

COORDINATION OFCOMMUNITY PROGRAMMES

COORDINATION OFCOMMUNITY PROGRAMMES2nd LEVEL CONTROL2nd LEVEL CONTROL

Measuresupervisor


reporting

Measuresupervisor


reporting

Measuresupervisor


reportingüSelection of beneficiariesüRoutine (1st level) project controlü Engagements Payment and authorisationüMonitoring data collection and forwardingü….






üCheck of compliance with EU regulationsüVerification of management and control system effectiveness and accuracyüAccounting auditsüDeclaration at winding-up of the assistance

(art. 15 Reg. 438/2001)

üComplement preparation, co-ordination and implementationüDrawing up of annual implementation reportsü Partnership activitiesü Forwarding of monitoring data to Ministy of Economics and FinanceüExpenditure certification (art. 9 Reg. 438/2001)ü…..


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Model B In Model B the Managing and Paying Authorities are separated. The RC of the structure identify the various organisation units in charge of: • management; • payment; • second- level check; of programmes financed with the Structural Funds of the European Union. The three RC are in the same line but separated and totally independent from a hierarchical point of view, although functionally tied. Model B requires a greater breakdown of delegations. Therefore, it cannot be easily applied in structures where powers are highly concentrated or where the organisation has not been clearly defined yet. The Model B layout given in figure 3 reflects mainly the organisation of management and control systems in Objective 1 regions. The model is however subject to variants that make it suitable also to central and regional Administrations outside Objective 1. In particular, one variant of the model assumes that the Managing and Paying Authorities coincide and lie within the same Responsibility Centre (as in Model A). Another interpretation of the model may assume that operational units (Measure supervisors) are part of the Managing Authority, so that Management A concentrates all the activities related to measure implementation. There could even be a plurality of Paying Authorities, each being responsible for the reference fund (ESF, EDRF, etc.).

Guidelines for the organisation of management and control systems and for the preparation of audit trails

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FIGURE 3 – MODEL B


DEPARTMENT ACOORDINATION

DEPARTMENTS B, C, D,...

OPERATING

MANAGING AUTHORITY

PAYING AUTHORITY

… …

2nd LEVEL CONTROL

üCheck of compliance with EU regulationsVerification of management and control system effectiveness and accuracyü Accounting auditsüDeclaration at winding-up of the assistance (art. 15 Reg. 438/2001)

üComplement preparation, co-ordination and implementationüDrawing up of annual implementation reportsü Information actionsüPartnership activitiesü…..

üMonitoring system co-ordinationüDevelopment of financial statisticsüForwarding of monitoring data to Ministry of Economics and FinanceüFinancial flow managementüExpenditure certification (art. 9 Reg. 438/2001)ü…..

Measuresupervisor


Measuresupervisor

Measuresupervisor


DEPARTMENT ACOORDINATION

DEPARTMENTS B, C, D,...

OPERATING

MANAGING AUTHORITY

PAYING AUTHORITY

PAYING AUTHORITY

… …

2nd LEVEL CONTROL2nd LEVEL CONTROL

üCheck of compliance with EU regulationsVerification of management and control system effectiveness and accuracyü Accounting auditsüDeclaration at winding-up of the assistance (art. 15 Reg. 438/2001)

üComplement preparation, co-ordination and implementationüDrawing up of annual implementation reportsü Information actionsüPartnership activitiesü…..

üMonitoring system co-ordinationüDevelopment of financial statisticsüForwarding of monitoring data to Ministry of Economics and FinanceüFinancial flow managementüExpenditure certification (art. 9 Reg. 438/2001)ü…..

Measuresupervisor


Measuresupervisor

Measuresupervisor


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4.2 Routine management and control Model A Managing Authority The types of Managing and Paying Authorities foreseen by the Community Regulations are concentrated within the same RC. Individual line structures interested in the interventions financed with Structural Funds are responsible for their operational management of. Paying Authority In Model A, the duties of certification, submission of payment applications and payment collection vest with the RCs in charge of the management, and are carried out also with the help of special dedicated organisational units. Therefore, these organisational units are responsible for: • operation monitoring and reporting; • accounting co-ordination and cash flow management for the programme; • making payments according to the applications submitted and the audits

performed by measure supervisors. The presence of these dedicated organisational units contributes to ensure, among other things, the compliance with Art. 9 § 4 of Regulation no. 438/2001, whereby, if the managing and paying authorities coincide, procedures ensuring the control of expenditure eligibility and control system adequateness must be into place. Management activities and procedures The staff body is in charge of co-ordinating programme management, while the operational programme management is entrusted to the individual line structures involved in the operations. These are responsible for programme measures and, as operational management supervisors, also deal with: • the preparation and definition of calls for tenders and related documents; • the selection of projects eligible for funding; • the stipulation of contracts and agreements with implementing bodies; • procedural requirements relevant to the start of financed projects; • the first- level control of project implementation progress (procedural and

material); • final project testing and cost reporting; • the verification of the adequateness and correctness of the implementation

practices for the initiatives financed; • the audit of individual part- financed operation reporting and of the compliance

with regional, national and Community regulations.


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Besides the activities above, these lines are also in charge of the tasks relevant to the issue of the payment authorisation and to the auditing of administrative documents, such as accounting records and invoices. In fact, each operation requires automated controls on the correctness of financed operations and their compatibility with sound financial management practices – these activities may also be carried out by other units within the RC in charge of the management. Monitoring system All evaluation and control mechanisms are based on the adoption of an organisational system to allow for data monitoring, which must be considered in the development of an organisational structure. In Model A, the Managing and Paying Authority will be at the core of the financial, material and procedural monitoring of Community programmes. The key element of any organisational pattern is the creation of an adequate information system to allow for the gathering, organisation and co-ordination of data related to procedural, financial, material and quality indicators for the implementation of each programme (with particular reference to socio-economic, operational, juridical and procedural aspects). This system should be able to detect the progresses in intervention implementation and provide the necessary elements to draw up annual reports and completion reports to be submitted to the Monitoring Committee for approval. For the purpose of a higher programme transparence, this system will need to integrate financial, material and procedural information into a single detection and processing system, in order to achieve an immediate dialogue between institutional structures and to provide in real time the data required for a correct management and for the support to action planning and re-planning. The system will be fed with the data in the possession of line structures and convey such data into a main database, held by a specific organisational staff unit in charge of the monitoring. The information acquisition process may be described as follows: • the information is entered in the system for each operation and forwarded to the

staff structure; • the staff structure co-ordinates and collects all the information at central level and

forwards them electronically to the central monitoring unit of the Ministry of Treasure, Budget and Economic Planning.


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Model B Managing Authority Each Managing Authority is in charge of: � preparing the technical proposal for the programme complement; � preparing, also at request of the Monitoring Committee, Programme re-

programming and/or re-modulation actions; � drawing up of implementation reports; � carrying out information and publicity actions; � partnership activities. In Model B the Managing Authority is separate from the Payment Authority although in the same RC (Management, etc.) Paying Authority Each Paying Authority is in charge of processing, certifying and submitting payment applications. In particular, the RC is in charge of: � co-ordinating the monitoring system; � developing financial statistics; � forwarding data to the Ministry of Treasure, Budget and Economic Planning; � certifying expenditures (Art. 9 Reg. 438/2001); � cash flow management. The structure of the Paying Authority must ensure that the certificates as per Art. 38 § 1, lett. d) of Reg. 1260/99 are drawn up by an expert or an office of the Payment Authority itself, functionally independent on any office authorising payments (Art. 9 § 1, Reg. 438/2001). Management activities and procedures In the model proposed, the operational responsibility for intervention implementation is entrusted to the RCs competent by field and subject (Education, Agriculture, Industry, Environment, etc.). Department supervisors may be supported in this activity by specific first- level Control and Monitoring structures and by "third" structures in the same line. Measure supervisors work in their respective departments and carry out the formal check (1st-level) and the financial and administrative management of operations. These collection, verify and forward to the department’s control and monitoring structure the information relevant to measure implementation, with particular reference to procedural, financial, implementation and result indicators foreseen by the programme complement. Through routine checks, measure supervisors will ensure, among other things, that: � commitments and/or payments comply with the regulations in force; � fund destination is consistent with the one stated in programming documents.


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Therefore, measure supervisors have the same management tasks as described for model A, including those related to the issue of the payment authorisation and to the auditing of administrative documents, such as accounting records and invoices. Monitoring system This organisational pattern also relies on an adequate data monitoring system. Monitoring activities may be entrusted either to the RC in charge of the management or to the one in charge of the payment. For the purposes of a correct and effective operation of the monitoring system, this model will require the co-ordination, at data transmission stage, between the RC embodying the Managing and Paying Authority (in charge of overall programme monitoring) and the RCs in charge of measure implementation. For a more streamlined system, each line may include a monitoring structure that will receive all the information related to the operations to be implemented under the same line. 4.3 Second-level control and intervention completion statement Model A Apart from management and payment activities, the rules introduced by Community regulations imply routine and second- level sample checks. In Model A, the former form of control is carried out by the Managing and Paying Authority itself, while second-level control is entrusted to a separate and totally independent structure. In general, such structure shall refer to the Institutional Management of the body according to the level of integration of the General Co-ordination. Even a different position should in any case ensure its substantial independence. This RC will perform tests (on a sample of operations equalling at least 5% of the total eligible expenditure) and, as resolved by the Administration, will provide the final certification of the expenditure incurred and eligible for part-financing with Community Structural Funds.


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Model B In this Model too, second- level activities are carried out by a special RC in charge of: � checking the compliance with Community regulations; � checking the efficacy and reliability of the management and control system; � performing administrative accounting audits; � certifying the correctness of the final statement of expenditure for the intervention

pursuant to Art. 38 § 1, lett. f) of EC Regulation no. 1260/99. This structure is functionally independent of both the Managing and the Paying Authorities, although it lies in the same line.

* * * This structure is in both models responsible for the second- level controls to be carried out during the management on a sample representing the projects and initiatives approved. In particular, the tasks of the structure deal with: � checks of projects of various kinds and sizes; � checks based on the risks detected; � check of project concentrations into an implementation body; � check of the practical application and efficacy of management and control

systems; � check of consistency between an adequate number of accounting entries and the

relevant supporting documents; � check of compliance of the nature and time schedule of expenditure with

Community provisions and with the material characteristics of approved projects. This structure will cooperate with monitoring and control “third” structures and carry out on-the-spot checks availing itself of external bodies acting under its responsibility. A specific report is prepared after each check; this will remain in the files of the checking body or office, with one copies sent to the regional co-ordination structure. 4.4 Other controls In order to avoid the concentration of a large number of checks on the beneficiaries and in order to achieve a stronger co-ordination among the various structures (inside and outside the Administrations involved) in charge of controlling the Community programmes, certain Administrations may enter into agreements with other public structures. For instance, certain Regions wish to sign a memorandum of understanding with the Revenue Guard Corps (Regional Command Anti-Fraud Force), for the co-ordination and mutual exchange of information on the projects under control and the results of such controls.


21

SECTION B – GUIDELINES FOR THE PREPARATION OF AUDIT TRAILS

1 Methodology 1.1 Introduction and objectives An audit trail is an organisational tool for the planning and management of audit activities within the management of Programmes part- financed by the European Union through Structural Funds. Regulation no. 438/2001 of the European Commission regards as the purpose of an audit trail the regulation of activities aimed at auditing Structural Funds accounts, and as well as the form and content of the information made available to the Commission for auditing. An audit trail shall be considered sufficient where it permits: a. reconciliation of the summary amounts certified to the Commission with the

individual expenditure records and supporting documents held at the various administrative levels and by final beneficiaries including, where the latter are not the final recipients of funding, the bodies or firms carrying out operations; and

b. verification of the allocation and the transfers of the available Community and national funds.

In the previous programming actions 1994-99 (pursuant to Reg. no. 2064/97) the reference funds for the building of audit trails used to be the 3 Structural Funds (Regional, Social and EAGGF) and financial instruments for fisheries guidance. For the period 2000-2006 in Italy the adoption of the operation class is proposed as a baseline for the identification of management macro-processes and the relevant audit trails to be prepared for each procedural stage. These classes represent the 3 categories identified within the procedural monitoring, an innovative and essential part currently being implemented of the entire Monitoring System for Programmes part-financed by the Funds. The Operation classes considered are the following: 1. construction of public works 2. procurement of goods and services 3. granting of funds and services to individual beneficiaries The decision to replace Structural Funds with operation classes as a reference for the definition of management processes and audit trails is due to two reasons: 1. the need to standardise the control systems of part- financed Programmes; 2. operation classes describe better the possible structures of management and

control processes.


22

In fact, the monitoring of public works has taken on a central role1, especially as far as interventions part- financed with Structural Funds are concerned. Italy has supported a close tie between the analysis of expenditure mechanisms and the implications arising from the principle of performance reserve. Therefore, an effective the monitoring system is crucial, as the only means of attesting the achievement of procedural objectives. As to the second reason, we may say that a description of the processes included in the three classes (or categories, or typologies) of operation will provide a thorough insight of the main design, material, administrative, financial and audit activities characterising the management of part- financed interventions. The same analysis, referred to the four typologies of Fund would not have reflected in full the differences among the processes, which are also related to the nature of interventions, to the different organisational units involved and to each individually detectable stage.

1 See for instance the establishment of the MIP (public investment monitoring system) within the CIPE, under

Art.1 of Law no. 144/99, or, for instance, the work monitoring action started by the Watchdog Authority on Public Works or, again, the establishment of committees for the evaluation and auditing of public investments pursuant always to Art.1 of Law no. 144/99.


23

1.2 Applied methodologies 1.2.1 Methodology for the description and charting of management and control processes referred to operation classes The design of audit trails was based on Process Analysis, a methodology aimed at describing and charting flows of activity with identification of operations carried out, bodies involved, resources used and results obtained. Process Analysis, intended as the description of the situation “as is”, is a study tool introductory to all re-organisation interventions, either in terms of process improvement and of process reengineering. In the case in question, the PA was partially used to describe management flows and audit activities, with identification of links between management and auditing. The first step after the definition of objectives is the identification of the analysis area. In this case, the scope of the analysis is broader and encompasses the entire management of part-financed Programmes. For this reason, the output of this chapter will necessarily reflect the simplifications imposed by the complexity of the system rather than by the need to allow different bodies to use the operational tools proposed. The next step is the definition of analysis levels. When the area being studied is particularly large, as in this case, a correct choice of the analysis level is crucial, as long as such choice is linked to the quantity and type of information to be processed. The figure below depicts the three analysis levels considered in this paper.

There are three levels: macro-process, process and activity. A macro-process is composed by m processes, each of which may be broken down into p activities. The table below refers to the classes of operation defined as Granting of funds and services to individual beneficiaries and Procurement of goods and services and describe the concepts of macro-process, process and activity.

GENERALMACROPROCESS

Process 1 Process m

Activity 1 Activity pActivity ...

Process ...


24

LEVELS EXAMPLES

Macro-process Granting of funds and services to individual beneficiaries

Procurement of goods and services

Process Project evaluation Implementation

Activity Project technical/financial evaluation

Grant of first advance of financing

For all classes of operation (construction of public works, procurement of goods and services, granting of funds and services to individual beneficiaries), each of which, as stated above, is linked to a macro-process, individual projects may be analysed with the help of flow charts showing process flows and, per each activity: • description • responsible body • type of activity

The graph above identifies processes, and the macro-process they belongs to. The first column reports a description of the activity2 while the other four columns are dedicated to specific types of bodies (managing bodies, final beneficiaries, external bodies, bodies managing financial flows). The last column is used as appropriate to identify the audit to be carried out for the activity reported in the row. If there are two or more viable procedural alternatives, alternative symbols and flows are shown in dotted lines.

2 To each type of activity (official notice, reporting, decision-making, operation, complex activity) is associated a

specific graphic symbol.

ACTIVITY MANAGING BODIES

FINAL BENEFICIARIES

EXTERNAL BODIES

FINANCIAL FLOW

MANAGERSAudit activities

Description of activityAudit description

(code)

Description of activity


Description of activityAudit description

(code)


MACRO-PROCESS: ______________PROCESS: ________________

BODY

BODY

BODY

BODY BODY

BODY


25

The formalisation proposed presents the advantage to show the points in the procedural flow where audit activities are paired with the planning, co-ordination, administration and financial activities typical of the management system. The flow has also been associated to the main parallel activities of measure management: • notices to financial and/or material monitoring • infeed to procedural monitoring The presentation model described above is useful to describe the flow of activities characterising one class of operations but is not enough to define an audit trail. To do this, the contents of each audit activity identified in the procedural flow must be analysed and disclosed, also with the aid of a table (as in example below), reporting the following information in column: • audit activity code • audit supervisor • description of audit with identification of reference documents • archive supervisor and location • reference regulations used in audit activities The example shown below refers to the verification of fund availability and competence related to a payment from the paying authority to the final beneficiary, the paying authority being in this case a regional body. Audit code

Audit supervisor

Audit description and reference documents

Archive supervisor and location

Reference regulations

…… Regional Accounting Office

VERIFICATION OF FUND AVAILABILITY AND COMPETENCE Verification of the amount of the budget caption or of the allocated residual amounts for the operation (Regional Budget) Comparison of expenditure (Order of payment) with the amount in budget

"Managing Authority Offices in …………... Paying Authority Offices in…………"

National and regional laws on public accounting Accounting regulations


26

1.3 Description and charting of management and control processes The analysis aimed at describing and charting processes will apply to the three classes of operations. Each of these classes may be considered within the framework of a general macro-process (e.g. procurement of goods and services macro-process) including all activities (design, material, administration, financial and audit) required to achieve the main objective of the macro-process. In the case of the macro-process above, the mission is to plan and implement actions aimed at purchasing goods and services. Therefore, the scope of the analysis will cover three macro-processes as detailed in the table below.

Each macro-process may be divided into processes and in the breakdown of the general macro-process four standard processes can be identified: 1. programming 2. project evaluation 3. implementation 4. reporting

GRANTING FUNDS AND SERVICESTO INDIVIDUAL BENEFICIARIES

PROCUREMENT OF GOODS AND SERVICES

CONSTRUCTION OF PUBLIC WORKS

GENERAL MACRO-PROCESS

MACRO-PROCESSIDENTIFICATION


27

These processes are in common to all classes of operation. Any part- financed intervention requires planning, project evaluation, material/administrative implementation and final auditing. With reference in particular to process analysis, the existing differences imposing a specific description/explanation for each macro-process can be highlighted. When processes are broken down into activities, they are aligned to the procedural monitoring system. This system has been developed to establish the expected implementation schedule for each project (e.g. estimated, updated and final work commencement date) and the details of each operation are reported at activity analysis level. With the audit trail audit activities become systematic, especially financial ones, i.e. those aimed at monitoring the and the correctness, compliance and eligibility of the expenditure for which Community contributions are being applied. The audit trail shall trace back measure progress on the basis of the expenditure reports related to individual projects eligible for part- financing. Therefore, in certain cases, process analysis will tend to group together activities that do not require to be audited, while other processes (usually financial ones) will require further investigation to support a complete picture of audit activities parallel to management flows. To make things easier, we have assumed that these processes take place in succession, although programming in particular does not end with the initial definition of the interventions but is subject to ongoing changes during their implementation, through the monitoring function. These processes are integrated by fund raising and EC reporting activities, called Financial circuit, a process that runs parallel to the implementation process of all interventions. MACRO-PROCESS 1: CONSTRUCTION OF PUBLIC WORKS The type (or class) of operation configured in procedural monitoring as CONSTRUCTION OF PUBLIC WORKS concerns the construction of infrastructures where the final beneficiary is the public body that owns the works.

GENERAL MACRO-PROCESS

PROGRAMMING PROJECT EVALUATION IMPLEMENTATION REPORTING


28

Even if the infrastructure works involved are many and heterogeneous, the macro-process contains a series of feature that somehow allow for a certain generalisation. Nevertheless, there are reference (i.e. procedural) regulations 3 that differentiate the various paths from resource allocation to infrastructure functionality according to type of works, location, amount of investment. The macro-process described refers to a general measure, managed at regional level, concerning the construction of public works. MACRO-PROCESS 2: PROCUREMENT OF GOODS AND SERVICES This macro-process analyses the operations consisting of the procurement of services by public administrations relevant to the management of Programmes part- financed with Structural Funds. The reference regulations for this class (or type) of operations are the Legislative Decrees no. 157 and no. 158 of 1995, adopting the Community directives on the supply of goods and services to the P.A. The example in this paper considers a measure concerning training courses managed at central level (Region). The macro-process refers to training interventions required and directed by bodies within central regional organisational units and provided by public or private institutes – the final beneficiaries – outside the regional administration. MACRO-PROCESS 3: GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES The class of operations in question is characterised by the management of projects regarding facilitation of any kind (monetary or material) intended for reception by one beneficiary (enterprise, private individual, etc. …). Within the macro-process Granting of funds and services to individual beneficiaries, the reference operation for the example provided is a national intervention (Law 488) concerning contributions to be granted to farms for productive investments; in the example, the beneficiaries are located in Objective 1 areas.

3 Law no. 109/94 and the new Regulation on Public Works have reformed the law provisions on public works in

Italy.


29

1.4 Definition of filing practices Before describing the proposal for the development of audit trails, this paper will focus on filing and accounting practices providing operational support to financial management. Audit activities at all levels cannot do without an accurate analysis that should be carried out based on real terms, i.e. following the actual progress of a given operation included in an intervention eligible for part-financing. There will be supporting items for each procedural phase, either on hard copy or in electronic format, that may be used to trace back the implementation history of the action being audited. For the sake of clarity of any action carried out by any body with a role in the procedure, certain basic criteria for procedural document processing and filing should be observed. These document may belong to either one of the following categories:

§ accounting documents, or in any case documents of financial content; § other documents

For the first category, Annex I of EC Regulation no. 438/2001 states that these documents should be acquired according to a bottom-up pattern: the lowest end (final beneficiaries) should have the utmost detail of documentary evidence in order to ensure the correspondence of the expenditure eligible for part- financing with the expenditure actually incurred, as defined in the first section of Regulation no. 1685/2000 concerning the eligibility of the expenditure with regard to Structural Funds. As we climb up towards the top of the decision-making pyramid competent for funds (the paying authorities, in charge of applying for payments to the European Union) the level of detail decreases, while the possibility to trace back the expenditure at all levels (by means of specific summary charts) must always be maintained, and each expenditure should be the sum of the expenditures of the levels immediately next. The following chart may help to understand this important guiding principle for filing, that could be referred to as a cascading structure.

Guidelines for the organisation of management and control systems and for the preparation of audit trails ____________________________________________________________________________________________________________________

30

MEMBER STATE

Assumes as realised expenditure the sum of expenditures certified by each paying authority

Assume as realised expenditure the sum of expenditures aggregated in special summary reports by measure supervisors

PAYING AUTHORITY .. PAYING AUTHORITY 1

PAYING AUTHORITY n

Measure supervisor a)

Measure supervisor ..)

Measure supervisor x)

Measure supervisor b









Assume as realised expenditure the sum of expenditures analytically documented by final beneficiaries

F.B. F.B. F.B. F.B. F.B. F.B.













31

As far as accounting records are concerned, for each expenditure authorisation must be signed by the person responsible for that procedure and bear the date of the payment, so that the audit trail may be able to trace back the history of the expenditure process within a defined time frame. Non-financial documents (complete investment projects, financial plans, documents concerning tenders or other market recourse procedures such as cost estimates, inspection reports on public works, information on implementation progress, etc.) must be kept by the final beneficiary or any other body who carries out the expenditure and support the accounting documents evidencing the correctness of the financial operations performed. Pursuant to the provisions set forth in Annex I to the Community Regulation no. 438/2001 (definition of information required for a correct audit trail) the body carrying out the expenditure (this may be the final beneficiary in the case of a public entity) shall produce a detailed report of the expenses incurred (with the supporting documents, that will not be delivered but kept for future controls). For the higher- in-rank competence level, this report (as do invoices or other accounting documents) justifies the expenditure granted to the final beneficiary/body carrying out the expenditure. Each progressive aggregate of expenditure for various operations represents the supporting document for the upper- level body. As to filing practices, it is essential that audit trails report the exact location of the documents. As shown by the examples below, reporting the organisational unit (sector, service, department, …) where the documents are is not enough: their exact position must be indicated (address, floor, room). This entails the need for a regular update of these information whenever a change occur s within the organisational unit in charge of the various implementation stages.


32

1.5 Definition of accounting records For the utmost understandability of the whole use of structural funds, accounting records should be in line with the payments relevant to individual operations, through an accounting plan of the Administrations in charge of the interventions, organised in expenditure items that coincide with individual measures, and with sub- items (or even more itemised accounting entries, in the case for instance to resort to sub-measures). However, operation implementation involves bodies of different nature, and therefore does not facilitate to have the entire picture of the expenditure for a given intervention into a single accounting system. Even if the implementation was concentrated into one individual body (even though with territorial or sectorial branches), an accounting system handling simultaneously individual expenditure items would not handle operations, sub-measures, priorities and intervent ions as a whole in an easy manner. The methodology proposed by Regulation no. 438/2001 is based on the same principle used for the filing of documents that support and are therefore aligned to accounting records. Accounting record keeping practices are thus inspired to the same bottom-up concept on which Community programmes are built and managed. In fact, while the regulation annex defining the minimum requirements of an audit trail lays down how to record information according to an analytical detail involving expenditure items for the final beneficiaries of each operation, it would be sufficient to record summaries of the expenditure for each operation at intermediate authority level (if any); payment summary records for each measure will be sufficient at measure supervisor level, and records on the intervention as a whole may be kept by the paying authority.


33

EXPENDITURE MANAGEMENT

LEVEL DETAIL OF ACCOUNTING

RECORDS

Member state Recording of transfers relevant to interventions as a whole (e.g. ROP, SPD, NOP, CIP, …)

Paying authority Recording of each payment made for the entire intervention or part of the intervention under the responsibility of the paying authority (e.g. ERDF, ESF, EAGGF-FIFG)

Measure supervisor Recording of each payment made for the measure(s) managed, structured into various specific payments for individual operations

Intermediate authority Recording of each payment made for each operation as a whole, i.e. without distinction as to nature of expenditure

Final beneficiary

Recording of individual payments for each operation, broken down by expenditure item: • Works, Amounts Available by nature and

infrastructure • Construction works, designing, installations,

machinery, equipment, current capital for aid schemes

• Design, training, teaching, headquarters, etc. for human resources

• …


34

2 Proposal for the creation of an audit trail 2.1 Introduction This chapter is aimed at providing an operational guideline for the creation of an audit trail to be used by measure supervisors. The first paragraph describes the presentation model proposed, which consists of three sections. These sections completed are the final output required from measure supervisors. The second paragraph contains an operational manual to serve as a guide to build the audit trail. The final paragraph reports a few suggestions on how to handle the audit system. The examples provided in the next chapter, far from being cogent dictamina on how an audit trail should be presented, may be a useful reference for the solution of problems that this paper cannot possibly dealt with in more detail. Therefore, the examples are not intended to be a comprehensive presentation of the management and control systems for the classes of operations they refer to but a practical reference aid on how the theoretical methodologies outlined above may be applied in the practice.

2.2 Presentation model An audit trail presentation model is made up of three sections: § ID sheet of the audit trail § Description of trail process flows § Details of audit activities ID sheet of the audit trail The ID sheet states measure, class of operation it belongs to, name of body responsible, estimated programme budget, assigned objectives4, beneficiaries and bodies involved. The organisation chart of the body the measure supervisor belongs to should also be reported, highlighting its functional relationships.

4 These are considered reporting the specific objective of the measure, the implementation and result levels

attributed to the operation, expressed in terms of valorisation of material monitoring indicators. The consideration of objectives will facilitate (as long as the measure or its macro-processes are implemented) the activation of a strategic control assumed at the base of intervention management, through the exercise of an active evaluation function.


35

Description of trail process flows Processes are described by means of flowcharts, each of which is attributed to an individual process of the measure analysed (e.g. implementation, reporting, etc.).

Measure

Operation class

Measure supervisor

Budgeted amount

Objectives Specific objectiveExpected implementation levels

Expected result levels

Audited entities

Other entities involved

AUDIT TRAIL ID SHEET

ORGANISATION


36

Detail of control activities The audit trail closes with the following table containing detailed information on each control activity identified in the process flow for the measure, providing an exhaustive picture of the audits planned in the management of that measure.

DETAIL OF AUDIT ACTIVITIES

Audit code Audit supervisor

Audit description and reference documents

Archive supervisor and position


ACTIVITIES MANAGING BODIES

FINAL BENEFICIARIES

EXTERNAL BODIES

FINANCIAL FLOW

MANAGERS

IMPLEMENTATION TIME

Auditactivities

LEGEND

MACRO-PROCESS: __________PROCESS: ____________

DECISION-MAKING

COMPLEX ACTIVITY

OFFICIAL DOCUMENT OPERATION

DETAILED AND COMPLEX DOCUMENT - REPORT


37

2.3 Operating manual The operating manual is divided into three parts, each of which provides guidance to the three sections described in the paragraph above. Part One: Filling out the ID sheet of the audit trail Enter description of the measure in the first field, Measure. Enter the class of operation5 referred to the measure in the second field, Class of Operation. Measures may include actions referable to a plurality of classes of operation. In this case as many audit trails will have to be prepared as the number of different classes identified in the measure analysed. Enter the name and institutional function of the measure supervisor in the third field, Measure Supervisor. Enter the Estimated programme budget (in Euro and Italian Lire) in the fourth field. The fifth field contains indications on measure Objectives, expressed in terms of description of specific objectives, and valorised in terms of expected levels of the appropriate implementation and result indicators. The next field identifies the Beneficiaries of the measure. The last field identifies any Other bodies involved in measure management. In other words, the last two fields identify the bodies that liaise with the measure supervisor within the processes being analysed. The ID sheet ends with a brief presentation of the organisation chart of the body the measure supervisor belongs to – usually the Managing Authority of the Programme. Part Two: Description of process flows The description of process flows is based on the layout proposed in the previous chapter. First of all, the measure/action (macro-process) must be broken down into its main stages (processes), namely: programming, project evaluation, implementation, reporting and financial flow. All these stages together make up the analysis area. These should be presented each in its own specific chart. The methodology described below should be applied again to each process. First of all, those activities making up the process in sequence should be identified and entered in the first column. The activity should be described in brief and identified so that it may be related to one reference body only. For instance, the following identification: Granting of intermediate share of financing, collection of intermediate share and accounting would be incorrect, as it mentions significant activities carried out by different bodies, while a definition such as Collection of intermediate share and accounting would be

5 There are three classes of operations: Construction of public works, Procurement of goods and services, Granting

of funds and services to individual beneficiaries.


38

accepted as a single activity as long as it is the responsibility of the same one body and in direct time sequence. In certain cases some of the activities detected may verify simultaneously and consequently one or more simultaneous flows may be charted with dotted symbols. The type of each activity detected will have to be defined in order to chart it with an appropriate symbol. The symbols in our Key are proposed in between using one single symbol to describe a general activity with no other specification or choosing a more technical approach that should refer to the symbols proposed by Organisational Analysis manuals. The graphic symbol representing the type of activity must identify the body. Then the symbol must be charted in the column entitled as the category that body belongs to. The categories proposed are the following: managing bodies, final beneficiaries, external bodies and financial flow bodies. Graphic symbols must be cross-related by arrows in order to obtain a full presentation of the management flow and its development along the timeline. After this presentation, individual activities must be reviewed and the need to perform any specific audit must be reported. Such notice (audit name and code) must be entered in the last column to the right, in correspondence with the activity. The code will specify whether the audit is a financial one (FA), a managing one (MA) or a strategical one (SA). The code will be a useful reference for the full description contained in the Detail of audit activities table, where codes are reported in progressive order, classified by type according to the denomination given. The final stage is the filling out of the implementation schedule column (start and completion date) to be used for an estimate of the time required to complete each activity included in the procedural flow. This will allow to carry out a final evaluation of the managing efficiency over time of the measure. Part Three: Filling out the details of audit activities Enter audit codes in the fields of the first column, allowing for connections with the flow chart. Enter the body in charge of audit activities in the second column. The third column will contain the analytic description of the activity/procedure with identification of all the relevant documents managed within such activity/procedure. The fields of the fourth column are used to identify the person or body in charge of keeping the hardcopy and electronic archives. Document location information must be as much detailed as possible (body, address, floor, office, etc.). The last column lists the regulations (laws, regulations, procedures, manuals, etc.) to be used as reference in audit activities.


39

2.4 Audit trail management practices An audit trail is one of the organisational tools of the managing and control system for Structural Funds and the managing authority is obliged to keep a copy and make it available to all the bodies involved. Apart from trail design and creations, attention should be given to trail management. While audit trails are extremely important in the detection and evaluation of organisational criticalities (and therefore allow to detect the risks related to the various stages of the processes in a measure) this manual will detail the aspects related to their update. Trails as an organisational tools require a constant and timely ma intenance to keep – possibly improve – their performance levels. Therefore, measure supervisors will not finalise its tasks with the creation and implementation of the audit trail but will also oversee its ongoing update in view of changes inside and outside its organisation that might cause its obsolescence in the short term. Such changes may be the mere relocation of archives – which would require the updated of audit activity sheet (column 4) or the change in the procedures of a service, or the enactment of a new law. We may suggest to establish procedures for update activities, getting internal audit specialists involved as applicable. These will check the trails on a regular basis and detect any criticalities with respect to actualisation. All audit trail releases will have to be delivered to the organisations concerned. Audit trail management may be required by external organisations for the purpose of auditing control systems. Therefore, audit trails must endure these tests. A reference example could be the one mentioned in Appendix 16 of the Guide to the Audit of Management and Control Systems, to perform a self-check of the audit trail.

6 Which, on the other hand, was drawn up on enforcement of EC Regulation no. 2064/97 and will therefore be

reviewed in the light of new Commission Regulations concerning audits


40

3 Examples The following are examples of the work pattern adopted for the 3 classes of operations. The flowcharts adopt the symbols below.

Symbols used in the flow-chart

MeaningsSymbols used in the flow-

chartMeanings

Decision-making

Complex activity Operation

Detailed and complex document - Report

LEGENDA

Document containing a formal notice


41

3.1 Example of audit trail for Class of Operation 1. CONSTRUCTION OF PUBLIC WORKS

Measure Priority VI - Measure ___

Operation class 1. Construction of public works

Measure supervisor

Region …………Public Works Department Public Works Sector Local Bodies Service

Budgeted amount Lire/Euro __________

Objectives Specific objective

Expected implementation levels


Entities concerned Local bodies

Other entities involved Programming Sector, Accounting Sector, Municipal Treasuries, Civil Engineers, implementing Firms


ORGANISATION

Body Region __

Public Works Department

Programming and Budget Department

Public Works Service Civil Engineers Accounting SectorProgramming Sector


42

ACTIVITIES MANAGING BODIES FINAL BENEFICIARIES EXTERNAL BODIES FINANCIAL FLOW MANAGERS IMPLEMENTATION TIME AUDIT ACTIVITIES

Analysis of programming documents and reference regulations

Start __/__/__End __/__/__

Detection and analysis of reference territory requirements

Start __/__/__End __/__/__

Preparation and forwarding of proposals

Start __/__/__End __/__/__

Analysis of the proposals and drafting of the programming document

Start __/__/__End __/__/__

Receipt of political and social requests

Definition of measures and actions as well as of implementation procedures (notices, forms, etc.). Allotment of financial resources NOTICE TO FINANCIAL MONITORING

Start __/__/__End __/__/__

Compliance with European Commission instructions (C S 1)

Ex-ante evaluation

Preparation of final draft

Publication of the National Operational Plan on the IROG

Start __/__/__End __/__/__

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 1. CONSTRUCTION OF PUBLIC WORKS

PROCESS: PROGRAMMING

Managing Authority

Local Bodies

Local Bodies

PartnershipParliament

Regions

Managing Authority

Managing Authority

Managing Authority

Managing Authority

Independent Assessor


43


Preparation of Feasibility Study INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Preparation of preliminary project INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Preparation of notice for the submission of projects and publication of the same on the ORB INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Preparation and submission of applications for funds

Start __/__/__

End __/__/__

Receipt of applications for funds INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Analysis of the legal and administrative correctness of the application and preparation of the list of non-eligible applications

Start __/__/__

End __/__/__

Check of reception dates of applications (C G 1)

Evaluation of projects, drafting of minutes and forwarding of the ranked list to the managing authority

Start __/__/__

End __/__/__

Analysis of evaluation criteria (C G 2)

Preparation of ranked list and list of non eligible candidates and publication on the ORB

Start __/__/__

End __/__/__Submission of appeals by the candidates considered as non-eligible

Start __/__/__

End __/__/__

Examination of appeals and drafting of final ranked list

Start __/__/__

End __/__/__

Publication of final ranked lists on the ORB

Start __/__/__

End __/__/__

Notices to the final beneficiaries INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__


PROCESS: PROJECT EVALUATION

Measure supervisor

M.S.

A.C.

M.S.

Local Bodies

A.C.

Auditing Commission

A.C.

M.S.

M.S.

LocalBodies

Localbodies

Localbodies

Projectengineers

Projectengineers


44


Drafting and approval of the disciplinary regulations governing the implementation of infrastructural works

Start __/__/__

End __/__/__

Formal grant of the financing Start __/__/__

End __/__/__

Stipulation of the agreement and formal notice

Start __/__/__

End __/__/__

Preparation of final project INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Preparation of executing project and determination of Economic Technical Sheet and minimum bidding amount INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Calling for tenders for the implementation of the works through a sufficiently publicised notice INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Verification of compliance with the principle of competition (CG 4)

Appointment of Awarding Commission

Start __/__/__

End __/__/__

Submission and receipt of bids from firms INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Evaluation of bids and provisional award

Start __/__/__

End __/__/__

Possible filing of appeals by firms Start __/__/__

End __/__/__

Examination of appeals and final award INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Stipulation of the contract agreement and approval of the Economic Technical Sheet with amounts net of rebates INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__Notice of the commitment for allocation to financial and physical monitoring

Verification of the correct development of the project stage

(CG 3)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 1. CONSTRUCTION OF PUBLIC WORKS PROCESS: IMPLEMENTATION (I)

M.S.

Measure Supervisor

M.S. Local Bodies

Localbodies

Localbodies

Projectengineers

Projectengineers

Local Bodies

Competitors

Awarding Commission

Local Bodies

continued

Competitors

Implementing Firm

Local Bodies

Local Bodies Awarding Commission

M.S.


45


Delivery and start of works INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Application for payent by the body

Authorization of first advance payment

Start __/__/__

End __/__/__

Correspondence between advance payment requested and amount due

(C F 1)

Verification of financial resources available and competence

Start __/__/__

End __/__/__

Verification of financial resources available on balance-sheet item

(C F 2)

Issuance of order for payment

Payment of the first instalment of the financing

Start __/__/__

End __/__/__

Correct determination of amount and beneficiary's identity (CF 3)

Implementation of works

Presentation of Progress Reports and request of relevant payment INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Payment of Progress Reports Start __/__/__

End __/__/__

Correct application of rules on public works by implementing firm (C F 4)

Issuance of order for payment Start __/__/__

End __/__/__

Correct determination of amount and implementing firm's identity (C F 5)

Notice to financial monitoring for allotment of payment

Payment of Available Amounts Start __/__/__

End __/__/__

Check of eligibility of expenses to be paid (C F 6)

Issuance of order for payment Start __/__/__

End __/__/__

Correct determination of amount and creditors' identity (C F 7)



PROCESS: IMPLEMENTATION (II)

Regional Accounting Office

M.S.

RAO

continued

Local Bodies

Local Bodies

M.S.

Implementing Firm

Implementing Firm

Accounting Office

Implementing Firm

Treasury

M.S. Local Bodies

Accounting Office

Eligible entities Treasury

M.S. Local Bodies

continued

ImplementingFirm

Local Bodies

Local Bodies


46


Application for payment of second instalment by the body

Authorisation of second advance payment

Start __/__/__

End __/__/__

Correspondence between advance payment requested and amount due

(C F 8)


Start __/__/__

End __/__/__


(C F 9)

Issuance of order for paymentStart __/__/__

End __/__/__

Payment of first instalment of financing

Start __/__/__

End __/__/__

Correct determination of amount and beneficiary's identity (C F 10)

Completion of works INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Check that works are actually completed (C G 5)

Appointment of Testing Commissiozn

Start __/__/__

End __/__/__

Technical and administrative testing

Start __/__/__

End __/__/__Test-related verifications (C G6)

Approval of testing report INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__

Full operation of the work INFEED TO PROCEDURAL MONITORING

Start __/__/__

End __/__/__Notice to physical monitoring for allotment of physical accomplishment

Submission of application for payment of Completion Report

Payment of Completion Report Start __/__/__

End __/__/__

Correct application of rules on public works by implementing firm (C F 11)


End __/__/__

Correct determination of amount and implementing firm's identity (C F 12)


Ex-post evaluation of achievement of measure objectives (1)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 1. CONSTRUCTION OF PUBLIC WORKS PROCESS: IMPLEMENTATION (III)

(1) During the implementation stage a mid-term evaluation of responsibility of the independent assessor is regularly carried out. Furthermore, the ex-post evaluation is virtually the conclusion of the implementation. After the physical conclusion of operations it will be possible to ascertain whether the objectives of the measure were achieved in terms of accomplishments, results, specific impact.

continued

Local Bodies Implementing Firm

LocalBodies

TestingCommission

Local Bodies

Technical Office

Accounting Office

Implementing Firm

Treasury

M.S. Local Bodies

Implementing Firm

M.S.

Regional Accounting

Office

M.S.

RAO

Local Bodies

M.S.



47


Delivery of administrative and accounting documentation to reporting purposes

Start __/__/__

End __/__/__

Self-audit of administrative and accounting documentation (C F 13)

Examination of audit reports, check of administrative and accounting documentation, determination of balance payment

Start __/__/__

End __/__/__

Check of eligibility of expenses and correctness of payment methods

applied (C F 14)

Evaluation of reporting results Start __/__/__

End __/__/__

Acceptance of reporting Start __/__/__

End __/__/__

Authorisation to pay the financing final instalment

Start __/__/__

End __/__/__

Correspondence between final payment requested and amount due

(C F 15)


Start __/__/__

End __/__/__


(C F 16)


End __/__/__

Payment of the final instalment of the financing

Start __/__/__

End __/__/__

Correct determination of amount and beneficiary's identity (C17)


PROCESS: REPORTING

LocalBodies

M.S.

M.S.

Regional Accounting Office

RAO

Paying Authority

Paying Authority

Paying Authority


48


Issuance of grant of funds Start __/__/__

End __/__/__

Payment of 7% of the participation of Funds in the intervention

Start __/__/__

End __/__/__

Receipt of advance payment and recording in the accounts

Start __/__/__

End __/__/__

Check of amount received and recording thereof in the accounts

(C F 18)

Submission of the application for payment of the mid-term instalment to the European Commission and to IGRUE

Start __/__/__

End __/__/__

Evaluation of eligibility of the application

Start __/__/__

End __/__/__

Payment of mid-term instalment of community financing

Start __/__/__

End __/__/__

Receipt of the mid-term payment and recording in the accounts

Start __/__/__

End __/__/__


(C F 19)

Submission of the application for payment of final instalment, final implementation report and declaration (under art. 38, para. i, lett. F of Reg.(EC) 1260/1999)

Start __/__/__

End __/__/__

Evaluation of eligibility of the application for final instalment of the financing

Start __/__/__

End __/__/__

Payment of the final instalment of the community financing

Start __/__/__

End __/__/__

Receipt of final payment and recording in the accounts

Start __/__/__

End __/__/__


(C F 20)

PROCESS: FINANCIAL CIRCUIT


Paying Authority

Paying Authority

Paying Authority

Regional Accounting

Office

EuropeanCommission

MTBPE RGS-IGRUE

MTBPE D.P.S.

MTBPE RGS-IGRUE

Regional Accounting

Office

EuropeanCommission

MTBPE RGS-IGRUE

MTBPE D.P.S.

MTBPE RGS-IGRUE

Regional Accounting

Office

European Commission

MTBPE RGS-IGRUE

MTBPE D.P.S.

MTBPE RGS-IGRUE


49

CodeSupervising Authority

Description of audit and reference documentation Filing of documents Reference regulations

CS1 Managing Authority

COMPLIANCE WITH EC REQUIREMENTS Verification of the correct management of the entire programming process based on the provisions of the EuropeanCommissions, in particular pursuant to Regulation 1260/99, Title 2

Managing authoritySeat ______________Address ___________Office _____________Room ____________

Regulation (EC) no. 1260/1999

CG1 Measure Supervisor

CHECK OF RECEIPT DATE OF APPLICATIONS Verification of correct dating of receipt of applications in particular with reference to the deadline for applications for funds


Notice of measure

CG2 Measure Supervisor

ANALYSIS OF EVALUATION CRITERIA Verification that criteria applied are consistent with those which may have been included in the Notice, or however that such criteria are consistent with the objectives in the measure, as well as compliance with EU horizontal politicies (Equal Opportunities, Environment, Employment, Competition)


Notice of measureProgramme ComplementReference community regulations

CG3 Final Beneficiary

VERIFICATION OF THE CORRECT DEVELOPMENT OF THE PROJECT STAGE Analysis of implementation times of annexes on project, as well as of the colling of the necessary meetings of the bodies concerned (Territorial Bodies, Ministry of Environment, Superintendence Offices, etc.) for the passage from the preliminary level to the final and executive level of the project

Final beneficiarySeat ______________Address ___________Office _____________Room ____________

Laws and Regulations on public worksLaws and Regulations in force in the national and local territories on attribution of competence and delegations to the various bodies of the Public Administration


VERIFICATION OF THE COMPETITION PRINCIPLE Examination of the advertisement forms applied. Such forms must be in line with the provisions in community directives and relevant adopting national laws, concerning bidding procedures and level of advertisement


Directives and rules on public tenders

CF1 Managing Authority

AUDIT FOR PAYMENT OF FIRST INSTALMENT Check of the amount applied for by the final beneficiary (Notice of first instalment request) in respect of the amount due in connection with the amount of the financing and the portion to be paid as first instalment (Notice of grant of funds)

Paying authoritySeat ______________Address ___________Office _____________Room ____________

Notice of measureAgreement between region and final beneficiary

MEASURE ____ - MACRO-PROCESS/OPERATION CLASS: 1. CONSTRUCTION OF PUBLIC WORKS BREAKDOWN OF AUDIT ACTIVITIES


50



CF2 Regional Accounting

Office

VERIFICATION OF FINANCIAL RESOURCES AVAILABLE AND COMPETENCE Verification of the amount of the balance-sheet item/s or residual amounts provided relating to the action (Regional Budget)Comparison between the amount to be paid in advance (Order for payment of first instalment) and the budgeted amount


National and regional laws on public accountingAccounting Regulation


Office

PAYMENT OF THE FIRST INSTALMENT Check of personal data of the beneficiary and the treasurer thereof (Order for payment)Check of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.


National and regional laws on accounting and budgetAccounting Regulation

CF4 Technical Office of beneficiary

body

AUDIT FOR PAYMENT OF PROGRESS REPORTS Check that the implementing firm complies with safety rules (safety plan and other documents required).Check that the firm complies with insurance and social security obligations, as well as with the provisions of the National Labour Agreement (certificates of social security compliance).Check that there are no collective creditor actions or criminal proceedings pending for the firm and its legal representatives (certifications issued by competent authorities or self-certifications).


Law adopting the community directive on job safety and health and on building sites.Anti-mafia lawBankruptcy law

CF5 Accounting Office of

beneficiary body/Treasury of beneficiary

body

AUDIT FOR ISSUANCE OF ORDERS FOR PAYMENT OF PROGRESS REPORTSVerification of the amount applied for by the implementing firm, comparison of supporting documentation for the application (Payment Certificates issued by the Site Engineers).Check of the correct determination of the bank account and of the beneficiary's identity (supplying firm) for credit operation or direct payment to the treasury.Comparison of the expenditure amount to be paid with the financial resources available for the Body.


Laws and Regulations on public worksNational and regional laws on accounting and budgetAccounting Regulation of the body

CF6 Site Engineer and Process

Manager

CHECK OF ELIGIBILITY OF EXPENSES TO BE PAID Analysis of expenses included in the amounts available to the administration and control of their eligibility.Consistency between the expenses paid and the estimates made upon approval of the Technical and Economic Sheet


Schede SEM 2000Laws and Regulations on public works.



body

AUDIT FOR ISSUANCE OF ORFERS FOR PAYMENT OF AMOUNTS AVAILABLECheck of the amount to be paid to the creditor, comparison with supporting documentation (Invoice, receipt, parcel plan of expropriations, ...).Check that bank account and beneficiary's identity are correctly determined for the credit operation or direct payment to the treasury.Comparison of the expenditure amount to be paid with the financial resources available for the Body.





51

Code Supervising Authority



beneficiary body

AUDIT FOR PAYMENT OF SECOND INSTALMENT Check of the amount applied for by the final beneficiary (Notice of second instalment request) in respect of the amount due in connection with the amount of the financing and the portion to be paid as second instalment (Notice of grant of funds)


Notice of measure


Office


Managing authorityPaying authoritySeat ______________Address ___________Office _____________Room ____________



Office

PAYMENT OF THE SECOND INSTALMENT Check of personal data and bank codes of the beneficiary (Order for payment)Check of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.

Managing authorityPaying authoritySeat ______________Address ___________Office _____________Room ____________


CG5 Technical Office of beneficiary

body

CHECK THAT WORKS ARE ACTUALLY COMPLETEDObjective verification of the work completion date through a report of the inspection with the Site Engineer and the site manager.


Laws and Regulations on public works

CG6 Testing Commission /

Civil Engineers

TEST-RELATED CHECKS Check of physical works and the nature of the works provided for in the project.Verification of the size of the works as compared to the project.Verification of functionality of works in connection with the objectives of the measure....


Laws and Regulations on public works.Scheda di misura

CF11 Technical Office of beneficiary

body

AUDIT FOR PAYMENT OF FINAL REPORT Check that the implementing firm complies with laws on employment (specific releasing certificate issued to competent authorities ).Check that there are no collective creditor actions or criminal proceedings pending for the firm and its legal representatives (certifications issued by competent authorities or self-certifications) .


Anti-mafia lawBankruptcy law



body

AUDIT FOR ISSUANCE OF ORDERS FOR PAYMENT OF FINAL REPORTVerification of the amount applied for by the implementing firm, comparison of supporting documentation for the application (Payment Certificates issued by the Site Engineers).Check of the correct determination of the bank account and of the beneficiary's identity (supplying firm) for credit operation or direct payment to the treasury.Comparison of the expenditure amount to be paid with the financial resources available for the Body.





52



CF13 Final Beneficiary

ADMINISTRATION AND ACCOUNTING The final beneficiary is required to keep the following documentation:Economic and Technical SheetProgress Reports and Payment Certificates Expenditure documentation Expenditure certification with final allotment between Works and Amounts AvailableFinal reporting table



In particular, the checks required to the purpose of the final report may be summarised as follows:Each accounting document, after checking eligibility to the part-financing, is to be referred to the corresponding expenditure item, checking the reference to the project concerned; the documents relating to expenses in common to may projects are to be referred on the basis of objective reversal coefficients. Balance-sheet expenditure items must correspond to the summation of the amounts in the single accounting documents attached.

CF14 Measure Supervisor

AUDIT OF THE ADMINISTRATIVE AND ACCOUNTING DOCUMENTATION The following documents are subjected to audit:Expenditure documentation (1)Final reporting table (9)

Final beneficiarySupervising/managing authorityPaying authority

In particular, the checks to be made by the reporting service may be detailed as follows:Formal and substantial correctness of all the documents produced (dates, numbering, readability, originality, …)Correct attribution of expenditure documents to the project being examinedCorrect attribution of supporting documents to each expenditure item in the budget

Correspondence, or difference within the allowed limits, between balance-sheet and budget amountsCorrespondence between the overall sum of the amounts in the documents and the relevant expenditure itemCorrectness of allocation rates in case of costs in common to many part-financed projects or to various actions taken by the final beneficiaryAscertainment that payments were actually made

BREAKDOWN OF AUDIT ACTIVITIES

Laws and Regulations on public worksNational and regional laws on accounting and budgetAccounting Regulation of the body EU Regulations

MEASURE ____ - MACRO-PROCESS/OPERATION CLASS: 1. CONSTRUCTION OF PUBLIC WORKS


53



CF15 Paying Authority

AUDIT FOR PAYMENT OF FINAL INSTALMENT Check of the amount applied for by the final beneficiary (Notice of final instalment request) in respect of the amount due in connection with the amount of the financing and instalments previously paid

Managing authority Notice of measure


Office

VERIFICATION OF FINANCIAL RESOURCES AVAILABLE Verification of the amount of the balance-sheet item/s or residual amounts provided relating to the action (Regional Budget)Comparison between the amount to be paid in advance (Order for payment of final instalment) and the budgeted amount

Managing authorityPaying authority



Office

PAYMENT OF THE FINAL INSTALMENT Check of personal data and bank codes of the beneficiary (Order for payment)Check of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.

Managing authorityPaying authorityFinal beneficiary



Office

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount paif corresponds to 7% of the participation of Funds in the interventionsCorrect recording of the amount received in connection with the management of accounting, making a distinction between community financing and government financing.

Managing authoritySeat ……………...Paying authoritySeat ………………

Regulation (EC) no. 1260/1999Organisational Regulation of Office Accounting Regulation of Office


Office

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount applied for (mid-term instalment) corresponds to the amount paid by the European CommissionCorrect recording of the amount received in connection with the management of accounting, making a distinction between community financing and government financing.




Office

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount applied for (final instalment) corresponds to the amount paid by the European CommissionCorrect recording of the amount received in connection with the management of accounting, making a distinction between community financing and government financing.





54

3.2 Example of audit trail for Class of Operation 2. PROCUREMENT OF GOODS AND SERVICES

Measure Regional ROP X - Measure __ - Training aimed at the reinstatement of long time unemployed workers

Operation class 2. Procurement of goods and services

Measure supervisor Vocational training department - Training action sector





Entities concerned Long time unemployed workers

Other entities involved Subsidised training centres - Auditing Service - Regional accounting office - Reporting service


ORGANISATION

Supervising and auditing sector

Training action sector

Community policy service

Auditing and reporting service

Vocational training department

BodyRegion

Regional accounting office

Budget Department


55

ACTIVITIES MANAGING BODIES FINAL BENEFICIARIES EXTERNAL BODIES FINANCIAL FLOW MANAGERSIMPLEMENTATION

TIME AUDIT ACTIVITIES



Guidelines on courses to be held and applications for training

Application of the guidelines supplied by the regional vocational training centres on the courses to he held and partnership requests

Processing and forwarding of the provincial proposal of training programme

Start __/__/__End __/__/__

Analysis of the proposed provincial programmes and drafting of the programming document

Start __/__/__End __/__/__


Start __/__/__End __/__/__

Definition of measures and actions as well as of implementation procedures (notices, forms, etc.). Allotment of financial resources to measures and actions NOTICE TO FINANCIAL MONITORING

Start __/__/__End __/__/__

Compliance with European Commission instructions (CS 1)

Ex-ante evaluation

Preparation of final draft of training Plan

Publication of the training Plan on the ORB

Start __/__/__End __/__/__

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES PROCESS: PROGRAMMING OF SUBSIDISED COURSES WITH CENTRAL CO-ORDINATION

Programming Service

Provincial Programming

Service

Partership

Provincial Programming

Service

VTRC

Provincial Programming Service

PartnershipRegional Council

Programming Service

Programming Service

P. S.

P. S.



56


TIMEAUDIT ACTIVITIES

Preparation of notice for the submission of projects and publication of the same on the ORB

Start __/__/__End __/__/__

Check of timely publication of notice and access thereto of

potential beneficiaries (C G 1)

Preparation and submission of applications for funds

Start __/__/__End __/__/__

Receipt of applications for funds and opening of the case

Start __/__/__End __/__/__

Check of receipt and registration methods (C G 2)

Analysis of the legal and administrative correctness of the application and preparation of the list of non-eligible applications

Start __/__/__End __/__/__

Evaluation of projects, drafting of minutes and forwarding of the ranked list to the managing authority

Start __/__/__End __/__/__

Preparation of ranked list and list of non eligible candidates and publication on the ORB

Start __/__/__End __/__/__

Check of procedure relating to the preparation and publication

of the ranked list and list of non eligible candidates (C G 4)

Submission of appeals by the candidates considered as non-eligible

Start __/__/__End __/__/__

Examination of appeals and drafting of final ranked list

Start __/__/__End __/__/__

Publication of final ranked lists on the ORB

Start __/__/__End __/__/__

Notice to the beneficiaries of the contributions

Start __/__/__End __/__/__

Check of notice to the beneficiary (C G 5)

Check of administrative audit and project evaluation

procedures (C G 3)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES PROCESS: PROJECT EVALUATION OF SUBSIDISED COURSES WITH CENTRAL CO-ORDINATION

Measure supervisor

Training Centres

M.S.

A.C.

M.S.

Training Centres

A.C.

Auditing Commission

A.C.

M.S.

M.S.


57



Admission to the financing and forwarding of the relevant rules

Start __/__/__End __/__/__

Acceptance of the financing and execution of the relevant rules

Start __/__/__End __/__/__

Formal grant of the financing

Notice to financial and physical monitoring

Stipulation of the agreement and formal notice INFEED TO PROCEDURAL MONITORING

Check of notice of obligations to the beneficiary (C G 6)

Auditing inspection Start __/__/__End __/__/__

Publication of notice of courses Start __/__/__End __/__/__



Receipt of applications for participation in courses

Start __/__/__End __/__/__


Selections Start __/__/__End __/__/__

Preparation and publication of students' ranked lists

Start __/__/__End __/__/__

Notice of authorisation to start courses

Start __/__/__End __/__/__

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES PROCESS: IMPLEMENTATION OF SUBSIDISED COURSES WITH CENTRAL CO-ORDINATION (I)

M.S.

Measure Supervisor

Training Centres

M.S.Training Centres

Training Centres

T.C.

Selection Board

T.C.

M.S.

Auditing Service

continued

M.S.


58



Notice of start of courses INFEED TO PROCEDURAL MONITORING

Start __/__/__End __/__/__

Establishment of bank guarantee and application of first advance payment

Start __/__/__End __/__/__

Authorization of first advance payment

Start __/__/__End __/__/__

Correspondence between advance payment requested and

amount due (C F 1)


Start __/__/__End __/__/__

Verification of financial resources available on balance-

sheet item (C F 2)

Issuance of order for payment Start __/__/__End __/__/__

Check that payments are timely made (C G 9)


Start __/__/__End __/__/__

Correct determination of amount and beneficiary's

identity (C F 3)Adjustment of bank guarantee amount and application for the second advance payment

Start __/__/__End __/__/__

Auditing inspection Start __/__/__End __/__/__

Authorisation of second advance payment

Start __/__/__End __/__/__


amount due (C F 4)


Start __/__/__End __/__/__


sheet item (C F 5)



Payment of the second instalment of the financing

Start __/__/__End __/__/__


identity (C F 6)

Final exams Start __/__/__End __/__/__

Publication of results and end of courses INFEED TO PROCEDURAL MONITORING

Start __/__/__End __/__/__

Ex-post evaluation of achievement of measure objectives (1)

(1) During the implementation stage a mid-term evaluation of responsibility of the independent assessor is regularly carried out. Furthermore, the ex-post evaluation is virtually the conclusion of the implementation. After the physical conclusion of operations it will be possible to ascertain whether the objectives of the measure were achieved in terms of accomplishments, results, specific impact.

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES PROCESS: IMPLEMENTATION OF SUBSIDISED COURSES WITH CENTRAL CO-ORDINATION (II)

Training Centres

Measure Supervisor

Regional Accounting

Office

M.S.

RAO

T.C.

RAO

M.S.

RAO

M.S.

T.C.

Board of Examiners

T.C.

continued

Auditing Service

Independent assessor


59



Delivery of administrative and accounting documentation to reporting purposes

Start __/__/__End __/__/__

Self-audit of administrative/accounting

documentation (C F 7)

Examination of audit reports, check of administrative and accounting documentation, determination of balance payment

Start __/__/__End __/__/__

Check of eligibility of expenses and correctness of payment

methods applied (C F 8)

Evaluation of reporting results Start __/__/__End __/__/__

Acceptance of reporting Start __/__/__End __/__/__

Appeal against reporting Start __/__/__End __/__/__

Examination of appeal and possible counter-appeal

Start __/__/__End __/__/__

Authorisation to pay the financing final instalment

Start __/__/__End __/__/__


amount due (C F 9)


Start __/__/__End __/__/__


sheet item (C F 10)



Payment of the final instalment of the financing

Start __/__/__End __/__/__


identity (C F 11)Notice to the financial and physical monitoring*INFEED TO PROCEDURAL MONITORING

Forwarding of residual accounting documents

Start __/__/__End __/__/__

Audit and certification of adequacy of residual expenditure

Start __/__/__End __/__/__

Verification that correct payment methods are applied

(C F 12)

Release of bank guarantee Start __/__/__End __/__/__

* : Accounting data relating to payments are obtained by adding the amounts reported for all the projects included in a certain measure. Such summation refers to the financing sources (Government, region, EU, private parties) and represents the output forwarded by the Measure Supervisor to the monitoring structure.

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES PROCESS: REPORTING ON SUBSIDISED COURSES WITH CENTRAL CO-ORDINATION

Training Centres

Reporting Service

T.C.

T.C.

T.C.

Measure Supervisor

M.S.

M.S.

Regional Accounting

Office

RAO

Training Centres

M.S.

Reporting Service

M.S.


60


TIME AUDIT ACTIVITIES

Issuance of grant of funds Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__

Check of amount received and recording thereof in the

accounts (C F 13)

Submission of the application for payment of the mid-term instalment to the European Commission

Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__


accounts (C F 14)

Submission of the application for payment of final instalment, final implementation report and declaration (under art. 38, para. i, lett.

F of Reg.(EC) 1260/1999) to the European Commission

Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__

Receipt of final payment and recording in the accounts

Start __/__/__End __/__/__


accounts (C F 15)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES PROCESS: FINANCIAL CIRCUIT OF SUBSIDISED COURSES WITH CENTRAL CO-ORDINATION

Paying Authority

Paying Authority

Paying Authority

Regional Accounting

Office

MTBPE RGS-IGRUE

Ministry of Labour

EC

MTBPE RGS-IGRUE

EC

MTBPE RGS-IGRUE

Ragioneria regionale

MTBPE RGS-IGRUE

Ministry of Labour

EC

MTBPE RGS-IGRUE

Ragioneria regionale

MTBPE RGS-IGRUE

Ministry of Labour


61


Description of audit and reference documentation Body in charge and location of records


CS1 Managing Authority


Managing AuthoritySeat ______________Address ___________Office _____________Room ____________


CG1 Managing Authority

TIMELY AND ACCESSIBLE NOTICE The notice shall be timely drafted and published so that the entities concerned may have sufficient time to prepare and submit their applications within the established deadline.Publicity of the invitation to file applications shall be optimised in order to allow the highest possible number of entities to have access and, therefore, to have a high number of proposals for the selection.


Programme Complement Notice of the Measure


RECEIPT AND REGISTRATION METHODS The Authority checks that the appropriate procedure is applied in respect of the provisions concerning the receipt and registration of applications.


Programme ComplementNotice of the MeasureReceipt and registration procedures


ADMINISTRATIVE AUDIT AND TECHNICAL AND ECONOMICAL APPRAISAL OF THE APPLICATIONThe control of applications is based on clear, relevant and quantifiable criteria which must also comply with eligibility requirements set forth by EC. Such criteria must be applied on a standardised basis, and their results and motivations must be made public (Preliminary Evaluation Reports).


Programme ComplementNotice of the MeasureApplication management procedures


RANKED LIST AND LIST OF NON-ELIGIBLE ENTITIES The development and publicisation process for the ranked list and the list of non-eligible enties must comply with the procedures set forth in the Programme Complement and in the Notice of the Measure (Ranked Lists and Lists of non-eligible entities).


Programme ComplementNotice of the MeasureRanked list management procedures


NOTICE TO THE BENEFICIARY The beneficiary shall receive prompt written notice of the acceptance of the beneficiary's application (Letter to the beneficiary).




BENEFICIARY'S OBLIGATIONS The beneficiary shall receive prompt written notice concerning the rights and obligations under the grat of the funds (Agreement).


Agreement

BREAKDOWN OF AUDIT ACTIVITIES

MEASURE ____ - MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES


62

Code Supervising Authority Description of audit and reference documentation Body in charge and

location of records Reference regulations


TIMELY AND ACCESSIBLE NOTICE The notice shall be timely drafted and published so that the entities concerned may have sufficient time to submit their applications.Access shall be granted to all potentially concerned in order to have a high number of proposals for the selection.

Final Beneficiary (Training Entity)Lista degli Enti formativi convenzionati con indicazione degli uffici di archiviazione e relativi indirizzi

ESF ManualAgreement


RECEIPT AND REGISTRATION METHODS Check that the appropriate procedure is applied in respect of the provisions concerning the receipt and registration of applications.

Final Beneficiary (Training Entity)List of Training Entities under an agreement including records offices and relevant addresses

ESF ManualAgreement


AUDIT FOR PAYMENT OF FIRST INSTALMENT Check of the amount applied for by the final beneficiary (Notice of first instalment request) in respect of the amount due in connection with the amount of the financing and the portion to be paid as first instalment (Notice of grant of funds)


Notice of the Measure


Office


Managing AuthoritySeat ……………...Paying AuthoritySeat ………………

National and regional laws on public accountingAccounting regulation


TIMELY PAYMENTS Check that payments are timely made after receipt of the applications (3 months) on terms and conditions complying with the rules prescribed.


EC Regulations


Office

PAYMENT OF THE FIRST INSTALMENT Check of personal data and bank codes of the beneficiary (Order for payment)Check of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.


National and regional laws on public accounting and budget Accounting regulation


AUDIT FOR PAYMENT OF SECOND INSTALMENT Check of the amount applied for by the final beneficiary (Notice of second instalment request) in respect of the amount due in connection with the amount of the financing and the portion to be paid as second instalment (Notice of grant of funds)

Managing AuthoritySeat ………………


MEASURE ____ - MACRO-PROCESS/OPERATION CLASS: 2. PROCUREMENT OF GOODS AND SERVICES BREAKDOWN OF AUDIT ACTIVITIES


63





Office

VERIFICATION OF FINANCIAL RESOURCES AVAILABLE AND COMPETENCE Verification of the amount of the balance-sheet item/s or residual amounts provided relating to the action (Regional Budget)Comparison between the amount to be paid in advance (Order for payment of second instalment) and the budgeted amount






EC Regulations


Office

PAYMENT OF THE SECOND INSTALMENT Check of personal data and bank codes of the beneficiary (Order for payment)Check of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.


National and regional laws on public accounting and budgetAccounting regulation

CF7 Final Beneficiary

ADMINISTRATION AND ACCOUNTING The final beneficiary is required to keep the following documentation:Attendance books for students and teachers Documentation of expenses Cash day bookStock-book Teaching material delivery books Any document relating to the course (teachers' CV's and students' ID sheets, teaching material, notices, examining board's minutes, …)Final reporting table

Final Beneficiary (Training Entity)List of Training Entities under an agreement including records offices and relevant addresses

Ministry of Labour CircularsRegion Circulars

In particular, the checks required to the purpose of the final report may be summarised as follows:Each accounting document, after checking eligibility to the part-financing, is to be referred to the corresponding expenditure item, checking the reference to the project concerned; the documents relating to expenses in common to may projects are to be referred on the basis of objective reversal coefficients. Balance-sheet expenditure items must correspond to the budgeted amounts (subject to the small variations allowed) .

Balance-sheet expenditure items must correspond to the summation of the amounts in the single accounting documents attached.



64

CodeSupervising Authority Description of audit and reference documentation

Body in charge and location of records Reference regulations

CF8 Reporting Service

AUDIT OF THE ADMINISTRATIVE AND ACCOUNTING DOCUMENTATIONThe following documents are subjected to audit:Attentance books for students and teachers (1)Documentation of expenses (2)Cash day book (3)Stock-book (4)Teaching material delivery books (5)Notices, examining board's minutes (6)Teachers' CV's and students' ID sheets (7)Teaching material (8)Final reporting table (9)

Final Beneficiary (see above for location of records)(1-3-4-5-7-8)Managing/Audit Bodies (9)cc Managing/Audit Bodies (2-6)Seat ………...

Ministry of Labour CircularsRegion Circulars (reporting manual)

In particular, the checks to be made by the reporting service may be detailed as follows:Formal and substantial correctness of all the documents produced (dates, numbering, readability, originality, …)Correct attribution of expenditure documents to the project being examinedCorrect attribution of supporting documents to each expenditure item in the budget Correspondence, or difference within the allowed limits, between balance-sheet and budget amountsCorrespondence between the overall sum of the amounts in the documents and the relevant expenditure itemCorrectness of allocation rates in case of costs in common to many part-financed projects or to various actions taken by the final beneficiaryAscertainment that payments were actually made


AUDIT FOR PAYMENT OF FINAL INSTALMENT Check of the amount applied for by the final beneficiary (Notice of last instalment request) in respect of the amount due in connection with the amount of the financing and the previously paid instalments

Managing AuthoritySeat ………………



Office

VERIFICATION OF FINANCIAL RESOURCES AND COMPETENCE Verification of the amount of the balance-sheet item/s or residual amounts provided relating to the action (Regional Budget)Comparison between the expenditure amount (Order for payment of final instalment) and the budgeted amount






EC Regulations



65





Office

PAYMENT OF THE FINAL INSTALMENT Check of personal data and bank codes of the beneficiary (Order for payment)Check of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.


National and regional laws on public accounting and budgetAccounting regulation

CF12 Reporting Service

AUDIT OF ADMINISTRATIVE AND ACCOUNTING DOCUMENTATIONThe residual expenditure documentation relating to payments made after the receipt of the last instalment is audited in order to ascertain who the recipients of compensations are and the methods of payment.

cc Managing/Audit BodiesSeat ………………

Ministry of Labour CircularsRegion Circulars (reporting manual)


Office

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount paid corresponds to 7% of the Funds participation in the interventionsCorrect recording of the amount received in connection with the management of accounting, making a distinction between Community and Government financing.


Regulation (EC) no. 1260/1999Office organisational Regulation Office accounting Manual


Office

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount applied for (mid-term instalment) corresponds to the amount paid by the European CommissionCorrect recording of the amount received in connection with the management of accounting, making a distinction between Community and Government financing.


Regulation (EC) no. 1260/1999Office organisational RegulationOffice accounting Manual


Office

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount applied for (final instalment) corresponds to the amount paid by the European CommissionCorrect recording of the amount received in connection with the management of accounting, making a distinction between Community and Government financing.


Regulation (EC) no. 1260/1999Office organisational RegulationOffice accounting Manual



66

3.3 Example of audit trail for Class of Operations 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES

MeasureNational Operative Plan for Industry - Measure no. 1 Law 488/92 Industry

Operation class 3. Grant of funds and services to individual beneficiaries

Measure supervisor

Ministry of Industry and Trade - General Direction co-ordinating incentives to enterprises - Office A9: Community Affairs; Office B1: Regulation and grant of funds to depressed areas; Office B2: Subsidised programmes in depressed areas Objective 1





Entities concerned Enterprises

Other entities involved Banks under an agreement, MICA DGCII Office A5 Management and control of financial resources


ORGANISATION

Ministry of Industry

Regional Subsidies Co-ordination of General Affairs

DGCII

Office A5 Office B1 Office B2Ofice A9


67



Start __/__/__End __/__/__


Start __/__/__End __/__/__

Entrepreneurial system requirements

Receip of requests from partnership, preparation and forwarding of regional proposals

Start __/__/__End __/__/__

Analysis of the proposed provincial programmes and drafting of the programming document

Start __/__/__End __/__/__


Definition of measures and actions as well as of implementation procedures (notices, forms, etc.). Allotment of financial resources to measures and actions per region NOTICE TO FINANCIAL

MONITORING

Start __/__/__End __/__/__

Compliance with European Commission instructions (C S 1)

Ex-ante evaluation

Preparation of final document

Publication of the National Operational Plan on the IROG

Start __/__/__End __/__/__

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: PROGRAMMING, NATIONAL OPERATIONAL PLAN FOR INDUSTRY LAW 488

Ministry of Industry DGCII

Office A9

Regional Boards of Councillors

Partnership

Regional Boards of Councillors

PartnershipParliamentRegions


Office A9


Office A9


Office A9




68


Preparation of notice to submit projects and publication thereof on the IROG

Start __/__/__End __/__/__



Preparation and submission of applications for funds attaching the deposit receipt or bank guarantee/insurance policy

Start __/__/__End __/__/__

Receipt of applications for funds and opening of the case

Start __/__/__End __/__/__


Analysis of the legal and administrative correctness of the application and notice to enterprises whose applications have been accepted

Start __/__/__End __/__/__


procedures (C G 3)

Correction of formal irregularities and errors; clarifications and explanations

Evaluation of project, drafting of minutes and forwarding of results to enterprises (calculation of indicators and non-eligible expenses) and to the Ministry of Industry (preliminary evaluation report)

Start __/__/__End __/__/__


procedures (C G 3)

Preparation and publication of subsidisable projects ranked lists until availability of financial resources Notice to enterprises for which preliminary assessment led to an unfavourable result

Start __/__/__End __/__/__

Check of procedure relating to the preparation and publication

of the ranked list and list of non eligible candidates (C G 4)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: PROJECT EVALUATION OF NOP FOR INDUSTRY LAW 488


Office B1

Enterprises

Licensed Banks

L.B.

L.B.

Enterprise


Office B1


69


Issuance of the provisional granting decree and forwarding thereof to enterprise and licesed bank INFEED TO PROCEDURAL MONITORING

Start __/__/__End __/__/__

Check of notice to the beneficiary (C G 5)

Notice to financial and physical monitoring

Establishment of bank guarantee

Submission of application for advance payment of financing

Start __/__/__End __/__/__

Verification and forwarding of list of programmes for which funds may be granted

Start __/__/__End __/__/__

Check of application for advance payment (C F 1 )

Verification and crediting of contributions requested to licensed banks

Start __/__/__End __/__/__

Verification of financial resources available (C F 2)

Payment of advance instalment of financing

Start __/__/__End __/__/__


identity (C F 3)Check that payments are timely

made (C G 6 )

Submission of application for payment of first instalment together with progress report

Start __/__/__End __/__/__

Verification and forwarding of list of programmes for which funds may be granted

Start __/__/__End __/__/__

Check of application for advance payment (C F 4 )


Start __/__/__End __/__/__



Start __/__/__End __/__/__



made (C G 7 )

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: IMPLEMENTATION NATIONAL OPERATIONAL PLAN FOR INDUSTRY LAW 488


Office A5


Office B1

Enterprise

Enterprise

Licensed Bank

Licensed Bank

Enterprise

Licensed Bank


Office A5

Licensed Bank

continued


Office B1


70


Submission of application for payment of second instalment together with progress report

Start __/__/__End __/__/__

Verification and communication of list of programmes for which funds may be granted

Start __/__/__End __/__/__

Check of application for advance payment (C F 7)


Start __/__/__End __/__/__


Payment of the second instalment of the financing (decreased by 10%)

Start __/__/__End __/__/__



made (C G 8)

Ex-post evaluation of achievement of measure objectives(1)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: IMPLEMENTATION NATIONAL OPERATIONAL PLAN FOR INDUSTRY LAW 488 (II)

(1) During the implementation stage a mid-term evaluation of responsibility of the independent supervisor is regularly carried out. Furthermore, the ex-post evaluation is virtually the conclusion of the implementation. After the physical conclusion of operations it will be possible to ascertain whether the objectives of the measure were achieved in terms of accomplishments, results, specific impact.

Enterprise

Licensed Bank


Office A5

Licensed Bank

continued



71


Completion of project INFEED TO PROCEDURAL MONITORING

Forwarding of final expenditure documentation, declarations of the enterprise in respect of the completion date of the programme and of plant start of operation, as well as the application for the final instalment of the financing

Start __/__/__End __/__/__

Self-audit of administrative/accounting

documentation (CF 10)

Verification that final expenditure documentation and declarations are complete and relevant

Start __/__/__End __/__/__

Check of application for advance payment (CF 11)

Drafting of report on the final status of the project

Start __/__/__End __/__/__

For projects amounting to less than 3 billionLire: forwarding of the report on the final status of the project and declarations of the enterprise

Start __/__/__End __/__/__

For projects amounting to or higher than billion 3 Lire: forwarding of the report on the final status of the project, declarations of the enterprise and expense documentation

Start __/__/__End __/__/__

For projects amounting to less than 3 billion Lire: evaluation of the completeness and adequacy of the final report and of the declarations of the enterprise

Start __/__/__End __/__/__

Control before issuing final decree (CF 12)

For projects amounting to or higher than billion 3 Lire: assessments carried out by specific auditing commissions

Start __/__/__End __/__/__

Control before issuing final decree (CF 13)

Preparation of summary report on assessment results

Start __/__/__End __/__/__

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: REPORTING NATIONAL OPERATIONAL PLAN FOR INDUSTRY LAW 488 (I)

Licensed Bank

Enterprise

Enterprise

L.B.


Office B2


Office B2

L.B.

L.B.

Auditing Board

continued


72


Submission of application for payment of second instalment together with progress report

Start __/__/__End __/__/__

Verification and communication of list of programmes for which funds may be granted

Start __/__/__End __/__/__

Check of application for advance payment (CF 7)


Start __/__/__End __/__/__


Payment of the second instalment of the financing (decreased by 10%)

Start __/__/__End __/__/__



made (CG 8)

Ex-post evaluation of achievement of measure objectives(1)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: IMPLEMENTATION NATIONAL OPERATIONAL PLAN FOR INDUSTRY LAW 488 (II)

(1) During the implementation stage a mid-term evaluation of responsibility of the independent supervisor is regularly carried out. Furthermore, the ex-post evaluation is virtually the conclusion of the implementation. After the physical conclusion of operations it will be possible to ascertain whether the objectives of the measure were achieved in terms of accomplishments, results, specific impact.

Enterprise

Licensed Bank


Office A5

Licensed Bank

continued



73


Issuance of provisional granting decrees

Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__


accounts (C F 16)

Submission of the application for payment of mid-term instalment (national and EU) together with certification of the expenses actually incurred to: State General Accounting Office (IGRUE), Ministry of Industry DGCII Office B2 and Managing Authority of CSF

Start __/__/__End __/__/__

Audit and documentation on payments (C F 17)

Submission of the application for payment of the mid-term instalment to the European Commission

Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__


accounts (C F 18)

Submission of the application for payment of final instalment (national and EU shares) together with certification of the expenses actually incurred to: State General Accounting Office (IGRUE), Ministry of Industry DGCII Office B2 and Managing Authority of CSF

Start __/__/__End __/__/__

Audit and documentation on payments (C F 19)

Submission of the application for payment of final instalment, final implementation report and declaration (under art. 38, para. i, lett. F of Reg.(EC) 1260/1999) to the European Commission

Start __/__/__End __/__/__


Start __/__/__End __/__/__


Start __/__/__End __/__/__

Receipt of mid-term payment and recording in the accounts

Start __/__/__End __/__/__


accounts (C F 20)

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIESPROCESS: FINANCIAL CIRCUIT, NATIONAL OPERATIONAL PLAN FOR INDUSTRY LAW 488

Ministry of IndustryDGCII


Office A5


Office A9


Office A5


Office A9

EuropeanCommission

MICA DGCIIOffice A5

MTBPE RGS-IGRUEMTBPE

D.P.S.

MTBPE RGS-IGRUE

European Commission

MICA DGCIIOffice A5

MTBPE RGS-IGRUE

MTBPE D.P.S.

MTBPE RGS-IGRUE

European Commission

MICA DGCIIOffice A5

MTBPE RGS-IGRUE

MTBPE D.P.S.

MTBPE RGS-IGRUE


74

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES

BREAKDOWN OF AUDIT ACTIVITIESCode Supervising

AuthorityDescription of audit and reference documentation Body in charge and

location of recordsReference regulation

CS1 Ministry of Industry DGCII

Office A9


Ministry of Industry DGCII - Office A9Seat ______________Address ___________Office _____________Room ____________


CG1 Ministry of Industry DGCII

Office B1

TIMELY AND ACCESSIBLE NOTICE The notice shall be timely drafted and published so that the entities concerned may have sufficient time to prepare and submit their applications within the established deadline.Publicity of the invitation to file applicatio

Ministry of Industry DGCII - Office B1Seat ______________Address ___________Office _____________Room ____________

Programme Complement Notice of the Measure

CG2 Licensed Bank RECEIPT AND REGISTRATION METHODS The Authority checks that the appropriate procedure is applied in respect of the provisions concerning the receipt and registration of applications.

Licensed BankList of the licensed banks indicating the addresses of the filing offices

Programme ComplementNotice of the MeasureReceipt and registration procedures

CG3 Licensed Bank ADMINISTRATIVE AUDIT AND TECHNICAL AND ECONOMICAL APPRAISAL OF THE APPLICATIONThe control of applications is based on clear, relevant and quantifiable criteria which must also comply with eligibility requirements set forth by EC. Such criteria must be ap

Licensed BankList of the licensed banks indicating the address of the filing offices

Programme ComplementNotice of the MeasureApplication management procedures


Office B1

RANKED LIST AND LIST OF NON-ELIGIBLE ENTITIES The development and publicisation process for the ranked list and the list of non-eligible enties must comply with the procedures set forth in the Programme Complement and in the Notice of the Measure (Ranked




Office B1

NOTICE TO THE BENEFICIARY The beneficiary shall receive prompt written notice of the acceptance of the beneficiary's application (Letter to the beneficiary).



CF1 Licensed Bank AUDIT FOR PAYMENT OF FIRST INSTALMENTCheck of amount applied for by the beneficiary and of the existence and completeness of the following documentation:Request of payment of first instalmentCCIAA certificateBank guaranteeDocuments proving the engagement to support to issue their own means and their real emissionEventual deliberation of medium-long term financing from the credit institutionDeclaration of non-enjoyment of other benefits for the services subject of the investment programSworn survey, in case of use of pre-existent real property, on the compliance with building permits and/or authorizations and use destinationsThe check, if positive, involves the inclusion of the program in the list transmitted to MICA (Ministry of Industry and Commerce) DGCH Office A 5 containing the requests examined favorably

Licensed bankList of the licensed banks indicating the addresses of the filing offices

Regulation Law 488Agreement with Ministry of Industry


75

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES

BREAKDOWN OF AUDIT ACTIVITIESCode

Supervising Authority

Description of audit and reference documentationBody in charge and location of records

Reference regulation

CF2 Ministry of Industry DGCII

Office A5

VERIFICATION OF FINANCIAL RESOURCES AVALAIBLE Verification of financial resources available with reference to the requests made by the licensed bank on behalf of the enterprises and, within the special accounting "Interventions for depressed Areas".


Regulation Law 488Organisational Regulation for OfficeAccounting Manual for Office

CF3 Licensed Bank PAYMENT OF INSTALMENT Check of personal data and bank codes of the beneficiaryCheck of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.






EC Regulations

CF4 Licensed Bank CHECK FOR FIRST INSTALLMENT EMISSIONCheck of the amount required by the final beneficiary and existence and thoroughness of the following documentation:Request for advance emissionCertificate of registration to the Chamber of CommerceDocuments showing the work progress of the programSworn survey, in case of “ex novo” construction (to be done completely) of building works, in compliance with building permits and/or authorizations and use destinations




Office A5

VERIFICATION OF FINANCIAL RESOURCES AVALAIBLEVerification of financial resources available with reference to the requests made by the licensed bank on behalf of the enterprises and, within the special accounting "Interventions for depressed Areas".



CF6 Licensed Bank PAYMENT OF THE FIRST INSTALMENT Check of personal data and bank codes of the beneficiaryCheck of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.

Licensed bankReference to Annex including the list of licensed banks as well as records offices and relevant addresses



76

MEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES BREAKDOWN OF AUDIT ACTIVITIES







EC Regulations

CF7 Licensed Bank CHECK FOR SECOND INSTALLMENT EMISSION Check of the amount required by the final beneficiary and existence and thoroughness of the following documentation:Request for advance emissionCertificate of registration to the Chamber of CommerceDocuments showing the work progress of the programSworn survey, in case of “ex novo” construction (to be done completely) of building works, in compliance with building permits and/or authorizations and use destinations




Office A5

Check of the amount required by the final beneficiary and existence and thoroughness of the following documentation: Verification of financial resources available with reference to the requests made by the licensed bank on behalf of the enterprises and, within the special accounting "Interventions for depressed Areas".



CF9 Licensed Bank Request for advance emission Check of personal data and bank codes of the beneficiaryCheck of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.






EC Regulations


77

CodeSupervising Authority Description of audit and reference documentation

Body in charge and location of records Reference regulation

CF10 Final beneficiary

ADMINISTRATIVE AND ACCOUNTING MANAGEMENTThe final beneficiary is required to keep the following documentation:Receipted invoices Internal order sheets with annexes (list of purchase invoices, stock withdrawal vouchers, and employees' processing sheets). Such documents must include the certification by the enterprise that the valorization determines the actual cost of the internal order for the company.

Final beneficiary (Enterprise)

Regulation Law 488

CF11 Licensed Bank AUDIT OF ADMINISTRATIVE AND ACCOUNTING DOCUMENTATIONThe following documents are checked in respect of their completeness and relevance for the subsidised programme:Final expenditure documentation, i.e. legalised copies of receipted invoices or, alternatively, list of each expenditure item summarising invoices (number and date of invoice, supplier, complete description of fixed assets, nature of expenditure and amount net of VAT) and internal order sheets with annexes.Declaration by the enterprise

Final beneficiary (original copies)Licensed Bank (legalised copies) Reference to Annex including the list of licensed banks as well as records offices and relevant addresses



Office B2

AUDIT FOR ISSUANCE OF FINAL DECREEE (projects < 3 billions)The existence and completeness of the following documents is ascertained:Report on the final status of projectDeclarations of the enterpriseSuch activity generates the following document:Report on the findings of the control


Regulation Law 488


Auditing Commission

AUDIT FOR ISSUANCE OF FINAL DECREE (projects >= 3 billions)Testing of the project and verification at the enterprise that statements in the final expenditure documentation and in the declaration are true.Such activity generates the following documents:Test reportReport on the findings of the control


Regulation Law 488Commission's auditing manual


Office A5

VERIFICATION OF FINANCIAL RESOURCES AVALAIBLEVerification of financial resources available with reference to the requests made by the licensed bank on behalf of the enterprises and, within the special accounting "Interventions for depressed Areas", credit of part-financed funds to a specific account opened with the licensed bank.


Regulation Law 488Organisational Regulation for Office Accounting Manual for Office

CF15 Licensed Bank PAYMENT OF THE FINAL INSTALMENT Check of personal data and bank codes of the beneficiaryCheck of the bank documentation received (bank receipt) evidencing the transit of the funds, in order to record such payment.

Licensed BankReference to Annex including the list of licensed banks as well as records offices and relevant addresses


BREAKDOWN OF AUDIT ACTIVITIESMEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES


78


Description of audit and reference documentationBody in charge and location of records




Managing Authority Seat ……………...Paying AuthoritySeat ………………

EC Regulations


Office A5

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount paid corresponds to 7% of the Funds participation in the interventionsCorrect recording of the amount received in connection with the management of the special accounting of "Interventions for depressed Areas"


Regulation Law 488Regulation (EC) no. 1260/1999Organisational Regulation for Office Accounting Manual for Office


Office A5

VERIFICATION AND DOCUMENTATION OF PAYMENTS Verification and quantification of amounts paid to licesed Banks vis-à-vis the list of applications filed by enterprises with expenses actually incurred (certified expenses).


Regulation Law 488Regulation (EC) no. 1260/1999Organisationa Regulation for Office


Office A5

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount applied for corresponds to the amount paid by the European CommissionCorrect recording of the amount received in connection with the management of the special accounting of "Interventions for depressed Areas".




Office A5

VERIFICATION AND DOCUMENTATION OF PAYMENTS Verification and quantification of amounts given to the licensed Banks and comparison thereof with total amounts to be paid to final beneficiariesDetermination of balance amount still to be paid.


Regulation Law 488Regulation (EC) no. 1260/1999Organisational Regulation for Office


Office A5

VERIFICATION OF AMOUNT AND RECORDING THEREOF Verification that the amount applied for corresponds to the amount paid by the European CommissionCorrect recording of the amount received in connection with the management of the special accounting of "Interventions for depressed Areas".



BREAKDOWN OF AUDIT ACTIVITIESMEASURE ____ MACRO-PROCESS/OPERATION CLASS: 3. GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES


79

GLOSSARY • Risk analysis: the definition of management and control systems must be based

on a risk assessment that allows to identify and oversee those internal and external factors that may compromise the fulfilment of intervention objectives, with special reference to the objectives of sound financial management, which should consider strategic as well as management and financial risks.

� Activity: the smallest unit detected in the description of managing systems, with identification of their description, responsible body(ies), relevant audits.

� Routine check (first level): this is carried out in parallel with management and is made up of all the checks performed over the activities of Managing Authorities, Paying Authorities and intermediate bodies.

• Sample check of operations (second level): these are aimed at verifying the

efficacy of the management and control systems implemented and, based on selective criteria and on a risk assessment, the statements of expenditure presented at the various levels involved. Sample check activities are also aimed at obtaining the completion statement as per Art. 38, § 1, letter f), of EC Regulation no. 1260/99. Such statement shall be drawn up by a person or department having a function independent of the designated managing authority, of the person or department of the Paying Authority in charge of the certification as per Art. 38, § 1, letter d), as well as of the intermediate bodies.

� Managing Authorities: the public or private national, regional or local authorities designated by the Member State to manage an intervention.

� Paying Authority: one or more national, regional or local authorities or bodies designated by the Member State to process and submit payment applications and receive payments from the Commission.

� Certificate of expenditure: certification of the expenditure statements issued by the Paying Authority under Art. 32, § 3 and 4, and Art. 38, § 1, lett. d) of the EC Regulation 1260/99.

� Classes/types of operation: the plurality of operations that can be implemented within each measure require the definition of standard operation models grouped by implementation process; the monitoring system at implementation stage has identified three typical operations, namely: PUBLIC WORKS, PROCUREMENT OF GOODS AND SERVICES, GRANTING OF FUNDS AND SERVICES TO INDIVIDUAL BENEFICIARIES.

� Intervention completion statement: certificate released on completion of individual interventions by a person or service independent of the Managing Authority, the Paying Authority or any intermediate body, briefing the results of the audits performed in previous years and rendering a judgement on the eligibility for balance payment, as well as on the legitimacy and correctness of the operations referred to in the final expenditure statement;


80

� Intervention: denomination used for Operational Programmes (OP), Single Programming Documents (SPD), Community Initiative Programmes (CIP), support for technical assistance and innovative measures.

� Macro-process: the whole of procedures characterising a class of operation; there is a two-way relationship between these classes and the macro-process, therefore there is a macro-process for each class of operations.

� Operation: any project or action carried out by the final beneficiaries of intervention, or the smallest portion thereof that can be carried out by the final beneficiary and that must be reported for the purposes of material and procedural monitoring.

� Audit trail: Written description of the management and control systems, stating the procedures and controls required for decision making on the expenditures out of Structural Funds as well as on payments and payment accounting. An audit trail must verify: (i) that the existing procedures are adequate and consistent with Community principles; (ii) that the existing measures ensure the supply of appropriate information by resource beneficiaries; (iii) that the management system ensures that payments are made only when due; (iv) that the system is consistent with Community control guidelines; and (v) that there are management control systems into place to ensure expenditure effectiveness.

� Main process: series of procedures or activities characterising the management of a given operation within a given macro-process. The main processes characterising each operation are: programming, preliminary evaluation, implementation, reporting.

� Project: the smallest unit detected by monitoring, with complete and homogeneous results.

� Management and control systems: the administrative processes and organisational structures at the basis of the implementation of interventions co-financed with Structural Funds. Management and control systems must ensure the sound financial management of the interventions, as well as the correctness, eligibility and compliance with EC rules of the expenditure reported.

� Monitoring system: information system developed by the State Accounting Office to monitor the interventions part-financed with EU Structural Funds in the period 2000-2006, broken down into three subsystems: material, financial and procedural monitoring.

� Risk assessment: for the purpose of verifying the efficacy of the management and control system, second-level checks must identify the main risk factors associated to it. Therefore, the selection of a sample of operations to be checked must be subject to a preventive risk assessment, taking into account both inherent risks (linked to the peculiar features of the operation such as, for instance, high amount of financing, nature of beneficiary, etc.) and control risks (linked to the reliability of the control system adopted such as, for instance, failure to detect errors and/or irregularities).