FINANCIAL REPORTING Lead Partner Seminar Madrid, 20 October 2008

1. FINANCIAL REPORTING Lead Partner Seminar Madrid, 20 October 2008 Petra Geitner Senior Finance Officer Katja Ecke, Finance Officer

2. Content • Financial Control • Eligibility questions & General Advice

3. Financial Control

4. REPORTING PROCESS

5. DESIGN OF FIRST LEVEL CONTROL SYSTEM • Legal basis: Art. 16 of R. 1080/2006: • In order to validate expenditure, each Member State shall set up a control system (…) • 4 systems possible: • Centralised control at MS level by a public administrative body • Centralised control at MS level by a private audit firm • Decentralised control by controllers selected by the project partner from a central shortlist • Decentralised control by internal or external controller proposed by the project partner and approved at national level

6. Through Public Administrative body: Belgium (Walloon Region) Czech Republic Estonia Hungary Ireland Luxembourg Latvia Malta Poland Romania Sweden Slovenia Slovakia Through Private Audit firm Lithuania CENTRALISED CONTROL SYSTEMS For more details see: http://www.interreg4c.net/load/Country_Specific_Control_Requirements.pdf

7. Controllers selected in a short list: Austria Bulgaria Norway Portugal Controllers selected by project partners and confirmed at national level Austria (Federal+Land) Belgium (Bruxelles Capitale) Belgium (Flanders) Cyprus Denmark Finland France Germany Poland (for Marshall offices…) Spain The Netherlands United Kingdom DECENTRALISED CONTROL SYSTEMS For more details see: http://www.interreg4c.net/load/Country_Specific_Control_Requirements.pdf

8. THE ROLE OF THE PP CONTROLLER • To confirm the expenditure for the PP • after having checked • The payment date of the costs reported • That all necessary documents concerning receipts, payments and activities are correctly recorded to ensure the audit trail • Thedelivery of the co-financed products and services • That progress made is reflected in the report • The compliance of such expenditure with community rules, programme rules (subsidy contract refering to programme manual + Application form) and national rules • on the basis of • Accounting documents and project documentation • 100% check (sample only if well justified)

9. GUIDANCE TO PPs TO PERFORM CONTROLS • TO BE PUBLISHED SOON • The Programme has issued templates of a Control Report and of a Check List annexed to the Programme Manual to be filled in by the PP’s controller • Programme manual Annex 6 • On the basis of these two documents that have to be kept in PP’s files, the PP’s controller issues a Partner control confirmation • Programme manual Annex 5b • The Partner control confirmation will be submitted to the LP

10. DESIGNATION OF THE PP CONTROLLERS: PARTICULARITIES OF DECENTRALISED SYSTEMS • There is a compulsory approbation of the first level control controller by the central approbation body of the Member State for PP (including LP) located in Member States that have opted for a decentralised system • This approbation shall be finalised before the end of the first reporting period (31 December for progress report to be submitted on 1 April )

11. THE APPROBATION PROCEDURE OF THE PPs CONTROLLERS • The PP proposes a controller to the central approbation body of the Member State. A specific checklist is filled in by the PP for this purpose • The MS checks the information and assesses the qualification and independence of the controller • If OK, the MS issues an approbation certificate to the PP • LP submits individual approbation certificates to the JTS when PP reports for the first time or in case of change of controller • For each progress report, the LP checks that the name of the controller is the same as the authorised one • In case of change of controller, the approbation procedure shall be started again

12. THE SPECIFIC ROLE OF THE LP CONTROLLER • The role of the LP controller is to confirm the expenditure for the whole partnership and to submit the Progress Report for the whole project to the JTS • after having checked that • project expenditure is related to the project and correspond to the delivery status of the partner • the figures in the progress report coming from the individual partners are correctly summed up • on the basis of • control confirmations signed off by the PP controller in compliance with the country specific control requirements Note that the LP is also a PP. Therefore the LP controller = the PP controller for the LP

13. POINTS OF ATTENTION FOR THE LP • The LP reports every six months expenditure paid out during the reporting period in compliance with the information in the Application Form, i.e. • the budget by budget line • the budget by component • the budget by partner • the specifications for external expertise + equipment • the payment forecast • Costs have to be in line with the activities listed in the Application Form • Deviations need to be justified in PR or agreed with JTS beforehand • The LP provides any clarification on Progress Report where requested by JTS. The payment is made within maximum 4 weeks after approval of the Progress Report

14. GUIDANCE TO LP CONTROLLERS TO PERFORM CHECKS • TO BE PUBLISHED SOON • There is an additional section for LPs to be filled in the template of the Check List annexed to the Programme Manual • Programme manual Annex 6 • On the basis of all documents submitted by the PPs and its own documents as a partner, the LP shall issue a Progress Report including the Lead Partner Control Confirmation signed by LP controller • Programme manual Annex 5a

15. POINTS OF ATTENTION FOR THE LP • The LP sumbits to JTS • The Progress Report including the LP’s Control confirmation • The PP control confirmations • In case of decentralised system where controllers are proposed by the PP, the approbation certificate of Member State’s approbation body when partners report for the first time or when there is a change of controller.

16. Eligibility Questions & General Advice

17. Eligibility Eligibility period • Preparation phase: costs are eligible • subject to project approval • within limit of EUR 30,000 • For first call: between 1 January 2007 and date of submission of AF to JTS (for first call = max.15 January 2008) • To be paid out by the end of the first reporting period and to be reported with Progress Report 1 • Project implementation phase: costs are eligible if • incurred after date of MC approval • paid before the end of the reporting period and the finalisation month quoted in the AF

18. Eligibility Eligibility of activities outside the EU (Art. 21 of Reg. no.1080/2006) Activities outside the EU / Norway can be eligible to ERDF or Norwegian funding if • contracted and paid by EU or Norwegian partner • for the benefit of the operation • explicitly mentioned and justified in the approved application • within limit of 10% of the operation’s INTERREG IVC budget NB.: Travel costs of EU partners to places outside the EU (if foreseen in the AF) eligible to ERDF outside the 10% rule as part of ‘normal’ project expenditure. • 0

19. Eligiblity Ineligible costs • VAT – if recoverable by whatever means • In-kind contributions • Bad debt interests, fines, financial penalties, foreign exchange losses • Expenditure already supported by other subsidies • Revenues – to be deducted from total eligible costs

20. General Advice

21. Advice • Lessons learnt from IIIC • Use programme manual as the reference book. • Only costs paid by partners officially listed in the AF can be reported in PR. • Keep in mind that audits can take place beyond the end of the project. Proper documentation is essential - especially for public procurement, calculation of staff cost + indirect administration costs. • Pay particular attention to public procurement rules. Also below European threshold of EUR 206,000, you have to put into competition when you contract goods and services (refer to national + internal rules!). • Base your staff cost calculation on hours actually worked + timesheets. • Do not artificially inflate your administration costs. The link to project has to be obvious and clear. Costs have to be actual.

22. Advice Lessons learnt from IIIC • Be coherent in cost allocation to the budget lines + Components • Staff • Administration for personnel employed • Travel and Accommodation by partners in AF only! • Equipment • External Expertise and Services • Sub-Projects for mini-programmes only

23. Advice Leassons learnt from IIIC • Be careful with shared costs • Responsible partner has to provide to all partners taking over a share of common costs • request for reimbursement • all relevant supporting documentation • Responsibility of each partner to include share of common costs in own financial report and to obtain confirmation from controller (according to country specific control requirements) • Recommendation: • limit as much as possible shared costs to budget line “external expertise and services” • include procedure in partnership agreement • procedure for sharing and reporting costs to be checked with national controllers of each individual partner concerned.

24. Advice • Measures for an effective reporting process + FLC • Ensure good communication between • LP/PP, coordinators, financial managers and controllers • Include the following points in the partnership agreement • Budget by partner by budget line, component • Payment forecast by partner • Deadlines for reporting • Methods / amounts of shared common costs • Exchange rate conversion (one method for the whole partnership) • Make sure that all documents are available on all levels • Application Form • Subsidy Contract • Partnership Agreement • Programme Manual

25. Advice • Further measures for an effective reporting process + FLC • Have available the following documents (on PP level): • list of expenditure • invoices • bank statements • procurement documentation: procurement note, terms of reference, offers/quotes, order form, contract • documentation of calculations (if only a share was allocated to the project) • time sheets, employees’ contracts, pay slips • proofs for delivery of services and goods (studies, brochures, newsletters, minutes of meetings, translated letters, participants’ list etc), record of assets • control report incl. control checklist (model in Programme Manual) • Set up a separate account for project expenditure (or separate costs center in accounting system)

26. Conclusion • Support from JTS/MA/CA/MS • Programme manual (practical information in grey boxes) • Advice from the JTS • Standardized control confirmations, control reports and checklist • A limited number of quality checks by CA, MA/JTS, MS • Training on financial management for financial managers + controllers

27. Thank you for your attention!