The National Audit Office of Denmark

1. The National Audit Office of Denmark

2. A new audit approach • The European Parliament – comments in connection with the discharge procedure • The National Audit Office of Denmark – a new audit approach

3. Discharge 2003 - comments (1) Shared management between the Commission and the Member States concerns 80 % of EU’s expenditure Delegation risk: • The Member States and beneficiaries do not always give equal attention to the spending of European funds as to the spending of national funds • The heterogeneous quality of Member States’ control standards • The notable absence of involvement of most national institutions in seeking assurance that European funds are being used regularly and legally for the intended purposes The European Parliament suggest: • That the Member States’ Finance Ministers make a Declaration of Assurance regarding the legality and regularity of the underlying transactions

4. Discharge 2003 – comments (2) • The Parliament fails to understand how the ECA (for the past 10 years) have given a negative Statement of Assurance (DAS) on payment appropriations whilst at the same time giving a de facto clean opinion on the Commission’s general accounts • The European Parliament acknowledges that the ECA has shown a degree of awareness of the criticisms raised and has attempted to reform the DAS methodology by widening the basis for its evaluation by including • an assessment of the supervisory systems and controls • substantive transaction testing • review of the annual activity reports and declarations of the Directors-General • evaluation of relevant results of other auditors

5. Discharge 2003 – comments (3) • The European Parliament would like increased co-operation between the ECA and the SAIs

6. Discharge 2004 – comments (1) • The European Parliament notes with satisfaction that the ECA for the first time has issued a positive statement on expenditure under the Integrated Administrative and Control System (IACS) and that it considers this system, when effectively implemented, to be a strong instrument in reducing risk of irregular expenditure • The Parliament notes the fact that, with regard to structural measures, the ECA found further shortcomings in the management and control systems and calls specifically on the Member States to undertake improvements with the assistance of the ISA’s and the relevant independent authorities

7. Discharge 2004 – comments (2) • The European Parliament believes that the SAIs could audit the internal control systems set up by the national administration as well the regularity and legality of the underlying transactions effected in their own country • The European Parliament calls on national audit bodies to assume responsibility in controlling the local use of EU funds, in order that all consideration to establish national audit bodies of the Court of Auditors are made redundant

8. Discharge 2004 – comments (3) • The European Parliament calls on the Member States to ensure that the SAIs publish an annual audit report on EU funds spent • The European Parliament suggests a review of the DAS system be undertaken by the ECA in order to establish specific statements of assurance for individual Directorates-General within the Commission within an overall statement of assurance

9. Auditors auditing EU funds (1) Auditors auditing EAGGF-funds in Denmark: • NAOD • The Internal Audit Unit in the paying agency • Ernst & Young (2004) – Certifying Body • The European Commission • The European Court of Auditors

10. Auditors auditing EU funds (2) Auditors auditing structural funds in Denmark: • NAOD • Controllers in the Danish Social and Regional Fund • Private auditors (the beneficiaries accounts) • The European Commission • The European Court of Auditors

11. Section 9 Agreement The Internal Audit Unit has been made on the basis of an agreement between the minister of Food, Agriculture and Fisheries and the Auditor General The agreement may be categorised into three main areas: • Organization and authority • Audit tasks • Co-operation with the NAOD

12. Organization and authority • The Internal Audit Unit shall be placed organisationally as an independent unit under the manager of the directorate • The Internal Audit Unit is responsible for the overall internal audit effort in the directorate • The Internal Audit Unit shall be capable and competent so that it at any time may solve the tasks in a satisfactory way • Staff in the Internal Audit Unit may not participate in work, which is incompatible with carrying out audit tasks • The Internal Audit Unit shall have access to all information, which is considered of importance for the performance of the tasks of the Internal Audit Unit

13. Audit tasks • The Internal Audit Unit shall carry out its work in accordance with the principles of good auditing practice and internationally recognised auditing standards • Dividing the Audit tasks (Audit split)

14. Audit split Split between Internal Audit and NAOD

15. Co-operation with NAOD • Meetings are held every second month • The Internal Audit Unit presents its audit plans to the NAOD and keeps the NAOD informed of any changes • The Internal Audit Unit keeps the NAOD informed of the carried out audit • The reports ect. from the Internal Audit Unit is forwarded to the NAOD • After each accounting year, the Internal Audit Unit makes a statement and a report of the carried out audit

16. NAOD – new audit approach (1) • The NAOD plans and conducts the audit of EU funds on the basis of the same materiality and risk considerations, which are applied to the audit of government funds • The NAOD and the Internal Audit Unit in the paying agency co-operates in conducting the audit of EAGGF funds • The NAOD and the controllers in the Danish Social- and Regional Fund co-operates in conducting the audit of EU structural funds

17. NAOD – new audit approach (2) • The NAOD expressed an opinion on the audit of EU funds in Denmark in the annual report on the audit of the state accounts for 2004 • The NAOD still works on developing a statement of assurance about the EU funds in Denmark • The statement of assurance will include an opinion about ”Reliability of the accounts” and about ”Legality and regularity of the underlying transactions”

18. NAOD – new audit approach (3) Example of future statement of assurance: Reliability of the accounts In the NAOD’s opinion, the accounts of the EU funds were drawn up in accordance with the Danish accounting principles, rules and methods. The accounts faithfully reflect the revenue and expenditure of the EU funds for the year and their financial position at the year-end. Legality and regularity of the underlying transactions On the basis of its audit results, the NAOD is of the opinion that transactions underlying the consolidated accounts of the EU funds, taken as a whole, are legal and regular. For common agricultural policy (CAP) expenditure it is the NAOD’s opinion that the integrated administration and control system (IACS) in Denmark is properly applied and functions according to the intentions.