Implementation of Article 73 Ljubljana, 12-13 October 2009

1. Implementation of Article 73 Ljubljana, 12-13 October 2009 Mark Schelfhout Androulla Ioannou DG Employment, Social Affairs DG Regional Policy and Equal Opportunities Ljubljana, 12-13 October 2009

2. Content • Practices 2000-2006 • Inventory of information sources 2007-2013 • Approach for implementation of Art 73 • Single Audit Concept • Joint Audit Strategy for Structural Actions • Conclusions Ljubljana, 12-13 October 2009

3. Practices 2000-2006 • Approaches • System audits and audits of operations • Reliance from other Commission/ECA audits • Reliance on information from national audit activity • Contract of confidence Ljubljana, 12-13 October 2009

4. Practices 2000-2006 • Difficulties • No ex-ante control of systems • Non-standardized audit strategy and/or unclear risk assessment • Absence of common audit methodology • Lack of timely exchange of information Ljubljana, 12-13 October 2009

5. Information sources 2007-2013 • Compliance assessment of MCS • Audit strategy • National audit reports • Annual control reports and opinions • Annual summaries • Coordination meetings Ljubljana, 12-13 October 2009

6. Implementation of Article 73 • Regulation- « …Commission may ..rely principally… » if: • …compliance of systems…is without reservations • …audit strategy of audit authority is satisfactory • …reasonable assurance…that management and control systems function effectively… • …on the basis of ..audits by Commission and Member State Ljubljana, 12-13 October 2009

7. Implementation of Article 73 • Step-by-step approach • (1) Annual control report and opinion indicate assurance level • Works well, only minor improvements needed (unqualified opinion) • Works, but some improvements needed (qualified opinion) - ONLY on a case-by-case basis • (2) Combined with low error rate resulting from the audits of operations • (3) satisfactory results from the review and re-performance of AA audit work Ljubljana, 12-13 October 2009

8. Implementation of Article 73 • Step-by-step approach (con’t) • (4) sufficient coverage of audit universe • (5) official notification by the Commission of its conclusion to put into effect Article 73(3) • (6) increased coordination • (7) if there is evidence of shortcomings… Ljubljana, 12-13 October 2009

9. Single audit concept • Coordination with Member States: technical meetings, annual bilateral meetings, and Homologues • Common standards: guidance-ARM, standard models and internationally accepted audit standards • Financial Regulation • Internal Control Standards • Annual Summary Ljubljana, 12-13 October 2009

10. Joint Audit Strategy for Structural Actions • Priorities for 2007-13 period: • to obtain assurance on functioning of systems by • (1) assessing reliance that can be placed on audit authority and • (2) conducting systems audits and substantive testing of operations, where applicable Ljubljana, 12-13 October 2009

11. Joint Audit Strategy for Structural Actions (1) assessing reliance that can be placed on audit authority • Initial audits 2009-10: selection of OPs with highest risk and responsible AA • Desk work to review procedures of AA • On-the-spot visits to review audit files • Re-performance of systems audits • Re-performance of audits of operations • 2010+ : Selection of OPs with lower risk and responsible AA Ljubljana, 12-13 October 2009

12. Joint Audit Strategy for Structural Actions (2) conducting systems audits and substantive testing of operations, where applicable • based on risk assessment and/or • focus on bodies which will not be immediately subject to national audit Ljubljana, 12-13 October 2009

13. Conclusions • Greater responsibility on audit authority • Reliance by the Commission – subject to conditions for Article 73 being met • Greater coordination, less Commission audits • Reconsideration of Article 73 Ljubljana, 12-13 October 2009

14. Thank you for your attention! Mark.Schelfhout@ec.europa.eu Androulla.Ioannou@ec.europa.eu Tel: +32 2 295 95 18 Tel: +32 2 296 17 94 Ljubljana, 12-13 October 2009