Structural Funds Programming Predeal, Romania

1. Structural Funds Programming Predeal, Romania Irregularities / Eligibility Mgr. Danka Kovaľová kovalova@ca-slovakia.sk June 2006

2. Regulatory Framework I • Regulation 95/2988/EC on protection of the European Communities financial interests • Commission Regulation 94/1681/EC concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the structural policies and organisation of an information system in this field • Commission regulation 2005/2035/EC of December 12, 2005 amending Regulation 94/168/EC irregularities and the recovery of sums wrongly paid in connection with the financing of the structural policies and organisation of an information system in this field • Regulation (EC) No. 94/1831/EC concerning irregularities and the recovery of sums wrongly paid in the connection with the financing from the Cohesion Fund and organisation of information system in this field of July 26, 1994 • Regulation 91/595/EC on irregularities and recovery of sums wrongly paid in the connection with the financing the CAP and organisation of the IS in this field

3. Regulatory Framework II • Regulation No. 96/2185/EC concerning on-the-spot checks and inspections carried out by the European Commission in order to protect European Communities financial interests against fraud and other irregularities • Commission Regulation 2001/438/EC of 2 March 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 1260/1999 as regards the management and control systems for assistance granted under the Structural Funds • Regulation (EC) 2002/1386/EC laying down detailed rules for the implementation of Council Regulation No. 94/1164/EC as regards management and control systems for assistance granted from the Cohesion Fund and the procedure for making financial corrections • Regulation No. 2001/448/EC laying down detailed rules for implementation of Regulation No. 99/1260/EC as regards the procedure for making financial corrections to assistance granted under the Structural Funds • Commission Regulation No 2004/448/EC laying down detailed rules for implementation of the Council Regulation No 99/1260/EC as regards eligibility of expenditure of operations co-financed by the structural funds),

4. What is irregularity • Irregularity - definition • Types of Irregularities • Responsibilities for irregularities

5. Irregularity - definition Regulation 95/2988/EC on protection of the European Communities financial interests – Art. 1 (2): 'Irregularity` means any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure

6. Irregularity – national budget 'Irregularity` also means any infringement of a provision of national law or agreements providing the funds from the national budget for co-financing common actions with ECs, resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the national budget.

7. Types of Irregularities I 1. Irregularities by the kind of infliction: • Intentional irregularities • caused by negligence (errors, mistakes) 2. Irregularities by the kind of impact: • Without financial impact • With financial impact ( more significant)

8. Types of Irregularities II 3. Irregularities by the frequency of appearance • Systemic • Non-systemic (specific) 4. Irregularities by the EC OLAF typology

9. Irregularities by the kind of infliction • Intentional irregularities – with the intent of self-benefit or benefiting other subjects • Fictive invoices (for undelivered goods or service not provided) • Invoice falsifications • Duplicated invoices • Invoices issue for excessive amounts • Invoices with non-calculated discount • Falsification of customs documentation, certificates and other supporting documents • Falsified bank account • Fraudulent transfer of funds to the undue bank account • breach of contract • Activity has not been implemented • Activity has not been closed • Activity has not been implemented in accordance with the contract conditions • Ineligible expenditure • Excess of budget , etc.

10. Measures for combating irregularities • Transparent written procedures and two-level-control principle • Separation of functions and setting up the system of concrete positions and related job descriptions • Financial control performance • External control and audit bodies • Transparent and controlled system of document registration and archiving • Audit trail of financial flows and its observance (example)

11. Reporting Irregularity The Member State is obliged to inform the Commission about: • Irregularities which were the subject of the first administrative and /or judicial proceeding (court) • Irregularities in respect of which the fraud was confirmed • Irregularities with the impact outside the MS territory, • Irregularities where it is feared that new method or new practice of fraud has been employed, • Irregularities with the financial impact exceeding EUR 10,000 In accordance with EC Regulation  2035/2005, the Commission may ask the Member State for information and documentation regarding irregularities with the financial impact not exceeding EUR 10,000 – for the subjects involved in the EU funds management at the national level, it is recommended to report and monitor irregularities with the financial impact <= 10,000 EUR.

12. Recovery of Irregularities • Debtor Ledger • Refund of sums unduly paid to the Commission • Refund of sums unduly paid at the national level (example) (simulation information flows – example)

13. Eligibility of Expenditure I • paid between the date of submission of the operational programmes to the Commission or from the 1st January 2007 whichever is the earliest, and 31 December 2015 • Operations co-financed must not have been completed before the starting date for eligibility

14. Eligibility of Expenditure II • Exceptions: • In kind contributions, depreciation costs and overheads – under certain conditions • Expenditure upon modification of the OP • Rules of eligibility - laid down at national level subject to exception provided under each Fund

15. Eligible Expenditure by Funds I • ESF – ineligible expenditure • Recoverable VAT • Interests on debt • Purchase of furniture, equipment, vehicles, infrastructure, real estate and land. • Conditional eligibility – non-recoverable VAT genuinely and definitively borne by a beneficiary • Eligible expenditure

16. Eligible Expenditure by Funds II • CF – ineligible expenditure • Interest on debt • Purchase of land for an moment exceeding 10% of the total eligible expenditure for the operation concerned • Housing • Decommission of nuclear power stations • Reimbursable VAT • Conditional eligibility – non-recoverable VAT genuinely and definitively borne by a beneficiary

17. Eligible Expenditure by Funds III • ERDF – ineligible expenditure • Interest on debt • Purchase of land for an moment exceeding 10% of the total eligible expenditure for the operation concerned (exceptions) • Decommission of nuclear power stations • Reimbursable VAT • Conditional eligibility – • non-recoverable VAT genuinely and definitively borne by a beneficiary – when • Housing – for which countires