1 st L evel F inancial C ontrol in Latvia

1. 1stLevel Financial Controlin Latvia Seminar on Financial Management and Auditing Ilze Fīlipa Rostock, 27 April 2006

2. Institutional framework for INTERREG programme in Latvia • National Authority – Ministry of Regional Development and Local Governments • 1st level control system is centralized – responsible authority State Regional Development Agency (SRDA) • 2nd level control – responsible authority Ministry of Regional Development and Local Governments

3. 1st level control. Insight into SRDA procedures • 1st level financial control is divided into two parts: • Control of project progress report – includes assessment of the reported expenditures (examination of 6 months period reports) – compliance with laws, guidelines, eligibility rules etc. In case of positive Control the “Confirmation by an independent controller” is submitted. • On-the-spot check – verification of material assets and activities.

4. 1st level control. Insight into SRDA procedures • Controls for III B project progress reports are carried out twice a year: • From 1stof January till 15th of February • From 1st of July till 15th of August • On-the-spot checks are carried out in the whole the project progress period (verification of assets, activities)

5. 1st level control. Insight into SRDA procedures • Planning • Strict schedule including control dates for each partner is made (every project partner may send to SRDA the information of suitable date for control) • Notification is sent to every projectpartner not later than two weeks before the control (including the date of control, list of requested documents etc.) • Every project must follow the dates set by SRDA. Priority is given to the projects submitted in time.

6. 1st level control. Insight into SRDA procedures • Controls • Controls are conducted in accordance with Latvian legislation, EU regulations and INTERREG guidelines. • Control for one project is carried out in 10 working days in case the project is submitted in time

7. 1st level control. Insight into SRDA procedures • Result of control can be positive or negative • In case of positive result • Project partner receives signed Confirmation and Controller’s opinion (recommendations are possible) • In case of negative result • Project receives signed Controller’s opinion, where the findings and recommendations are stated • Project partner may correct the project progress report and resubmit it to the auditors. It gives possibility for the project partner to eliminate mistakes.

8. Audit fee • Audit fee is 2 % of totalproject partner budget • Every project partner from Latvia should reserve 2% of their budget for 1st level control For example: Total project partner budget 1 000 EUR Audit fee 2% 20 EUR (1 000 * 0.02)

9. Common Mistakes • Project expenditures/revenues are not recorded in a separate accounting system. (Installation of separate (sub-) accounts for the financial transactions is obligatory ) • Costs stated in the financial report are not incurred and paid during the respective period • Eligibility rules are not considered carefully for compiling the financial reports • The calculation of labor costs are not based on rates per hour or day. Insufficient evidence documents providing that work has been carried out.

10. Common Mistakes • Revenue received by the project (e.g attendance fees for workshops, sales revenue of brochures) are not deducted from the operation’s eligible expenditures • Insufficient source documents are submitted • Project partners do not use the same system of the exchange rate during the whole implementation period • Overhead costs are not calculated on pro-rata basis and justified with calculations • Hourly rate calculations are not based on official labour agreements and actual expenditures

11. Common Mistakes • Costs exceed planned budget stated in Application Form respecive annexes (Budget line VI Other Costs and Equipment, Budget line VII Small scale investments) • Breakdown of planned budget per milestones are not submitted • Foreign change commissions and losses are shown in project progress report • National legislation on business trips is not observed

12. Common Mistakes • Expenses included in travel costs do not cover economy class travel on public transport • External expertise costs are not essential to the project and the costs are not economically reasonable • Costs based Labour agreements (salaries) are shown in budget line External Expertise • Information and communication activities are not implemented in compliance with provisions of EU Regulation No. 1159/2000 • Procurement procedures are not carried out

13. Forms for project progress report preparingfor project partners • Available at http://www.vraa.gov.lv/interreg_audit/doc/

14. Contact information • Diāna StrodeHead of Cross-border Projects Control Unite-mail: diana.strode@vraa.gov.lv Tel: + 371 7079017 • Ilze FīlipaFinancial Experte-mail: ilze.filipa@vraa.gov.lv Tel: + 371 7079020 • Gints PīpiķisFinancial Experte-mail: gints.pipikis@vraa.gov.lv • Jānis RiežnieksFinancial Experte-mail: janis.rieznieks@vraa.gov.lv

15. Thank you for your attention