Procedures for Determination of Eligible and Ineligible Costs of Latvian Partner Projects for Programmes of Objective 3 "European Territorial Co-operation" of European Union Structural Funds and Ensuring of the First Level Financial Control

Issued pursuant to
Section 24, Paragraph two, Clause 6 of the
Law On the Management of Programmes of Objective 3
"European Territorial Co-operation" of
European Union Structural Funds

I. General Provisions

1. These Regulations prescribe the types of eligible and ineligible costs of the projects financed by programmes of Objective 3 "European Territorial Co-operation" of European Union Structural Funds for 2007-2013 (hereinafter - territorial co-operation programmes) (hereinafter - project) and the procedures for ensuring of the first level financial control (hereinafter - financial control).

2. Costs within the framework of a project shall be planned in accordance with these Regulations, observing the conditions of the documents of a particular territorial co-operation programme.

3. If the requirements of the documents of a particular territorial co-operation programme and of these Regulations are different, the most stringent conditions shall be applied.

4. The State Regional Development Agency shall fulfil the functions of the financial control authority in relation to recipients of financing in the Republic of Latvia within the framework of the territorial co-operation programmes to be implemented with the aid of the European Regional Development Fund (hereinafter - recipient of financing).

5. The Ministry of Regional Development and Local Government shall ensure the methodological management of financial control.

II. Eligible and Ineligible Costs of Projects

6. Costs shall be eligible within the framework of a project if they have occurred during preparation and implementation of the project and:

6.1. are specified in the approved project and contract regarding granting of the programme co-financing (hereinafter - financing contract) and have been performed, observing the principles of sound financial management;

6.2. have been actually performed (except investments in kind), are accounted in the accounting registers of the recipient of financing, identifiable, separated from other costs, verifiable, and they are confirmed by the originals of documents justifying the costs or equivalent accounting documents;

6.3. have been performed, observing the requirements specified in the regulatory enactments regarding public procurement, as well as in the documents of territorial co-operation programmes; and

6.4. have been performed, observing the publicity and information requirements specified in the documents of territorial co-operation programmes.

7. Eligible costs of a project shall be as follows:

7.1. the preparation costs of the project;

7.1.1. the costs of preparation of technical documentation for objects of infrastructure, which will be built (including renovated, restored or reconstructed) within the framework of the project, as well as the costs of development of a feasibility study, except the costs of development of a detailed plan;

7.1.2. the costs of preparation and translation of the project application and accompanying documents; and

7.1.3. the costs related to evaluation of an investment in kind in accordance with the conditions referred to in Sub-paragraph 7.8 of these Regulations;

7.2. the costs of persons employed in the project in accordance with the regulatory enactments regarding work remuneration:

7.2.1. wage of employees and mandatory State social insurance contributions of the employer. The wage rate, which is determined in the employment contract, shall be applied for determination of wages; and

7.2.2. payment for sickness and paid leave in proportion to the period of time worked in the project - for such employees who are employed only within the framework of the project;

7.3. administrative costs, which are directly related to ensuring of the management of the project:

7.3.1. payment for the lease of premises used within the framework of the project;

7.3.2. the costs of management of premises - basic services and additional services in accordance with the regulatory enactments regarding residential tenancy;

7.3.3. the costs of stationery; and

7.3.4. the costs of communication services;

7.4. the costs of outsourcing:

7.4.1. the costs of services of specialists necessary for implementation of the project. The costs of services of specialists shall not exceed the market prices of services of specialists with corresponding qualification;

7.4.2. the costs of development and maintenance of home pages and databases, as well as other costs related to the provision of information technology services;

7.4.3. the publicity and information costs (for example, publishing of booklets, publications in newspapers, advertisements, preparation of information for the press, as well as preparation and placing of large format posters, plaques, large format information billboards according to the publicity and information requirements of territorial co-operation programmes); and

7.4.4. other costs related to implementation of the project and fulfilment of the requirements of the financing contract, which are not in contradiction with Paragraph 11 of these Regulations;

7.5. the costs of local and foreign official travel and business trips of the persons involved in implementation of the project in accordance with the norms specified in regulatory enactments:

7.5.1. daily allowance;

7.5.2. the costs of transport services not exceeding the prices of economy class, the costs of car rental and fuel;

7.5.3. the accommodation costs;

7.5.4. the insurance costs; and

7.5.5. the visa costs;

7.6. the costs of meetings, seminars, conferences, training, exhibitions, camps (hereinafter - events):

7.6.1. the costs related to technical organisation of events - rental of premises and equipment, multiplication of materials, services of an interpreter;

7.6.2. the costs of feeding the participants of events; and

7.6.3. participation fee in events for the persons involved in implementation of the project;

7.7. investment costs:

7.7.1. the costs of purchase and setting up of technical equipment and installations in accordance with the regulatory enactments regarding public procurement. If second-hand technical equipment or installations have been purchased:

7.7.1.1. their price does not exceed the market value of the equipment, taking into account the depreciation of the equipment, and is smaller than the price of an equivalent new piece of equipment; and

7.7.1.2. the seller of the equipment declares the origin of the equipment and confirms that it has not been purchased by using other financial instruments of the European Union, international or national financial instruments;

7.7.2. the costs related to construction (including renovation, restoration or reconstruction) and investments in infrastructure in accordance with the regulatory enactments regulating building;

7.8. the costs related to an investment in kind, the amount of which does not exceed the amount of national co-financing of the project:

7.8.1. ensuring of land, immovable property, equipment or raw materials;

7.8.2. ensuring of professional work or research results; and

7.8.3. unpaid voluntary work if it is confirmed by the number of hours worked on the project indicated in individual working time record sheets;

7.9. the value added tax, if it may not be recovered in accordance with the procedures specified in the regulatory enactments governing taxes;

7.10. depreciation of fixed assets if fixed assets are necessary for achievement of the objective of the project and:

7.10.1. national financing or financing of the European Union has not been invested in the purchase of immovable property or equipment; or

7.10.2. depreciation of fixed assets has been calculated in accordance with the regulatory enactments regulating accounting.

8. The costs which have been performed in accordance with Sub-paragraphs 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9 and 7.10 of these Regulations, but which do not ensure the achievement of the planned objectives and results of the project, shall not be regarded as eligible costs.

9. Costs shall be ineligible within the framework of a project if they:

9.1. are not directly related to the activities of the project;

9.2. exceed the amount of eligible costs approved in the project;

9.3. have occurred before 1 January 2007;

9.4. are not confirmed with the originals of the documents justifying the costs or equivalent accounting documents; or

9.5. are co-financed from other financial instruments of the European Union, international or national financial instruments.

10. If ineligible costs occur during implementation of a project, they shall not be reimbursed from the financing of territorial co-operation programmes.

11. Ineligible costs of a project shall be as follows:

11.1. bonuses, supplements, including supplements for overtime work, gifts or any other acquired benefit of persons involved in implementation of the project;

11.2. voluntary contributions in private pension funds;

11.3. the costs which occur as a result of the fulfilment of the basic functions of public persons and derived public persons and would occur regardless of implementation of the project;

11.4. the costs of services and supplies which have occurred on the basis of a sub-contract between partners of the project and related persons in accordance with the regulatory enactments regarding taxes and fees;

11.5. the costs of supplies and services which have been provided between units in an organisation of the project partner;

11.6. transport costs - costs of the use of a taxi or car, which have occurred if public transport is available and they do not have written justification;

11.7. the costs of official travel and business trips if they do not have economic justification and are in contradiction with the regulatory enactments regarding official travels and business trips and documents of territorial co-operation programmes;

11.8. the costs of recreational events, which are not related to achievement of the objective of the project;

11.9. the costs which have been performed without observing the publicity and information requirements specified in documents of territorial co-operation programmes;

11.10. the value added tax, if it may be recovered in accordance with the procedures specified in regulatory enactments regulating taxes;

11.11. current and capital repairs of technical equipment and installations;

11.12. payment for intermediatory services;

11.13. the costs related to the hire purchase of goods;

11.14. operational or financial lease;

11.15. the costs related to individual sponsorship, individual scholarships;

11.16. payments for political or religious activities, membership fee;

11.17. commission on money transfers in the Republic of Latvia;

11.18. interest payments, costs of currency exchange and other financial costs, except payments for the opening and maintenance of a separate bank account provided for the purposes of the project;

11.19. compensation for losses;

11.20. fines and legal costs;

11.21. payments or expenditures, which have occurred from unforeseen liabilities;

11.22. debts; and

11.23. other costs which are not referred to in Paragraph 7 of these Regulations.

12. Costs, which occur in relation to the aid measures of commercial activities specified in regulatory enactments, - any direct or indirect assistance to selected commercial companies, which might cause obstacles to fair competition, providing advantages to particular commercial companies or for production of particular goods or services, shall not be eligible within the framework of a project.

III. Duties, Rights and Ensuring of Financial Control

13. The financial control authority shall verify the eligibility of the costs that have occurred during preparation and implementation of projects.

14. Financial control shall include one hundred per cent examination and evaluation of accounting of the costs performed within the framework of a project, the conformity thereof to the project objective and expedience thereof in accordance with the requirements specified in the regulatory enactments of the European Union and the Republic of Latvia, in documents of territorial co-operation programmes and in the financing contract.

15. Financial control shall include:

15.1. control of such costs, which are included in the report on the progress of the project of the recipient of financing in relation to the project activities implemented and costs performed during the relevant accounting period (hereinafter - report); and

15.2. control at the implementation site of the project (at least once during implementation of each project for each recipient of financing).

16. A recipient of financing has the following duties:

16.1. to inform the financial control authority regarding entering into a financing contract within 10 working days thereafter, submitting a copy of the financing contract;

16.2. to submit to the financial control authority the report within 10 working days after the end of the accounting period, appending documents justifying the costs or equivalent accounting documents;

16.3. to submit an updated report or additional information within 10 working days after a request of the financial control authority;

16.4. if the recipient of financing is the leading partner of the project - to submit to the financial control authority the consolidated report on the relevant accounting period, which includes project activity reports and financial reports of all partners involved in the project. The referred to report shall be submitted not later than 10 working days before the deadline for submission thereof to the joint technical secretariat of the relevant territorial co-operation programme; and

16.5. to provide the performers of financial control with access to all documents related to implementation of the project and to the project accounting system, premises and other material values related to the control to be performed.

17. The financial control authority has the following duties:

17.1. to perform, within 20 working days after receipt of the report referred to in Sub-paragraph 16.2 of these Regulations and within 10 working days after receipt of the report referred to in Sub-paragraph 16.4 of these Regulations, one hundred per cent inspection of the activities implemented and costs performed during the accounting period and of the documents justifying them or equivalent accounting documents;

17.2. to perform inspection at the implementation site of the project at least once during implementation of the project;

17.3. to provide an opinion regarding eligibility of the costs performed on the basis of the inspections referred to in Sub-paragraphs 17.1 and 17.2 of these Regulations within the deadlines specified for the relevant territorial co-operation programme;

17.4. to ensure the provision of information to the national responsible authority of territorial co-operation programmes and the joint technical secretariat of the relevant territorial co-operation programme regarding the substantial deficiencies detected during inspections; and

17.5. to inform the recipient of financing regarding a planned inspection at the project implementation site five working days in advance.

18. The financial control authority has the following rights:

18.1. to perform the inspections referred to in Sub-paragraphs 17.1 and 17.2 of these Regulations at any stage of implementation of the project;

18.2. to request from the recipient of financing the originals of the documents justifying the performed costs or equivalent accounting documents and information necessary for financial control;

18.3. to request that the recipient of financing submit an updated report referred to in Sub-paragraph 16.2 or 16.4 of these Regulations or additional information if the financial control authority detects during an inspection that more precise information or additional information is necessary for provision of an opinion regarding eligibility of costs;

18.4. depending on the scale of violation, to reduce eligible costs if the financial control authority detects that the requirements specified in the regulatory enactments of the European Union and the Republic of Latvia, as well as documents of territorial co-operation programmes have not been observed partially or completely; and

18.5. not to inform the recipient of financing in advance regarding unplanned inspections at the project implementation site.

19. The financial control authority shall perform an inspection at the project implementation site in order to ascertain that the project is being implemented in accordance with the financing contract and the costs, which have been applied for reimbursement from the programme financing, have been actually performed and are eligible, as well as it shall inspect whether:

19.1. the recipient of financing ensures that the originals of the following documents related to implementation of the project and derivatives thereof with legal force are kept in accordance with the regulatory enactments regarding accumulation, registration, storage and usage of archive documents:

19.1.1. the project applications and any correspondence documents related to the project;

19.1.2. the public procurement documentation, including the minutes of the public procurement commission meetings, decisions, assessment reports, informative notices, tenders submitted by applicants;

19.1.3. the contracts entered into within the framework of the project;

19.1.4. documents confirming the work performed, supplies and the services provided, including deeds of delivery and acceptance, bills of lading-invoices, bills of lading with numbers assigned by the State Revenue Service and invoices; and

19.1.5. documents confirming payments, including payment orders, extracts of bank accounts or print-outs of the State Treasury account for the carried out transactions;

19.2. the work, supplies, payments performed and services provided within the framework of the project complies with the provided for in the project, including it shall be checked whether:

19.2.1. the work or supplies have been performed or the services have been provided in accordance with the contracts entered into between the recipient of financing and the performer;

19.2.2. the payments conform with the entered into contracts of the performer, the work, supplies performed and services provided, and the recipient of financing has the relevant corroborative documents; and

19.2.3. public procurement requirements, State aid and environmental protection requirements and gender equality principle are observed;

19.3. in accordance with the conditions for implementation of activities, the costs of basic activities of the recipient of financing or other costs co-financed from financial instruments of the European Union or international or national financial instruments have been included in the eligible costs of the project; and

19.4. the requirements specified in the regulatory enactments of the European Union regarding conformity with the publicity and information requirements of European Union funds are observed.

20. If substantial deficiencies are detected during inspection at the project implementation site, the financial control authority shall notify thereof in accordance with the procedures for provision of reports regarding non-conformities detected in implementation of the projects financed by programmes of Objective 3 "European Territorial Co-operation" of European Union Structural Funds and recovery of non-conforming expenditures.

21. The financial control authority shall prepare a record regarding control at the project implementation site. Information regarding inspection procedure, results of inspection and proposals regarding measures to be taken shall be indicated in the record if the requirements of regulatory enactments referred to in Paragraph 14 of these Regulations and territorial co-operation programmes have not been observed completely or partially.

22. The financial control authority shall perform a repeated inspection at the project implementation site if it is detected in the previous inspection that the conditions referred to in Paragraph 19 of these Regulations have not been observed completely or partially.

23. By 30 January of the current year the financial control authority shall submit a report on inspections of projects performed in the previous year at the project implementation site to the national responsible authority of territorial co-operation programmes.

IV. Closing Provision

24. Documents justifying the costs of a project shall be drawn up in accordance with the requirements of regulatory enactments.

Prime Minister I. Godmanis

Minister for Regional Development and
Local Government E. Zalāns

Translation © 2009 Valsts valodas centrs (State Language Centre)