Republic of Latvia Cabinet Regulation No. 501 Adopted 24 July 2012

Procedures for Ensuring the Functions of the Audit Authority in the Management of European Union Structural Funds and the Cohesion Fund

Issued pursuant to
Section 18, Clause 4
of the Law On Management of
European Union Structural Funds and the Cohesion Fund

I. General Provisions

1. This Regulation prescribes the procedures, by which the functions of the Audit Authority shall be ensured in the management of European Union funds.

2. The Audit Authority shall perform the functions in conformity with Council Regulation No 1083/2006/EC of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation No 1260/1999/EC, and Commission Regulation No 1828/2006/EC of 8 December 2006 setting out rules for the implementation of Council Regulation No 1083/2006/EC laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation No 1080/2006/EC of the European Parliament and of the Council on the European Regional Development Fund.

3. This Regulation shall apply to the Managing Authority, the Paying Authority, the Certifying Authority, the Responsible Institution, the Co-operation Institution, the Procurement Monitoring Bureau (hereinafter - institutions), the Audit Authority and the final beneficiary of European Union Structural Funds and the Cohesion fund (hereinafter - EU funds).

4. The Ministry of Finance shall perform the following functions of the Audit Authority:

4.1. prepare the single audit strategy and ensure updating thereof;

4.2. perform audits on the EU funds management and control system;

4.3. perform audits of operations on expenditure approved by the Certifying Authority;

4.4. prepare the annual control report and the opinion on the conformity, efficiency of the functioning of the EU funds management and control system and the eligibility of expenditure approved by the Certifying Authority and the conformity thereof with the regulatory enactments;

4.5. assess the validity of the application for payment of the final balance and prepare the final control report and the closure declaration; and

4.6. develop legal acts related to ensuring of the functions of the Audit Authority.

5. Within the meaning of this Regulation an audit period shall be the time period from 1 July of the preceding year to 30 June of the current year.

6. In accordance with the regulatory enactments regarding the procedures for establishment and use of the information system for the management of European Union Structural Funds and the Cohesion Fund, results of examinations and audits performed by the Audit Authority shall be entered, updated and stored in the information system for the management of European Union Structural Funds and the Cohesion Fund.

7. Institutions and the final beneficiary of EU funds shall provide the Audit Authority with an unlimited access to all types of documents, registers and other information, which is related to the implementation and management of EU funds projects and is necessary for performing of the functions of the Audit Authority.

8. If the Audit Authority establishes substantial deficiencies or violations in administration or control of EU funds, the Audit Authority shall inform:

8.1. the head of the Managing Authority regarding the necessity to assess them and take decisions in relation to the management of EU funds;

8.2. the head of the Certifying Authority regarding the necessity to assess them and take decisions in relation to the certification of expenditure;

8.3. the European Anti-Fraud Office, if irregularities have been detected, which conform to the conditions of Commission Regulation No 1828/2006/EC of 8 December 2006 setting out rules for the implementation of Council Regulation No 1083/2006/EC laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation No 1080/2006/EC of the European Parliament and of the Council on the European Regional Development Fund and which the Managing Authority has not yet notified to the referred to Office.

II. Information to be Submitted to the Audit Authority

9. The Managing Authority shall each year until 2015:

9.1. on the basis of information submitted by institutions and the Audit Authority regarding the EU funds management and control system, ensure updating of the description of the EU funds management and control system and submission thereof to the Audit Authority by 31 October;

9.2. by 23 December provide a confirmation of completeness and credibility of the information submitted to the Audit Authority and information regarding substantial changes in the EU funds management and control system, which have occurred in the time period since the last updating of the description of the EU funds management and control system.

10. Each year until 2015 the Certifying Authority shall submit to the Audit Authority:

10.1. by 15 January - a list of the approved expenditure for the time period from 1 July to 31 December of the preceding year and a confirmation regarding accuracy of the data; and

10.2. by 15 July - a list of the approved expenditure for the time period from 1 January to 30 June of the current year and a confirmation regarding accuracy of the data.

III. Single Audit Strategy

11. The single audit strategy shall be a document, which is prepared by the Audit Authority for the time period from 2007 to 2015 and in which the objectives, scopes of activities and methodology for implementation of the functions of the Audit Authority for the 2007-2013 programming period of EU funds are indicated.

12. Until 2015 the head of the Audit Authority shall approve the single audit strategy updated by the Audit Authority by 30 June of each year. The single audit strategy shall be updated on the basis of:

12.1. changes in the description of the EU funds management and control system;

12.2. audits on the EU funds management and control system and audits of operations on certified expenditure planned by the Audit Authority;

12.3. the information regarding the results of audits on the EU funds management and control system and audits of operations on expenditure approved by the Certifying Authority; and

12.4. the necessary changes in the methodology applied by the Audit Authority and the risk evaluation of the EU funds management and control system.

13. The Audit Authority shall notify the European Commission regarding changes in the single audit strategy in the annual control report for the current year.

14. The Audit Authority shall ensure the insertion of the updated single audit strategy on the website of the EU funds (www.esfondi.lv) within 10 working days after approval of the updated single audit strategy.

IV. Audit on the EU Funds Management and Control System

15. In order to assess the efficiency of the functioning of the EU funds management and control system, the Audit Authority shall, in accordance with the single audit strategy, perform the audits on the management and control system referred to in Sub-paragraph 4.2 of this Regulation in accordance with the basic requirements referred to in Paragraphs 16, 17, 18 and 19 of this Regulation.

16. The Audit Authority shall verify whether the following basic requirements are complied with in the Managing Authority, the Responsible Institution and the Co-operation Institution:

16.1. clearly defined and separated functions in institutions, as well as among institutions;

16.2. a procedure developed, which is used for the selection of financed operations;

16.3. clear and appropriate information and guidelines to final beneficiaries of EU funds;

16.4. a procedure developed, which is used for the monitoring of the project management;

16.5. clear and traceable documentation for proofs regarding the management of EU funds;

16.6. safe information system for the accounting and monitoring of the financing and preparation of reports; and

16.7. existence of a procedure for the prevention and correction of the systemic deficiencies detected by the Audit Authority.

17. The Audit Authority shall verify whether the following basic requirements are complied with in the Certifying Authority:

17.1. clearly defined and separated functions in the Authority, as well as among the Authorities;

17.2. clear and traceable documentation and information system for proofs regarding accounting of the approved expenditure;

17.3. a procedure developed, which is used for the certification of expenditure; and

17.4. a procedure developed, which is used for accounting of unjustifiably incurred payments and recovering thereof.

18. The Audit Authority shall verify whether the following basic requirements are complied with in the Paying Authority:

18.1. clearly defined and separated functions in the Authority, as well as among the Authorities; and

18.2. clear and traceable documentation and information system for proofs regarding accounting of payments.

19. The Audit Authority shall verify whether the following basic requirements are complied with in the Procurement Monitoring Bureau:

19.1. clearly defined and separated functions in the Procurement Monitoring Bureau;

19.2. a procedure developed, which is used for the examination of procurement documentation and the course of the procurement procedure; and

19.3. clear and traceable documentation for proofs regarding the management of EU funds.

20. The conformity and efficiency of the functioning of the EU funds management and control system shall be assessed on the basis of the following assessment categories:

20.1. Category 1 - works well: the system is efficient, no deficiencies or only minor deficiencies found, which do not have significant impact on the functioning of the EU funds management and control system;

20.2. Category 2 - works, but, some improvements are needed, some deficiencies have were found, which have a moderate impact on the functioning of the EU funds management and control system. The Audit Authority has expressed recommendations for the improvement of the system, and the relevant authority has developed a plan of measures for the implementation of recommendations;

20.3. Category 3 - works partialy, substantial improvements are needed, deficiencies were found that have a significant impact on the functioning of the EU funds management and control system. Deficiencies are systemic and may cause irregularities. The Audit Authority has provided recommendations for the improvement of the system, and the relevant authority has developed a plan of measures for the implementation of recommendations;

20.4. Category 4 - essentially does not work: significant deficiencies were found, as a result of which the EU funds management and control system functions poorly or does not function at all. Deficiencies are systemic and may cause irregularities. The Audit Authority has provided recommendations for the improvement of the system, and the relevant authority has developed a plan of measures for the implementation of recommendations.

21. The Audit Authority shall prepare a draft report on the audit on the EU funds management and control system and recommendations, specifying the time periods of implementation for the elimination of the deficiencies detected during the audit on the EU funds management and control system, and send them to the audited institutions for the provision of comments, as well as to the Managing Authority and the Certifying Authority - for information.

22. The Audit Authority shall determine the time period of implementation of the recommendations referred to in Paragraph 21 of this Regulation on the basis of the impact of the deficiency on the EU funds management and control system and the introduction priority of the recommendation.

23. The institutions shall, within 10 working days after receipt of the information referred to in Paragraph 21 of this Regulation, prepare and submit electronically to the Audit Authority (to the official e-mail address of the Audit Authority and the e-mail address of the person who developed the report):

23.1. justified comments on the draft report on the audit on the EU funds management and control system and recommendations. If possible, comments shall be justified with documents;

23.2. a plan of measures for the elimination of the deficiencies detected in the audit on the EU funds management and control system and introduction of recommendations, indicating the official responsible for the implementation of recommendations.

24. The draft report on the audit on the EU funds management and control system shall be deemed agreed, if the Audit Authority has not received comments from institutions within the time period referred to in Paragraph 23 of this Regulation.

25. The Audit Authority shall assess the comments provided by institutions, justification thereof and measures to be taken for the elimination of deficiencies and implementation of recommendations, prepare a report on the audit on the EU funds management and control system and append thereto a plan for the elimination of deficiencies.

26. If the Audit Authority, in assessing the information referred to in Paragraph 23 of this Regulation, does not change the essence of recommendations, a co-ordination meeting shall be organised. If co-ordination of opinions is not achieved during the meeting and the Audit Authority does not obtain sufficient proof in order to change the opinion thereof, the relevant recommendations shall be indicated in the plan for the elimination of deficiencies of the report on the audit on the EU funds management and control system as not agreed.

27. The Audit Authority shall, in accordance with Sub-paragraphs 8.1 and 8.2 of this Regulation, inform the Certifying Authority and the Managing Authority regarding recommendations not agreed.

28. The report on the audit on the EU funds management and control system and the plan for the elimination of deficiencies shall be approved by the head of the Audit Authority. The Audit Authority shall send the approved report on the audit on the EU funds management and control system and the plan for the elimination of deficiencies to the audited institutions and the European Commission, as well as to the Managing Authority and the Certifying Authority - for information.

29. The institutions shall be responsible for the implementation of the measures included in the plan for the elimination of deficiencies in compliance with the time period specified by the Audit Authority and, within 10 working days after the time period specified for implementation of the relevant recommendation, inform the Audit Authority thereof, submitting a documentary proof.

30. The Audit Authority shall monitor the implementation of the recommendations provided by the audit on the EU funds management and control system. The Audit Authority shall, within 10 working days after receipt of the information referred to in Paragraph 29 of this Regulation, assess it, where appropriate, request additional information and take a decision on the necessity to perform follow up audit on the implementation of recommendations. The Audit Authority shall, within five working days, enter its assessment on the process of implementation of recommendations in the information system for the management of European Union Structural Funds and the Cohesion Fund.

31. If institutions do not comply with the deadline referred to in Paragraph 29 of this Regulation, the Audit Authority shall assess the impact of the recommendation not introduced in time on the EU funds management and control system and, if necessary, perform the activities referred to in Sub-paragraphs 8.1 and 8.2 of this Regulation.

V. Audit of Operations on Expenditure Approved by the Certifying Authority

32. The Audit Authority shall perform an audit of operations on the expenditure approved by the Certifying Authority (hereinafter - certified expenditure) in accordance with the single audit strategy and, if necessary, complementary audits at the Responsible Institution or the Co-operation Institution and at the relevant final beneficiary of EU funds in order to verify whether the expenditure certified within the framework of the operational programme and eligible expenditure included in the statement of expenditure sent to the European Commission is eligible and made in compliance with the regulatory enactments.

33. The Audit Authority shall prepare a draft report on the audit of operations on the certified expenditure and recommendations, specifying the time periods of implementation for the elimination of the deficiencies detected during the audit of operations on the certified expenditure, and send it for the preparation of comments to the audited institutions. The documents referred to in this Paragraph shall be sent for information to the Managing Authority, the Certifying Authority and the Responsible Institution, if it is not the audited institution and the audit was performed within the scope of activities and sub-activities of EU funds under the supervision of the relevant Responsible Institution.

34. The Audit Authority shall determine the time period of introduction of the recommendations referred to in Paragraph 33 of this Regulation on the basis of the impact of the deficiency on the EU funds management and control system and the introduction priority of the recommendation.

35. The institutions shall, within 10 working days after receipt of the information referred to in Paragraph 33 of this Regulation, prepare and submit electronically to the Audit Authority (to the official e-mail address of the Audit Authority and the e-mail address of the person who developed the report):

35.1. justified comments on the draft report on audit of operations on the certified expenditure and recommendations. If possible, comments shall be justified with documents;

35.2. a plan of measures for the elimination of the deficiencies detected in the audit of operations on the certified expenditure and implementation of recommendations, indicating the official responsible for the implementation of recommendations.

36. The draft report on the audit of operations the certified expenditure shall be deemed agreed, if the Audit Authority has not received comments from institutions within the time period referred to in Paragraph 35 of this Regulation.

37. The Audit Authority shall assess the comments provided by institutions, justification thereof and measures to be taken for the elimination of deficiencies and introduction of recommendations, prepare a report on the audit of operations on the certified expenditure and append thereto a plan for the elimination of deficiencies.

38. If the Audit Authority, in assessing the information referred to in Paragraph 35 of this Regulation, does not change the essence of recommendations, a co-ordination meeting shall be organised. If co-ordination of opinions is not achieved during the meeting and the Audit Authority does not obtain sufficient proof in order to change its opinion, the relevant recommendations shall be indicated in the plan for the elimination of deficiencies of the report on the audit of operations on the certified expenditure as not agreed.

39. The Audit Authority shall, in accordance with Sub-paragraphs 8.1 and 8.2 of this Regulation, inform the Certifying Authority and the Managing Authority regarding recommendations not agreed.

40. The report on the audit of operations on the certified expenditure and the plan for the elimination of deficiencies shall be approved by the head of the Audit Authority. The Audit Authority shall send the report on the audit of operations on the certified expenditure and the plan for the elimination of deficiencies to the audited institutions. The documents referred to in this Paragraph shall be sent for information to the Managing Authority, the Certifying Authority and the Responsible Institution, if it is not the audited institution and the audit was performed within the scope of activities and sub-activities of EU funds under the supervision of the relevant Responsible Institution, as well as shall be sent to the European Commission upon a request.

41. The institutions shall be responsible for the implementation of the measures included in the plan for elimination of deficiencies according to the time period specified by the Audit Authority and, within 10 working days after the time period specified for introduction of the relevant recommendation, inform the Audit Authority thereof, submitting a documentary proof.

42. The Audit Authority shall monitor the implementation of the recommendations provided by the audit of operations on the certified expenditure. The Audit Authority shall, within 10 working days after receipt of the information referred to in Paragraph 41 of this Regulation, assess it, where appropriate, request additional information and take a decision on the necessity to perform an follow up audit on the implementation of recommendations. The Audit Authority shall, within five working days, enter its assessment on the process of introduction of recommendations in the information system for the management of European Union Structural Funds and the Cohesion Fund.

43. If institutions do not comply with the deadline referred to in Paragraph 41 of this Regulation, the Audit Authority shall assess the impact of the recommendation not introduced in time on the EU funds management and control system and, where appropriate, perform the activities referred to in Sub-paragraphs 8.1 and 8.2 of this Regulation.

VI. Annual Control Report

44. Each year until 2015 the Audit Authority shall prepare and by 31 December send the European Commission the following approved by the head of the Audit Authority:

44.1. an annual control report in which the results of the audits on the EU funds management and control system and audit of operations on the certified expenditure performed in the audit period are laid out and the deficiencies detected in the EU funds management and control system are notified;

44.2. an opinion regarding efficiency of the functioning of the established EU funds management and control system and eligibility of expenditure declared to the European Commission and conformity with the regulatory enactments in the audit period. The opinion shall be issued on the basis of:

44.2.1. the report referred to in Sub-paragraph 44.1 of this Regulation;

44.2.2. information at the disposal of the Audit Authority; and

44.2.3. the confirmations referred to in Sub-paragraphs 9.2, 10.1 and 10.2 of this Regulation.

45. The Audit Authority shall ensure the insertion of the annual control report on the website of the EU funds (www.esfondi.lv) within 10 working days after sending of the annual control report and opinion to the European Commission.

VII. Final Control Report and Closure Declaration

46. In order to prepare a closure declaration, the Audit Authority shall assess the validity of an application for payment of the final balance and legality and conformity of those transactions with the regulatory enactments, to which the closure declaration applies. The final control report shall be attached to the closure declaration.

47. The Audit Authority shall, by 31 January 2017, prepare and, by 31 March 2017, send the European Commission a final control report and closure declaration approved by the head of the Audit Authority.

48. The Audit Authority shall ensure the insertion of the final control report and closure declaration on the website of the EU funds (www.esfondi.lv) within 10 working days after sending of the final control report and closure declaration to the European Commission.

VIII. Closing Provision

49. Cabinet Regulation No. 1153 of 21 December 2010, Procedures for Ensuring the Functions of the Audit Authority in the Management of European Union Structural Funds and the Cohesion Fund, 2010, No. 206), is repealed.

Acting for the Prime Minister,
Minister for Welfare I. Viņķele

Minister for Finance A. Vilks

 

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Translation © 2013 Valsts valodas centrs (State Language Centre)