Procedures for Ensuring the Functions of the Audit Authority during Managing the Financial Mechanism of the European Economic Area and the Norwegian Financial Mechanism in 2009-2014

Issued pursuant to Section 15, Clause 4 of
the Law On Managing the Financial Mechanism of the European Economic Area
and the Norwegian Financial Mechanism in 2009-2014

I. General Provisions

1. This Regulation prescribes the procedures for ensuring the functions of the Audit Authority during managing the Financial Mechanism of the European Economic Area and the Norwegian Financial Mechanism (hereinafter - financial mechanisms) in 2009-2014.

2. This Regulation shall apply to the National Focal Point, Certifying Authority, Programme Operator, programme partner, agency, the Procurement Monitoring Bureau (hereinafter - authorities), Audit Authority and beneficiary of the project or pre-defined project co-financing (hereinafter - beneficiary of co-financing).

3. Within the meaning of this Regulation a reporting period shall be the time period from 1 July of the previous year to 30 June of the current year.

4. Authorities and the beneficiary of co-financing shall ensure the Audit Authority with unlimited access to documents and registers of all types and other information, which is related to the implementation of the financial mechanisms, programme, project or pre-defined project.

II. Audit Strategy and Annual Audit Plan

5. The audit strategy is a document, which is prepared by the Audit Authority for the time period from 2013 to 2017 and in which the objectives, areas of activity and methodology for implementation of the functions of the Audit Authority for the time period from 2009 to 2014, as well as indicative audit plan are indicated in order to ensure that audits are evenly distributed throughout the time period.

6. The Audit Authority shall prepare a single audit strategy for both financial mechanisms, which shall be approved by the head of the Audit Authority, and submit to the Financial Mechanism Office (hereinafter - Office) within nine months after approval of all programmes. The Audit Authority shall ensure posting of the single audit strategy on website of financial mechanisms (www.eeagrants.lv and www.norwaygrants.lv) within 10 working days after sending of the single audit strategy to the Office, informing the authorities thereof accordingly.

7. Until 2017 the head of the Audit Authority shall approve an annual audit plan each year until 31 January, and the plan shall include audits of the financial mechanisms and the programme management and control system and audits of the project or pre-defined project planned in the subsequent reporting period (hereinafter - audit).

8. The Audit Authority shall submit the annual audit plan to the National Focal Point for inclusion in the strategic report within 10 working days after approval of the annual audit plan.

III. Information to be Submitted to the Audit Authority

9. From 2013 until 2017 the National Focal Point shall ensure updating of the description of the financial mechanism management and control system regarding the previous reporting period and submitting of the updated description to the Audit Authority each year by 31 August.

10. A Programme Operator shall:

10.1. ensure the preparation and submission of the description of the programme management and control system to the Audit Authority not later than within a month from submitting of the first financial interim report of the relevant programme to the Office;

10.2. from 2013 until 2017 ensure updating of the description of the programme management and control system regarding the previous reporting period and submitting of the updated description to the Audit Authority each year by 31 August.

IV. Conformity Assessment of the Financial Mechanism and Programme Management and Control System

11. In order to verify the conformity of the financial mechanism or programme management and control system with the provisions referred to in Section 1, Clause 5, Sub-clauses "c" and "d" of the Law On Managing the Financial Mechanism of the European Economic Area and the Norwegian Financial Mechanism in 2009-2014, the Audit Authority shall perform:

11.1. the conformity assessment of the financial mechanism management and control system in authorities - within three months after submitting the description of the financial mechanism management and control system prepared by the National Focal Point to the Audit Authority;

11.2. the conformity assessment of the programme management and control system at the institution of the Programme Operator, the institution of the programme partner and the agency - within four months after submitting the description of the programme management and control system prepared by the Programme Operator to the Audit Authority.

12. The Audit Authority shall prepare a draft report of the conformity assessment of the financial mechanism or programme management and control system (hereinafter - conformity assessment) and a plan for rectification of the detected deficiencies, in which recommendations shall be indicated, and send them to the authorities for preparing comments.

13. The authorities shall, within 10 working days after receipt of the information referred to in Paragraph 12 of this Regulation, prepare and submit electronically to the Audit Authority (to the official e-mail address of the Ministry of Finance and the e-mail address of the person who developed the report):

13.1. comments on the draft report of the conformity assessment and the plan for rectification of deficiencies, providing documentary justification thereof or ensuring the Audit Authority with access to documentary proof;

13.2. information regarding measures for introduction of recommendations, the responsible official and the time periods for introduction of recommendations.

14. The draft report on the conformity assessment shall be deemed co-ordinated, if the Audit Authority has not received comments from the authorities within the time period referred to in Paragraph 13 of this Regulation.

15. The Audit Authority shall assess the comments provided by the authorities within 10 working days receipt of the information referred to in Paragraph 13 of this Regulation, their validity and the measures to be taken for introduction of recommendations and, if necessary, update the conformity assessment report and the plan for rectification of deficiencies, as well as prepare a assurance report on the conformity of the financial mechanism or programme management and control system. The referred-to documents shall be approved by the head of the Audit Authority.

16. The Audit Authority shall send the following documents to the National Focal Point for submitting to the Office (sending copies to the authorities):

16.1. the approved conformity assessment report, plan for rectification of deficiencies and assurance report on the conformity of the financial mechanism management and control system - not later than within three months after submitting the description of the financial mechanism management and control system to the Audit Authority;

16.2. the approved conformity assessment report, plan for rectification of deficiencies and assurance report on the conformity of the programme management and control system and the description of the programme management and control system submitted by the Programme Operator - not later than within five months after submitting the first financial interim report of the relevant programme to the Office.

17. The authorities shall be responsible for implementation of the measures included in the plan for rectification of deficiencies according to the time period laid down in the plan and, within 10 working days after the time period laid down for introduction of the relevant recommendation, inform the Audit Authority thereof, providing a documentary justification or ensuring the Audit Authority with access to documentary proof.

18. The Audit Authority shall supervise the introduction of the recommendations provided in the conformity assessment, assessing the information referred to in Paragraph 17 of this Regulation regarding introduction of recommendations and, if necessary, performing a post-examination of introduction of recommendations, and information regarding execution of the approved plan for rectification of deficiencies shall be included in the annual audit report.

V. Audits

19. Until 2017 the Audit Authority shall perform the following in accordance with the audit strategy and the annual audit plan:

19.1. audits of the financial mechanism management and control system and at least one audit of the programme management and control system in each programme in accordance with the requirements included in the provisions referred to in Section 1, Clause 5, Sub-clauses "c" and "d" of the Law On Managing the Financial Mechanism of the European Economic Area and the Norwegian Financial Mechanism in 2009-2014 for the financial mechanism management and control system in order to assess the efficiency of functioning of the financial mechanism and programme management and control system;

19.2. audit of a project or pre-defined project at the institution of the Programme Operator, the institution of the programme partner and the agency, at the beneficiary of co-financing of the relevant project or pre-defined project, in order to ascertain whether the declared expenditure are eligible.

20. The conformity and efficiency of the functioning of the financial mechanism or programme 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, deficiencies have not been detected or insignificant deficiencies have been detected, which do not affect the functioning of the financial mechanism or programme management and control system;

20.2. Category 2 - works, however, some improvements are required: some deficiencies have been detected, which have a medium effect on the functioning of the financial mechanism or programme management and control system. The Audit Authority has provided recommendations for improvement of the system, and the relevant authority has developed a plan of measures for introduction of recommendations;

20.3. Category 3 - works, however, significant improvements are required: deficiencies have been detected, which have a significant effect on the functioning of the financial mechanism or programme management and control system and which may cause non-conformities. The Audit Authority has provided recommendations for improvement of the system, and the relevant authority has developed a plan of measures for introduction of recommendations;

20.4. Category 4 - does not work: many different or systemic deficiencies have been detected, which have a significant effect on the functioning of the financial mechanism or programme management and control system and which may cause non-conformities. The Audit Authority has provided recommendations for improvement of the system, and the relevant authority has developed a plan of measures for introduction of recommendations.

21. The Audit Authority shall prepare a draft audit report and a plan for rectification of the detected deficiencies, in which recommendations and the time periods for introduction thereof are indicated, within 10 working days after carrying out of the audit referred to in Paragraph 19 of this Regulation. The Audit Authority shall send the approved audit report and plan for rectification of deficiencies to the audited institutions for preparation of comments.

22. The Audit Authority shall stipulate the time period for implementation of the recommendations referred to in Paragraph 21 of this Regulation on the basis of the impact of the deficiency on the financial instrument or programme management and control system and the implementation priority of the recommendation.

23. The authorities 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 Ministry of Finance and the e-mail address of the person who developed the report):

23.1. comments on the draft audit report and the plan for rectification of deficiencies, providing documentary justification thereof or ensuring the Audit Authority with access to documentary proof;

23.2. information regarding measures for introduction of recommendations and the responsible official.

24. The draft audit report shall be deemed co-ordinated, if the Audit Authority has not received comments from the authorities within the time period referred to in Paragraph 23 of this Regulation.

25. The Audit Authority shall assess the comments provided by the authorities within 10 working days receipt of the information referred to in Paragraph 23 of this Regulation, their validity and the measures to be taken for introduction of recommendations and, if necessary, update the audit report and the plan for rectification of deficiencies.

26. If upon assessing the information referred to in Paragraph 24 of this Regulation the Audit Authority does not change the essence of recommendations, a co-ordination meeting shall be organised between the Audit Authority and the authorities responsible for introduction of the relevant recommendations.

27. If, taking into account the priority of recommendations and the essence and scope of objections, it is not necessary to reach an agreement in the presence, the Audit Authority may organise repeat co-ordination of the draft audit report in accordance with the procedures referred to in Paragraphs 21, 22, 23, 24 and 25 of this Regulation.

28. If co-ordination of opinions is not achieved in accordance with the procedures referred to in Paragraph 26 or 27 of this Regulation and the Audit Authority does not obtain sufficient proof in order to change its opinion, the Audit Authority be indicate the relevant recommendations in the plan for rectification of deficiencies of the audit report as not co-ordinated.

29. The audit report and the plan for rectification of deficiencies shall be approved by the head of the Audit Authority. The Audit Authority shall send the approved audit report and the plan for rectification of deficiencies to the audited institutions, as well as to the National Focal Point and the Certifying Authority - for information.

30. The authorities shall be responsible for implementation of the measures included in the plan for rectification of deficiencies according to the time period laid down by the Audit Authority and, within 10 working days after the time period laid down for introduction of the relevant recommendation, inform the Audit Authority thereof, providing a documentary justification or ensuring the Audit Authority with access to documentary proof.

31. The Audit Authority shall supervise the introduction of the recommendations provided in audits, assessing the information referred to in Paragraph 30 of this Regulation regarding introduction of recommendations and, if necessary, performing a post-examination of introduction of recommendations, and inform the National Focal Point and the Certifying Authority regarding progress of introducing recommendations.

VI. Annual Audit Report

32. Each year until 2017 the Audit Authority shall prepare and by 31 December send the Office the following approved by the head of the Audit Authority:

32.1. the annual audit report. It shall lay out the results of audits of the financial mechanism and programme management and control system and project audits carried out in the reporting period and notify regarding deficiencies detected in the financial mechanism and programme management and control systems;

32.2. an opinion on efficiency of the functioning of the established financial mechanism and programme management and control system, the interim financial report submitted to the Office and the lawfulness and accuracy of expenditure declared therein in the reporting period. The opinion shall be prepared on the basis of:

32.2.1. the report referred to in Sub-paragraph 32.1 of this Regulation;

32.2.2. the information referred to in Paragraphs 9 and 10 of this Regulation.

33. Upon sending the report and opinion referred to in Paragraph 32 of this Regulation to the Office, their copies shall be sent to the National Focal Point and the Certifying Authority.

VII. Final Control Report and Closure Declaration

34. In order to prepare a closure declaration, the Audit Authority shall assess the validity of an application for payment of the final balance and lawfulness and accuracy of those transactions to which the closure declaration of the programme applies. The final control report shall be attached to the closure declaration.

35. Until 31 December 2017 the Audit Authority shall send a final control report and closure declaration approved by the head of the Audit Authority to the Office, sending their copies to the National Focal Point and the Certifying Authority.

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

Minister for Finance A. Vilks

Translation © 2013 Valsts valodas centrs (State Language Centre)