Procedures for Ensuring the Functions of the Audit Authority in the Management of the European Economic Area Financial Mechanism and the Norwegian Financial Mechanism in 2014-2021

Issued pursuant to
Section 15, Clause 11 of the Law on Management of the European Economic Area
Financial Mechanism and the Norwegian Financial Mechanism in 2014-2021

I. General Provisions

1. The Regulation prescribes the procedures for ensuring the functions of the audit authority in the management of the European Economic Area Financial Mechanism and the Norwegian Financial Mechanism (hereinafter - the Financial Mechanisms).

2. The Regulation applies to the National Focal Point, the irregularities authority, the certifying authority, the programme operator, the programme partner, the agency (hereinafter - the authorities), the audit authority, the project or pre-defined project promoter (hereinafter - the project promoter), and the project partner.

3. The accounting period within the meaning of this Regulation shall be from 1 July of the previous year until 30 June of the current year.

4. The authorities, the project promoter, and the project partner shall ensure unlimited access for the audit authority to all types of documents, registers, and other information related to the implementation of the Financial Mechanisms, a programme, a project, or a pre-defined project.

II. Audit Strategy and Annual Audit Plan

5. An audit strategy shall be a document which is prepared by the audit authority for the time period from 2019 until 2025 and in which the objectives, fields of activity, and methodology for the implementation of the functions of the audit authority for the Financial Mechanisms 2014-2021, and also an indicative audit plan are indicated in order to ensure that audits are evenly distributed throughout the entire period.

6. The audit authority shall, within nine months after approval of all programmes, prepare a single audit strategy on the Financial Mechanisms. The strategy shall be approved by the head of the audit authority and submitted to the Financial Mechanism Office (hereinafter - the Office) upon request within one month. The audit authority shall, within 10 working days after approval or updating of the single audit strategy, ensure posting thereof on the websites of the Financial Mechanisms (www.eeagrants.lv and www.norwaygrants.lv), informing the authorities thereof accordingly.

7. The head of the audit authority shall, until 2025 each year by 31 January, approve an annual audit plan. The audit plan shall include the planned audits of the Financial Mechanism and programme management and control system, and audits of the project or pre-defined project. The audit authority shall, within 10 working days after approval of the annual audit plan, ensure posting thereof on the websites of the Financial Mechanisms (www.eeagrants.lv and www.norwaygrants.lv), informing the National Focal Point and the certifying authority thereof accordingly.

III. Information to be Submitted to the Audit Authority

8. From 2019 to 2025 the National Focal Point shall, each year until 31 August, ensure updating of the description of the Financial Mechanism management and control system for the previous reporting period and submission of the updated description to the audit authority.

9. The programme operator:

9.1. shall ensure preparation of the description of the programme management and control system, approval and submission thereof to the audit authority within three months after approval of the relevant programme with the Office;

9.2. from 2019 to 2025 the National Focal Point shall, each year until 31 August, ensure updating of the description of the programme management and control system regarding the previous reporting period and submission of the updated description to the audit authority.

10. The certifying authority shall, until 2025 each year by 30 March, submit to the audit authority the list of expenditures of the programmes, projects, technical assistance and fund for bilateral relations approved in the current reporting period.

11. As soon as the information becomes known, the National Focal Point shall inform the audit authority as soon as possible of external audits which are carried out or planned to be carried out in the Financial Mechanism management and control system or projects financed by the Financial Mechanisms by the authorities specified in Article 10 of the Memoranda of Understanding referred to in Section 1, Clause 18, Sub-Clauses "a" and "b" of the Law on Management of the European Economic Area Financial Mechanism and Norwegian Financial Mechanism 2014-2021 and their authorised representatives.

IV. Compliance Assessment of the Financial Mechanisms and Programme Management and Control System

12. In order to ascertain the compliance of the Financial Mechanisms and programme management and control system with the Memoranda of Understanding referred to in Section 1, Clause 18, Sub-Clauses "a" and "b" of the Law on Management of the European Economic Area Financial Mechanism and Norwegian Financial Mechanism 2014-2021, the audit authority shall carry out:

12.1. compliance assessment of the Financial Mechanism management and control system in the authorities - within three months after receipt of the description of the Financial Mechanism management and control system prepared by the National Focal Point at the audit authority;

12.2. compliance 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 three months after receipt of the description of the programme management and control system prepared by the programme operator at the audit authority.

13. The audit authority shall prepare a draft report on the compliance assessment of the Financial Mechanisms or programme management and control system (hereinafter - the compliance assessment) and a plan for the rectification of the established deficiencies in which recommendations are provided, and send them to the authorities for preparation of comments.

14. The authorities shall, within 10 working days after receipt of the information referred to in Paragraph 13 of this Regulation, prepare and submit the following electronically to the audit authority:

14.1. comments regarding the draft report on the compliance assessment and the plan for rectification of deficiencies by substantiating them with documents or ensuring access for the audit authority to documentary evidence;

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

15. The draft report on the compliance assessment shall be regarded as co-ordinated if the audit authority has not received the comments referred to in Sub-paragraph 14.1 of this Regulation from the authorities within the time period referred to in Paragraph 14 of this Regulation.

16. The audit authority shall, within 10 working days after receipt of the information referred to in Paragraph 14 of this Regulation, evaluate the comments provided by the authorities, their justification, and the measures to be taken for the introduction of recommendations, and, where necessary, adjust the report on the compliance assessment and the plan for the rectification of deficiencies, and also prepare an opinion on compliance of the Financial Mechanism or programme management and control system. The abovementioned documents shall be approved by the head of the audit authority.

17. The audit authority shall, within three months after receipt of the description of the Financial Mechanism management and control system, send the approved report on the compliance assessment, the plan for the rectification of deficiencies, and the opinion on compliance of the Financial Mechanism management and control system to the National Focal Point for submission to the Office.

18. The audit authority shall, within three months after receipt of the description of the programme management and control system, send the approved report on the compliance assessment, the plan for the rectification of deficiencies, and the opinion on compliance of the programme management and control system to the programme operator for submission to the National Focal Point together with the description of the programme management and control system.

19. The authorities shall be responsible for implementation of the measures included in the plan in conformity with the time period specified in the plan and, within 10 working days after the end of the time period specified for the introduction of the relevant recommendation, inform the audit authority thereof, substantiating it with documents or ensuring access for the audit authority to documentary evidence.

20. The audit authority shall monitor the introduction of the recommendations provided in the compliance assessment by evaluating the information referred to in Paragraph 19 of this Regulation or, where necessary, by carrying out follow-up inspection of the introduction of recommendations, and shall include the information regarding execution of the approved plan for the rectification of deficiencies in the annual audit report.

V. Audits

21. According to the audit strategy, until 2025 the audit authority shall carry out the following:

21.1. 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 order to assess the efficiency of the operation of the Financial Mechanism and programme management and control system;

21.2. audit of the project or pre-defined project in the programme operator institution, the programme partner institution, and the agency, with the project or pre-defined project promoter and with the project partner in order to ascertain that the declared expenditures are eligible.

22. Compliance and efficiency of the operation of the Financial Mechanism or programme management and control system shall be assessed according to the assessment categories:

22.1. Category 1 - is operating well: the system is efficient, deficiencies have not been established, or insignificant deficiencies have been established which do not affect the operation of the Financial Mechanism or programme management and control system;

22.2. Category 2 - is operating but some improvements are required: some deficiencies have been established which have medium influence on the operation of the Financial Mechanism or programme management and control system. The audit authority has submitted recommendations for improvement of the system and the relevant authority has developed a plan of measures for the introduction of the recommendations;

22.3. Category 3 - is operating partly, significant improvements are required: deficiencies have been established which have significant influence on the operation of the Financial Mechanism or programme management and control system and which may cause irregularities. The audit authority has submitted recommendations for improvement of the system and the relevant authority has developed a plan of measures for the introduction of the recommendations;

22.4. Category 4 - is not operating: systemic deficiencies have been established which have significant influence on the operation of the Financial Mechanism or programme management and control system and which may cause irregularities. The audit authority has submitted recommendations for improvement of the system and the relevant authority has developed a plan of measures for the introduction of the recommendations.

23. The audit authority shall, within 10 working days after performance of the audit referred to in Paragraph 21 of this Regulation, prepare a draft audit report and a plan for the rectification of the established deficiencies in which recommendations and time periods for their introduction are indicated. The audit authority shall send the approved draft report and the plan for the rectification of deficiencies to the audited authorities for preparation of comments.

24. The audit authority shall determine the time period for introduction of the recommendations referred to in Paragraph 23 of this Regulation on the basis of the influence of the deficiency on the Financial Mechanism or programme management and control system and the priority of introduction of the recommendation.

25. The authorities shall, within 10 working days after receipt of the draft audit report and the plan for the rectification of the established deficiencies referred to in Paragraph 23 of this Regulation, prepare and submit the following electronically to the audit authority:

25.1. comments on the draft audit report and the plan for the rectification of the deficiencies, substantiating them with documents or ensuring access for the audit authority to the documentary evidence;

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

26. The draft audit report shall be regarded as co-ordinated if the audit authority has not received comments from the authorities within the time period referred to in Paragraph 25 of this Regulation.

27. The audit authority shall, within 10 working days after receipt of the information referred to in Paragraph 25 of this Regulation, evaluate the comments provided by the authorities, their justification, and the measures to be taken for the introduction of the recommendations, and, if necessary, adjust the audit report and the plan for the rectification of deficiencies.

28. If, upon evaluating the information referred to in Paragraph 25 of this Regulation, the audit authority does not change the essence of the recommendations, a co-ordination meeting is organised between the audit authority and the authorities which are responsible for the introduction of the relevant recommendations.

29. If, upon taking into account the priority of the recommendations and the essence and amount of objections, it is not necessary to agree in presence, the audit authority may organise repeated co-ordination of the draft audit report in accordance with the procedures referred to in Paragraphs 23, 24, 25, 26, and 27 of this Regulation.

30. If co-ordination of opinions is not reached in accordance with the procedures referred to in Paragraph 28 or 29 of this Regulation and the audit authority fails to obtain sufficient evidence in order to change its opinion, the relevant recommendations shall be indicated as not co-ordinated in the plan for the rectification of deficiencies of the audit report.

31. The audit report and the plan for the 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 the rectification of deficiencies to the audited authorities, and also to the National Focal Point and the certifying authority for information.

32. The authorities shall be responsible for the implementation of the measures included in the plan for the rectification of deficiencies according to the time period stipulated by the audit authority and, within 10 working days after the end of the time period specified for the introduction of the relevant recommendation, shall inform the audit authority thereof, substantiating it with documents or ensuring access for the audit authority to the documentary evidence.

33. The audit authority shall monitor the implementation of the recommendations provided in audits by evaluating the information referred to in Paragraph 32 of this Regulation regarding the introduction of the recommendations, or, if necessary, by carrying out follow-up inspection of the introduction of the recommendations.

VI. Annual Audit Report

34. The audit authority shall, until 2025, each year prepare and send the following documents approved by the head of the audit authority to the Office by 15 February:

34.1. the annual audit report. The audit results of the Financial Mechanism and programme management and control system and the results of project audits performed in the previous calendar year shall be explained therein and the deficiencies detected in the Financial Mechanism and programme management and control systems shall be reported;

34.2. an opinion on the efficiency of the operation of the established Financial Mechanism and programme management and control system, the interim financial report submitted to the Office, and the legality and regularity of the expenditure declared therein in the reporting period. The opinion shall be prepared on the basis of:

34.2.1. the report referred to in Sub-paragraph 34.1 of this Regulation;

34.2.2. the information referred to in Paragraphs 8 and 9 of this Regulation;

34.2.3. the information at the disposal of the audit authority.

35. The audit authority shall, within 10 working days after sending of the annual audit report and the opinion to the Office, ensure posting thereof on the websites of the Financial Mechanisms (www.eeagrants.lv and www.norwaygrants.lv), informing the National Focal Point and the certifying authority thereof accordingly.

VII. Final Audit Report and Closure Declaration

36. In order to prepare a closure declaration, the audit authority shall evaluate justification for the final report of the programme and the legality and regularity of those transactions to which the closure declaration of the programme applies. The final audit report shall be appended to the closure declaration.

37. The audit authority shall send the final audit report and the closure declaration approved by the head of the audit authority to the Office until 31 December 2025.

38. The audit authority shall, within 10 working days after sending of the final audit report and the closure declaration to the Office, ensure posting thereof on the websites of the Financial Mechanisms (www.eeagrants.lv and www.norwaygrants.lv), informing the National Focal Point and the certifying authority thereof accordingly.

Prime Minister Māris Kučinskis

Minister for Finance Dana Reizniece-Ozola

Translation © 2019 Valsts valodas centrs (State Language Centre)