III.3.1 National Control Systems
National control systems have been set in place by the Member States of the Interreg CE Programme. Designated bodies or authorised individuals are therefore responsible for verifying expenditure of beneficiaries on their territories.
Type of National Control Systems
National control systems can be organised as:
- Centralised systems, in which Member States appoint one single body to perform the verification of expenditure of all beneficiaries located on their territory. In these Member States, beneficiaries must submit their expenditure for verification to this body.
- Decentralised systems, in which each beneficiary shall appoint its own controller, according to instructions and procedures set in place at national level. Controllers appointed by the beneficiaries are subject to approbation by a body designated at national level for this purpose. Beneficiaries should check carefully the national provisions and procedures applicable in their Member States.
Controls performed on the expenditure submitted by beneficiaries can either be free of charge or charged to the beneficiary. In latter case, costs of control are also eligible as project expenditure and can therefore be reimbursed if they are foreseen in the project budget and claimed in the joint finance report.
Qualification and Capacity of Controllers
The whole management and control system, and ultimately the sound implementation of the Interreg CE Programme and its projects, strongly relies on the quality of the national control systems set in place.
Minimum qualification requirements of controllers are set at national level. The following requirements should anyway be held by a controller:
- A degree preferably in accounting, finance and relevant fields;
- Work experience in control and audit, preferably related to projects co-financed by EU Structural Funds;
- Knowledge of relevant EU, programme and national rules;
- Good command of English.
In addition, knowledge and skills of controllers should be regularly updated through targeted training (e.g. organised at national level). Furthermore, the MA/JS periodically organise opportunities for exchanging knowledge and experiences among national control bodies.
While in centralised systems, the qualification of controllers is ensured directly by the Member States when designating the body in charge of national controls, in decentralised systems it is the responsibility of each beneficiary, when appointing its controller, to ensure that such controller respects programme and national requirements. When selecting the controller, the qualification and competence should be privileged.
In addition, in accordance with Article 46(9) of the Interreg Regulation, where the controller is a private body or a natural person, the controller shall meet at least one of the following requirements:
- Be a member of a national accounting or auditing body or institution which in turn is a member of International Federation of Accountants (IFAC);
- Be a member of a national accounting or auditing body or institution without being a member of IFAC, but committing to carry out the management verifications in accordance with IFAC standards and ethics;
- Be registered as a statutory auditor in the public register of a public oversight body in a Member State in accordance with the principles of public oversight set out in Directive 2006/43/EC of the European Parliament and of the Council (21); or
- Be registered as a statutory auditor in the public register of a public oversight body in a third country, partner country or OCT, provided this register is subject to principles of public oversight as set out in the legislation of the country concerned.
If the performance of controllers in decentralised systems casts doubts on their professional standards, the MA reserves the right to require that the selected controller is replaced, in consultation with the national responsible body.
Irrespective of the type of control system, national controllers must have enough capacity for processing the expenditure submitted by the beneficiaries without delays. A timely verification of expenditure by the controllers largely depends on the completeness and accuracy of documents submitted by the beneficiary which, in turn, must also be ready to respond quickly to requests for clarification that the controller may pose.
Independence of Controllers
Controllers must be independent from the beneficiary. The independence of external controllers may not always be given if close commercial relations exist between the partner institution and the selected controller (e.g. use of own tax accountants).
In Member States with a decentralised control system, minimum requirements on independence are set at the national level.
Selection and Approbation of Controllers in Decentralised Systems
When a beneficiary in a decentralised control system selects a controller, the selection shall respect procurement rules as described in chapter I.4.4.1.
It is highly recommended to foresee contractual clauses, which:
- Define the liability of the controller linked to the quality of the performance;
- Ensure the availability of the selected controller also in the project closure phase, i.e. until the last instalment has been paid out following the project end and beyond in case of audits.
Following the selection of the controller by the beneficiary, the controller must be approved by an approbation body designated by the Member State. Following checks, the national approbation body issues an official approbation certificate. The assignment of the national controllers to an authorised control institution and to a beneficiary in Jems is done by the relevant national control body.
Programme bodies can only accept project expenditure that is verified through certificates issued by approved controllers.
National controllers have to verify at least that:
- Expenditure claimed on a real costs basis relates to the eligible period and has been paid;
- Expenditure relates to an approved project;
- Expenditure complies with programme conditions and with the applicable eligibility rules;
- Supporting documents are sufficient and an adequate audit trail exists;
- In case of flat rates or lump sums conditions for payments have been fulfilled;
- Expenditure complies with State aid rules, procurement rules, branding rules, as well as sustainable development (including environment protection), equal opportunity and non-discrimination requirements;
- The project physically progresses;
- The delivery of products or services is in full compliance with the content of the subsidy contract, including the latest version of the approved application form;
- An effectively functioning accounting system exists on the level of the beneficiary allowing a clear identification of project-related expenditure.
Expenditure incurred and paid by beneficiaries can be claimed only after it was verified by their respective national controller.
The verification of expenditure is performed on incurred expenditure to be included by the beneficiary in each finance report. This is done through administrative verifications (i.e. desk-based verifications) as well as on-the-spot verifications. Only expenditure claims verified by national controllers in accordance with national requirements and procedures can be accepted by the MA.
Risk-based verifications are to be carried out in accordance with the methodology set up at national level approved by the relevant programme body.
On-the-spot verifications are performed by the controller at the premises of the beneficiary as well as in any other place where the project is being implemented. On-the-spot verifications should check the existence of the project, especially with regard to cost items referring to the cost categories “Equipment” (CC5) and “Infrastructure and works” (CC6) and to accounting documents that form part of the audit trail. Furthermore, on-the-spot verifications should check the existence and effective functioning of an accounting system on the level of the controlled beneficiary.
As a general rule, on-the-spot verifications have to be performed by controllers on all beneficiaries. An exception to this rule applies to countries with a centralised control system, where on-the-spot verifications may be performed on a sample of beneficiaries. However, beneficiaries claiming costs for “Infrastructure and works” (CC6) need to be verified on-the-spot by controllers also in countries following centralised control systems. Equipment items do not need to be checked on-the-spot, but comparable measures to an on-the-spot check should be carried out (e.g. photo documentation).If a beneficiary is selected for an on-the-spot check, or if an obligatory on-the-spot check is required because the beneficiary has incurred costs for “Infrastructure and works”, it is recommended that the equipment should also be checked when carrying out the on-the-spot check.
In countries with a decentralised control system, on-the-spot verifications of all beneficiaries are compulsory at least once and they have to take place in the first half of the project implementation period. Furthermore, a second on-the-spot verification is compulsory on those beneficiaries incurring costs for infrastructure and works (CC6).
If during its checks, the MA/JS discover that the obligatory on-the-spot verification did not take place in the first half of the project implementation, the controller will be requested to carry out the check before the due date of the next finance report. In case that the on-the-spot check is not done within the given deadline, the costs of the relevant project partner have to be removed from the finance report. Once the on-the-spot check is performed, the costs can be included in the finance report which is due after the performance of the check.
The documentation of the control work carried out by the national controller is an essential element of the audit trail. It is done through filling-in and issuing the following documents:
- Certificate of expenditure, which certifies the compliance of the expenditure verified by the controller with the principles of eligibility, legality and relevance.
- Control report and checklist in which the controller gives evidence of the verifications performed and describes the methodology used for the verifications, explanation of the nature of the documents tested, of national and EU rules checked, etc.
The use of the abovementioned documents by the national controllers is compulsory. The documents must be filled in and issued by the authorised controllers through Jems. For information purposes only, offline templates will be made available at the programme website.
III.3.2 Ongoing Controls by the MA/JS
The ongoing controls performed by the MA/JS are complementary to the verification of expenditure carried out by national controllers. Such controls are aimed at verifying the quality of project implementation as well as the quality of work done by national controllers.
The following types of control are performed by the MA/JS:
- Verification of the project’s existence and physical progress by analysing the activity part, including indicators, of each progress report as well as outputs and relevant deliverables produced by the project.
- Plausibility checks of expenditure consisting of desk checks of invoices and other supporting documents with the scope of analysing several aspects linked to the plausibility of expenditure, including the adequacy of costs (value for money) of the reported outputs and deliverables. These checks are performed by the MA/JS on a sample of projects.
- Verification of the documentation of the control work performed by national controllers, through the check of the control report and checklist issued by controllers together with the certificate of expenditure. These checks are performed by the MA/JS on a sample of projects.
- On-the-spot verifications, which are mainly targeted at projects that realise investments through equipment or infrastructure and works, thus complementing the desk verification of the existence of the project.
The MA/JS perform additional verifications on quality standards of national control systems.
On the basis of a risk assessment, the MA/JS may also perform additional verifications on incurred expenditure charged to the project at any time with the scope of preventing and detecting potential irregularities (including fraud).
III.3.3 Audits by the Audit Authority (AA) and Group of Auditors (GoA)
The AA is the programme body responsible for carrying out system audits and audits on operations in order to provide independent assurance to the EC that the programme management and control system functions effectively and that expenditure submitted to the EC is legal and regular.
The AA is supported by the GoA which is composed of representatives from each programme Member State. The AA and the GoA entrust part of the audit work to an external audit company.
Audits on projects are performed during the entire programme lifetime. An EU level sample of the projects and project partners to be audited is drawn every year by the EC for all Interreg programmes.
During the audit, auditors analyse a number of aspects related to the implementation of the project, including the following:
- Existence of the project;
- Compliance with obligations set in the subsidy contract and partnership agreement;
- Eligibility of expenditure;
- Compliance with EU and national rules (including public procurement);
- Existence and soundness of the audit trail;
- Review of the control work carried out by the national controller.
The audit is in most cases performed on the spot, at the premises of the audited body or in any other place where the project is being implemented. It is complemented by desk verifications.
In case of detected non-compliances or infringements, audit findings are raised. For each finding they clearly state the reasons and provide requirements for clearance of the finding. All findings are presented to the audited body upon completion of the audit in order to undergo a contradictory procedure. Within the contradictory procedure the LP, PP(s) and controller(s) have the possibility to comment on each finding. At the end of this procedure, the AA and GoA have to confirm or lift the findings. Following this, the audit report becomes final and the audit follow-up process starts.
The audit follow-up depends on the type of findings detected:
- In case of findings with financial impact (i.e. in case of detecting irregular amounts), the amounts considered as not eligible are withdrawn from the next payment claim submitted to the MA/JS or are recovered from the LP if the project is already closed (or if the amount claimed by the concerned beneficiary is lower than the irregular amount);
- Should findings have no financial consequences, the affected beneficiary (or its controller if applicable) has to document that recommendations set by the auditors have been followed up.
The MA/JS support the communication flows between all parties involved in the audit process, i.e. the AA, GoA members, audit company, LP, PPs and national controllers.
The MA/JS will also provide further guidance as well as training to beneficiaries on audit preparation and follow-up.
III.3.4 Other Controls and Audits
As provided for in the subsidy contract, and in addition to the programme bodies, the European Commission, the European Anti-Fraud Office (OLAF), the European Court of Auditors (ECA) and, within their responsibility, the auditing bodies of the Member States or other national public auditing bodies, are entitled to audit the proper use of funds by the beneficiaries. The concerned beneficiaries are notified in due time about any audit to be carried out by authorised persons of such bodies.
Beneficiaries undergoing an audit have to provide any project-related information to the above auditing bodies and give access to their business premises. Audits may occur at any time until the end date for the retention of documents, as provided for in chapter III.3.6.
III.3.5 Audit Trail
Contents of the Audit Trail
An audit trail is to be understood as a chronological set of accounting records that provide documentary evidence of the sequence of steps undertaken by the beneficiaries and programme bodies for implementing an approved project.
According to this definition, the proper keeping of accounting records and supporting documents held by the beneficiary and its national controller plays a key role in ensuring an adequate audit trail. In turn, setting up and maintaining an adequate project audit trail is a basic requirement for the eligibility of the expenditure claimed.
At the level of each beneficiary, an adequate audit trail is composed at least of the following elements:
- The subsidy contract (and its amendments);
- The partnership agreement (and its amendments);
- The latest version of the approved application form in Jems;
- Adequate evidence and documentation of all outputs and deliverables produced during the project lifetime;
- For real costs claimed within the project, the documents proving the expenditure incurred and the payment made;
- Adequate documentation of all procurement procedures implemented for selecting experts, service providers and suppliers;
- Any other supporting document applicable to each cost category as further specified in chapter I.4.3;
- Reports submitted in Jems to the national controller with the purpose of validating project expenditure;
- Documents issued by the national controller validating expenditure claimed within the project.
In the project start-up phase it is essential, for each beneficiary, to set up adequate arrangements that ensure the availability of:
- A separate accounting system or an adequate accounting code set in place specifically for the project;
- A physical and/or electronic archive which allows storing data, records and documents concerning the physical and financial progress of the project – as listed above – until the end of the document retention period specified in chapter III.3.6.
All documents composing the audit trail shall be kept either in the form of originals, or certified true copies of the originals, or on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only. The certification of conformity of documents held on commonly accepted data carriers with original documents shall be performed in compliance with national rules on the matter.
In case of beneficiaries using e-archiving systems, where documents exist in electronic form only, the systems used shall meet accepted security standards that ensure that the documents held comply with national legal requirements and can be relied on for audit purposes.
Annulling of Documents
One important element to be taken into account when setting up the audit trail is the need to avoid double funding from different co-financing sources for the same expenditure item. Whereas analytical accounting systems help in this respect, more straightforward measures must also be foreseen, as for instance the annulling of invoices and other probative documents.
The practice of annulling the originals of invoices and other probative documents is compulsory in the framework of the Interreg CE Programme. Where available, the annulling of originals of expenditure documents should be carried out by means of a stamp bearing at least the following information:
- That the expenditure has been co-funded by the Interreg CE Programme;
- The number and the name (acronym) of the project;
- If applicable (e.g. same document covering different cost items), a statement on the share of expenditure claimed in the concerned project.
If invoices (or other probative documents) are available only on electronic support (i.e. no original can be identified) the abovementioned information should be included in the subject or the body of the electronic document.
III.3.6 Retention of Documents
All supporting documents composing the audit trail must remain available at the premises of each beneficiary at least for a period of five years. This period starts from 31 December of the year in which the last payment is made by the MA to the LP. Furthermore, all documents referring to project activities and expenditure for which State aid was granted shall be available for at least 10 years from the date of granting the last aid issued by the programme. The retention period shall be interrupted either in the case of legal proceedings or by a request of the EC.
At the closure of projects, the MA/JS will inform each LP and its national controller on the exact start date of the above mentioned retention periods. The LP shall in turn inform the PPs.
Other, possibly longer document retention periods according to e.g. national and internal rules, remain unaffected.
For the entire retention period, all bodies entitled to perform controls and audits are allowed to access the project and all relevant documentation and accounts of the project.
 Restrictions apply to beneficiaries located in Austria, in which case controllers are not appointed/selected by the beneficiaries themselves.