CCI 2007 CB 163 PO 037 DESCRIPTION OF THE MANAGEMENT AND CONTROL SYSTEM

Transcription

1 Operational Programme Italy-Malta ERDF European Territorial Cooperation Objective CCI 2007 CB 163 PO 037 DESCRIPTION OF THE MANAGEMENT AND CONTROL SYSTEM November 2013

2 LIST OF CONTENTS Description of the Management and Control System o Main abbreviations... Errore. Il segnalibro non è definito. FLOW CHART SYMBOLS... Errore. Il segnalibro non è definito. 1. GENERAL DATA... Errore. Il segnalibro non è definito. 1.1 General information... Errore. Il segnalibro non è definito. 1.2 Document reference date... Errore. Il segnalibro non è definito. 1.3 Structure of the Cooperation System... Errore. Il segnalibro non è definito Single Managing Authority... Errore. Il segnalibro non è definito Single Certifying Authority... Errore. Il segnalibro non è definito Single Audit Authority and audit bodies... Errore. Il segnalibro non è definito. 1.4 Guidelines provided to the Managing and Certifying Authorities and to the intermediate bodies to guarantee the appropriate management of the st ructural fundserrore. Il segnalibro non è definito. 2. Single Managing Authority... Errore. Il segnalibro non è definito. 2.1 Single Managing Authority - main functions... Errore. Il segnalibro non è definito Date and type of the formal designation authorising the Managing Authority to perform its functions... Errore. Il segnalibro non è definito Identification of the functions and tasks carried out by the Single Management Authority... Errore. Il segnalibro non è definito Functions formally transferred by the Single Managing Authority Errore. Il segnalibro non è definito. 2.2 Organisation of the Single Managing Authority... Errore. Il segnalibro non è definito.... Errore. Il segnalibro non è definito Written procedures developed for the staff of the Single Managing Au thorityerrore. Il segnalibro non è definito Description of the operation selection and approval procedures and procedures aimed at guaranteeing conformity with the applicable national and community norms throughout the implementation period (art. 60, letter a) of the EC Regulation no. 1083/2006 Errore. Il segnalibro non è definito Check operations (art. 60, letter b) of EC regulation no. 1083/2006 and subsequent amendments thereof... Errore. Il segnalibro non è definito Handling of reimbursement applications... Errore. Il segnalibro non è definito.

3 2.2.6 Description of the procedure followed by the single Managing Authority to send the information to the single Certifying Authority... Errore. Il segnalibro non è definito Eligibility norms defined by a member state and applicable to the operative programme... Errore. Il segnalibro non è definito. 2.3 If the same authority is designated as single Managing Authority and Certifying Authority, describe how the functions are maintained separate... Errore. Il segnalibro non è definito. 2.4 Public tenders, state aids, equal opportunities, environmental normserrore. Il segnalibro non è definito Instructions and guidelines on the applicable norms. Errore. Il segnalibro non è definito Provision to guarantee compliance with the applicable norms, e.g. controls on management, checks, audits... Errore. Il segnalibro non è definito. 2.5 Audit trail... Errore. Il segnalibro non è definito Application of the provisions of art. 15 of the EC Regulation no. 1828/2006 to the programme and / or the priorities... Errore. Il segnalibro non è definito Instructions to the beneficiaries on how to maintain the e vidence documents... Errore. Il segnalibro non è definito. 2.6 Anomalies and collection of undue amounts... Errore. Il segnalibro non è definito Instructions on how to report and correct the irregu larities, record debts and collect undue payments... Errore. Il segnalibro non è definito Procedure on compliance with the obligation to report irregularities to the Commission, as per article Errore. Il segnalibro non è definito. 3. Auditors as per art.16 of the EC Regulation no. 1080/2006 and subsequent amendments thereof... Errore. Il segnalibro non è definito Assessment of operations as per art. 16 of the E C Regulation no. 1080/2006 and subsequent amendments thereof... Errore. Il segnalibro non è definito. 4. CERTIFYING AUTHORITY... Errore. Il segnalibro non è definito. 4.1 Single Certifying Authority - main functions... Errore. Il segnalibro non è definito Date and type of the formal designation authorising the Certifying Authority to perform its functions... Errore. Il segnalibro non è definito Functions performed by the Certifying Authority... Errore. Il segnalibro non è definito Function formally entrusted to the Certifying Authority (functions, intermediate bodies, type of power entrusted).... Errore. Il segnalibro non è definito. 4.2 Organisation of the Certifying Authority... Errore. Il segnalibro non è definito Organisation chart and detail on the unit functions (including the approximate number of staff)... Errore. Il segnalibro non è definito. 3

4 4.2.2 Written procedures developed for the staff of the Certifying Authority (date and reference)... Errore. Il segnalibro non è definito. 4.3 Certification of declaration of expenditures... Errore. Il segnalibro non è definito Description of the procedures to draw up, certify and submit the declaration of expenditures to the Commission... Errore. Il segnalibro non è definito Description of measures taken by the Certification Authority to ensure the observance of provisions as set forth by the article 61 of the (EC) Regulation No. 1083/2006 of the Council... Errore. Il segnalibro non è definito Provisions concerning the access of the Certification Authority to the detailed information regarding the operations, checks, and activities carried out by the Management Authority, intermediate bodies, and Audit Authorit y... Errore. Il segnalibro non è definito. 4.4 Accounting system... Errore. Il segnalibro non è definito Description of the accounting system to be established and used as a basis for certification of expenditure to the Commission... Errore. Il segnalibro non è definito Detail degree of the accounting system... Errore. Il segnalibro non è definito. 4.5 Amounts recovered... Errore. Il segnalibro non è definito Description of the way to ensure fast recovery of the EU support Errore. Il segnalibro non è definito Provisions implemented for keeping the register of debtors and ded ucting the amounts recovered from the expense to be declared... Errore. Il segnalibro non è definito. 5. SINGLE AUDIT AUTHORITY AND MONITORING AUTHORITIESErrore. Il segnalibro non è definito. 5.1 Description of the main tasks and interconnections of the single Audit Authority with the Monitoring Authorities under its responsibility... Errore. Il segnalibro non è definito. 5.2 Organisation of the Single Audit Authority and Moni toring Authorities under its responsibility... Errore. Il segnalibro non è definito Organisation charts... Errore. Il segnalibro non è definito Provisions aimed at ensuring the independence... Errore. Il segnalibro non è definito Qualifications or experience required... Errore. Il segnalibro non è definito Description of procedures to monitor the implementation of recommenda tions and corrective measures indicated in the audit reports... Errore. Il segnalibro non è definito Description of procedures regarding the supervision of the activities of the other Monitoring Authorities... Errore. Il segnalibro non è definito. 5.3 Annual audit report and closing statements... Errore. Il segnalibro non è definito. 4

5 Description of procedures regarding the completion of the annual audit report and closing statement... Errore. Il segnalibro non è definito. 5.4 Designation of the coordinating audit body... Errore. Il segnalibro non è definito Description of the role of the coordinating audit bodyerrore. Il segnalibro non è definito. 6. INFORMATION SYSTEM (ARTICLE 60 (C) OF COUNCIL REGULATION (EC) NO 1083/2006)... Errore. Il segnalibro non è definito Description of the information sy stem including flowchart (central or common network system or decentralised system with links between the systems)... Errore. Il segnalibro non è definito. 7. ANNEXES... Errore. Il segnalibro non è definito. 5

6 Description of the Management and Control System o

7 Description of the Management and Control System o MAIN ABBREVIATIO NS GGAA AA CA MA MNCA BC/LP BP/PP SC RC MC EC EA NPC ERDF IGRUE MEF OLAF CP OP AER ST MCS IT JTS CU OCO EU General Affairs Area Single Audit Authority Single Certifying Authority Single Managing Authority Maltese National Coordination Authority Beneficiario Capofila /Lead Partner Beneficiario Partner/ Project Partner Steering Committee Responsibility Centre Monitoring Committee European Commission 1 st level External Auditors National Public Counterparty European Regional Development Fund Inspectorate General for Financial Relations with the European Union Ministry for Economic and Financial Affairs European Antifraud Office Communication Plan Operation Programme Annual Executive Report State Treasury Management & Control System Information system Joint Technical Secretariat 1 st level Control Unit Office Competent for Operations European Union

8 Description of the Management and Control System o FLOW CHART SYMBOLS Symbol Meaning Decision Complex activity Complex and articulate document Data recorded in IT system Official document

9 1. GENERAL DATA 1.1 General information Member State: Italy Programme title and CCI no: Operational Programme Italy Malta adopted through Commission Decision (2008) 7336 of 27 th November CCI no CB 163 PO 037 Name of main contact: The main Programme contact is Sicily, Regional Government of Sicily - Regional Programming Department, Pro- Tempore General Manager Mr. Vincenzo Falgares, P.za Sturzo, Palermo, dipartimento.programmazione@regione.sicilia.it Tel /032 Fax Document reference date The information herein contained describes the management and control system, as developed by the Sicilian Region, as of 21 November Should amendments and / or changes in the reference regulatory framework occur or new organisation and operations requirements emerge, this paragraph shall refer to the following versions of the document and the main changes will be highlighted. The present version introduces non-substantial changes to the following paragraphs of the System: Organisation chart and description of the unit functions, Handling of reimbursement applications and 3.1. Assessment of operations as per art. 16 of the EC Regulation no. 1080/2006 and subsequent amendments thereof. Moreover, the name of the Maltese National Coordination Authority has been updated. 1.3 Structure of the Cooperation System The organisation model that has been adopted to implement the Operational Programme includes and enhances the experiences acquired in managing the community interventions in the previous programming periods and takes the new European Union norms and the guidelines of the Italian National Strategic Framework into consideration. The description of the management and control system, in agreement with article 21 of the (EC) Regulation 1828/2006, contains information on the general principles of the management and control of each Operational Programme (article 58 of the Regulation 1083/2006) and also the information as per articles 22 (Managing Authority, Certifying Authority and intermediate Bodies ) and 23 (Audit Authority and other bodies performing the audit activities). Moreover it guarantees compliance with the provisions of article 24, letters a.b.c.d 1 of the (EC) Regulation 1828/2006 dealing with the European Territorial Cooperation Objective. In accordance with the principle of the separation of functions of the bodies participating in the management and control as per article 58, letter b), of the (EC) Regulation no. 1083/2006, and with the aim of guaranteeing the effective and proper implementation of the operational programme, the correct implementation of the management and control system and the monitoring functions, here follows a list of the common cooperation bodies involved in the implementation of the programme: Single Managing Authority Page 9 of 80

10 The Single Managing Authority, i.e. the Pro-Tempore General Manager of the Regional Programming Department within the Regional Government, is responsible for the management and implementation of the operation programme, in accordance with the healthy financial management principle, and carries out the functions described in the article 60 of the (EC) Regulation 1083/06, art. 15 of the (EC) Regulation 1080/2006 and art. 13 of the (EC) Regulation 1828/2006 Maltese National Coordination Authority In its capacity as Member State of the Programme, the Maltese National Coordination Authority shall perform the regulatory function that each Member State has in checking and imposing controls on the eligibility of the expenditure, activate the programme execution within the country and contribute to the implementation of the Programme together with the MA and the JTS. These functions shall be performed by the pro-tempore manager of the Planning and Priorities Coordination Division Office of The Prime Minister 12, St. Paul Str Valletta VLT 1210 Malta Tel.: Fax: Website: Joint Technical Secretariat The Joint Technical Secretariat (hereinafter JTS) is the technical-operative body that supports the activities of the Managing Authority, the Certifying Authority and the Monitoring Committee, in agreement with art. 14 of the EC Regulation 1080/06 and, if necessary, also the Audit Authority. The JTS works where the MA is based and performs its activities consistently with chapter of the Italy-Malta OP The insularity problems have been tackled by establishing a cross-border contact point in Malta, with the aim of providing information, increasing the awareness, promoting and supporting the local partnership and fostering the projects. Single Certifying Authority The Single Certifying Authority, i.e. the Pro-Tempore Manager of the Certifying Authority for the Programmes cofinanced by the European Commission, is responsible for the proper certification of the expenditures incurred in the implementation of the operational programme and the applications for payment to be submitted to the Commission. Single Audit Authority The Single Audit Authority, i.e. the Pro-Tempore General Manager of the Audit Authority for the Programmes cofinanced by the European Commission, shall verify the effective implementation of the management and control system. The Audit Authority is functionally independent from the Single Managing Authority and the Single Certifying Authority and carries out the functions as per Article 6 of the (EC) Regulation 1083/2006. Monitoring Committee In agreement with Article 63 of the (EC) Regulation no. 1083/2006 and in conformity with Chapter of the Programme, the Monitoring Committee (hereinafter JMC) has been established and appointed with the assessment of the efficacy, efficiency and quality of the implementation of the Operation Programme. The JMC has approved its internal rules that contain the details on the composition, the tasks and the operative methods (Annex 1). Steering Committee In compliance with art. 19 of the (EC) Regulation no. 1080/2006, and in line with paragraph of the OP, a Steering Committee (hereinafter SC) has been established as the technical body of the partnership in charge of supporting the MA in the implementation of the Programme; it is involved in the selection of the operations, assures complementarity and prevents any overlapping in the regional policy instruments. The internal rules of the SC regulate its activities (Annex 2). The OP is structured as shown in the figure below, as of the date of this document: Page 10 of 80

11 European Commission Monitoring Comittee Steering Comittee Selection of Operations Coordinating Administration Italy Coordinating Administration- Malta Audit Authority Certifying Authority Managing Authority Maltese National Coordination Authority Team of Auditors Cooperation Service Axes Manager Progr. Dept C.U. ANCM- TCU Team of Auditors (as per Art. 14 Par. 2, Reg.1080/2006); perform the functions as per Art. 62 Reg. 1083/2006. UCO Axes I & II UCO Axis III 1st-level control as per Art. 16 EC Reg 1080/2006 Joint Technical Secretariat PP 3 PP 1 Project COLOUR CODING Body and / or subject are located in the same territory of the Managing Authority LP PP 2 Body and / or subject are located in the partner member state Page 11 of 80

12 1.3.1 Single Managing Authority Name: Contact Point Sicilian Region Presidency of Regional Government Regional Programming Department Pro-Tempore General Manager Address: P.za Sturzo, Palermo Telephone: (+39) /032 Fax: (+39) Web site: Joint Technical Secretariat Address: P.za Sturzo, Palermo Telephone: (+39) /066 Fax: (+39) Web site: The Managing Authority (hereinafter MA), in accordance with Article 14 of the Regulation no. 1080/2006 and subject to consultation of the Member States represented in the Programme area, has established a Joint Technical Secretariat (hereinafter JTS), i.e. a technical-operative body that supports the MA, the Certifying Authority and the Monitoring Committee and, if necessary, the Audit Authority. The JTS works where the MA is based and its staff is selected through a public procedure. Programme Partner Name: Republic of Malta Parliamentary Secretariat for the EU Presidency 2017 National Coordination Autority Contact Point Mr Raphael Scerri Address: Triq il-kukkanja, Santa Venera SVR 1411 Malta Telephone: Fax: info.ppcd@gov.mt Web site: Controls as per article 16.1 of (EC) Regulation 1080/2006 Name: Sicilian Region Presidency of Regional Government Regional Programming Department Control Unit Contact Point Pro-tempore Manager of the First Level Control Offices Coordination Area Address: P.za Sturzo, Palermo Telephone: (+39) Fax: (+39) nicola.tarantino@regione.sicilia.it Web site: Page 12 of 80

13 Name: Republic of Malta Planning and Priorities Coordination Division (PPCD) Office of the Prime Minister (OPM) Territorial Cooperation Unit Address: 12-13, St. Paul Str. Valletta VLT 1210 Malta Telephone: Fax: Web site: In line with art. 16 par. 1, of the (EC) Regulation 1080/2006, and in agreement with the document General characteristics of the national control system for the Programmes of the European Territorial Cooperation Objective MEF - IGRUE June 2008 for Italy, in compliance with the national and community norms in force, the auditors shall be selected through a specific procedure; under the coordination of the Control Unit, they will audit the expenditures of the Italian beneficiaries within the relevant financial operations. In Malta, the ANCM has implemented a centralised control system. The beneficiaries applications for reimbursement, with the attached certificates issued by the auditor who checked the expenditure, shall be forwarded to and validated by the Territorial Cooperation Unit. The control activity is generally performed by an external or internal auditor, in agreement with the First Level Control Manual, and is documented in the specific checklists (Annex 5). The auditor is professionally qualified and shall state his/her independence from the project management and implementation activities. ANCM-TCU, after receiving the application for reimbursement, shall verify the documentation and certify that the expenses described in the application comply with the national provisions and the Programme requirements. For further details, please refer to chapter 3 of this document Single Certifying Auth ority Name: Sicilian Region Presidency of Regional Government Authority for the certification of the Programmes Co-financed by the European Commission Contact Point Pro-Tempore General Manager Address: P.za Sturzo, Palermo Telephone: (+39) Fax: (+39) autorita.certificazione@regione.sicilia.it Single Audit Authority and audit bodies Name: Sicilian Region Presidency of Regional Government Special Audit Authority Office for Programmes co-financed by the European Commission Contact Point Pro-Tempore General Manager Address: Via Notarbartolo n. 12/A, Palermo Telephone: (+39) Fax: (+39) autorita.audit@regione.sicilia.it The Audit Authority, in agreement with art. 62 of the (EC) Regulation 1083/2006, is supported by the team of auditors, established through the Decree of the General Manager of the Special Audit Authority Office no dated (Annex 12). The team of Auditors, in conformity with art. 14, par. 2 of the EC Regulation 1080/2006, is composed of a Page 13 of 80

14 representative of the Maltese Government (Internal Investigation Authority Department (IAID) of the Office of the Prime Minister of the Republic of Malta), a representative of the Italian Government and is chaired by the General Manager of the Special Audit Authority Office of the programmes co-financed by the European Commission. The team of auditors has approved its internal rules (Annex 12). For the Sicilian Region Organisation: Special Audit Authority Office for the Programmes co-financed by the European Commission Address: Via Notarbartolo, 12/A Palermo, Sicily, Italy. Contact Point Manager of Service 12 Audit Authority Telephone: (+39) Fax: (+39) , mnicosia@regione.sicilia.it For the Republic of Malta Organisation: Internal Audit and Investigations Division, Cabinet Office, Office of the Prime Minister Address: Valletta Buildings, Lower Ground Floor, Valletta. VLT MALTA Contact Point General Manager of the Internal Audit and Investigations Division Telephone: ext 10 Fax: philip.gafa@gov.mt For further details on the role and tasks of the team of auditors and all the other affected bodies, see chapter 5 of this document. 1.4 Guidelines provided to the Managing and Certifying Authorities and to the intermediate bodies to guarantee the appropriate management of t he structural funds Note no of 3 May 2007 of the Ministry of Economic and Financial Affairs: Transmission of the guidelines on the management and control systems for Circular letter no. 34 of 8 November 2007 for the transmission of the procedures for the assessment of conformity in agreement with article 71 of the regulation no. 1083/2006. Note no of 27 November 2008 of the Ministry of Economic and Financial Affairs: Transmission of checklist forms for firstlevel controls. CIPE (Italian inter-ministerial economic committee) deliberation no. 158/2007 dated 21 December 2007 (published in the Ordinary Supplement to the Official Journal no. 136 of 12/06/2008), containing information on the "Team of auditors and the national control system. Note no of of the Ministry of Economic and Financial Affairs: Transmission of the general characteristics of the national control system for the programmes of the European Territorial Cooperation Objective Circular letter no. 23 of 31 July 2008 of the Ministry of Economic and Financial Affairs: Transmission of the financial management procedures for the interventions of the European Territorial Cooperation Objective for the programming period The national guidelines on the proper management of the Structural Funds for the Republic of Malta are contained in the document: "Eligibility of expenses for the Maltese partners participating in the territorial cooperation programmes for ". Page 14 of 80

15 2. SING LE MANAG ING AUTHORITY 2.1 Single Managing Authority - main functions Date and type of the formal designation authorising the Managing Authority to perform its functions The Deliberation of the Council of the Regional Government no. 108 of 3 April 2009 has eliminated the Special Office for Decentralised cooperation for Development and International Solidarity, i.e. the former Managing Authority of the OP Italy-Malta , and its competences, human resources and balance sheet have been transferred to the Presidency of the Regional Government, Regional Programming Department. Therefore the functions of the Managing Authority are carried out by the General Manager of the Regional Programming Department of the Presidency of the Government of the Sicilian Region. Following the Deliberation of the Regional Government Council no. 191 of 22 May 2009, a new organisation has been approved for the Regional Programming Department of the Presidency of the Regional Government. Within this new organisation chart, the tasks of the Special Office for Decentralised cooperation for Development and International Solidarity have been transferred to Service V European Territorial Cooperation and Decentralised Development Cooperation. The Service is also responsible for programming, managing and controlling the Identification of the functions and tasks carried out by the Single Management Authority The Managing Authority (hereinafter MA) of the OP Italy Malta , as per article 59 and subsequent amendments of the EC Regulation no. 1083/2006 and article 14 and subsequent amendments of the EC Regulation no. 1080/2006, is the Sicily Region. It performs all the functions and tasks in accordance with the (EC) Regulation no. 1083/2006 and with the implementation methods defined in the (EC) Regulation no. 1828/2006 and as specified in chapter 6 Implementation Provisions of the Operational Programme Italy-Malta It is represented by the Pro-Tempore General Manager of the Regional Programming Department; he is the main contact point for the European Commission, the Maltese National Coordination Authority and the Italian national authorities and, thanks to his organisation, he coordinates, harmonises and guides the activities. In compliance with art. 14 of the (EC) Regulation 1080/06, the MA carries out the OP management and implementation activities with the support of the Joint Technical Secretariat, which has been established, subject to the approval of the Member States of the area affected by the Programme, with appropriate human and financial resources. The MA guarantees the overall supervision of the OP, the consistency of the methods and working tools that are used for the appropriate and effective execution of the activities thanks to manuals, guidelines, workshops and training sessions. The MA is responsible before the Commission for the execution of the tasks as per articles 60 of the (EC) Regulation 1083/06 and its subsequent amendments, art. 15 of the (EC) Regulation 1080/06 and its subsequent amendments, and art. (13) of the (EC) Regulation 1828/2006, with specific reference to the following: Guarantee that the operations that will benefit from funding are selected in accordance with the criteria that are applicable to the operational programme and comply with the community and national norms that are applicable throughout the implementation period; Guarantee the availability of an IT system for recording and maintaining the accounting data on all the operations performed within the operational programme, for recording the implementation data that are needed for the financial management, the monitoring, the checks, audits and assessments; Guarantee that the beneficiaries and the other bodies participating in the implementation of the operations keep a separate accounting system or an appropriate accounting system for any operation transaction, without prejudice to the national accounting rules; Page 15 of 80

16 Guarantee that the operational programme as per article 48, 3 of the (EC) Regulation no. 1083/2006 is assessed in conformity with the provisions of article 47 of the same Regulation; Develop procedures so that all the expenditure and audit documents that are needed to guarantee an appropriate audit trail are maintained in accordance with article 90 of the (EC) Regulation no. 1083/2006 (three years after the end of the programme); Guarantee that the Certifying Authority receives the necessary information on the procedures and expenditure verifications that are carried out for certifying purposes; Guide the work of the Monitoring Committee and give it the documents that are necessary for the qualitative monitoring of the implementation of the operational programme, keeping its specific objectives into consideration; Develop the annual and final execution reports and submit them to the Commission, subject to the approval of the monitoring committee; Guarantee compliance with the information and advertising obligations as per article 69 of the (EC) Regulation no. 1083/2006; Represent the Programme before the EU; Guarantee that the expenditures of each beneficiary participating in the operation have been validated by an auditor, in compliance with Article 16.1 of the (EC) Regulation no. 1080/2006; Agree on and sign the ERDF convention with the Lead Partner; Appoint the reference staff responsible for information and advertising and inform the Commission accordingly (art. 10 (EC) Regulation no. 1828/2006). With the aim of giving the CA the necessary information on the controls and checks of eligibility of the expenditures, with specific reference to letter b of art. 60 of the (EC) Regulation no. 1083/06, the MA shall obtain the following from the Maltese National Coordination Authority (hereinafter MNCA), in its capacity as the Administration that contributes to the implementation of the Programme within the Maltese territory: The validated expenditures as per art. 16 of the (EC) Regulation no. 1080/06; Communication on the non-eligible expenditures incurred by the Maltese beneficiaries and included in the first administrative or judicial report. The MNCA shall also inform the Programme Certifying and Audit Authorities (as per art. 28 of the (EC) Regulation 1828/2006 4). Collection of the amounts that have been unduly paid to the Maltese beneficiaries. If such collection is not possible, the unduly paid amount shall be refunded in accordance with the (EC) Regulation no. 1080/2006, article 17, paragraph Functions formally transferred by the Single Managing Authority The MA has not formally transferred any functions. As indicated in the previous paragraph 1.3, the OP is jointly carried out with the Republic of Malta. 2.2 Organisation of the Single Managing Authority Organisation chart and description of the unit func tions SINGLE MANAGING AUTHORITY (MA) In conformity with the OP Italy Malta , with the aim of guaranteeing the efficient, effective and full use of the resources of the European Regional Development Fund (ERDF) and the National Public Counterpart (NPC), the smooth Page 16 of 80

17 execution of the financial operations included in each Axis, the MA shall give information on the implementation methods and identify the most effective solutions to solve the operative criticalities, if any. This activity, and the programming, coordination and management activities, are performed through Service V for European Territorial Cooperation and Decentralised Development Cooperation. This Service performs the following functions with an integrated approach to the use of the regional, national and Community resources, with specific reference to the regional policy: Programming, coordination and management of the Operational Programme Italy-Malta ; Coordination of the closing activities of the Interreg programme Italy-Malta ; Preparation, update and implementation of the Single Programming Document and the other regional programming instruments. Within this Service, the Manager, in his capacity as person responsible for the Axes of the Italy-Malta Programme for , shall not only coordinate, program and manage the OP, but shall also collaborate with the Maltese National Coordination Authority and, upon request, may also act as President of the Steering Committee. In performing these functions, the Service is supported by the Joint Technical Secretariat and the Operative Areas/Units of the Regional Programming Department; they guarantee the execution of specific or cross-functional activities. The Base Operative Unit 2, within the same Service, is competent for the Axes I and II Operations. The following Operative Areas /Units of the Department are involved: Coordination, Communication, Technical Assistance Area General Affairs Area Technical IT Area First Level Control Offices Coordination Area The Coordination, Communication and Technical Assistance Area supports activities such as communication and reporting through the Partnership Forum Secretariat, together with the socio-economic and institutional partnership. General Affairs Area: Supports the Service in the administrative matters related to the implementation of the Programme and is also competent for the Axis III operations, as explained in detail here below. The Technical-IT Area manages the IT network and coordinates the Programme monitoring as the body responsible for the local IT system. On behalf of the MA, it also validates the Programme monitoring data and sends them to the national database of the NSF , managed by MEF-IGRUE, as and when agreed with the latter, which also sends them to the EU competent authorities. The First Level Control Offices Coordination Area assures: the direction and coordination of the check activities done by the auditors, the execution of the checks, by means of a sampling procedure, aimed to verify the quality of the work of the first level auditors. The managing and control activities described in article 58 of the EC regulation no. 1083/2006, in the implementing methods of the (EC) Regulation no. 1828/2006, and in art. 15 of the (EC) Regulation no. 1080/2006, are guaranteed by the single MA that is held accountable before the national and EU authorities, also for the management and control system. This activity is supported by an IT monitoring system that allows all the subjects participating in the process to enter the data and information on the operations they are responsible for. The MA guarantees that the operations are performed in accordance with the EU regulations and the implementing provisions and also undertakes corrective actions, if needed. Compliance with 5 of article 13 of the (EC) Regulation no. 1828/2006 and its subsequent amendments is guaranteed by keeping the following functions separate: selection procedure (UCO) and management control of the expenditure declarations (UC). More specifically: Office Competent for Operations (UCO): The AXES I and II UCO has been established within the Base Operative Unit 2 of the Service for the European Territorial Cooperation and Decentralised Development Cooperation, while Page 17 of 80

18 the AXIS III UCO has been established within the General Affairs Area of the Regional Programming Department. In both cases, the Office Manager, in agreement with the competent areas/units of the Department, in collaboration with the Axes Manager and with the help of the JTS, undertakes the relevant preliminary assessment and implementation procedures. The IT monitoring system is involved in all the operations and steps. Control Unit (CU): This office is headed by a Manager who is functionally independent from the UCO, who assures the direction and the coordination of the first level auditors check activities; verifying them by means of sampling procedures, aimed to verify the quality of the work of the first level auditors. AXES MANAGER (AM) The Programme Axes Manager (hereinafter AM) is the Manager of Service V and, within the axes and the relevant objectives, he/she is in charge of verifying the compatibility of the financial plan of each axis and the consistency with the requests for implementing the procedures, with the aim of activating the expenditure. The Axes Manager carries out the coordination and harmonisation activities, obtains the data, information and documentation for the monitoring of the procedure, the physical and financial progress of each financial transaction from the competent offices (UCO and CU), when and as defined by the MA, and prepares the execution reports paying special attention to the financial, physical and result indicators. The Manager also follows the trends of the Axis-specific objectives and, in agreement with the Maltese National Coordination Authority, recommends the initiatives that favour their implementation. More specifically, the AM: - Participates in the development of the executive programme of the axes and, if necessary, in reprogramming them; - Starts and coordinates the organisation of the calls for proposals in the framework of the OP axes; - Starts and coordinates the selection and approval of the Axis III operations (beneficiary MA), certifies the programme and financial consistency and finally certifies the performance; - Receives the list of validated expenditures, with the relevant performance declaration, for Axis III of the OP from the Maltese State and the expenditure and payment documentation and forwards them to UCO II for the subsequent activities; - Prepares the expenditure declaration for the whole Programme and submits it, through the MA, to the CA that will undertake the subsequent actions; - Submits the appropriate corrective actions, to solve the issues identified by the CA, to the MA; - In agreement with the UCO, and in line with the agreed-upon schedule and methods, prepares the expenditure forecasts and makes them available to the MA that will undertake the subsequent actions. The Manager of the Service for European Territorial Cooperation and Decentralised Development Cooperation, in his/her capacity as AM of the Programme, is supported by the Joint Technical Secretariat and his/her own staff. The staff is composed of the manager and two more units. OFFICE COMPETENT FOR OPERATIONS (UCO) Consistently with the guidelines provided by the MA through the AM, with the support of the JTS and in collaboration with the MA's areas/units, it participates in the implementation and management of the relevant Programme axes. More specifically: The UCO Axes I and II is identified with the Manager of the Base Operative Unit 2 (UOB2), within Service V for European Territorial Cooperation and Decentralised Development Cooperation- Programming Department; it carries out the following tasks: 1. Participates in the development of the executive programme of the Axes I and II and, if necessary, in reprogramming them; 2. participates in the preliminary assessment/selection process: Page 18 of 80

19 I. Ordinary Projects call procedure: a) as recommended by the PM, preparation of the calls for proposals to select the operations and sharing of the call for proposals with the Maltese National Coordination Authority; b) request for establishment and participation in the socio-economic and institutional partnership technical discussion through the Coordination, Communication and Technical Assistance Area; c) summoning of the SC for the approval of the call and the relevant documentation; d) collection of the project proposals and forwarding to the JTS that will check the formal eligibility criteria; e) preparation of the decree for the adoption of the final ranking list of the SC, containing the list of projects and the relevant financing eligibility requirements; the results of the assessment will be communicated to the LP together with the funding contract; f) preparation of the funding acceptance decree, commitment and payment of the initial amount, following the acquisition of the funding contract, the partners' agreement and the request for payment of 20% by the LP II Strategic Projects negotiated procedure: a) as recommended by the PM, preparation of the public procedure to "express interest" with the aim of acquiring "project ideas" for the development of one or more themes among those included in the strategic project and sharing with the Maltese National Coordination Authority; b) request for establishment and participation in the socio-economic and institutional partnership technical discussion through the Coordination, Communication and Technical Assistance Area; c) summoning of the SC for the approval of the call and the relevant documentation; f) collection of the project ideas that will be forwarded to the JTS for verification of the eligibility criteria ; g) the SC obtains the results of the eligibility check; h) the lead beneficiaries are informed on the results of the assessment of the project ideas and are asked to prepare the project proposals; f) collection of the project ideas that will be forwarded to the JTS for verification of the eligibility criteria ; e) preparation of the decree for the adoption of the final ranking list of the SC, containing the list of projects and the relevant financing eligibility requirements; the results of the assessment will be communicated to the LP together with the funding contract; f) preparation of the funding acceptance decree, commitment and payment of the initial amount, following the acquisition of the funding contract, the partners' agreement and the request for payment of 20% by the LP. 3. focus on the relation with the lead beneficiary (LP); 4. When and as agreed by the MA, it performs the procedural, physical and financial monitoring through the JTS, on the basis of the information made available by the LP and the Partner Beneficiaries, and enters the data in the IT monitoring system; 5. He/she receives from the Control Unit (hereinafter CU) the list of the expenditures verified by the LP and validated by the CU and the MNCA-TCU, for the operations or parts of operations performed by the Maltese beneficiaries; 6. After verifying the accuracy of the documentation accompanying the application for reimbursement submitted by the LP, he/she issues the payment requests to the LP on the basis of the funding and commitment decree registered by the Court of Auditors; 7. He/she receives information on the operations that have been fully or partially cancelled or discontinued following administrative or judicial proceedings and information on any anomalies and / or criticalities. If amounts have been collected, notice on the debit note or reimbursement request shall be sent to the General Affairs Area that will undertake the appropriate actions. If the amount is not reimbursed within the due date, the relevant information is sent to the European Antifraud Office and to the competent national and community Page 19 of 80

20 authorities, when and as agreed by the latter. He/she enters the data on this phase in the monitoring system and makes them available to the users. 8. When and as agreed, he/she writes down the expenditure declaration for the relevant axes (containing the information as per point below) and makes it available to the AM who will undertake the appropriate actions; 9. In agreement with the AM, and in line with the agreed-upon schedule and methods, he/she prepares the expenditure forecasts and makes them available to the MA and to the Maltese National Coordination Authority; 10. He/she responds to the MA observations, when and as agreed, and submits the corrective measures to be implemented in order to solve the issues to the MA, through the AM; 11. He/she prepares and follows the activities that fall within its field of competence, also based on the information provided by other subjects (Certifying Authority, Audit Authority, Control Unit); he/she also prepares the documentation containing the information as per Art. 15 of the Regulation no. 1828/2006 and its subsequent amendments; 12. He/she sends information to the AM, such as the physical accomplishment indicators, that are needed to draw up the execution reports as per art. 67 of the EC Regulation of the Council, no. 1083/2006 its subsequent amendments; 13. He/she enters the data in the monitoring system and makes the data available to the other authorised users. The Base Operative Unit 2 (UOB2) Manager UCO Axes I and II has two members of staff to support him/her. The UCO AXIS III has been established within the General Affairs Area of the Programming Department and performs the following tasks: 1. Participates in the preliminary assessment/selection process: I. Acquisition of assets and services through a tender procedure: a) It receives the request to start the activities from the AM; at the same time the programme and financial consistency are certified and the call for proposals to select the operations is prepared; b) it collects the offers and the documentation specified in the tender rules and forwards them to the committee in charge of assessing them, designated by the MA; c) the beneficiary is informed on the result of the assessment; the tender contract and the commitment document are drawn up. II) Acquisition of assets and transfer on a force-account basis a) it receives the request for intervention by the AM; the programme and financial consistency are simultaneously checked; b) preparation of the contract decree and request sent to the suppliers of goods/services; c) the offers, accompanied by the documentation specified in the request, are collected and assessed according to the request criteria; d) the final assignment document is prepared and published; the subject that has been awarded the contract and the other participants are informed on the results of the assessment; the contract and the commitment document are drawn up. 2. It receives the performance certificate from the AM. 3. The request for payment is issued according to the decree recorded by the Court of Auditors; 4. The financial operations within the affected axis are monitored from the procedural, physical and financial point of view; 5. The Control Unit (CU) receives the list of expenditures to be assessed and the list of the Maltese expenditures that have already been verified; Page 20 of 80

21 6. The UCO Axes I and II receives information on the operations that have been fully or partially cancelled or discontinued following administrative or judicial proceedings and information on any anomalies and / or criticalities; 7. When and as agreed, it writes down the expenditure declaration for the relevant axes (containing the information as per point below) and makes it available to the AM who will undertake the appropriate actions; 8. In agreement with the PM, and in line with the agreed-upon schedule and methods, it prepares the expenditure forecasts and makes them available, through the PM, to the MA and to the Maltese National Coordination Authority; 9. It responds to the MA observations, when and as agreed, and submits the corrective measures to be implemented in order to solve the issues to the MA, through the PM; 10. It prepares and follows the activities that fall within its field of competence, also based on the information provided by other subjects (CA, AA, CU); I also prepares the documentation containing the information as per Art. 15 of the Regulation no. 1828/2006 and its subsequent amendments; 11. It sends information to the PM, such as the physical accomplishment indicators, that are needed to draw up the execution reports as per art. 67 of the EC Regulation of the Council, no. 1083/2006 its subsequent amendments; 12. It enters the data in the monitoring system and makes the data available to the other authorised users. The UCO Axis III Manager has two members of staff to support him/her. CONTROL UNIT (CU) Subject to the approval of the UCO and the Maltese National Coordination Authority, it prepares the audit trails for each group of financial operations included in the Programme and sends them to the MA, through the PM. With reference to the financial operations in the framework of the Programme Axes I and II: - it appoints an auditor to each financed project, among the auditors acknowledged and listed in the proper Italia-Malta Programme long-list of auditors; - it assures the direction and the coordination of the first level auditors check activities; - it verifies the quality of the work of the first level auditors by means of sampling procedures; - it receives the application for reimbursement and the relevant documentation from the LP, verifies the conformity of the request and of the attached documents and makes the results of the checks available to the UCO I and II for its consequent tasks; - it prepares an annual plan for the quality controls that are carried out and supported by check-lists and reports. This activity will be locally performed at the auditors places in order to verify:. With reference to Axis III actions: - It receives from the UCO III the lists of the expenditures incurred in Italy and the certification of the provision of goods/services by the AM and performs 100% of the documentary and local checks, in agreement with article 16 of the EC Regulation no. 1080/2006, also thanks to the checklists attached to the first-level control manual prepared by the MA; - It receives from the UCO III the list of the expenditures validated by the Maltese State for the activities therein performed and checks the payments made by the UCO III; - It makes the control results (documentary and local) available to the UCO that will undertake the necessary actions. Upon completion of the first-level control activities on the operations of the Italian beneficiaries in the framework of the Axes I and II, it coordinates the activities and assessment methods of the auditors by means of local checks, with the Page 21 of 80

22 aim of ascertaining and verifying the quality of the work performed by the auditors. The control is performed and documented thanks to checklists and reports that will be made available to the users. The verification may require visits to the auditors with the aim of ascertaining the following: - Correct information flow between the auditors and the beneficiaries; - Implementation of the control tools (manuals, checklists, reports, etc.) that have been developed for all the Programme bodies; - Ongoing checks at the beneficiaries sites, according to the agreed-upon schedules and methods. It responds to the MA observations, when and as agreed, and submits the corrective measures to be implemented in order to solve the issues to the MA, through the AM; The UCO receives information and the documents needed to implement the document containing the information as per art. 15 of the Regulation no. 1828/2006 and its subsequent amendments for any financial transaction. It sends information to the AM, such as the physical accomplishment indicators, that are needed to draw up the execution reports as per art. 67 of the EC Regulation of the Council, no. 1083/2006; they will be forwarded to the MA as and when agreed by authority itself. It enters the data in the monitoring system and makes the data available to the other authorised users. The Control Unit manager has one member of staff and at least ten first-level auditors; in compliance with the national and community regulations in force, they shall be recruited from the internal staff of the regional administration. MALTESE NATIONAL COORDINATION AUTHORITY TERRITORIAL COOPERATION UNIT In line with the provisions of art. 16 of the EC Regulation no. 1080/2006 and its subsequent amendments, and also in conformity with the first-level control Manual and the annexes provided by the MA, the MNCA-TCU performs the documentary and local checks on the financial operations performed within the Maltese territory, in agreement with the expenditure reporting manual and the first-level control manual, prepared by the MA, and the relevant checklists. More specifically: - For the operations within Axes I and II, it validates the expenses incurred by the Maltese beneficiaries and verified by the auditors and communicates the results to the Maltese partner and lead beneficiaries; - For the operations within Axis III, it verifies the expenses incurred in the Maltese territory and forwards the reimbursement applications to the MA; - It makes the results of the controls (documentary and local) and the lists of expenditures validated by the MA available; - It obtains from the Maltese beneficiaries their counter-deductions to solve the issues identified during the controls; - It collects the amounts that have been unduly paid to the Maltese beneficiaries; - It communicates the anomalies included in the first administrative or judicial report to the Commission, the Managing Authority, the Certifying Authority and the programme Audit Authority (Art. 28, EC Regulation 1828/2006, paragraph 4); The MNCA - Territorial Cooperation Unit (TCU), following the documentary and local checks (100%) performed by the Auditors and in any case during the project lifecycle, shall perform on-the-spot checks by means of specific checklists. This control is aimed at verifying the quality of the checks carried out during the project lifecycle and in any case before the verification of the last accounting. MNCA - Territorial Cooperation Unit (TCU) is composed of a manager and two staff members. Page 22 of 80

23 Segretariato Tecnico Congiunto Organisation chart of the single Managing Authority Autorità di Gestione Servizio V per la Cooperazione Territoriale europea e per la Cooperazione decentrata allo Sviluppo Responsabile Assi I, II, III Area Coordinamento, Comunicazione, Assistenza Tecnica; Area Affari Generali; Area Tecnica Sistema informativo UCO ASSE I e II n. 1 Dirigente n. 2 unità di personale UCO ASSE III n. 1 Dirigente n. 2 unità di personale UC + Controllori n. 1 Dirigente n. 2 unità di personale Here follow the main tasks of the subjects involved in the management process and their function within the organisation. 2 Parties FUNCTIONS Programming Management Control Accounting/Payments PM UCO Axes I and II UCO Axis III CU+CE MA+cross-sectional areas MNCA Written procedures developed for the staff of the Singl e Managing Authority The procedures to be followed by the staff of the MA, the MNCA and the JTS in performing their tasks are described in the following forms, developed by the MA: - OP implementing manual (Annex 4) - First-level control manual (with annexes) (annex 5) Page 23 of 80

24 - Expenditure reporting manual (with annexes) (annex 6) A formal procedure is also in place to review the manuals, should changes occur or new procedures be added or old ones be removed, thus guaranteeing that the manuals are always up-to-date. The manuals are distributed to all the subjects involved in the implementation of the OP, including the external auditors, so that they can work in compliance with the norms in force in the member states and within the community and guarantee the consistency on the implemented control procedures Description of the operation selection and approval procedures and procedures aimed at guaranteeing conformity with the applicable national and community norms throughout the implementation period (art. 60, l etter a) of the EC Regulation no. 1083/2006 In accordance with the, the Steering Committee (hereinafter SC), as per chapter of the OP, is established as per art. 19 of the EC Regulation 1080/2006 within the Monitoring Committee, with the aim of selecting the projects, as a partnership body and to support the MA of the OP during the implementation process; it shall perform the following tasks: Propose the project selection criteria for final approval to the Monitoring Committee, with the support of the Joint Technical Secretariat; Develop the Programme implementation guide with the support of the Joint Technical Secretariat; together they define the submission, preliminary assessment and project monitoring methods and describe the project selection criteria; It selects the projects with the technical support of the JTS; It assesses and approves the proposed amendments to the approved projects; It is informed on the activities of the Managing, Certifying and Audit Authorities. The SC is composed as follows: A representative of the single MA; A representative of the Maltese National Coordination Authority; A representative of the Sicilian Environmental Authority, a representative of the Maltese Ministry of the Environment and the members of the Monitoring Committee; A representative for each member state in the field of equal opportunities. The internal rules of the SC regulate its activities as follows: Decisions are taken by consensus; Italian and English are both used; The Presidency functions are performed by the MA. The selection procedures may vary depending on the project types as per chapter 6.2 of the O.P.: ordinary and strategic projects. The two project types are selected on the basis of a notice of public works published by the single MA. In compliance with art of the EC Regulation 1828/2006, the MA shall specify in the notice of public works the requirements of the products or services that the applicants must meet within the operation framework, the funding plan, the deadline and the financial or any other data to be kept or communicated. The same information can also be found in the Funding contract that regulates the relations between the MA and the project LP. The selection procedure for the strategic projects is divided into two phases, while the ordinary projects only have one phase. In compliance with art. 19 of the EC Regulation 1080/2006, in selecting the operations the cross-border character will be taken into consideration, in accordance with the specific objectives of the Priority axes of the OP; moreover beneficiaries from Italy and Malta that will contribute to each operation in one of the following two ways will be included: Joint development, joint implementation, joint staff and joint financing. Page 24 of 80

25 The criteria to select the programme operations were adopted by the MC on 24 April 2009 (Annex 3) and have been described in the OP implementing Manual, chapter 3.2; the assessments and checks are performed according to the eligibility criteria, the consistency checks and the assessment of the project proposals. The cross-sectional assessment criteria for the equal opportunities policies and the project scores that promote the gender policies with a multiplier effect are described in the project selection notice. The OP identifies the project intervention areas for the environmental policies with the aim of following the recommendations provided during the Strategic Environmental Assessment of the OP with specific reference to the mitigation measures and the environmental selection criteria. The operations performed in these fields are given extra scores according to the objective-specific environmental selection criteria. The project proposal must be drawn up in accordance with the OP implementing manual, the norms detailed in the public notice for project submission and in line with the forms contained in the "project submission kit" (Annex 7). The project submission kit, for both ordinary and strategic projects, has been published in the public notice and is also available in Italian and English on the website of the It contains the following: Application form (Word and Excel) Guidelines for the applicants OP implementing manual Letter of intents and partner co-financing Letter of intents and lead partner co-financing Letter of intents of the Maltese private partner Letter of co-financing of the Maltese private partner Project proposal checklist De minimis regime declaration I. Public selection procedure based on a public notice, indicating the available budget, approved by the Programme Steering Committee. This procedure refers to the ordinary projects and is divided into the following phases: PHASE 1: The public MA issues a public notice, a "call for proposals", aimed at obtaining "project proposals" for the development of one or more themes among the ones included in the axes of the operational programme. The notice specifies that the project proposal and its general and specific objectives must be accurately described in the Application Form; the lead partner, the partners, the main project activities and actions, the affected geographic areas, the outputs and the final results must also be indicated. The public notice also indicates the budget and the minimum score that a project should have in order to be included in the final ranking list. The application form is accompanied by the guideline for applicants. PHASE 2: The MA collects the project ideas that will be forwarded to the JTS for verification of the eligibility criteria ; The JTS submits a list of the project proposals to the SC; they must be: Acceptable to move to the next assessment phase; Eligible, subject to the provision of additional documentation, as defined in the public notice; Not acceptable for the next assessment phase and the necessary explanations must be provided. The JTS will then assess the accepted project proposals according to the consistency criteria and the assessment of the project proposal"; the SC will receive a ranking list accompanied by the "technical assessment report" and the list of proposals divided by priority of intervention. PHASE 3: The SC checks the ranking list proposed by the JTS and communicates the final ranking list to the MA, together with the "technical assessment report", containing the project list and the eligibility for funding according to the following definitions: Project eligible for funding; Project eligible for funding, subject to conditions; Page 25 of 80

26 Project eligible, but not funded; Project rejected and not accepted. The MA finalizes the process and communicates the results of the assessment to the lead partners who are also requested to implement the approved operations. II. Negotiated procedure for the selection, identification and approval of the strategic projects; the MA and the applicants interact to program, negotiate and improve the contents of the project proposal with the help of a team of external experts, if needed3. This procedure refers to the strategic projects and is divided into the following phases: PHASE 1: The MA starts a public procedure to express its direct "interest" in obtaining "project ideas" for the development of one or more themes among those included in the strategic project. Such interest implies that a project idea is described in a project idea sheet, together with the general and specific objectives, the lead partners and the project partners, the main work activities, the affected geographic areas, the outputs and final results. The project idea sheet is accompanied by the guideline for applicants. PHASE 2: The MA collects the project ideas that will be forwarded to the JTS for verification of the eligibility criteria. The JTS will submit a list of project ideas with the following features to the Steering Committee: Eligible for the following phase and the development of a project proposal; Eligible for the following phase, subject to submission of a (formal) integration, as defined in the public notice; Not eligible, due to deficiencies in the formal acceptability and eligibility criteria and / or inconsistencies in the specific programme objectives. PHASE 3: The SC verifies the list of the projects that the JTS has declared eligible and informs the MA on the results of the eligibility check. The MA communicates the results to the lead partners of the projects and, in line with the schedule indicated in the public notice, the MA asks the lead partners to submit the requested integrations (negotiating phase - if necessary some external experts are involved) and prepare the final project proposal using the Application form accompanied by the Guideline for applicants, which contains the accurate description of the general and specific objectives, the lead partner and the project partners, the main project activities and actions, the affected geographic areas, the outputs and the final results. PHASE 4: The MA collects the project ideas that will be forwarded to the JTS for verification of the eligibility criteria. The JTS submits a list of the project proposals to the SC; they must be: Acceptable to move to the next assessment phase; Eligible, subject to the provision of additional documentation, as defined in the public notice; Not acceptable for the assessment phase and the necessary explanations must be provided. The JTS shall assess the eligible project proposals according to the consistency check and the assessment of the project proposal and submit a proposed ranking list, accompanied by the final technical assessment report to the SC. PHASE 5: The SC checks the ranking list proposed by the JTS and communicates the final ranking list to the MA, together with the "technical assessment report", containing the project list and the eligibility for funding according to the following definitions: Project eligible for funding; Project eligible for funding, subject to conditions; Project eligible, but not funded; Project rejected. The MA shall communicate the assessment results to the lead partners. The date of the notice of eligibility for funding of the submitted project is the formal start of the project activities, in line with the last Application Form validated by the MA of the OP. Within two months from the notice of project eligibility for funding, the lead partners and the project partners shall sign the following: Page 26 of 80

27 A grant contract that regulates the relations between the MA and the project lead partner(hereinafter LP), describes the methods for payment of the ERDF contribution and the lead partner obligations concerning the activities, control and advertising of the operation (Annex 8); Agreement between the partners that regulates the relations between the lead partners and all the partners involved in the implementation of the operation; it defines the methods for payment of the ERDF fund (including 20% advance payment of ERDF resources) and the obligation of each partner concerning the activities, control and advertising of the operation (Annex 9). Within the set deadline, the LP submits the request for payment of 20% of the ERDF contribution to the MA and provides the bank data for the transfer. The MA guarantees that all 20% payments are made, up to 80% of the budget granted to each beneficiary (partners and lead partner). Once the 80% threshold has been exceeded for the project eligible for funding, only reimbursements shall be made. In the framework of the implementation of the programme management and control system, the MA shall ask the LP and the project beneficiaries the administrative, financial, technical and physical data for the implemented financial operations, thus monitoring them Check operations (art. 60, letter b) of EC regulation no. 1083/2006 and subsequent amendments thereof In compliance with art of the EC Regulation 1080/2006, the MA performs the tasks as per article 60 of the EC Regulation no. 1083/2006, with the exception of those concerning the acceptability of the operations and expenditures according to the national and community rules, as defined under letter b) of the same article. In line with the above and the provisions of art. 16 of the (EC) Regulation 1080/2006 and subsequent amendments thereof, the expenses incurred by the partner and lead beneficiaries for each operation must be recorded in the checklists prepared by the MA, to be then validated by the auditors. This control, known as first-level control, is intended to ascertain that the products and services have been actually provided, that the expenses reported by the beneficiaries are related to the approved projects and that the expenses comply with the regional national and community norms. With reference to Italy, in line with the document General characteristics of the national control system for the programmes of the European Territorial Cooperation Objective MEF - IGRUE June 2008, the CU shall designate an auditor for each project approved within the. The auditors, at least a team of 10, can also be chosen by the MA from the staff of the regional administration, according to the expenditure reporting manual and the first-level control manual (with its checklists). They shall audit the expenditures for the operations performed by the participating Italian beneficiaries. The auditor shall check the work, the date, the results of the check and the measures that have been undertaken to overcome any anomalies. These checks are duly signed by the auditor. The auditors are designated in a way that guarantees their independence from any beneficiary. The MA has developed a statement of independence, attached to the first-level control manual (Annex 5), to be signed by each auditor. For Malta, the project partners and lead partners shall select an auditor from the list made available by the MNCA that checks the expenditures associated with the part of the operations performed by the participating Maltese beneficiary. The checks are carried out in accordance with the Expenditure Reporting Manual and the First-level control manual developed by the MA and are documented in the checklists to be duly signed by the auditor upon completion of the checks. The project and / or lead partners shall send the expenditure lists and the signed checklists to the MNCA to have them validated in accordance with article 16 of the EC Regulation 1080/2006 and its subsequent amendments Handling of reimbursement applications The MA guarantees that the information that the single AA needs to perform its tasks and the activities specified in the EU regulations is provided. The MA shall collect the expenditure reports and the relevant validation certificates, sent by the LP, together with the requested documentation, specified in the Expenditure Reporting Manual, and shall collect the eligible expenditure declarations and the relevant attachments by priority axis and eventually send them to the CA. Here follows the detailed procedure on how to handle the reimbursement applications and the payment to the beneficiaries, in accordance with article 22, letter d) of the EC Regulation no. 1828/2006: Page 27 of 80

28 The project partners send the expense documentation to the first-level auditors; The first-level auditors perform the documentary and on-site checks, as per article 16 of the EC Regulation no. 1080/2006; The project partners send the expenditure validation certificate, issued by the first-level auditor, to the lead partner; The lead partner checks the expenses listed by each beneficiary and prepares the reimbursement application to be sent to the MA in compliance with art. 20, letter d) of the EC Regulation no. 1080/2006. The application includes: the expense validation certificate, the list of eligible expenditures, as confirmed by the first-level auditor, the project progress report, the technical-administrative report and the final technical-administrative report. The lead partner verifies the procedure, physical and financial progress data of the whole financial operation, as sent by each beneficiary, and forwards them to the MA. The MA verifies that the expenses of all beneficiaries have been validated by the auditors, prepares the expenditure declarations and the relevant validation certificates by axis and sends them to the single CA; The CA performs the checks as per article 61 of the EC Regulation no. 1083/2006 and article 17 of the EC Regulation no. 1080/2006 and draws up the expense certification and the applications for payment to be submitted to the European Commission through the Italian Ministry of Economic and Financial Affairs (IGRUE). A copy of the applications for payment and the list of projects is sent to the MNCA. Once the application for payment has been acknowledged as acceptable for the EC, the financial flows can be started, as described in chapter 6.4 of the OP, article 82 of the EC Council Regulation no. 1083/2006; the Commission can pay the pre-financing amount, once the decision approving the contribution of the Funds to the Programme has been approved. The subsequent payments of the Commission are activated by the applications for payment submitted by the CA. The European Commission transfers the ERDF funds to the Italian Ministry of Economic and Financial Affairs on the current account no of the central state Treasury. The Italian Ministry of Economic and Financial Affairs (MEF IGRUE) transfers the ERDF funds and the Italian national funds to the Sicilian Region, Regional Unit for Balance and Finances, Balance and Treasury Department, as the regional unit in charge of making the payments, by transferring them to the current account no , Central Treasury, in the name of Sicilian Region EEC Resources National Co-financing. The office shall manage the financial resources assigned to the OP according to the community, national and regional administrative and accounting norms and to the good financial management criteria. The single CA communicates the transfer of the ERDF funds and the relevant national public counterparty (CPN) to the single MA, which shall prepare the ERDF resource allocation for each operation. The MA transfers the ERDF and CPN funds to the Italian lead partner, the ERDF funds only to the Maltese lead partner and the CPN alone to the Italian project partners participating in the financial operations that have a Maltese lead partner. The procedure that regulates the accounting activities of the Sicilian Region also manages the ERDF contribution and the financial flows resulting from the community programme. The LP transfers the ERD funds and the national quota to the Italian project partners, according to the partnership agreement and the reimbursement applications submitted by them. The MA verifies the cash availability and pays the ERDF amount before being reimbursed by the EC. The MA pays 20% of the ERDF amount assigned to the project and based on the partner budget, so that the expenses can be anticipated. Upon receipt of this downpayment, the lead partner shall wire transfer the amount to the partner as soon as possible and evidence of it shall be given to the MA. The transfer of additional 20% downpayments, up to max. 80% of each project or lead partner, is subject to an expense declaration equal to or higher than the downpayment that has already been received. Following the adoption of the new version of the "SI-GTS - Sistema informativo per la gestione dei titoli di spesa " which introduces the new application "Ordini di accreditamento", only for the strategic projects which Page 28 of 80

29 have a regional Department as lead partner, the Department of Planning, Managing Authority of the Programme, provides to issue the payment orders to the partners directly, after the request of the lead partner. The amounts (downpayments and / or reimbursements) are transferred by the lead partner to the project partners on the basis of a direct payment request; the funds are taken from the project account and, in line with art. 80 of the EC Regulation no / 2006, the payments is ordered by the MA within one month from the receipt of the ERDF and the CPN, for the Italian partners. This subject matter is regulated by the agreement between partners (Annex 9) signed by the project and the lead partners; according to the agreement, 20% is paid to each project partner that sends an activity start declaration to the project partner. The main steps of the application handling procedures are shown in the following diagram: Page 29 of 80

30 Page 30 of 80

31 2.2.6 Description of the procedure followed by the single Managing Authority to send the information to the single Certifying Authority In compliance with art letter g) of the (EC) Regulation no. 1083/2006, the Managing Authority guarantees that the information that the Certifying Authority needs to perform its tasks and the activities in accordance with the community regulations is given. Upon receipt of the expenditure declaration, the Managing Authority makes sure that the expenses of each beneficiary have been validated by the auditors, collects the expenditure declaration and the relevant validation certificates by priority axes and sends the documentation to the Certifying Authority Eligibility norms defined by a member state and applicable to the operative programme In compliance with art. 56, point 4 of the EC Regulation no. 1083/2006 and subsequent amendments, in accordance with articles 7 and 13 of the EC Regulation no. 1080/2006, the expense eligibility norms are defined at national level. Through the Decree of the President of the Republic no. 196 dated 3 October 2008 (Italian Official Gazette no. 294 dated 17 December 2008), Italy has approved the execution Regulation of the EC Regulation no. 1083/2006, containing the general provisions on the ERDF, the ESF and the Cohesion Fund. With reference to the Italy-Malta cross-border cooperation programme for , the eligible expenses are specified under chapter 5 Eligibility of expenses of the OP implementing manual that is aimed at guaranteeing compliance with article 13 of the EC Regulation no. 1080/2006 and the consistency of the expenses eligible in the two countries. In conformity with article 56 of the EC Regulation no. 1083/2006, the eligibility of the expenses incurred within the programme is effective as of 1 January 2007 and ends on 31 December The eligibility of the project expenses starts on the date of the project selection call publication. With reference to the expenses being reported (documentation giving evidence of the expenses and payment) and the expense activation method (e.g. authorisations, declarations, signed sheets, contracts, deeds, service orders, etc.), the Expenditure Reporting Manual for the Italy Malta OP has been adopted. As for the prohibition to have multiple community contributions and funds for the same operation, the Managing Authority has decided that the following wording must be stamped on the original expenditure documentation submitted by the beneficiaries: Expense incurred in the framework of the Project code no. Italy Malta OP , authorised for the total amount of. or for the amount of.. Reported on. The following reference norms shall be used for the Republic of Malta: Territorial Cooperation Programmes Publicity Requirements and Guidelines for Maltese Project Partner Subsistence allowance Circular (MFEI Circular No 1/2008) 1 ; National Strategic Reference Framework (Malta); Voluntary Organisations Act, Chapter 492 of the Laws of Malta. 1 The Subsistence Allowance circular (last edition No. 1/2008 {as modified by circular letter MFEI No. 6/2009}) defines the daily amount to be paid to the Maltese officers for their missions abroad. Page 31 of 80

32 2.3 If the same authority is designated as single Managing Authority and Certifying Authority, describe how the functions are maintained separate Not applicable 2.4 Public tenders, state aids, equal opportunities, environmental norms Instructions and guidelines on the applicable norms With reference to the eligibility of the expenses for the Italy-Malta cross-border cooperation programme , the following specific norms have been referred to in the fields of public tenders, state aids, environment and equal opportunities. Norms on public tenders Community Norms Directive 2004/18/EC of 31 March 2004 dealing with the coordination of the procedures to grant public contracts for work, supply and services. Interpretation communication of the European Commission dealing with the community law applicable to contracts, which are not or are only partially regulated by the directives on public tenders no. 2006/C 179/02 published in the Official Gazette of the European Community of Italian national legislation Legislative decree no. 163 of 12 April 2006 Code on public contracts for work, supplies and services ; Law no. 248 of 4 August 2006 (converting the Legislative Decree 223/2006). Maltese national norms Public Contracts Regulations (Legal Notice 177 of 2005)2 Public Procurement of entities operating in the water, energy, transport and postal services sectors regulations (Subsidiary Legislation ). Norms on state aids Community Norms EC Regulation of the Commission no of 15 December 2006, dealing with the implementation of articles 88 and 89 of the EC Treaty on the de minimis regime (Official Gazette L 379 of 28 December 2006); EC Regulation no / 2007 of the Commission, dated 20 December 2007, dealing with the implementation of articles 87 and 88 of the EC Treaty on the de minimis regime applied to agricultural produce (Official Gazette L 337 of 21December 2007); 2 Norm on public contracts (Law No. 177 of 2005 {as amended by Law No. 382/2005, Law No. 11 and 130 of 2006 and Law No. 57, 238, 308 and 395 of 2007} and Law no. 178 of 2005). Page 32 of 80

33 EC Regulation no. 875 / 2007 of the Commission, dated , dealing with the implementation of articles 87 and 88 of the EC Treaty on the de minimis regime applied to fishery, as amended by the EC Regulation no. 1860/2004 (Official Gazette L 193 of 25/07/2007); EC Regulation no. 800/2008 of the Commission, of 6 August 2008, specifying some aid categories compatible with the common market, as per articles 87 and 8 of the Treaty (general regulation of exemption per category) (Official Gazette L 214 of 11/08/2008); Guidelines on state aids for regional purposes, (Official Gazette C 54 of 4 March 2006); Community regulation on state aids in the field of research development and innovation (Official Gazette C 323 of 30 December 2006); Community norms on state aids for environmental protection (Official Gazette C82 of 1/04/2008); Guidelines on state aids in agriculture and forestry (Official gazette C 319 of 27/12/2006); EC Regulation no. 1857/2006 of the Commission, of 15 December 2006, dealing with the implementation of articles 87 and 88 of the Treaty on state aids to the benefit of the SME s in the agricultural sector, as amended by the EC Regulation no. 70/2001 (Official Gazette L 358 dated 16 December 2006); Guidelines for the assessment of the state aids to fishing and aquaculture (Official Gazette C 84 of 3/04/2008); EC Regulation no. 736/2008 of the Commission, of , dealing with the implementation of articles 87 and 88 of the Treaty on state aids to the benefit of the SME s in the fish production, processing and marketing sector (L 201 dated ). Italian national legislation Legislative Decree no. 123/1998 containing the provisions for the optimisation of the public support to the enterprises, as per art. 4, par. 4, letter c) of the Law no. 59 of 15 March Maltese national norms Community Framework for State Aid for Research and Development and Innovation; De Minimis Regulation (Regulation (EC) No 1998/2006); Guidelines on National Regional Aid for (2006/C 54/08); Guidelines on National Regional Aid (98/C 74/06). Norms on equal opportunities Community Norms Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: A time schedule for equal opportunities between men and women, Italian national legislation Operative indications of the department for equal opportunities to include the gender dimension in the ex-ante evaluation of the operative programmes for the programming period (July 2006); Page 33 of 80

34 Guidelines Implementation of the principal of equal opportunities for men and women and assessment of the equal opportunities for both genders on the operative programme - Structural funds , development by the Department for Equal Opportunities (June 1999); Official document of the Workshop Equal Opportunities developed by the Department for Equal Opportunities in collaboration with the central administration of the Lead partners (Ministry of Economic and Financial Affairs, Department for Development and Cohesion Policies, Ministry for Welfare and Social Policies (3 November 2005). Maltese national norms Legislation falling within NCPE s remit: Chapter 456, Equality for Men and Women Act, Legal Notice 85/2007, Equal Treatment of Persons Order and Legal Notice 181/2008, Access to Goods and Services and their Supply (Equal Treatment) Regulations; OPM Circular No 24/2000 delineating the importance of gender mainstreaming. Environmental Norms Community Norms Directive 2008/1/EC of 15 January 2008 on the integrate pollution prevention and containment, repealing the Directive 96/61/EC, without prejudice to the obligations on translation into the national system of the member states; Directive 2003/105/EC of the 16 December 2003 Text coordinated with Directive 96/82/EC EP and Council Directive amending Directive 96/82/EC, dealing with the control of potential accidents caused by dangerous substances; Directive 2004/8/EC of the EP and Council of 11 February 2004, on the promotion of cogeneration based on heat demand in the domestic energy market, amending directive 92/42/EC; Directive 2003/30/EC, Directive of EP and Council of 8 May 2003 on the promotion of bio-fuels or other renewable fuels in the transportation sector; Directive 2003/87/EC of EP and Council of 13 October 2003 dealing with the establishment of a system for the exchange of greenhouse gas quotas in the Community, amending the Council Directive 96/61/CE; Directive 2003/105/EC of the 16 December 2003 Text coordinated with Directive 96/82/EC EP and Council Directive amending Directive 96/82/EC, dealing with the control of potential accidents caused by dangerous substances; Directive 2002/91/CE; Directive of EP and Council of 16 December 2002, on energy efficiency in buildings; Directive 2000/60/EC of 23 October 2000, establishment of a framework for community actions in the water sector; Directive 2001/77/EC, Directive of EP and Council of 27 September 2001, on the promotion of the energy obtained from renewable energy sources in the domestic energy market. Page 34 of 80

35 Italian national legislation Legislative Decree of , 4 additional corrective provisions amending the Legislative Decree of 3 April 2006, no. 152, containing environmental norms; Legislative Decree of 8 February 2007, no. 20, implementation of Directive 2004/8/Ce on the promotion of cogeneration, based on the heat demand within the internal energy market; Legislative Decree of 29 December 2006, no. 311, Corrective provisions amending the legislative decree no. 192 of 19 August 2005, implementing the directive 2002/91/EC, concerning the energy efficiency in the building sector; Legislative Decree of 08/11/2006, no. 284, Additional corrective provisions amending the Legislative Decree of 3 April 2006, no. 152, containing environmental norms ; Legislative Decree no. 152 of 3 April 2006 and subsequent amendments thereof; Environmental Norms; Legislative Decree no. 238 of 21 September 2005, Implementation of Directive 2003/105/EC, amending the Directive 96/82/EC, dealing with significant accidents caused by hazardous substances; Legislative Decree no. 192 of 19 August 2005, Implementation of Directive 2002/91/EC on energy efficiency in the building sector and subsequent amendments thereof; Legislative Decree no. 128 of 30 May 2005, Implementation of Directive 2003/30/EC concerning the promotion of bio-fuels and other renewable fuels in the field of transportation; Legislative Decree of 18 February 2005, full implementation of Directive 96/61/EC dealing with pollution prevention and reduction; Law no. 239 of 23 August 2004, Reorganisation of the energy sector and powers given to Government for the reorganisation of the energy norms in force; Legislative Decree no. 387 of 29 December 2003, Implementation of Directive 2001/77/EC dealing with the promotion of electricity obtained from renewable energy sources in the domestic energy market; Legislative Decree no. 351 of 4 August 1999, implementation of Directive 96/62/EC, concerning the assessment and management of the environmental air quality. Maltese national norms G.N of 2009 Malta Environment and Planning Authority - Re-appointment of Natural Heritage Panel; L.N. 368 of 2009 Development Planning Act (Cap. 356) - Commencement Notice for the Infrastructure for Spatial Information Regulations, 2009; L.N. 382 of 2009 Environment Protection Act (Cap. 435) - Deposit of Waste and Rubble (Fees) (Amendment) Regulations, 2009; G.N of 2009 Development Planning Act (Cap. 356) - Scheduling of Property - Property formerly included in the Antiquities List of 1932 (1939 as revised); G.N. 83 of 2009 Malta Environment and Planning Authority - Appointment of Registration and Review Board L.N. 30 of 2009 Environment Protection Act (Cap. 435) - Conservation of Wild Birds (Amendment) Regulations, 2009; Page 35 of 80

36 G.N. 69 of 2009 Environment Protection Act (Cap. 435) - Strategic Environment Assessment Audit Team notifications - Draft Waste Management Strategy - Grand Harbour Vision; G.N. 49 of 2009 Malta Environment and Planning Authority - Cultural Heritage Panel; L.N. 22 of 2009 Environment Protection Act (Cap. 435) Occupational Health and Safety Authority Act (Cap. 424) - Waste Management (Management of Waste from Extractive Industries and Backfilling) Regulations, 2009; G.N. 37 of 2009 Malta Environment and Planning Authority - Application that requires an Environment Impact Assessment [PA 06331/06]; G.N. 24 of 2009 Waste Management (Supervision and Control of Shipments of Radioactive Waste and Spent Fuel) Regulations, 2009; G.N. 6 of 2009 Malta Environment and Planning Authority - Application that requires an Environment Impact Assessment [PA 00167/07 and PA 00168/08] Provision to guarantee compliance with the applicable norms, e.g. controls on management, checks, audits Compliance with the community, national and regional norms in force (if applicable) is guaranteed by imposing specific obligations to the project and lead partners in the funding contracts and agreements between the partners, in the text of the public tenders for the submission of project proposals and by referring to the specific provisions contained in the Expenditure Reporting Manual. The Managing Authority of the Italy-Malta OP requires from all the beneficiaries of the ERDF funds full compliance with the community, national and regional norms listed above and concerning public tenders, state aids, equal opportunities and environmental norms, as a prerequisite to obtain the funds and for the eligibility of the expenses. In the framework of the first-level controls described in section 3, special checks are carried out to guarantee compliance with the applicable norms, with specific reference to the provisions on state aids, tenders, equal opportunities and the environment. The checklists and forms used for first-level controls, either documentary or on site, are implemented thanks to specific sections on these subjects so that accurate controls can be carried out. 2.5 Audit trail Application of the provisions of art. 15 of the EC Regulation no. 1828/2006 to the programme and / or the priorities In conformity with the targets identified in article 15 of the EC Regulation no. 1828/2006, the MA develops some audit trail models, which have been attached to this document (Annex 10), based on the standard schemes defined in the guidelines and concerning the management and control systems for the programming period , as developed by IGRUE. These trails are sent to the lead partner together with the indications on how to fill them in; they describe the common procedures that guarantee the consistent implementation of the requirements as per art. 15 of the EC Regulation no. 1828/2006. The audit trail describes the following procedure phases: Page 36 of 80

37 PROGRAMMING: This section of the audit trail is common to all the projects funded by the OP and describes the activities that have led to the identification, approval and amendment of the programme and to the approval of the operation selection criteria. PRELIMINARY SURVEY: This part of the audit trail describes the methods that have been implemented to start the activities (tenders, calls or others), the operation selection procedures, the assessment activities for eligibility and the actual decision on eligibility. PHYSICAL AND FINANCIAL IMPLEMENTATION OF THE OPERATIONS: This section of the audit trail highlights all the tasks associated with the accomplishment of the funded projects. Information is given on the management and control methods, on how to finalise the contracts and pay the contributions and the control procedures to be performed on site, in line with the control method implemented by the single MA. REPORTING, EXPENSE CERTIFICATION AND FINANCIAL CIRCUIT: This section describes the expense certification procedures required by the European Commission and the financial flows between the single Certifying Authority and the European Commission. Moreover a description of the reporting of the eligible costs incurred by the beneficiaries and payment of contributions is also provided. With reference to the requirements of art. 15 of the EC Regulation no. 1828/2006, they are guaranteed by the Managing Authority and by all the subjects involved in the implementation of the Programme, as described below. Requirements to be guaranteed for an appropriate audit trail (art. 15 CE Regulation no. 1828/2006) The global amounts certified by the European Commission must be compared with the detailed accounting documents and the evidence maintained by the Certifying Authority, the Managing Authority and the beneficiaries, for the operations co-financed in the framework of the OP Procedures to be indicated in the audit trail to guarantee the requirements as per art. 15 CE Regulation no. 1828/2006 The audit trail indicates the main reference documents for each procedure phase (e.g. financing and ranking list documents, etc.) In line with the number of operations associated with the audit trail, the reference to the payment deeds can also be included, so that the amounts certified to the EC can be reconciled with the individual operations. For those activities that are expected to have several operations financed, this requirements is guaranteed, within the audit trail, by referring to the programme monitoring system providing significant information on any project. Payment of public contribution to the beneficiary Verification of the implementation of the selection criteria defined by the Monitoring Committee for the Operative Programme. For each operation include, as appropriate, the technical specifications and the financing plan, the documents on funding approval, the documentation on the procedure to assign contracts based on public tenders, progress reports and audit reports. The audit trail indicates the number and date of the payment orders, issued to the benefit of the lead partner for the payment of the community contribution and of the project partners for payment of the national co-financing; it also specifies the data for the wire transfer of the ERDF from the lead partner to the project partners. The procedure describing the audit trails contains the methods that have led to the approval of the criteria (e.g. written procedure, monitoring committee) and also the definition of the tenders/calls for proposals to be undertaken for the implementation of the activities of the Operative Programme, based on a case-by-case evaluation of consistency with these criteria. The audit trail also describes the activities of the preliminary survey/control performed on the operations to be financed. The preliminary survey activity is described in the evaluation reports. The audit trail also indicates the location of the archives of each project, where the project - related documentation can be found Instructions to the beneficiaries on how to maintain the evidence documents The MA identifies the methods to guarantee that the document archive for each activity/operation complies with the requirements of the regulation, with specific reference to art. 19 of the EC Regulation no. 1828/2006. Proper archiving Page 37 of 80

38 of the documentation and the identification of the place where the documents are located, in the framework of the audit trails, guarantee compliance with art. 15 of the EC Regulation no. 1828/2006 Instructions on how the beneficiaries should maintain the evidence documents are contained in the ERDF allocation agreement and in the agreement between the partner, in conformity with article 19 of the EC Regulation no. 1828/2006, which also specifies the document format. The above-mentioned contracts also indicate for how long the documents should be maintained after the end of the operation, in conformity with article 90, 1, letters a) and b) of the EC Regulation no. 1083/2006 With reference to the maintenance methods, in conformity with art of the EC Regulation no. 1083/2006, the originals and the notarised copied of the documents shall be maintained using standard media. Art of the EC Regulation no. 1828/2006 clarifies that standard media are: Photocopies of original documents; Microcards of original documents; Electronic version of original documents; Documents available only electronically. Without prejudice to any other provisions, the beneficiaries shall maintain the original documentation giving evidence of the expenses or copies that have been notarised in agreement with the EU legislation. The beneficiaries shall provide abstracts or copies of the documentation to the bodies entitled to them, such as the MA, the CA, the AA and all the officers authorised by the Central Administration and by the European Commission and their authorised representatives. The OP authorities shall maintain the originals, if possible, of the following: Documentation on the selection of the operations; Refund applications and relevant attachments; Expense validation certificates and duly signed checklists on the first-level controls; Documentation confirming payment of the public contribution. These documents must be maintained in accordance with the requirements for the management of the protocol and the archive maintenance. With the aim of guaranteeing the availability of the documentation, the MA keeps into consideration the provisions of art of the EC Regulation no. 1828/2006: Where documents exist in electronic version only, the computer systems used must meet accepted security standards that ensure that the documents held comply with national legal requirements and can be relied on for audit purposes. In any case, the MA and the AA shall guarantee full access to the documentation confirming the incurred expenses. 2.6 Anomalies and collection of undue amounts Instructions on how to report and correct the irregul arities, record debts and collect undue payments»here follows the reference regulatory framework on the abnormalities: «EC Regulation 1083/2006, article 2, paragraph 7, that defines the irregularity as any infringement of a provision of Community law resulting from an act or omission by an economic operator which has, or would have, the effect of prejudicing the general budget of the European Union by charging an unjustified item of expenditure to the general Page 38 of 80

39 budget". EC Regulations 1083/2006 article 70 and 1828/2006 articles 27-36, which specify that the member states are responsible for preventing, identifying and correcting the irregularities, collecting any undue amounts, including interests on arrears, and reporting them to the Commission that will also be kept informed on how the administrative and legal proceedings are going. EC Commission Regulation no. 1828/2006 dated 8 December 2006, defining the implementation of the EC Council Regulation no. 1083/2006, containing the provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the EC Parliament and Council Regulation no. 1080/2006 dealing with the European Regional Development Fund. EC Regulation no. 1681/1994, as amended by the EC Regulation no. 2035/05 concerning irregularities and collection of unduly paid amounts in the framework of funding to the structural policies and the organisation of an IT system in the field. Agreement between State Government, Regions, Autonomous Provinces, Municipalities and mountain Municipalities on how to communicate frauds and irregularities with the European Commission, signed by the Unified Conference on 20 September Circular letter of the Presidency of the Council of Ministers, Department for European policies, dated 12 October 2007 and published in the Official Gazette no. 240 of 15 October Document General characteristics of the Italian system; control of the programmes of the European territorial cooperation objective, (IGRUE Protocol of ) Procedure on compliance with the obligation to report irregularities to the Commission, as per article 28 The regional administration, through its bodies participating in the implementation of the OP, aims at preventing, identifying and correcting the irregularities and collecting any unduly paid amounts, as per art. 70 of the EC Regulation 1083/2006 and the implementation methods adopted by the Commission. The Managing Authority of the Operative Programme is the regional body in charge of collecting information on irregularities from all the offices, both Italian and Maltese, and communicating them to the Commission through the competent central administration. More specifically, the bodies responsible for identifying the irregularities (the first-level auditors, as per art. 16 of the EC Regulation no. 1080/2006, the Audit Authority, the Certifying Authority, etc.) report on the results of the controls to the Managing Authority, upon completion of the checks. Within a fully computerised system, information is given in writing and is accompanied, if any irregularities have been identified, by an irregularity report and the relevant OLAF sheet. In conformity with article 28, paragraph 4 of the EC Regulation no. 1828/2006, any irregularities associated with the expenses incurred by a Maltese beneficiary are communicated to the Maltese National Coordination Authority. In this framework, the Managing Authority shall also check whether the reported cases are included in the derogations as per art of the EC Regulation no. 1828/2006 or whether they are below the threshold as per art. 36 of the EC Regulation no. 1828/2006 If the MA confirms the infringement of one of the above-listed Community or National norm, the irregularity that has undergone the first administrative or legal verification, is electronically communicated to the Presidency of the Council of Minister - Department for Coordination of the Community Policies, which will then forward it to the European Commission within the due date, i.e. within two months after the end of each quarter. This communication also contains information as per art of the EC Regulation no. 1828/2006 If the information as per art of the EC Regulation no. 1828/2006, with specific reference to the information on the procedures that have led to the irregularity and its identification, is not available, the Managing Authority shall provide the missing data, if possible, with the quarterly reports on the irregularities submitted to the Commission. Page 39 of 80

40 The quarterly communication on the irregularities is given even if the content is negative. As per art. 29 of the EC Regulation no. 1828/2006, the regional Administration shall immediately report any confirmed or alleged irregularities to the Commission and, if necessary, to the affected Member States if these irregularities may have rapid repercussions out of the territory or if unfair practices have been resorted to. The Managing Authority informs the bodies that have sent the document or information on the result of the decisions, with the aim of improving the control activity. Within two months from the end of each quarter, the Managing Authority, in conformity with art. 30 of the EC Regulation no. 1828/2006, through the Presidency of the Council of Ministers- Department for Coordination of the Community Policies, shall inform the Commission on previous communications, the procedures that have been undertaken to respond to irregularities and meaningful changes occurred after these initiatives. The information will contain at least: The amounts that have been or are expected to be collected; The temporary measures undertaken by the Member States to protect the amounts that have been unduly paid The administrative or legal procedures that have been undertaken to collect the unduly paid amounts and apply sanctions; The reasons why the collection procedures have been discontinued; The reason why the penal procedures have been discontinued. The Managing Authority undertakes the corrective measures based on the identified irregularities and collect any unduly paid amounts. The collection methods shall be agreed by the affected subjects; the ERDF co-financing quota is returned to the MA lead partner, while the national quota is returned to the reference administration. With reference to the obligations of the Lead Partner and the Project Partners, as per article 20 of the EC Regulation no. 1080/2006, especially 2 of the article, the Managing Authority has regulated these obligations in the following documents: Financing agreement between the Managing Authority and the Lead Partner and Agreement between the partners. The data on the irregularities and the controls as per sections 3, the information on the financial adjustments and the information on the steps of the collection procedure are registered in the IT system as per chapter 6 below, so that timely information can be given to the Certifying Authority that will record the collected and collectable amounts and the amounts that have been collected due to the total or partial withdrawal from participation in an operation. Thanks to this IT system, the MA is guaranteed full access and exhaustive information on the irregularities and the relevant corrective measures. Within the IT system, the information on the irregularities and the results of the audits as per section 3 are given in writing to the Certifying Authority and the Audit Authority. Here follows a flow chart that describes the procedure in place to comply with the obligation to report the irregularities to the Commission as per art. 28 of the EC Regulation no. 1828/2006. Page 40 of 80

41 3. AUDITORS AS PER ART.16 OF THE EC REG ULATIO N NO. 1080/2006 AND SUBSEQUENT AMENDMENTS THEREOF 3.1. Assessment of operations as per art. 16 of the EC Regulation no. 1080/2006 and subsequent amendments thereof In order to validate the expenditure, each Member State shall set up a control system making it possible to verify the delivery of the products and services co-financed, the soundness of the expenditure declared for operations or parts of operations implemented on its territory, and the compliance of such expenditure and of related operations, or parts of those operations, with Community rules and its national rules. Page 41 of 80

42 Article 16 of the EC Regulation 1080/2006 defines the content of the first-level control activities. Article 16 states: In order to validate the expenditure, each Member State shall set up a control system making it possible to verify the delivery of the products and services co-financed, the soundness of the expenditure declared for operations of parts of operations implemented on its territory, and the compliance of such expenditure and of related operations, or part of those operations, with Community rules and its national rules. For this purpose each Member State shall designate the controllers responsible for verifying the legality and regularity of the expenditure declared by each beneficiary participating in the operation. Member States may decide to designate a single controller for the whole programme area. Where the delivery of the products and services co-financed can be verified only in respect of the entire operation, the verification shall be performed by the controller of the Member State where the lead beneficiary is located or by the managing authority. Each Member State shall ensure that the expenditure can be validated by the controllers within a period of three months. In accordance with art. 13 of the EC Regulation 1828/2006, as amended by article 1, point 3 of the EC Regulation 846/2009, the controls performed by the first-level auditors focus on the administrative, financial, technical and physical issues and are intended to verify the following: The reported expenses are real and the products and services are provided in conformity with the agreement that has been entered into; Compliance with the provisions on information and advertising; Fairness and appropriateness of the public tender and bid procedures and compliance with the norms on state aids to the enterprises for the environment and equal opportunities; The expenses reflect the community, national and regional norms and the provisions of the Programme documents and the calls; The completeness of the administrative, technical and accounting documentation. The first-level control falls under the responsibility of the Member States participating in the OP, which designate their auditors responsible for verifying the legitimacy and regularity of the expenses reported by the beneficiaries participating in the project; for the purposes of this document, reference will be made to "expense validation". Administrative checks The beneficiary is accountable for the execution of the project part he is responsible for, selects the implementing subjects and coordinates the physical and financial execution of the operation, in accordance with the regional, national and community directions in force. The procedure on the first-level controls affecting the administrative checks is implemented by the beneficiary who develops an expense report for the part of the operation that the beneficiary is responsible for. The documentation, obtained when the operation financing has started, is prepared on the basis of the checklist contained in the "expense reporting kit" attached to the Expense Reporting Manual and is sent to the Italian or Maltese first-level auditor, depending on the territory the beneficiary comes from. The administrative-accounting checks on the beneficiary s expense documentation are documentary ( on the desk ) checks and focus on 100% of the expenses reported by the Italian and Maltese beneficiaries. The lead or project partners shall provide the financial, physical and procedural monitoring data when and as required by the MA. For Italy, in line with the document General characteristics of the Italian system; control of the programmes of the European territorial cooperation objective, (MEF-IGRUE Protocol, June 2008, the CU shall assign an auditor to all the projects approved within the ). The auditors are designated by the MA in accordance with the national and community provisions in force and may also be selected from the regional administration, up to max. 10 units, in compliance with the Expense Reporting Manual and the first-level control manual (with the relevant checklists); they shall check the expenses associated with the part of operation performed by the participating Italian beneficiary. For each audit, the auditor shall report the work, date, results of the checks and measures undertaken to correct the irregularities. These checks are duly signed by the auditor. The auditors appointment procedure shall guarantee that they are independent from any beneficiary. The MA has developed a statement of independence, attached to the first-level control Manual (Annex 5), to be signed by all the auditors. Page 42 of 80

43 The CU guarantees the coordination of the activities and check methods of the auditors for all the first-level audits affecting the Italian beneficiaries. Additional checks may also be performed at the beneficiary s site to ascertain and verify the quality system of the work performed by the first-level auditors. The control is performed and documented thanks to checklists and reports. The verification performed by the UC, as indicated, may lead to on-site checks where the auditors are based to ascertain the following: - The information flow between the auditors and the beneficiaries; - The implementation of the control tools (manuals, checklists, reports, etc.) that have been developed for all the structures operating in the Programme; - The execution of the ongoing checks at the beneficiaries' site in accordance with the agreed-upon times and methods. For Malta, the lead and project partners select an auditor who, as indicated in the Expense Reporting Manual and in the first-level control Manual, verifies the expenses incurred by the Maltese beneficiary participating in the operation. The lead partner and / or the project partners shall send the list of expenses and the signed checklists to the MNCA with the aim of obtaining the validation as per Art. 16 of the EC Regulation 1080/2006 and the subsequent amendments thereof. The first-level auditor performs the administrative checks on the expense documentation provided by the beneficiary, with the aim of: a) Verifying the consistency of the administrative documentation of the operation, which confirms the programme financing and the right to the provision of the contribution: more specifically, it verifies the consistency of the funding agreement between the Managing Authority and the Lead Partner, the partner agreement between the lead partner and the beneficiaries concerning the whole operation and the part of the operation performed by the latter; it verifies the consistency of the operation with the tender/call and the Operative Programme. b) Verifying the completeness and consistency of the expense documentation (including settled invoices or any equivalent accounting document) in compliance with the national and community norms, the Programme, the bid, the financing agreement and any variations thereof; c) Verifying the correctness of the expense documentation from the normative point of view (civil and fiscal law); d) Verifying the eligibility of the expenses incurred in the programme period; e) Verifying the eligibility of the expenses as specified in the reference national and community norms, the programme, the call for proposals, the financing agreement and any amendments thereof; f) Verifying the compliance with the eligible expense limits specified in the reference community and national norms (e.g. the aid regime applicable to the operation), the programme, the call for proposals, the financing agreement and any amendments thereof; this verification must also focus on the expense items included in the audited report; g) Verifying the link between the expenses incurred and reported by the beneficiary, whereby the contribution is requested, and the operation that is the object of the contribution; h) Verifying that the contribution being requested will not be added to other contributions (checks on the databases of the Administration that manages the programme or the central databases are needed). i) Verifying the compliance with the Community policies in the field of equal opportunities and environment during the implementation of the operations. The administrative-accounting auditing of the expense reports submitted by the Italian and Maltese beneficiaries is performed by means of the checklists. Verifications on site Page 43 of 80

44 The projects are verified on site to make sure that the expenses have actually been incurred and to check the conformity of the physical and technical features of the expense with the regional, national and community norms and with the Programme. For Italy, on site verifications are performed on 100% of the expenses reported by the lead and project partners and are directly carried out by the auditor designated by the CU. With reference to the timeframe, these verifications are performed after the completion of the administrative-accounting checks. For Malta, on site verifications are performed on 100% of the expenses reported by the lead and project partners and are carried out according to the following method. I. The Auditor designated by the beneficiary (who has already performed the administrative checks), carries out the (100%) on-site checks using the checklists to be sent by the MNCA together with the documentation of the administrative checks; II. During the project lifecycle the MNCA shall perform on-the-spot checks using the checklists. This control is aimed at verifying the quality of the checks carried out during the project lifecycle and in any case before the verification of the last report of expenditures. More specifically, the first-level auditor shall: a. Check the existence and soundness of the beneficiary selected in the Programme (especially the private beneficiaries); b. Make sure that the original administrative-accounting documentation (including the documentation giving evidence of the expenditure), in line with the Community, the national and regional norms, the Programme, the operation selection call, the financing agreement between the MA and the LP and the agreement between the LP and the PP, is available at the beneficiary's site; c. Make sure that the beneficiary keeps a separate accounting system for the expenses incurred in the framework of the operation co-financed within the OP; d. Check the progress or completion of the operation or the supply of goods and services that are covered by the co-financing, in line with the documentation submitted by the beneficiary to support the report and the application for the contribution; e. Make sure that the goods or services that are the object of co-financing comply with the Community, the national and regional norms, the Programme, the operation selection call, the financing agreement between the MA and the LP and the agreement between the LP and the PP and the bid and / or contract signed by the beneficiary and the implementing subject; f. Verify compliance with the information provisions in the Community norms, the OP, the MA Communication Plan concerning the co-financing of the operation in the framework of the Structural Fund and the OP; g. Verify the conformity of the operation with the guidelines on the community policies in the field of equal opportunities and environmental protection; h. Verify the consistency of the expenditure with the reference parameters (regional price lists, market prices for the purchased goods and / or services, etc.) Checks on the spot are performed and documented using the checklists and the reports. After the completion of the documentary checks and the verifications on site, the first-level auditor sends a document validating the eligible and reported expenses to the beneficiary and the lead partners and highlights the irregularities, if any, and the ineligible expenses. The CU guarantees the coordination of the activities and check methods of the auditors for all the first-level audits affecting the Italian beneficiaries. Additional checks may also be performed at the beneficiary s site to ascertain and verify the quality system of the work performed by the first-level auditors. The control is performed and documented Page 44 of 80

45 thanks to checklists and reports. The verification performed by the UC, as indicated, may lead to on-site checks where the auditors are based to ascertain the following: - The information flow between the auditors and the beneficiaries; - The implementation of the control tools (manuals, checklists, reports, etc.) that have been developed for all the structures operating in the Programme; - The execution of the ongoing checks at the beneficiaries' site in accordance with the agreed-upon times and methods. The expenses validated by the auditor fall under the responsibility of the lead partner who, in compliance with article 20, letter d) of the Regulation 1080/2006, shall give the OP MA a declaration of conformity that states that the goods and services being co-financed for each beneficiary participating in the operation reflect the Application Form approved by the MA, the project general and specific objectives, the call, the financing agreement between the Managing Authority and the Lead Partner, the agreement between the project and lead partners and any other directives and / or provisions of the project Steering Committee. The lead partner shall draw up the reimbursement application for the whole financial operation, in line with the time schedule to be agreed upon within the financing agreement. The reimbursement application contains only the expenses incurred by the lead partner and each project partner, validated by the first-level auditors and verified by the lead partner. The hard and electronic versions of the reimbursement application are sent by the operation lead partner to the MA. The MA, upon verification of the completeness of the documentation provided with the reimbursement application submitted by the lead partner, draws up the payment tables and issues the payment orders to the lead partner. The lead partner shall transfer the amounts to each project partner as rapidly as possible. Following the adoption of the new version of the "SI-GTS - Sistema informativo per la gestione dei titoli di spesa " which introduces the new application "Ordini di accreditamento", only for the projects which have a regional Department as lead partner, the Department of Planning, Managing Authority of the Programme, provides to issue the payment orders to the partners directly, after the request of the lead partner. The main steps of the first-level control are shown in the following diagram: Page 45 of 80

46 Page 46 of 80

47 4. CERTIFYING AUTHORITY 4.1 Single Certifying Authority - main functions Date and type of the formal designation authorising the Certifying Authority to perform its functions The Council Deliberation no. 620 of 22 December 2005 has established the Special Office of the Certifying Authority (CA) for the programmes co-financed by the European Commission; with the aim of guaranteeing homogenous administrative actions, the Paying Authority of the four structural funds for the programming period has also been integrated in the office. With reference to the above and according to its institutional mandate, also in relation to the Programming Period, the ERDF and the ESF, in compliance with the EC Regulation no. 1083/2006 and the EC Regulation 1828/2006, the above-mentioned activities will be carried out by the same office. In accordance with the Community norms, the Certifying Authority has been duly organised, so that its activities are independent from the management and the audits. It reports directly to the President of the Regional Government of Sicily. The Certifying Authority is functionally independent from the Managing and the Audit Authorities, from the financial and membership point of view. It enjoys managing autonomy and independence from any other office for the functions it has been entrusted with, in agreement with the EU provisions. Such autonomy is also confirmed by the assignment of specific budget items to the office, as per regional law no. 3 of 8 February 2007, whereby base provisions have been added to the budget of the Sicilian Region for expenses in capital and current account Functions performed by the Certifying Authority Article 61 of the Regulation 1083/2006 defines the following tasks, to be performed by the Certifying Authority: a) Draw up and submit the certified expenditure declaration and the payment applications to the Commission The CA shall draw up the certified expenditure declaration and the relevant application for payment of the contribution. This activity must be carried out on the basis of the information received by the MA. The payment application shall be electronically sent to IGRUE and to the lead partner state administration that will forward them to the Commission. b) Certify the following: - the expenditure declaration is correct, based on reliable accounting systems and verifiable supporting documents; - the reported expenditures are in conformity with the applicable community and national norms and have been incurred in relations to the operations that have been selected for financing, in accordance with the criteria applicable to the programme and the national and community norms; The Certifying Authority shall guarantee that the declared expensed have been properly documented and that they also comply with the norms, indications and criteria for financing individual categories of operations. The Certifying Authority shall ascertain the following: - The expenses have been incurred and properly reported, on the basis of the expenditure declarations provided by the MA and the documentation certifying the first-level control; - The expenditure declared by the MA is clearly associated with the amounts obtained from the monitoring system concerning the registration and maintenance of the accounting data for each operation, as populated by the MA; c) For certification purposes, guarantee that information has been obtained from the Managing Authority concerning the procedures and checks on the expenditures in the expense declarations. Page 47 of 80

48 In the framework of certification of the expenses incurred within an OP, the Certifying Authority receives from the MA a certification of the reliability, completeness and conformity of the data contained in the report of expenditures incurred for each operation and the reports that confirm the execution and results of the first-level controls on the appropriate implementation of the management procedures and the eligibility of the expenses associated with these operations. d) The results of the audits performed by the Audit Authority or under its responsibility must be taken into consideration for certification purposes. The Certifying Authority is informed by the Audit Authority on the results of the controls performed by the latter. With reference to the controls carried out by the Audit Authority on the expenditure reported to the Commission and IGRUE, should ineligible expenses be found, the AA shall ask the CA to deduct them from the subsequent expenditure declaration; moreover the paid amounts will have to be collected and the interests to be paid or already paid will have to be indicated. With reference to the controls on the management and control system performed by the AA, should systematic irregularities be found in one ore more groups of operations, the CA, depending on the severity of the irregularities, shall discontinue the certification of the expenditure associated with these operations, pending the decision of the MA. e) - enter the expenditures reported to the Commissions in the IT books; The CA records the expenditures reported by the MA and included in the certification submitted to the Commission in the IT accounting system. The system provides the information that is needed to comply with annex III of the EC Regulation no.1828/2006, part B, fields 35, 36 and 37 (total eligible expenses declared for the operation and included in the declaration submitted by the Certifying Authority to the Commission; date of the last expenditure declaration of the Certifying Authority containing the operation expenses). The certified expenditure declaration and the payment applications that have been sent out with the relevant documentation can also be archived. The CA can access the SFC (integrated IT system) to send the certified expenditure declarations and the relevant application for payment of the Community and national contributions to the Commission (through the Fund lead partner administration) and to the Ministry of Economic and Financial Affairs IGRUE. f) - keep the books of the amounts that can be recouped or that have been withdrawn following the total or partial cancellation of participation in an operation; The collected amounts can be returned into the general balance sheet of the European Union, prior to the end of the Operative Programme, by deducting them from the subsequent expense declaration. The CA guarantees the appropriate certification of the eligible expenses by recording the amounts that can be collected, to be identified on the basis of the checks carried out by the CA or the MA, the AA, the European Commission, the IGRUE and any other Community or national inspection and control body. The CA also keeps track of the unduly paid amounts that have been collected, under the responsibility of the MA, and also the amounts that have been collected following the partial or total cancellation of the contribution. Finally the CA deducts the collected amounts from the first available declaration of expenditure and in any case before the closure of the OP Function formally entrusted to the Certifying Authority (functions, intermediate bodies, type of power entrusted). No function entrusted. 4.2 Organisation of the Certifying Authority Organisation chart and detail on the unit functions (including the approximate number of staff) Page 48 of 80

49 With its deliberation no. 100 dated 5 April 2007, the Regional Council approved the organisation chart of the Certifying Authority for the programming periods and With specific reference to the programming period , for the Italy-Malta Cooperation Programme, , the functions of the Certifying Authority are performed by the personnel of the Special Office of the Certifying Authority: Maria Concetta Crivello tel: fax: autorita.certificazione@regione.sicilia.it - concetta.crivello@regione.sicilia.it in addition to two officers and an archive clerk MEMBERS OF STAFF OF CERTIFYING AUTHORITY Ludovico Benfante Pro-tempore General Manager, Certifying Authority for the programmes cofinanced by the European Commission Crivello Maria Concetta Certifying Authority Manager ERDF La Scala Giusto Certifying Authority Officer ERDF Ales Rosaria Certifying Authority Officer ERDF Barbanera Francesaca General Affairs Operator Written procedures developed for the staff of the Certifying Authority (date and reference) The procedures to be followed by the staff of the CA in performing their tasks are described in the following forms, developed by the MA: - OP implementing manual - Manual of Procedures of the Certifying Authority A formal procedure is also in place to review the manuals, should changes occur or new procedures be added or old ones removed, thus guaranteeing that the manuals are always up-to-date. The manuals are distributed to all the subjects involved in the implementation of the OP, including the external auditors, so that they can work in compliance with the norms in force in the member states and within the community and guarantee the consistency on the implemented control procedures. 4.3 Certification of declaration of expenditures Description of the procedures to draw up, certify and submit the declaration of expenditures to the Commission Ten days in advance the CA communicates that, by 20 February, 20 April, 20 July, 20 October and 20 December or on any other agreed-upon date, the declaration of the expenses incurred until that date and the documentation provided by the Managing Authority of the Italy-Malta Operative Programme will be acquired through the management IT system. A. A formal declaration certifying the following: Furthermore: a) The last annual report as per article 67, paragraphs 1 and 3 was: - Sent to the Commission within the due date - Attached - Not to be submitted b) The Commission has expressed no infringement opinion as per article 226 of the treaty for those operations the expenses of which have already been reported. B. A formal declaration on the legitimacy and conformity of the reported expenses, which specifies the following: Page 49 of 80

50 a) The reported expenses are correct and comply with the applicable national and community norm and have been incurred for the operations eligible for funding, in accordance with the criteria applicable to the programme and the national and Community norms, with specific reference to state aids and norms on public tenders, the environment and non-discrimination; b) The reported expenses are related to the eligible categories established by the Community and national norms, the OP, the public tender or call and the contract or agreement, if any; c) The contribution paid for each operation has been properly determined in accordance with the public tender or bid, the relevant contract or agreement and also according to the eligible and reported amount; d) The reported amounts match the beneficiaries expenditure and their transactions are legitimate and comply with the national and Community norms in force; e) The reported amounts reflect the expenses that have actually been incurred during the eligibility period established in the Decision, public tender or bid, contract or agreement; f) The reported expenses come from reliable accounting systems and are based on evidence documents that can be verified with the subject indicated in the audit trail; g) The expenses reported by the beneficiaries for ach operation only refer to it and have not been reported in other Community programmes; h) The eligibility of the final expenses, documented by the paid invoices or any equivalent accounting documents, relevant to the payments and reported by priority axis; i) The co-financed products and services have been supplied; j) The beneficiaries have received the full public contribution as soon as possible; no deductions, withdrawals or charges have been made; k) The reported amounts do not contain ineligible or unacceptable expenses or expenses resulting from discontinued, repealed and irregular operations, frauds or material errors; l) The reported expenses take collected or accrued amounts into consideration, together with the revenues obtained from the operations that have been funded in the framework of the OP; m) The reported amounts are related to measures whose aids have been formally approved by the Commission n) The information on the operations associated with the reported amounts can be clearly linked with the data obtained from the management information system; o) The results of the controls performed by the competent audit bodies have been taken into consideration and the irregularities, if any, have been reported to the competent authorities, with specific reference to the OLAF sheets; p) The national and Community norms on advertising have been complied with. C. A report on the audit, containing information on the specific indicators that demonstrate how the system works, including the following: a) The annual audit plan; b) Statement of the documentary check on all the operations included in the certification; c) The reports and results of the controls performed by the Community, national and regional inspection and control bodies; d) The implemented procedures, the sampling method and its revision date and the checklists; e) The list of the operations that have undergone the on-site checks and the relevant reports and results, together with: The amount of the audited expenditure The type of error that has been identified; The irregularities, the reported issues and the sheets forwarded to OLAF; The implemented corrective measures; The measured error rate; The implemented follow-up actions; The results of the follow-up actions. D. The list of the amounts withdrawn from the certification, classified as follows: Axis, category and operation with the relevant motivation: Page 50 of 80

51 a) Suspension due to a legal procedure or an administrative claim b) Partial or total suppression c) Material error d) Unacceptability or ineligibility e) Irregularity f) Fraud Based on the acquired information, the CA: - if the amended expense has already been included in an application for payment, will deduct the amount that has been corrected in the first application for payment following the communication receipt; - if the amended expense has not been included in an application for payment, only the actual expenditure, net of the adjustment, shall be included in the application for payment. The CA records the amounts that, based on the checks performed by all the control bodies (whether internal to the OP management and control system, or external, e.g. EC, IGRUE, Court of Auditors, Fiscal Authority, etc.) can be or have been collected. E. The level of the legally binding commitments; F. The list of the operations that have led to expenses after the last certification; the following must be indicated: Axis, specific objective and action; Title of the financial operation; Final beneficiary or partner and relevant taxpayer's code or VAT number; Place of the financial operation; Progress-based amount and amount already certified; Amount paid in advance as per article 78 of the regulation, date on which the expense was incurred, amount, type, data for payment, amount and description of the documents containing evidence of payment; Reference monitoring code; Single Project Code (as per Law no. 3/2003); Planned or approved expenditure amount; Amount and details of the committed expense for the financial operation; Amount, type, date and detail of the documents describing the incurred expense (paid bills or accounting documents containing equivalent evidence); Amount, type and details for payment; Place where the documents containing evidence of the amounts are kept; Revenues generated in the five years following the completion of a revenue-generating project, if the revenues cannot be estimated in advance, for deduction purposes in accordance with article 55 of the EC Regulation no. 1083/2006. Based on the available information, the CA checks the received data and processes the applications for payment. The applications for payment will be submitted to the European Commission through the lead partner state administration and to the Ministry of Economic and Financial Affairs IGRUE, through the SFC IT system, with a digital signature, by 28 February, 30 April, 31 July and 31 October; if necessary an additional one can be submitted to prevent the automatic divestment of the resources by 31 December of every year. The CA communicates to the MA that the reported expenditure has been certified (thanks to a specific function of the IT system, as per art. 60, letter c.) and the reasons why some expenses have not been certified. Here follows the diagram of the procedures to draw up, certify and submit the declaration of expenditures to the Commission: Page 51 of 80

52 4.3.2 Description of measures taken by the Certification Authority to ensure the observance of provisions as set forth by the article 61 of the (EC) Regulation No. 1083/2006 of the Council Before proceeding with the certification of expenditure and payment request, the Certification Authority shall check for the correctness and validity of expenditure and operations on a documental basis. Therefore, the Certification Authority shall formally check the contents of the Management Authority statement and certification of legitimacy and validity of expenditure stated to ensure the acceptance of the expenditure statement submitted. Page 52 of 80

53 To this purpose, the Certification Authority, upon receipt of an expenditure statement, shall check first the completeness and compliance with formal requirements, including the prescriptions, information, and evidences that shall be contained in the statements as mentioned above. The Certification Authority shall also check for the correspondence of acceptable expenditure data, resulting from the expenditure statement of the Management Authority, with the information contained in the first level inspection activities report and with the outcomes of inspections by any other EU, national, regional inspection and monitoring body provided to the Certification Authority. The following shall be checked in these activities: The check lists of first level inspections, as well as the outcomes of checks by all the other Monitoring Authorities for the purpose of checking the correctness of data entered, also through the comparison between the relevant outcomes; Any irregularities identified during the inspections have been entered into the IT system and competent Authorities have been informed, with particular reference to the completion and transmission of OLAF sheets; Transmitted data shall be consistent with the information recorded in the IT system; Any expenses considered as non-acceptable, based on checks performed should not have been entered in the certified statement of expenditure and in the payment request. In particular, the Certification Authority, based on the information contained in the list of operations (F) with specific reports of the monitoring system and its check lists, shall check for the following: Any expense has been paid during the eligibility period as set forth by the laws, standards, OP, call for proposals, or public notice for operation selection, by the contract, or reference agreement; Any expenses refer to the acceptable categories as set forth by the EU and national legislation, OP, call for proposals, or public notice for operation selection, and, by the contract, or agreement, if applicable; Any expenses shall refer to operations properly entered in the list of projects produced by the Management Authority; The contribution allocated for the operation under investigation has been properly measured in relation to the indications of the call for proposals or public notice, and in the contract or reference agreement, as well as in relation to the expense amount reported and considered as acceptable; In the expenditure statement, the Management Authority should have properly aggregated the admissible expense by Axis; The expenses related to the payments made and declared should have been justified by invoices or accounting documents with equivalent evidential value; Through a specific statement, all expense evidences should have been properly filed in original or as a copy in the Offices indicated in the check system. Said checks shall be carried out by internal organisations of the Certification Authority, in particular: By a section/unit responsible for checking the content of information provided in the above-mentioned items B and E and F; By a section/unit responsible for checking the content of information provided in the above-mentioned items C and D. If the Certification Authority, based on the documentation provided with the expenditure statement, identifies any improper operation of all or part of the management and monitoring system, or in the case all or part of the information or data is lacking or contradictory, it will suspend the certification of expenditure and formulate appropriate recommendations and specific requests for the purpose of acquiring due explanations for the corrective actions required by the Management Authority. In this case, the Certification Authority shall certify the expense and forward the payment request only after the Management Authority has implemented the recommendations. Page 53 of 80

54 The Certification Authority, upon partial or final closing of the OP, shall receive the final balance as well as the documentation indicated above from the Management Authority. The final balance shall indicate the expenses actually paid and admissible, substantiated by document having evidential value, based on national laws. If, based on the final balance, the admissible expenses calculated upon partial or final closing of the OP do not correspond to the expenses previously certified by the Certification Authority, the Certification Authority shall alter the final expenditure statement, by deducting any amounts considered as non-admissible from it. The above-mentioned documentation and procedures shall be communicated to the Management Authority and Audit Authority with an invitation to disseminate their content to all offices, institutions, bodies, and Beneficiaries involved Provisions concerning the access of the Certification Authority to the detailed information regarding the operations, checks, and activit ies carried out by the Management Authority, intermediate bodies, and Audit Authority The Certification Authority shall have access to all information contained in the management information system. 4.4 Accounting system Description of the accounti ng system to be established and used as a basis for certification of expenditure to the Commission The information system for recording and storage of accounting data, as well as any other implementation data required for financial management, monitoring, inspections, audits, and assessment contain all detail information and functions required for the activities of the Certification Authority. In particular, all financial information regarding every financially-supported operation on the Programme is reported in this system. In this respect, the accounting system is fed with the financial data related to admissible expenses (valued as a result of first level checks) paid for each operation and for each Beneficiary. After any independent inspections carried out by the Certification Authority, the Certification Authority shall enter the financial data related to the allocated contribution with reference to admissible expenses paid at the level of individual operation and individual Beneficiary. On the basis of the accounting system organized as mentioned above, the Certification Authority is able to extract, at the level of individual operation and individual Beneficiary, the admissible expense data, which determine the expenditure amount as referred to in the Certified Statement and Payment Request to be forwarded to the European Commission for subsequent aggregation. A specific section for amounts withdrawn and recovered and pending recovery is also an integral part of the accounting and monitoring system, whose accounting shall be guaranteed by the Certification Authority Detail degree of the accounting system The computerised accounting system, like the one already used for OP ERDF , has the following detail degree: - The distinction of expenses by axis, priority, operation, Beneficiary, and individual payment made by the Beneficiary with indication of the payment date, amount, scope, and receipt date; - The review of assignment and transfers of available public funds. The organization of the accounting system allows the identification of Beneficiaries, Organizations involved, and reasons for payments, as well as recording and storage of accounting data related to each operation. Page 54 of 80

55 Like for the OP ERDF , with reference to expenses actually paid (charged and validated on the system by the competent Management Authority), this system also gives the opportunity to acquire, for example: the number, date, and type of deed, as well as the related amount. It allows the Certification Authority to display the inspections and subsequent alterations applied on the amounts (with the relevant reasons, as ratified by the Management Authority). For further details, see the relevant section of the document described in Chapter Amounts recovered Description of the way to ensure fast recovery of the EU support The procedure provided for by the Certification Authority to ensure a fast recovery of the EU support consists of the following main steps: - The Certification Authority receives the communications regarding any irregularity identified by the Management Authority (in relation to first level inspections) and the Audit Authority (in relation to second level audits) and is directly informed by other national Monitoring Authorities and corresponding Maltese Authorities, in the case set forth by the article 28, paragraph 4, of the Regulation (EC) 1828/2006; - The Certification Authority transcribes any recoveries already operated and/or being operated on the register of debtors (see next section); - The Certification Authority shall ensure that the Management Authority has fulfilled all the activities related to the recovery procedures for any irregularities and/or anomalies identified in accordance with the Regulation (EC) No. 1080/2006 article 17 paragraph 2; - In the case of missed recovery or partial recovery from the Beneficiary, the Certification Authority shall check that the Management Authority has requested the Member State on whose territory said Beneficiary is located to provide the relevant funds, in compliance with the Regulation (EC) 1080/2006, article 17, paragraph 3. The partner Beneficiaries shall refund any amounts unduly paid to the lead Beneficiary, who shall return them to the Management Authority and inform the Certification Authority; if the lead Beneficiary does not receive the amount, the Management Authority shall be refunded by the Member State on whose territory said Beneficiary is located Provisions implemented for keeping the register of debtors and deducting the amounts recovered from the expense to be declared The Certification Authority, if applicable, asks the Management Authority for the actions taken in relation to the procedures adopted for recovering any amounts unduly paid and their actual recovery. In particular, based on the provisions of the art. 61, letter f) of the Regulation (EC) 1083/2006, the Certification Authority keeps an account of amounts recoverable and of amounts withdrawn following cancellation of all or part of the contribution for an operation. Amounts recovered shall be repaid to the general budget of the European Union prior to the closure of the operational programme by deducting them from the next statement of expenditure. To this purpose, the Management Authority shall inform the Certification Authority, preferably through the IT system mentioned in the chapter 6 below, about the amounts withdrawn, recoverable amounts, and recovered amounts, as well as any financial changes applied. With reference to any recovery proceeding started against the Beneficiaries, the Management Authority shall provide the Certification Authority with information regarding the following: - Data of the Beneficiary and the operation; - Amount to be recovered, differentiated by funding amounts; - Data and indications of the recovery deed; Page 55 of 80

56 - Data of any recovery operated with the indication of the amount recovered and date of collection and any legal and delay interest. In accordance with the art. 20 of the Regulation (EC) 1828/2006, the Certification Authority, based on the abovementioned information, shall send a statement to the Commission, not later than 31 March every year, in the format indicated in Annex XI of the regulation. Said statement shall indicate, for each Priority Axis of the Operational Programme, the amounts withdrawn from the statements of expenditure submitted during the previous year, the amounts recovered deducted from said statements of expenditure, and the amounts still to recover as of 31 December of the previous year. The amounts to be declared with Annex XI shall be automatically identified by specific functions of the IT system. The Certification Authority shall check for the following, based on the list of amounts withdrawn by the Management Authority: - If the expenditure being changed has already been entered in a refund request, the altered amount shall be deducted in the first payment request following the reception of the relevant communication; - If the expenditure being changed has not yet been entered in a payment request, just the expenditure amount before alteration shall be entered in the payment request. As concerns keeping of the Register of debtors, it is specified hereby that it is included in the IT system and: - Provides the identity of the debtor; - Contains all identification data of the sum to be recovered (date of recovery order, suppressed amount, subject that issued the recovery order, reporting to the OLAF, etc.); - Allows, as specified above, the distinction between revoked amounts, recovered amounts, and amounts still to be recovered as well as any suppressions performed, also for the purpose of completing the annual statement related to the amounts withdrawn and recovered, and pending recoveries (Annex XI of the Regulation (EC) 1828/2006). Page 56 of 80

57 5. SINGLE AUDIT AUTHORITY AND MONITORING AUTHORITIES 5.1 Description of the main tasks and interconnections of the single Audit Authority with the Monitoring Authorities under its responsibility The Audit Authority designated in accordance with the art. 59, par. 1, point c), of the Regulation (EC) No. 1083/2006, responsible for drawing up the Audit Strategy for the Operational Programme Italy-Malta , transmitted to the Commission with a note reg. No. 4828/06 dated 12 November 2009 and currently under approval is the Sicilian Region and its Special Audit Authority Office for programmes co-funded by the European Commission. In accordance with the article 62 of the (EC) Regulation No. 1083/2006, the Audit Authority shall be responsible in particular for: Ensuring that audits are carried out to verify the effective functioning of the management and control system of the Operational Programme; Ensuring that audits are carried out on operations on the basis of an appropriate sample to verify expenditure; Presenting to the Commission within nine months of the approval of the operational programme an audit strategy covering the bodies which will perform the audits referred to under points (a) and (b), the method to be used, the sampling method for audits on operations and the indicative planning of audits to ensure that the main bodies are audited and that audits are spread evenly throughout the programming period. By 31 December each year from 2008 to 2015: Submitting to the Commission an annual control report setting out the findings of the audits carried out during the previous 12 month-period ending on 30 June of the year concerned in accordance with the audit strategy of the operational programme and reporting any shortcomings found in the systems for the management and control of the programme. The first report to be submitted by 31 December 2008 shall cover the period from 1 January 2007 to 30 June The information concerning the audits carried out after 1 July 2015 shall be included in the final control report supporting the closure declaration referred to in point (e); Issuing an opinion, on the basis of the controls and audits that have been carried out under its responsibility, as to whether the management and control system functions effectively, so as to provide a reasonable assurance that statements of expenditure presented to the Commission are correct and as a consequence reasonable assurance that the underlying transactions are legal and regular; Submitting, where applicable under Article 88, a declaration for partial closure assessing the legality and regularity of the expenditure concerned. Submitting to the Commission at the latest by 31 March 2017 a closure declaration assessing the validity of the application for payment of the final balance and the legality and regularity of the underlying transactions covered by the final statement of expenditure, which shall be supported by a final control report. Composition of the Group of Controllers The Audit Authority, in accordance with the art. 62 of the EC Regulation 1083/2006, shall be supported by the Group of Controllers established through a Decree of the General Manager pro tempore of the Special Audit Authority Office No dated 26 February The Group of Controllers, according to the provisions of the art. 14, paragraph 2 of the EC Regulation 1080/2006, consists of one representative of the Maltese Government, one representative of the Italian Government, and is chaired by the General Manager of the Special Audit Authority Office of Programmes co-funded by the European Commission, Mr. Maurizio Agnese. The Group of Controllers shall support the Audit Authority in the performance of tasks provided for by the article 62 of the Regulation (EC) No. 1083/2006. Through a D.D. of the Special Audit Authority Office of programmes co-funded by the European Commission No dated 26 February 2009, the Group of Page 57 of 80

58 Controllers has been established in accordance with the art. 14, paragraph 2, of the Regulation (EC) No. 1080/2006. The Group of Controllers consists of Audit Authority representatives of the Sicilian Region and the Republic of Malta mentioned below: Sicilian Region: Mr. Michele Nicosia, Manager of Service 12 Audit Authority member in office; Republic of Malta: Director General Internal Audit and Investigations Division Cabinet Office, Office of the Prime Minister member in office; in case of absence or impediment, a substitute member shall be appointed by the Office of the Prime Minister.. As set forth by the Internal regulation of the Group of Controllers supporting the Single Audit Authority for the OP Italy-Malta approved as of 23 October 2009 (art. 2 Functions of the Single Audit Authority), the Group of Controllers shall meet regularly, upon initiative of the Single Audit Authority to fulfil the following tasks: Assist the Single Audit Authority in performing the activities provided for by the article 62 of the Regulation (EC) 1083/2006; Exchange of information, discussion about possible problems, organization of joint training seminars, and implementation of consulting and/or cooperation between the members of the Group of Controllers, in particular in reviewing the sampled projects. Each member of the Group of Controllers shall carry out audit activities in the reference territory (Maltese member on the Maltese territory and Italian member on the Sicilian territory). The Single Audit Authority can ask the Italian member of the Group of Controllers to support the Maltese member in monitoring the operations to be carried out on the Maltese territory. The same can be decided for monitoring on the Sicilian territory. Notwithstanding the responsibility of activities and final documents belonging to the individual members of the Group of Controllers, to carry out Audit activities, each of said members can be supported by the staff assigned to each reference organization and guaranteeing the requirements set forth for Auditors. Checks are divided into system audits and operation monitoring. A system audit shall check for effective operation of the management and monitoring system. Operation monitoring shall check for the validity of expenditure, in theory and in practice. The results of both audit activities carried out within the Maltese territory will be transmitted by the Maltese member of the Group of Controllers (or by both members of the two Governments in the case of joint audit) to the Single Audit Authority, and for information to the Director General of Internal Audit and Investigations Division, Cabinet Office, Office of the Prime Minister. The so-called second level checks shall be carried out, on the territory of the Sicilian Region, in a totally internalized manner, i.e. directly with the internal staff taken from the roles of the Sicilian Region and, on the territory of the Maltese State, from the representative of the Maltese Government of the Group of Controllers. Audit Authority Sicilian Region Organisation: Address: Special Audit Authority Office for the Programmes co-financed by the European Commission Via Notarbartolo, 12/A Palermo, Sicily, Italy. Telephone: (+39) , , , Fax: (+39) , Web site: Contact Point Pro-tempore General Manager Mr. Maurizio Agnese autorita.audit@regione.sicilia.it Page 58 of 80

59 Contact person: Mr. Michele Nicosia, Service 12 Manager, Audit Authority Telephone: (+39) Fax: (+39) , Republic of Malta Organisation: Internal Audit and Investigations Division, Cabinet Office, Office of the Prime Minister Address: Valletta Buildings, Lower Ground Floor, Valletta. VLT MALTA Telephone: ext 10 Fax: Contact Point Contact person: philip.gafa@gov.mt General Manager of the Internal Audit and Investigations Division Director General Internal Audit and Investigations Division Telephone: ext 30 Fax: philip.gafa@gov.mt 5.2 Organisation of the Single Audit Authority and Monitoring Authorities und er its responsibility Organisation charts The Special Office Audit Authority of Programmes Co-financed by the European Commission (previously called Special Office for Second Level Audits on the management of structural funds in Sicily) has been established through deliberation of the Sicilian Regional Council No. 327 dated 18 December 2000 (Annex 2), implemented in accordance with the art. 4, paragraph 7, of the regional Law No. 10/2000. This Law allows the creation of specific special offices in Sicily for the achievement of specific institutional purposes. The Special Office has been established with the only purpose of performing audit activities as an independent body initially set forth by the Regulation (EC) No. 2064/1997 ( programme), then by the Regulation (EC) No. 438/2001 ( programme). The allocated staff is distributed according to the following Organisation Chart: Audit Authority Organisation Chart Page 59 of 80

60 Sicilian Region PRESIDENCY ORGANISATION CHART SPECIAL OFFICE AUDIT AUTHORITY Programmes co-financed by the European Commission Members of staff working in the office as of 20 July 2009 Total members of staff Office Manager General Manager 41 All of them are full-time employees of the Sicilian Regional Government Mr. Maurizio Agnese Name of Area/Service Tasks and description Area/Service Manager Members of staff 2 officers Giovanna Mangione, Patrizia Valguarnera; Administrative area No. 1 General services, personnel and management control Ms. Carmela Mangione 3 instructors Martino Ingrassia, Maria Urso, Sebastiano Colomba U.O.B. n. Operative Unit Administrative Sector Mr. Gennaro Giovannelli Technical Area No. 14 Support to programming and control activities monitoring 1 officer Giovanni Padorno Control Service Controls on the IT systems of the Managing and Certifying Authorities, ROP 2000/2006, ROP ERDF, ROP ESF 2007/2013 and other community programmes; security and prevention service; Mr. No. 2 Support to the Office IT System Alfonso Trapani Date Processing Centre Control Service No. 3 Control on EAGGF-ROP Sicily , Structural Interventions in Agriculture (part) Control on ROP ESF Mr. Salvatore Ditta 1 officer Giovanni Marchese 1 instructor Mario Demma Page 60 of 80

61 Control Service No. 4 Control on FEAOG-POR measures Sicily Forests, Forest Concern, Waste and Water Regulation Agency, Structural Interventions in Agriculture (part). Control ROP ERDF Mr. Giuseppe Spanò 2 Officers: Teresa Migliarba, Anna Zafarana Control Service No. 5 Control on ESF-POR measures Sicily Vocational training (part), Family (part). Control on ROP ESF Mr. Rosario Cosentino 1 Officer: Giuseppe Infantone Control Service Control on ROP-ERDF measures Sicily Industry, Cooperation (part), Cultural Heritage (part), Public Education. Mr. 1 Officer: Dolcemascolo Gaetano No. 6 Control on ROP ERDF Corrado Mirabelli 1 Instructor: Corradengo Natalina Control Service No. 7 Control on ROP-ERDF measures Sicily Cultural Heritage (part), Health, Cooperation (part), Territory and Environment (part). Control on ROP ERDF Mr. Bartolomeo Brocco 1 Officer: Di Franco Silvana 1 Instructor: Scialabba Erminia Control Service No. 8 Control on ROP-ERDF measures Sicily Public Works, Transports, Tourism. Control on ROP ERDF Mr. Francesca Fontana Lia 2 Officers: Claudio La Manna Patrizia Cartia Control Service No. 9 Control on FEAOG-ROP measures Sicily Structural Interventions in Agriculture (part), Infrastructural Interventions in Agriculture. Control on ROP ERDF Mr. Francesco Marino 2 Instructors: Giunta Filippo Cassata Paolo Control Service No. 10 Control on ESF-SFOP-ROP measures Sicily Vocational training (part), Employment Agency, Fishery. Control on ROP ESF Mrs. Silvana Balletta 1 Officer: Giuseppe Blando 1 Instructor: Enrico Provenza Control Service No. 11 Control on ESF-ROP measures Sicily Vocational training (part), Public Education. Control on ROP ESF Mr. Maurizio Varia 1 officer Vincenzo Randazzo Page 61 of 80

62 Control Service No. 12 Control on programmes related to PRAI Sicily, Interreg Italy Malta, PIC Leader Plus. Control on Community Initiative Programmes Mr. Michele Nicosia 1 Officer: Maurizio Sinatra 1 Instructor: Antonino Pellerito Control Service Control on ROP-ERDF measures Sicily Budget, Territory, and Environment (part), Urban Planning, Programming, Waste and Water Regional Agency. Mr. 2 Officers: Vincenzo Scaccia No. 13 Control on ROP ERDF Maria Giovanna Tornabene Vincernzo Lo Re Three Auditors deal with the OP of Cross-border Cooperation Italy-Malta Twelve Auditors shall be added to said three: the General Manager in the top position of the Audit Authority, the staff of the Administrative Area and Technical Area in charge, respectively, of the General Services and Technical Services, the staff of the IT System, Security, and Prevention Service, in common with all programmes under the responsibility of the Audit Authority. The same staff, in the above-mentioned organisation, shall be responsible for both monitoring the system, and for checks on sampled operations, and for summary activities. The commitment of this staff for programming - also in consideration of the work volume actually required in the first period shall be initially of 20% of worked days, as the remaining part shall be dedicated to the conclusion and closing of the previous programme period. This rate shall become 100% while the activities related to the programme are completed and the activities related to the programme are implemented. Republic of Malta: The IAID (Internal Audit and Investigation Division) was established in June It received its legal status in July 2003 through the promulgation of the Law on financial audits and Internal Audits (chapter 461) of the laws of Malta regulating some divisions. The main purpose of this law is to ensure the independence of the Internal Audit. The art. 12 of this Law provides that, in the fulfilment of their functions, the officers of the Division are not subjected to any influence or control by the Management Authority. The IAID refers to the IAIB (Internal Audit and Investigation Board) appointed by the Prime Minister and its President is the Government Secretary. The functions of this Office are listed in the art. 9 of the Law on financial audits and Internal Audits and includes the supervision of IAID s work and protection of IAID continuous independence. The IAID also has its own body incorporating sections on the role and purpose of the Division and on the responsibility of the various Divisions. There are no discrepancies between the national legislation and EU legislation with regard to the work of the AUDIT, which shall be performed by the IAID. IAID Organisation Chart: Page 62 of 80

63 Internal Audit and Investigation Division (IAID) IAID 1 Director General 1 Audit Manager 1 Senior Auditor The Director General of Internal Audit and Investigations Division Cabinet Office, Office of the Prime Minister is a member in office of the Group of Controllers. In case of absence or impediment, a substitute member shall be appointed by the Office of the Prime Minister. The following is attached to this document: The Decree No dated 26 February 2009 establishing the Group of Controllers in accordance with the art. 14 paragraph 2 of the Regulation (EC) 1080/2006; The Internal Regulation of the Group of Controllers; The Directive No. 10/2009, reg. No dated 30 September 2009 of the Audit Authority of approval of the manual of Audit procedures and related attachments (check list for the Management Authority, Certification Authority; questionnaire to be submitted to the Management Authority; questionnaire to be submitted to the Certification Authority; visit report at the subject undergoing the Audit); The manual of Audit procedures and relevant attachments (check list for the Management Authority, Certification Authority; questionnaire to be submitted to the Management Authority; questionnaire to be submitted to the Certification Authority; visit report at the subject undergoing the Audit); The Directive No. 8 dated 5 August 2009 through which the OP Audit Strategy of Cross-border Cooperation Italy-Malta CCI 2007 CB 163 PO DEC COM C(2008) dated 27 November 2008, vers. 1 dated August 2009 was approved, which will be adopted by the Government of the Sicilian Region after the term within which the Commission can submit remarks Provisions aimed at ensuring th e independence In accordance with the EU legislation, the Sicilian Regional Council, upon the establishment of the Office through deliberation No. 327 dated 18 December 2000, guaranteed the observance of the independence principle. In practice, the Audit Authority was established by the Regional Council in a way as to be functionally independent from the Management Authority and the Certification Authority. The Management Authority is at the top of a Regional Department (Planning Department); The Certification Authority is at the top of the Special Office Certification Authority for programmes cofunded by the European Commission; The Audit Authority is at the top of the Special Audit Authority Office for programmes co-funded by the European Commission. Each Authority is in a position of juridical parallelism in relation to the others. In fact, the top positions of the respective Authorities have an identical juridical position within the administration (qualification as General Page 63 of 80

64 Manager). The result is that the Audit Authority is functionally autonomous from the Management Authority and the Certification Authority, from the financial point of view and from the point of view of their members. The formal mandate received from the Regional Council allows the Audit Authority, based on the reference European legislation, to perform the institutional functions it is responsible for with full access to data, persons, archives, goods in the scope of the Cross-Border Cooperation Programme Italy-Malta The Audit Authority has its management autonomy and independence from any other office, in relation to the functions assigned in accordance with EU provisions. This autonomy is also confirmed by the assignment to the Office of specific Account Statement chapters, in particular for attendance money/overtime work and missions, which allow the full performance of institutional tasks with no external operation interferences, as they are directly managed. The General Manager is identified by the Sicilian Regional Council, with its deliberation, according to the provisions set forth by the Regional Law No. 10/2000, art. 9, paragraph 5. The protection of the independence and objectivity condition of the Office, at the level of internal control, is assigned to the General Manager. The General Manager shall select the Managers of the various Areas and Services, according to applicable legislation and the Regional Law No. 10/2000. For the purpose of avoiding any conflicts of interest or in order not to be influenced by the audited bodies, the selected Managers, before being assigned to inspections, shall submit a statement to the General Manager indicating that they have not participated in the management and monitoring system or dealt with any operations whatsoever funded in the framework of EU programmes in the scope of their job assignments at the Audit Authority, before their appointment to the Audit Authority. This protects the independence of the Office and guarantees the objectivity in auditing. Like all the staff working at the Office, also the staff of the Department is selected by the General Manager. In fact, before the unit involved is assigned to the Office, the GM shall previously authorise the assignment request. Also in the case of expert consulting, the service shall always be provided with the guarantee of protection of the independence and objectivity of the Office. In fact, any professionals providing their consulting services to the Office shall be totally excluded from the participation, of any kind whatsoever, in programme management, certification, implementation, and evaluation activities, as well as design/implementation of operations funded by said Office. Under the responsibility of the Single Audit Authority, audits to be performed within the Maltese territory shall be dealt with by the IAID (Internal Audit and Investigations Division) of the Maltese Republic, according to the provisions of the internal Regulation of the Group of Controllers. The IAID, as for the other EU programmes concerning Malta, carries out its activities in full functional independence in relation to the Authorities Qualifications or experience required Although no specific professional profile has ever been formalized to have access to the Office, the Managers at the Audit Authority have usually been selected among the Public Managers of the Sicilian Regional Administration who have been at least for 15 years in office, having a specific university degree considered as appropriate and required to perform the audits with the best possible professional skills and diligence, in relation to the fields or macro-processes they were going to be assigned to. The awareness of their appointment and a better audit effectiveness are dependent on such requirements. The Managers were selected by carefully checking for their moral integrity, culture, and capacity requirements, and proper professional experience. All these requirements are necessary and indispensable to ensure the best performance of audit tasks. Some managers are present and work at the Audit Authority from the beginning of its activities (January 2002). Other managers were appointed through the years, due to both the expansion of the Office and to replace others who had retired in the meantime. Several years of audit experience on previous programmes, thorough knowledge of management systems which will mostly be transferred with a similar structure in the new programme will certainly be a valuable background for the audit activities, to ensure continuity, although it has evolved following the new legislation. During the previous seven years, the staff attended training courses, seminars, and meetings. In the perspective of future tasks, said staff attended the training sessions organised by the Formez, in the framework of the Project Traguardi. Other training activities were organised between 2008 and 2009 with the AIIA, focusing on relational techniques, such as Communication in Internal Audit and Techniques of management and organisation of Page 64 of 80

65 interviews in the Internal Audit, or to improve the knowledge on the implementation of international audit standards. The tasks of the General Manager include the Assignment of work plans to the Office staff and Monitoring of the number of units, available professional positions, available financial resources, and progress of activities, to ensure that they are always appropriate to allow the Office achieving the operational objectives institutionally assigned to it and develop the Audit Programme. In this perspective, the number of units, available professional positions in the Office, and financial resources Assigned are consistent and sufficient for the performance of the tasks Assigned so far in relation to the audit activities in the programming period. Seven days/unit should be added to the work units of said Single Audit Authority, as concerns the Maltese Government and in relation to the June-July 2009 and June 2010 period. The staff units of the Maltese Government assigned to System Audit and Sampled Operation Audit tasks have a Certified Public Accountant warrant and a Professional Practice Certification as Auditors. The managers of the Maltese Government who will deal with System Audit and Sampled Operation Audit have a Practicing Certificate in Auditing obtained after at least five years of experience in auditing. The above Maltese staff shall be bound by the code of ethics of public servants and the Code of Ethics for Warrant Holders published by the Accounting Board and Standards for Professional Conduct specifically applicable for IAID employees. The IAID also plans continuous vocational training programmes, taking into account the professional ethics requirements, in particular in the development of the Public Internal Auditor profession Description of procedures to monitor the implementation of recommendations and corrective measures indicated in the audit reports The Audit Authority provides for procedures to check for the implementation of recommendations and corrective measures shown in the audit reports. These procedures are substantially consistent with the principles set forth by EU regulations. The Audit Authority implements follow-up activities aimed at ensuring the adoption of appropriate corrective measures to overcome the critical aspects that appeared during system audits, and ensuring the adoption of corrective and/or improvement measures, including the recovery of unduly provided contributions, due to problems identified during operation audits. The detailed follow-up procedures, whose outcomes will be collected in the annual audit report sent to the European Commission, shall be described in the Audit Manual in annex to the audit strategy. The revocation of the contribution is always under the Management Authority s responsibility. The Management Authority can oppose the audit report. The management of discussion with the Management Authority and follow-up of prescriptions to the Management Authority and the Certification Authority is under the Audit Authority s responsibility. The Audit Authority is specifically responsible for coordinating the deadlines set forth by its procedures with the need for ensuring that the final draft audit report is completed and sent to the Beneficiary, so that the Beneficiary can formulate any remarks before 30 June every year Description of procedures regarding the supervision of the activities of the other Monitoring Authorities The audit planning ensures that the main bodies are monitored and that audits are equally distributed during the entire programme period. In particular, the audit planning provides for annual distribution, subjecting the Management Authority, Certification Authority, and Maltese National Coordination Authority to system audit. The audits are of two types: Audit of programme management and monitoring system, essential to establish the technical parameters of sampling, in accordance with the art. 17 and Annex IV of the Regulation No. 1828/2006. Audit of sampled operations, to measure, with the casual sample, the error rate identified as compared Page 65 of 80

66 with the estimated rate and the extracted expenditure amount considered as irregular in the payment request, and with a possible additional sample, the range of specific factors of systematic risks/critical aspects, to ensure, with the results of the additional sample, a sufficient reliability of the audits. The activities described above, monitored, analysed, and assembled as a whole, subsequently summarised in the annual/final Audit Report, allow the formulation of Annual Advice/Closing Statement, with a reasonable guarantee, concerning the level of effective operation of the programme management and monitoring system. Audit of programme management and monitoring system Said process provides for the review of the level of effectiveness and compliance of a management and monitoring system in relation to the targets of sound financial management and consistency with the EU and national legislation regulating its operation. The purpose of this verification is to assess the reliability of the management and monitoring system through an analysis of risks connected with the various activities (management/relevant control) of the Operational Programme. The system audit will include the annual performance of specific inspections on the IT system of the management and monitoring system implemented with the Control Organisation No. 2 of the Special Office Audit Authority of Programmes co-funded by the European Commission. The IT system shall be analysed under the various aspects: safety, effectiveness, and management efficiency, and design appropriateness. The audit aims at verifying the reliability of IT systems for accounting, monitoring, and financial information (Standard No. 22 INTOSAI; Information Systems Audit and Control Foundation: Control Objectives for Information and related Technology, COBIT, control objectives in the field of information and related technologies). The methodology used and criteria followed to assess the fundamental elements of the system are integrally based on the Subjects to be audited, each of them divided into Key Requirements. The Key Requirements are divided into Evaluation Criteria, identified in the guide and check-lists prepared by the European Commission. The Commission s working group defined four categories for assessing the efficiency of key requirements, authorities, and the system as a whole: It works well, It works, but improvements are necessary, It works partially, and Basically, it does not work. These four categories are systematically used in all parts of the evaluation process. The assessment of the reliability level assigned to the SYSTEM is complementary to the risk level identified for the system. The purpose of the audit is to identify and measure this risk level. The activities that characterize, among the various subjects, the management and monitoring system, are management activities in general, internal audit activities being part of the management activities, audit activities of an independent subject on them (independent, external audit). The cyclical annual audit activities are started by the system audit of the Programme, which is essential to establish the technical parameters of sampling, in accordance with the art. 17 and Annex IV of the Regulation No. 1828/2006. The system audit consists of verifying all the essential aspects of the programme implementation and is developed as follows: Visit at the subject to be audited (Management Authority, Certification Authority), with completion of the relevant report, in which the documents acquired in copy shall be indicated and remarks on implemented processes, audit track, management audits, and detail level of check lists used for said audits shall be described; A list of questions (questionnaire) to be submitted to managers, checked in relation to the legislation implemented, procedures adopted, structure of the competent subject, and any changes; The desk audit ; The authenticity test (also called conformity test ) of audit track of the set of operations referring to the audited subject, originally drawn up and/or in the review of the altered or adjusted one as a result of previously notified critical aspects. In fact, after the documentation regarding the reference legislation and results of any previous audits have been collected, the conformity of the audit track with the implementation procedures of funded operations is checked every year. Page 66 of 80

67 The scope of the inspection activities by the Audit Authority includes all processes indicated, checking for the procedures described in the audit tracks. In other words, the audit tracks show the direction followed by the auditors for audit activities to identify any deviations occurred during the implementation of procedures. Every year, the Audit Authority (for the programming period, this is during the last months of the year N) carries out a system audit on and at the Management Authority and the Certification Authority. A desk audit, carried out on site, provides useful indications about the observance of EU regulations. The authenticity test is carried out on some operations sampled at the moment, during the visit of the system audit, in order to check for the observance of the audit track under the procedural aspect. The system audit ends with general discussion activities at the headquarters of the Audit Authority, for the analysis of any specific critical aspects identified and noted in the check-list, for the evaluation of all indications acquired, to weigh the risks identified, draw up the proposal of corrective measures to be taken: in other words, to assemble and summarize the results of the general system audit work. The results of individual audit lines of the system audit shall be assembled and summarised in one temporary level of system reliability, which can be used as a reference for the entire management and monitoring system of the programme. The results of system reviews shall be provided to the responsible persons, along with the proposals for appropriate corrective measures, recommendations, etc. Subsequently, communications of actions taken and/or counter-deductions shall be expected from responsible persons. After the time assigned for discussion, within the first days of January of the year N+1, has elapsed, the results of individual audit lines of the system audit will be assembled, summarised, rechecked, and possibly reviewed, to be able to express the system reliability level, to be connected with the appropriate confidence level used for random statistic sampling of funded operations. The Programme system audit is preliminary to sampling of operations to be subjected to annual audit. Audit of sampled operations As concerns the documents used to apply the sampling methodology as per article 17, the Audit Authority has developed a specific Manual of sampling methodology for the programming period, vers. 1 dated 5 August 2009, approved with directive of the General Manager No. 7 dated 5 August 2009, and in annex to the Strategy. In summary, the sampling will consist of the following: a. Random sampling, performed in relation to the confidence level, identified on the basis of guarantees provided by the management and monitoring system. Said guarantees shall be checked after the audits on the system, as well as after the audits on operations previously selected, on the year following the first sampling; b. Any additional sampling, based on the professional assessment on the coverage obtained from the random sampling and performed on the basis of the risk assessment identified by the system audit activities and to guarantee the representativeness of the various types of operations. c. Additional sampling will be used in the case of any systematic irregularities identified in the operations selected by the random statistic sampling. To summarize the main information defining the sampling activities carried out by the Audit Authority of the Sicilian Region, the table below is shown, which provides a detailed description of each aspect, in the framework of the Sampling Manual in Annex to the Strategy. Page 67 of 80

68 AUDIT AUTHORITY SICILIAN REGION INFORMATION SHEET RELIABILITY OF THE SAMPLING SYSTEM MANUAL OF SAMPLING METHODOLOGY EU PROGRAMMING PERIOD Assessment of the reliability of the management and monitoring system In conformity with the Guidance on a common methodology for the Assessment of management and control systems in the Member States ( programming period), COCOF 08/0019/00-EN, final version Types: Types of sampling Sampling method Number of annual sampling and Universe (reference period considered for stated expenditure) of statistic random/random sampling A. Random sampling (if the number of operations with expenditure increase declared to the EU during the period taken into consideration is 800) B. Any additional sampling. A. Random Sampling: approximate Poisson Model B. Additional Sampling: based on risk factors, representativeness factors, on surveys concerning systematic errors. Single sampling session, with extraction of operations with expenditure increase declared between 1 st January and 31 st December of the year N. TECHNICAL PARAMETERS (of statistic random Sampling / random Sampling) As identified in Annex IV of the Regulation (EC) No. 1828/2006, in particular: Confidence level between 60% and 90% Relevance threshold 2%. EXTRACTION TECHNIQUE (of statistic random Sampling / random Sampling) Stratified sampling, with proportional allocation of units (as provided for by the art. 17, 2 of the Regulation (EC) No. 1828/06): stratification in operation classes (macroprocesses) and expenditure amount classes. Actual error rate (of statistic random Sampling / random Sampling) Relation between the amount of audited irregular expenditure declared during the year t only selected with random sampling and audited expenditure amount selected from relevant sampling declared during the year anno t only. Procedure to determine the estimated error rate (extrapolation) and corresponding amount of irregular expenditure in the payment request submitted to the European Commission Starting from the actual error rate, through the estimator for expansion of the total irregular expenditure declared. Audit report and Audit advice (annual/closing) Based on the global assessment of overall audit results, in compliance with attachments VI-VII-VIII of the Regulation (EC) No. 1828/2006 and international audit standards INTOSAI (23, 31, 32), IIA (2400, 2410, 2420, 2430, 2440). Page 68 of 80

69 Sampling on year N shall be performed at the end of the system audit on the last payment request submitted to the European Commission resulting as of 31 December of the year N, on the data that the Audit Authority withdraws from the IT accounting system of the Certification Authority of the programme (in practice at the beginning of the year N+1). The number of operations to be sampled (random sampling) for the year N, based on the relevance threshold and confidence level, shall be determined according to the approximate Poisson Model extracted from funded operations, whose expenditure was declared during the year being under auditing process. Additional operations can be selected, if additional audits are required. For further details, see the above-mentioned Sampling Manual. After sampling has been performed, audits on selected operations will start. Through the audits of operations, the legality and validity expenditure being audited shall be checked, based on appropriate and complete checklists, including the checks for the following: The operations shall meet the selection criteria for the Operational Programme. The operations should have been implemented in accordance with the funding assignment decree (in particular, as concerns the co-funding rate and effectiveness of the project), and comply with all applicable conditions concerning their functions and objectives that need to be achieved. The expenditure declared shall correspond to the accounting records and support documentation kept by the Beneficiary. The expenditure declared by the Beneficiary shall comply with national and EU rules (in particular, as concerns eligibility, public evidence procedures, State aids, environment, publicity, and equal opportunities...). The public contribution has been paid to the Beneficiary in accordance with the art. 80 of the Regulation (EC) No. 1083/06, i.e. as quickly as possible and entirely, with no deduction or cost. In the cases the problems identified are of systematic nature, the Audit Authority shall ensure that further checks will be performed to establish the size of such problems. The conclusion of audits on operations shall be, for the expenditure year N, before 30 June of the year N+1 (random statistic sample), as set forth by the audit schedule imposed by the art. 16 of said regulation and art. 62 of the Regulation No. 1083/2006. Within the two months following the conclusion of audits (required to formulate the final outcome of the audit, which is drawn up on the basis of reviews performed and after further analyses of reviewed and/or acquired documentation) and at the latest within 31 August of the year N+1, the Audit Authority shall send a note through which it describes the critical aspects (errors, irregularities, and special recommendations) with a summary again of those referring to the Management and Monitoring System, which have not been solved in the meantime, as well as the critical aspects identified after audits on individual audited sampled operations to the Management Authority and the Certification Authority. The Audit Authority shall also send a summary of any previous critical aspects (identified during previous audit years). At that point, the Audit Authority starts a follow-up for the operations selected and audited during the year, and continues further for previous critical aspects of the previous years. In said note, the critical aspects shall be coded, so that it is possible to identify the specific activities of the Audit Authority that determined the identification from the identification code. The critical aspects are differentiated and classified as follows: - The critical aspects referring to operations, by operation code (which allows identifying the Beneficiary). - By Authority. - By macro-process (public works; acquisition of goods and services; aids to businesses (provision of funds and/or services to individual Beneficiaries), training (specific macro-process for acquisition of goods and services). - By sampled/audited reference expenditure year. - Whether of system (ST). - The critical aspects shall be listed in progressive number sequence (e.g. ST1, ST2,.; OC01, OR02,.). Page 69 of 80

70 - Whether of systematic (SI), or non-systematic (NS) type. The note sent by the Audit Authority should indicate the document identified as affected by critical aspects (e.g. invoice No., date... ), or a missing document due to which critical aspects appear, the legislative/documental reference based on which the critical aspects are identified (e.g., art. 78, par. 1, Regulation (EC) No. 1083/06), and any potential financial impact. For the purpose of providing a solution to critical aspects, said note is sent with a proposal for corrective measures that the subject the critical aspects refer to shall adopt to solve them. The corrective measures proposed include, where applicable, the invitation to the Management Authority to prepare and forward the OLAF sheet. Occasionally, the audit results lead to the provision of recommendations, suggestions, as good practices to be taken into consideration. More in detail, said note consists of the following: > The actual information letter; > Three types of annexes: - Annex 1, with a summary of critical aspects for the system, divided by Authority, macro-process, Department, etc.; - Annex 2, with a summary of critical aspects identified on sampled operations for the year taken into consideration, selected through random statistic sampling, divided according to the indications of the ninth paragraph above (distinction in the case of operations with expenditures certified on several years); the critical aspects identified on operations for additional sampling; - Annex 3, with a summary of previous critical aspects, still persistent (for which no appropriate corrective measures have been adopted and/or no counter-deductions were received), identified on sampled operations in previous years (through both statistic sampling and additional sampling). The document drawn up during generic audit activities, referring to the system or to individual operations checklists, minutes, reports, discussion documents received and/or implementation of corrective measures, and follow-up documentation are entered, kept, and monitored in a specific IT system of the Audit Authority, which is an indispensable tool to quickly obtain summaries for completion, in general, of regular reports. With reference to the SI set forth in this SG&C document, the Audit Authority will feed it for the parts under its competence. In conclusion, for the purpose of guaranteeing the mission set by the Audit Strategy, perform the task of the Audit Authority in the modes and within the deadlines set forth by the EU legislation, the general methodological approach applied to the activities to be carried out is based on the Deming Cycle (PDCA cycle), which is a model studied for continuous quality improvement in a long-term perspective. It is used to promote a culture of quality, which is aimed at continuous process improvement and optimal use of resources. The following figure shows the audit method that considers the audit standards accepted at the international level: Page 70 of 80

71 1 Planning of audit activities (in conformity with the Audit Strategy) 14 Preparation of annual/closing Reports/Advices 2 Performance of System Audit 13 Analysis of final audit results. Summary 3/4/5 Notification of temporary results, discussion/corrective measures. Follow-up. Communication 12 System Audit / Audit of operations: final discussion and final follow-up 6/7 Risk assessment and Sampling. Sample notification 11 Analysis of first results. New invitation to residual corrections or risk acceptance. 8 Audit of sampled operations 9/10 Notification of temporary results. Discussion, first followup. Communication 5.3 Annual audit report and closing statements Description of procedures regarding the completion of the annual audit report and closing statement At the end of the year N+1, at the end of each audit cycle, the Audit Authority shall send the Audit Report and relevant Audit Advice to the subjects involved (Management Authority, Certification Authority). At this stage, they are considered as temporary. The Audit Report and Audit Advice shall be formulated according to the standardized formats (Annexes VI and VII, Regulation (EC) No. 1828), and provided with a short note describing the procedure adopted for completion, appropriate evaluations, and the expectation of convincing justifications, for the purpose of obtaining the maximum possible level of content sharing. The formulation of annual reports is based on the following usual logic process: Analysis of the system by the Audit Authority; Formulation of possible corrective measures by the Audit Authority to the Management Authority and Certification Authority; Collection of counter-deductions and advices by the Management Authority and Certification Authority; Subsequent issuance, by the Audit Authority, of recommendations to be implemented. After discussion (right of the audited body to be listened), the final Annual Audit Reports and Audit Advice shall be drawn up and sent, within 31 December year N+1, to the European Commission (art. 62, par. 1, letter d), points i) and ii), of the Regulation (EC) 1083/2006. The documents prepared by the Audit Authority in the final part of the annual audit are: 1. Annual Audit Report, which shows the results of audit activities carried out during the previous period of twelve months as of 30 June of the year taken into consideration. Said documents shall contain the outcomes of all second level audits carried out in the reference period; 2. Annual Audit Advice, about the effective operation of the management and monitoring system. The Page 71 of 80