Audits of NGO-projects financed by the EU Willy Swartjes European Commission Brussels, 4 March 2009 Overview EU external aid: context + role Audits of external aid projects 2
EU external aid key figures External aid European Commission in 2007 Commitments in million % Total EU budget Totaal EU (Community budget + EDF) for external aid 123.963 10.625 9% Community budget managed / implemented by 4.408 EDF managed / implemented by 3.636 8.044 6% Managed / implemented by other DGs Total 2.581 10.625 3 EU external aid key figures Regional distribution of external aid managed and implemented by in 2007 Commitments in million Payments in million Europe Africa Asia : Middle East Asia: South & Central, Far East America Oceania Developing countries unallocated Total 345 3.260 619 859 760 141 1.746 7.730 123 3.368 467 782 724 51 1.057 6.572 4
EU external aid - organisation DG RELEX Strategies & programmes DG DEV Project Management Cycle incl audits = devolved to delegations Del & Country A Del & Country B Del & Country C Del & Country D Project 1 P 2 P 3 P 4 P 5 P 6 P 7 P 8 P 9 P 10 P 11 P 12 P N Audits of external aid projects 5 EU external aid implementation: Implementation of programmes DG Development (DEV) + DG External relations (RELEX) Organisation => Headquarters Brussels: 5 operational directorates; 4 GEO and one THEMA => EU Delegations > 120 countries outside EU Activities => inter alia education, health, forestry, infrastructure (e.g. roads), water, institutional support Activities => 4 geographical zones + thematic area Project Management Cycle => projects, actions => agreements and contracts AUDIT SCOPE 6
EU external aid implementation: Project Cycle Management Audits external aid projects 7 EU external aid implementation: ORGANISATIONS - PARTNERS => National, regional and local authorities => International organisations : e.g. UN and World bank => Non-state actors: economic and social partners, private sector, civil society sector In principle non-profit organisations AGREEMENTS and CONTRACTS => FINANCING AGREEMENTS => CONTRACTEN: - Grants for actions, projects - Works e.g. roads, buildings - Supplies e.g. medical equipment - Services e.g. technical support and consulting => OTHER: e.g. programme estimates and AWPs NGOs AUDIT SCOPE Grant Contracts 8
- Audits Annual Audit Plan Risk-based audits + mandatory audits launched by Commission services (HQ + Delegations) => new / improved framework as of Oct 2007 => Terms of reference FIN, SYS and FIN &SYS audits => Auditors: framework contracts + specific contracts Mandatory expenditure verifications Grant and fee-based service contracts by beneficiaries / contractors of EC external aid contracts => new / improved framework as of beginning 2006 => ToR expenditure verifications ; concept agreed-upon procedures Audit / verification approach is generic ; no specific approach for NGOs 9 - Audits Objectives of FIN, SYS and FIN & SYS audits For a FIN audit the Auditor expresses an opinion on whether the Financial Report of a project presents, in all material respects, accurately, expenditure actually incurred and revenue received for the project in conformity with agreement terms and conditions; and project funds used, in all material respects, in conformity with the agreement terms and conditions. For a SYS audit the Auditor expresses an opinion on design and operating effectiveness of Internal Control Systems COMPLIANCE WITH AGREEMENT TERMS AND CONDITIONS IS ESSENTIAL 10
- Audits ToR for FIN, SYS and FIN & SYS audits 1&2 Introduction (incl terminology) + engagement context => anx 1 3 Requirements for the Auditor: general principles, membership professional body, qualifications, experience, team composition 4 Standards and guidance - IFAC standards + code of Ethics 5 Objectives 6 Scope : agreement terms and conditions, project, subject: financial report of IC system 7 Audit process and methodology: planning, conduct, documentation, audit evidence and reporting => anx 2 and 3 8 Other matters anx 1 Engagement context key information anx 2 Audit process and methodology anx 3 Model audit report 11 - Audits Objectives of expenditure verifications the Auditor carries out specific procedures The Auditor submits to the beneficiary a report of factual findings with regard to the specific verification procedures performed COMPLIANCE WITH AGREEMENT TERMS AND CONDITIONS IS ESSENTIAL => Focus is on eligibility of expenditure => no assurance expressed by the Auditor 12
- Audits ToR for an expenditure verification of an EU financed grant contract for external actions 1.1 Responsibilities of the parties to the engagement 1.2 Subject of the engagement 1.3 Reason for the engagement 1.4 Engagement type and objective List 1.5 Standards and ethics List of of 1.6 Procedures, evidence and documentation procedures 1.7 Reporting 1.8 Other terms ANX 1 Information about the grant contract ANX 2 List of procedures + guidelines ANX 3 Model report of factual findings 13 - Audits Essential for the Auditor Meet the requirements for Auditors in the ToR Obtain a sufficient understanding of the engagement context : agreement terms and conditions + activities What are the criteria to be audited / verified? What are the expectations of the Commission? Perform the engagement in accordance with the ToR and applicable IFAC Standards + Code of Ethics Report to the Commission in the required format 14
EU external operations and audit European Commission external cooperation programmes http://ec.europa.eu/europeaid/index_en.htm Terms of reference and guidance for audits and related services engagements http://ec.europa.eu/europeaid/work/frameworkcontract/audit2006/terms_of_reference_en.htm 15