Coordinated control of funds earmarked for financing projects implemented under the Operational Programme for Cross-border Cooperation Czech Republic – Republic of Poland 2007–2013
INTRODUCTION
Europe's developing community is a driving force behind cross-border cooperation as an integral part of the wider territorial cooperation that has been part of our lives for the last 20 years.
So let this community give an introduction to this joint report by the two supreme audit institutions of the neighbouring countries:
"185 million EU citizens (or 37% of the population) live in border areas.
These areas are usually underdeveloped and peripheral territories, often a remnant of the darker parts of Europe's history.
The main objective of cross-border cooperation is to help alleviate the existence of borders as administrative, legal and physical barriers and further help develop the dormant potential of border regions.
The programmes cover different border regions: some cover sea basins, others inland borders within the EU or borders shared with candidate countries.
Most of the programmes are bilateral, but some include more than two neighbouring countries. “
The programmes run for seven years and receive a total of €5.7 billion from the EU budget.
‘The programmes include the following activities: repairing and rebuilding cross-border roads, cycle paths and bridges, investing in cross-border waste management systems, health facilities, research centres, flood control measures, etc., joint management of natural sites or development of tourist destinations, development of common services for the local population, advice on employment issues, creation of thematic networks and clusters for innovation.
Support from the programme is provided on condition that organisations from both sides of the border (e.g. regional authorities, universities or SMEs) come together to implement projects based on the needs of the border region.
Representatives of cooperating regions, relevant ministries and other local partners meet regularly to decide which projects will be supported.
This system should lead to a sustainable form of cooperation even after the programme itself has ended.
The funding is provided on condition that project partners from both sides of the border cooperate in a way that fulfils at least two of the following four elements: joint preparation, joint implementation, joint staff, joint financing. “
Under the partnership, the tasks and responsibilities for the preparation, implementation, financing and control of project activities are clearly defined and distributed to the relevant partners.
The main attributes of the partnership are: joint selection of the lead partner, joint preparation of the project and the application, conclusion of a joint partnership agreement signed by all partners, assumption of overall responsibility for the implementation of the project by the lead partner, total support payments received by the lead partner and transferred to the relevant project partners.
Eligible projects implemented on the territory of regions and voivodships adjacent to the common border may be supported.
OBJECTIVES AND SCOPE OF CONTROL
On 11 December 2007, the European Commission (EC) approved the Operational Programme for Cross-Border Cooperation Czech Republic – Republic of Poland 2007–2013 (OPPS ČR–POL).
€258,187,467 was earmarked for the implementation of the operational programme.
The total included a contribution from European Funds (ERDF) totalling €219,459,344 (85%) which must be used by the end of 2015.
The financial data on the absorption of EU funds from the Operational Programme Cross-border Cooperation Czech Republic – Republic of Poland 2007-2013 at the end of 2013 are presented in the following table:
The agreement on the cooperation of supreme audit institutions of the Czech Republic (SAO) and the Republic of Poland (NIK) was concluded by the presidents of both authorities on 27 February 2013 after previous mutual negotiations at the meeting of the heads of supreme audit institutions of the Visegrad Four, Austria and Slovenia, which took place in September 2012 in Lovasberény, Hungary.
The aim of the cooperation was to verify that the implementation of the operational programme is carried out in accordance with the legislation and with the binding programming documents or agreements, that the management and control system functions reliably, that the objectives of the operational programme are achieved and that the selected projects are implemented in accordance with the established conditions of the support provided.
This cooperation took the form of a parallel audit, in which the audit authorities independently examined, on the basis of their statutory mandate, subjects whose content had been discussed jointly beforehand.
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The audit carried out also included elements of a performance audit.
The selected topics were tested on a sample of projects at project partners on both sides of the border.
As a result of the checks carried out, the audit conclusions were published in the usual way by both authorities.
On the basis of the two audit conclusions set out in the Annex, this Joint Report was established.
The selected joint control sample included six projects (Annex 1) under aid area 1.1 — Strengthening transport accessibility and aid area 2.2 — Promoting tourism development.
Before the start of the audit, the drawing of funds from these two areas of support represented more than 60% of the funds paid to the beneficiaries by the end of 2012 from the ERDF for all implemented projects within the whole OPPS CR-POL.
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In addition to the auditing of a joint sample of six projects, the SAO audited another 13 projects and the NIK audited two others (all from the support area 1.1 and 2.2).
The funds paid to the beneficiaries from the ERDF, which were audited by the SAO and NIK, totalled 25,362,174 € (SAO) and 8,450,784 € (NIK).
The audited volume accounted for 41 % of the total amount paid to beneficiaries from aid areas 1.1 and 2.2.
MAIN CONTROL CONCLUSIONS
Both audits carried out independently by the SAO on the Czech side and NIK on the Polish side showed that the level of identified irregularities did not exceed the level of significance.
Implementation of the OPPS CR–POL, including the operation of the management and control system and implementation of selected projects, was successful.
The auditees, which were part of the management and control system, took steps to reduce the risk of misuse of funds and non-use of ERDF funds.
Proof of the effectiveness of the implemented projects under the operational programme is the high level of achievement of the set objectives, which was supported by the results of the survey of the social evaluation of the implementation of the projects.
SUMMARY OF CONTROL RESULTS
A. Evaluation of the management and control system
The coordinated approach made it possible to check the management and control system of the OPPS CR-POL implemented by the following institutions in both countries: the managing authority (Ministry of Regional Development of the Czech Republic), the national coordinator (Ministry of Regional Development of the Czech Republic) and the controllers (Centre for Regional Development and Voivodship).
At the same time, the coordinated audit allowed an evaluation of the tasks and functions carried out by the Joint Technical Secretariat and the Monitoring Committee.
During the evaluation of the management system, the audit focused on activities carried out in connection with the setting up and performance of the functions of the managing authority and the national coordinator, in particular in connection with the setting of the objectives of the programme and the monitoring of the progress achieved, evaluation activities and annual reports, the assessment, evaluation, selection and approval of project applications, the drawdown of programme funds and the fulfilment of the obligation to publish correct, complete and up-to-date information on grants, the control activities of the managing authority, the setting of the performance of activities and the results of the audits of the delegated body and the system of reporting and monitoring of irregularities and its compliance.
Furthermore, the work of the competent authorities in the area of risk analysis and the drawing up of control plans at the site of project implementation was examined and the evaluations of project applications carried out by independent evaluators were assessed.
The examination of the control system included a review of the administrative and on-the-spot checks that allowed for the approval of e.g. deliveries of goods and co-financed services, the eligibility of expenditure submitted for reimbursement, as well as the compliance of the disbursement of these funds and the related activities (or parts thereof) with national and EU legislation.
Significant deficiencies were found by the SAO audit in the area of publishing correct, complete and up-to-date information about the grants provided.
In the area of project evaluation and approval, a risk of non-transparency of this process has been identified.
Further shortcomings were identified in the setting of monitoring indicators and in the setting of the irregularity reporting system.
Based on these findings, the Supreme Audit Office assessed the control and management system implemented by the managing authority as partially effective.
The irregularities identified by NIK relating to the functioning of the management and control system in Poland in relation to violations of the applicable laws and rules were not assessed as significant.
These irregularities had an impact only on individual projects and did not have a significant impact on the implementation of the entire OPPS CR-POL.
Despite the identified discrepancies, NIK assessed the functioning of the system positively.
B. Evaluation of project results
The audit did not reveal any discrepancy between the indicators and targets set for each project and those defined by the operational programme.
In all audited projects, the expected results were achieved, the funded activities were implemented and the indicators (measurable parameters) set in the project applications of the operational programme were met.
The audit conclusions are in line with the result of the survey of the societal evaluation of project implementation described below.
An important aspect that the SAO and NIK addressed in their conclusions is the limited possibility of objective evaluation of the performance of the projected results of individual projects with regard to the objectives of individual projects as well as the objectives of the entire operational programme.
On initiative A public opinion survey was conducted by the Supreme Audit Chamber and was carried out in the summer of 2013 at the place of implementation of the projects selected in the joint control sample.
The survey and its evaluation were carried out by the School of Higher Vocational Education in Nysa (Poland).
In agreement with the Supreme Audit Office, the survey was conducted on both sides of the border between 2 820 respondents, both for the public in Poland in relation to the part of the project implemented by Polish project partners and for the Czech public in relation to the part of the project implemented in the Czech Republic.
The survey covered in particular the appropriateness, quality, information exchange, use of funds and the social function of the projects, including the investments made.
The number of respondents for each project is given in Annex 2.
The assessment of the survey responses indicated that the overall societal rating of the projects was good at 4.8 points (on a scale with a maximum of 8 points), which means that the results of the projects were viewed positively by the majority of respondents both in terms of the objectives and the other parameters set out in the project applications.
According to the respondents, the projects examined fulfilled the criteria expressed in the operational programme.
Respondents also noted the positive impact of investments on improving the quality of transport and tourism infrastructure, transport accessibility, tourist attractiveness, business conditions, quality of life of citizens and the renewal of contacts between residents of the border region.
On the other hand, the overall assessment of the responses indicated a certain difference between the actual level of achievement of the objectives/parameters (actual impact rate) and the level expected by the respondents.
This difference relates to the evaluation of the results of individual projects, where in some cases there is a significant difference.
The results of the survey were in line with the views of the participants in the panel discussions (target groups) carried out in the framework of the NIK audit on the Polish side, who pointed to the need to implement the projects and confirmed their positive public acceptance and the fulfilment of the expected results.
C. Evaluation of legality of audited projects
Beneficiaries of the aid were checked for compliance of the material and temporal implementation of the project with the timetable and content of the project application, fulfilment of the stated objectives and purpose of the project, fulfilment of binding monitoring indicators, management of changes in projects, handling of potential project revenues, fulfilment of the obligation to keep separate accounting records of project transactions, compliance with the prohibition of financing projects from other EU sources, implementation of the project partnership and compliance with its conditions, fulfilment of the obligatory publicity concerning in particular the dissemination of knowledge of sources of financing projects from the EU, compliance with the conditions of eligibility of project expenses, selection of contractors and verification of contracted services.
The total financial value of the deficiencies classified by the SAO and NIK as ineligible expenditure from EU funds was found to amount to € 85,094.
However, this amount did not exceed the materiality level established for the total volume of funds audited for the sample of projects.
Despite the detected irregularities, the SAO and NIK evaluated the implementation of the selected projects positively.
In most cases, the commitments under the terms of the aid were duly implemented by the beneficiaries.
The funds earmarked for the implementation of the audited projects were spent in accordance with EU regulations and national law.
However, seven out of the eight beneficiaries audited by NIK were found to have irregularities in the implementation of their material and financial obligations.
These were individual cases of a non-systemic nature, involving particularly inconsistent preparation of project documentation and breaches of public procurement rules, but which had no impact on the choice of contractor or the delivery of contractually agreed works.
Only in one of all projects audited by NIK can an irregularity detected relating to non-compliance with reporting obligations be classified as ineligible expenditure, amounting to PLN 43 003 (of which EUR 8 231 financed by the ERDF).
On the other side of the border, the SAO identified ineligible expenditure amounting to CZK 2,098,053 in three of the 19 projects audited (of which EUR 76,863 were financed by the ERDF).
Irregularities included failure to deliver the materials and works paid or expenditure for the modernisation of a property owned by a person who was not linked to the project either as a beneficiary of the aid or as a project partner.
RECOMMENDATIONS
The joint recommendation of the SAO and NIK concerns the improvement of the monitoring system, especially with regard to the consistent setting of proper monitoring indicators for all specific objectives of the priority axis of the operational programme.
In general, efforts should also be made to establish such indicators at programme and project level that allow a more reliable verification of compliance with the identified impacts.
Comments and recommendations resulting from inspections carried out on both sides of the border are included in separate audit conclusions of the SAO and NIK on CD.
COMMUNICATIONS
The report was drawn up in Czech, English and Polish and signed by the presidents of the supreme audit institutions of the Czech Republic and the Republic of Poland.
