Coordinated control of funds earmarked for financing projects implemented under the Cross-Border Cooperation Operational Programme Czech Republic – Republic of Poland 2007-2013
INTRODUCTION
The developing community of Europe's population 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 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 relic 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 maritime areas, others inland borders within the EU or borders shared with candidate countries.
Most programmes are bilateral, but some also cover 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: repairs and reconstruction of cross-border roads, cycle paths and bridges, investment in cross-border waste management systems, medical facilities, research centres, flood control measures, etc., joint management of natural sites or development of tourist destinations, development of common services for local populations, advice on employment issues, creation of thematic networks and clusters for innovation.
Support from the programme is provided on the condition that organisations from both sides of the border (e.g. regional authorities, universities or SMEs) come together to carry out projects based on the needs of the border region.
Representatives of the cooperating regions, relevant ministries and other local partners meet regularly and decide which projects are to be supported.
This system should lead to a sustainable form of cooperation even after the programme itself ends.
Funding is provided on the condition that project partners from both sides of the border work together in a way that fulfils at least two of the following four characteristics: joint preparation, joint implementation, joint staff, joint financing.’
Within 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 choice of the lead partner, joint project preparation and applications, conclusion of a joint partnership agreement signed by all partners, assumption of overall responsibility for project implementation by the lead partner, total payments of support are received by the lead partner and transferred to the respective project partners.
Eligible projects implemented on the territory of the 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 € were earmarked for the implementation of the Operational Programme.
The total amount 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 drawdown of EU funds from the Operational Programme for Cross-Border Cooperation Czech Republic – Republic of Poland 2007–2013 at the end of 2013 are presented in the following table:
The Agreement on Cooperation between Supreme Audit Institutions of the Czech Republic (SAIs) and the Republic of Poland (SAIs) 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 whether the implementation of the Operational Programme proceeds in accordance with legal regulations and with binding programming documents or agreements, whether the management and control system works reliably, whether the objectives of the Operational Programme are achieved and whether the selected projects are implemented in accordance with the established conditions of the provided support.
This cooperation took the form of a parallel audit, in which the Audit Authorities, based on their legal mandate, independently examined topics whose content had been jointly discussed beforehand.
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The audit also included elements of a performance audit.
The selected topics were examined on a sample of projects at project partners on both sides of the border.
The results of the audits were audit conclusions published in the usual manner by both Authorities.
Based on the two audit conclusions mentioned in the annex, this joint report was created.
The selected joint audit sample included six projects (Annex 1) which fall within the support area 1.1 – Strengthening transport accessibility and support area 2.2 – Supporting tourism development.
Before the start of the audit, the drawing of funds from these two support areas represented more than 60% of the funds reimbursed to 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 audit of a joint sample of six projects, the SAO audited another 13 projects and NIK audited another two (all from the support area 1.1 and 2.2).
The funds paid to beneficiaries from the ERDF, which were audited by the SAO and NIK, totalled 25,362,174 € (SAO) and 8,450,784 € (NIK).
The audited amount of funds represented 41% of all funds paid to beneficiaries from the support areas 1.1 and 2.2.
MAIN 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 functioning of the management and control system and the implementation of selected projects, was successful.
The audited persons, who were part of the management and control system, took steps to reduce the risk of misuse of funds and non-use of the provided funds from the ERDF.
Proof of the effectiveness of the implemented projects under the operational programme is the high level of achievement of the stated objectives, which was supported by the results of the survey of the social evaluation of the implementation of the projects.
SUMMARY OF THE RESULTS OF THE CONTROL
A. Evaluation of the management and control system
The coordinated approach made it possible to carry out the control of the management and control system of the OPPS CR–POL implemented by the following institutions in both countries: the managing authority (Ministry for Regional Development of the CR), the national coordinator (Ministry for Regional Development of the POL) and the controllers (Centre for Regional Development and Voivodship).
At the same time, the coordinated audit made it possible to evaluate 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 and performance of the functions of the managing authority and the national coordinator, especially in connection with the setting of programme objectives and monitoring of the achieved progress, evaluation activities and annual reports, the assessment, evaluation, selection and approval of project applications, drawing of programme funds and fulfilling the obligation to publish correct, complete and up-to-date information on grants, the control activities of the managing authority, setting of performance of activities and outcomes from audits of the delegated audit body and with the system of reporting and monitoring of irregularities and its compliance, at the same time, the coordination of tasks and cooperation between institutions involved in the OPPS CR–POL was examined.
Furthermore, the activities of the competent authorities in the area of risk analysis and drawing up of control plans at the place of implementation of projects were examined and evaluations of project applications carried out by independent evaluators were assessed.
The audit system included a review of administrative and on-the-spot audits, which allowed approval of e.g. deliveries of goods and co-financed services, eligibility of expenses submitted for reimbursement, and compliance of the disbursement of these funds and 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 on the provided subsidies.
In the area of evaluation and approval of projects, a risk of non-transparency of this process was found.
Other deficiencies were found in the area of 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.
Irregularities found by the NIK, which related to the functioning of the control and control system in Poland in relation to violations of applicable laws and rules, were not evaluated as significant.
These irregularities had an impact only on individual projects and did not have a significant impact on the implementation of the whole OPPS CR–POL.
Despite the identified irregularities, the NIK evaluated the functioning of the system positively.
B. Evaluation of project results
The audit did not show a discrepancy between indicators and objectives set for individual projects 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 results of the survey of the social evaluation of project implementation described below.
An important aspect that the SAO and the SAI paid attention to in their conclusions is the limited possibility of objective evaluation of the fulfilment of the expected results of individual projects with regard to the objectives of individual projects and at the same time to the objectives of the entire Operational Programme.
On the initiative of the Supreme Audit Chamber, a public opinion survey was carried out in the summer of 2013 at the place of implementation of projects selected in the joint audit sample.
The survey and its evaluation were carried out by the School of Higher Vocational Training in Nysa (Poland).
In agreement with the Supreme Audit Office, the survey was carried out on both sides of the border between 2,820 respondents, both among the public in Poland in relation to the part of the project implemented by Polish project partners and among the Czech public in relation to the part of the project implemented in the Czech Republic.
The survey mainly concerned the suitability, quality, exchange of information, use of funds and social function of projects including the implemented investments.
The number of respondents for individual projects is given in Annex 2.
The assessment of the survey responses indicated that the overall social rating of the projects was good and reached 4.8 points (on a scale with a maximum of 8 points), which means that the results of the projects were positively perceived by the majority of respondents both in terms of the objectives and other parameters mentioned in the project applications.
According to respondents, the projects examined fulfilled the criteria expressed in the operational programme.
Respondents also noted the positive impact of the investments on improving the quality of transport and tourism infrastructure, transport accessibility, tourist attractiveness, business conditions, quality of life of citizens and resumption 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 fulfilment of the objectives/parameters (the actual level of impact) and the level expected by respondents.
This difference relates to the evaluation of the results of individual projects, where in some cases there is a significant difference.
The survey results were in line with the opinions of participants of panel discussions (target groups) carried out as part of the NIK audit on the Polish side, who pointed out the need for the implementation of the projects and confirmed their positive acceptance by the public and the fulfilment of the expected results.
C. Evaluation of legality of audited projects
The beneficiaries were checked for compliance of the material and time 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 the projects, treatment 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 awareness of the sources of financing projects from the EU, compliance with the conditions of eligibility of project expenses, selection of contractors and verification of the delivered fulfilment on the basis of the awarded public contracts.
The total financial value of the deficiencies classified by the SAO and NIK as ineligible expenditure from EU funds was found to be 85,094 €.
However, this amount did not exceed the stated level of materiality related to the total audited volume of funds for the sample of projects.
Despite the detected irregularities, the SAO and the SAI evaluated the implementation of selected projects positively by the beneficiaries.
In most cases, the commitments resulting from the conditions of support were duly fulfilled by the beneficiaries.
The funds intended for the implementation of audited projects were spent in accordance with EU regulations and national law.
Nevertheless, seven out of eight beneficiaries audited by the SAI were found to have irregularities in the implementation of material and financial commitments.
These were individual cases of a non-systemic nature and related to particularly inconsistent preparation of project documentation and breaches of public procurement rules, which did not have an impact on the selection of the contractor or the delivery of contractually agreed works.
In only one of all projects audited by NIK, the irregularity found, which related to the non-fulfilment of reporting obligations, can be classified as ineligible expenditure, amounting to 43 003 PLN (of which 8 231 € financed by the ERDF).
On the other side of the border, the SAO identified ineligible expenditure amounting to 2 098 053 CZK (of which 76 863 € financed by the ERDF) in three of the 19 projects audited.
Irregularities included the non-delivery of paid materials and works or expenditure for the modernisation of a property owned by a person who had no connection 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, in particular with regard to the consistent establishment of proper monitoring indicators for all specific objectives of the priority axis of the operational programme.
In general, it is also necessary to strive for the establishment of such indicators at the programme and project level, which will allow more reliable verification of the fulfilment of the determined 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 the SAI on CD.
COMMUNICATIONS
The report was prepared in Czech, English and Polish languages and signed by the presidents of the supreme audit institutions of the Czech Republic and the Republic of Poland.
