Coordinated audit of the funds earmarked for the funding of projects implemented within the Operational Programme Cross-Border Cooperation the Czech Republic – Poland 2007–2013
INTRODUCTION
The developing union of people of Europe is the driving force behind the cross-border cooperation as a part of broader territorial cooperation that has been with us for more than 20 years by now.
Let it provide itself the introduction into this joint report of supreme audit institutions of two close countries:
“185 million EU citizens, or 37% of the population, live in border areas.
These are often peripheral, underdeveloped or marginalised areas- sometimes the borders are historical scars.
The main aim of cross-border cooperation is to reduce the effect of borders as administrative, legal and physical barriers, tackle common problems and exploit untapped potential.
The programmes cover a variety of border regions: some work with maritime areas, others with internal EU land borders or borders shared with candidate countries.
Most programmes are bilateral, but some consist of more than two neighbouring countries (e.g. South Baltic programme).
The programmes last for seven years. It should be noted that there is EUR 5.7 billion in total earmarked for all programmes in this period.
“The programme activities include: Repairing and (re)building cross-border roads, cycle paths or bridges; Investing in cross-border waste systems, medical equipment, research centres, anti-flood measures, and so on; Managing jointly natural or tourism sites; Developing common services for the local population; Advising on employment issues; and Creating thematic networks and clusters for innovation.
The funding is granted on condition that organisations from both sides of the border, such as regional authorities, universities and small and medium enterprises, come together to implement projects based on the needs of the border region.
Representatives of cooperating regions, thematic ministries and other local partners meet regularly and decide which projects are going to be supported.
This unique structure is supposed to lead to sustainable collaboration that continues long after the programme ends.
The funding is granted on condition that partners from both sides of the border work together and fulfil at least two of the following conditions: common financing, common staffing, common preparation and common implementation of the project.”
Within the partnership framework, the tasks and responsibility for preparation, implementation, financing and control of project activities are clearly defined and distributed among the respective partners.
The following are main attributes: joint selection of leading partner; joint preparation of project and applications; making of joint agreement of partnership signed by all partners; overtaking of complete responsibility for project implementation by leading partner; total support payments received by leading partner who completes their transfer to respective project partners.
The support can be granted to eligible projects implemented in the regions and voivodeships adjacent to the joint border.
AUDIT OBJECTIVES AND SCOPE
On 11 December 2007 the European Commission approved the Operational Programme Cross-Border Cooperation the Czech Republic – Poland 2007–2013 (OP CBC CZ-PL).
EUR 258 187 467 was allocated for the implementation of the Operational Programme.
This amount included the contribution of EU funds (ERDF funds) in the total amount of EUR 219 459 344 (85%) which must be settled by the end of 2015.
Financial data related to the drawdown of EU resources from the Programme as of the end of the year 2013 are presented in the following table:
The Agreement of Cooperation between the Czech Supreme Audit Office (NKU) and the Supreme Audit Office of Poland (NIK) was signed on 27 February 2013 after previous deliberations at the meeting of the heads of the supreme audit institutions of Visegrád countries, Austria and Slovenia in Lovasberény in Hungary in September 2012.
The objective of the cooperation was to verify whether the OP CBC CZ-PL is being implemented in accordance with legal regulations and with obligatory programme documents or agreements, the management and control system is reliable, the objectives of the Operational Programme are reached, and selected projects are implemented in accordance with the obligatory criteria set in the grant agreements or decisions.
The cooperation took the form of a parallel audit during which the supreme audit institutions, in compliance with their mandate, verified independently the topics which were previously discussed by both sides.
It had a character of compliance audit focusing on the implementation of OP CBC CZ-PL.
The completed audit had also elements of performance audit.
The selected topics were verified on the sample of projects at the project partners on both sides of the border.
The results of the executed audits were audit reports published independently by both institutions in regular manner.
This joint report was prepared on the basis of these audit reports.
The selected joint audit sample included six projects (see attachment 1) which fall under the intervention area 1.1 – Strengthening of transport accessibility and intervention area 2.2 – Tourism development support.
Prior to the beginning of the audit, the drawdown of the financial resources from these two areas of support represented more than 60% of financial resources paid out to beneficiaries until the end of the year 2012 from the ERDF for all implemented projects within the OP CBC CZ-PL.
In total, amounts of EUR 39 748 636 and EUR 42 714 548 were paid out in the intervention areas 1.1 and 2.2, respectively.
Apart from the audit of a common sample of six projects, the NKU conducted audits of 13 other projects and NIK audits of two additional projects (all of them in areas 1.1 and 2.2).
The financial means paid to beneficiaries from the ERDF that were audited by NKU and NIK amounted to EUR 25 362 174 and EUR 8 450 784, respectively.
The audited amount represented 41% of the financial means paid to the beneficiaries in the intervention areas 1.1 and 2.2.
THE MAIN AUDIT CONCLUSION
Both audits carried out by the NKU on the Czech side and by the NIK on the Polish side of the border have shown that the level of identified irregularities did not exceed the materiality threshold.
The implementation of the OP CBC CZ-PL, including the management and control system performance and the realization of selected projects, was successful.
Actions taken by the audited entities established within the management and control system, limited the risk of improper expenditure of funds, as well as the possibility of failure to utilise the available ERDF funds.
What indicates the effectiveness of the operations carried out within the Operational Programme is a high level of achievement of the results, which was also confirmed by the social evaluation of projects´ completion.
SUMMARY OF THE AUDIT RESULTS
A. Assessment of the management and control system
The coordinated approach allowed carrying out an audit of the management and control system of OP CBC CZ-PL implemented by institutions of both countries: Managing Authority (Ministry of Regional Development of the Czech Republic), National Coordinator (Ministry of Regional Development of Poland), Comptrollers (Centre for Regional Development and Voivodes).
The audit also allowed for evaluation of tasks and functions performed by the Joint Technical Secretariat and the Monitoring Committee.
During the assessment of the management system, the focus was on the set-up and performance of the Managing Authority and National Coordinator functions, particularly on the programme objectives set-up and monitoring of the progress, evaluation and annual reports, assessment, review, selection and authorisation of project applications, Operational Programme resources drawdown, publishing of correct, complete and up-to-date information about grants, on the control activity of the Managing Authority, set-up and performance of commissioned audit entity, on the management and reporting of irregularities and coordination of tasks and cooperation between institutions taking part in the Operational Programme.
Furthermore, the activity of the respective authorities was audited in the area of risk analysis and the control plan design related to the on-the-spot checks. The evaluations of project applications carried out by independent experts were also scrutinised.
The audit of the control system included verification of on-the-spot and administrative checks which enabled confirmation of e.g. the products delivery and co-financed services, eligibility of the expenditure declared for reimbursement, as well as the compliance of such expenditure and related operations (or their parts) with EU and national regulations.
The NKU found significant shortcomings in the area of publishing correct, complete and up-to-date information about provided grants.
In the area of projects assessment and authorisation, the risk to the transparency of the process was identified.
Further shortcomings were found in the area of monitoring indicators set-up and in the set-up of system for reporting irregularities.
Based on the findings, the NKU evaluated the management and control system implemented by the Managing Authority as partially effective.
The irregularities, identified by the NIK, related to management and control system functioning in Poland concerning both violation of existing law and the lack of regularity in the undertaken activities were not evaluated by the NIK as material.
The results of these irregularities concerned individual projects and did not crucially influence the implementation of the OP CBC CZ-PL.
Despite the identified irregularities, the NIK evaluated the system functioning positively.
B. Evaluation of project effects
The audit has shown no inconsistency between the indicators and objectives set for each project and those included in the Operational Programme.
In all the audited projects the expected results were achieved, the activities supported by funding have actually been executed; indicators (measurable parameters) set in the project applications for the Operational Programme funding have been achieved.
These audit conclusions are in agreement with the results of the public opinion poll, the realization of which is described further in this chapter.
The important aspect, which both the NKU and NIK paid attention to in their audit reports, is the reduced possibility of objective verification of the achievement of assumed effects of individual projects, both when it comes to the objectives of individual projects, as well as of the whole Operational Programme.
The NIK initiated a public opinion poll which took place in the summer of 2013 in the location of the projects implementation.
The poll and its evaluation were carried out by the School of Higher Vocational Education in Nysa (Poland).
After the agreement with the NKU, a survey was carried out on both sides of the border on a sample of 2 820 people, i.e. both among the public in Poland in relation to the part of the project implemented by Polish project partners and among the public in the Czech Republic in relation to the part of the project implemented in the Czech Republic.
The survey particularly concerned the validity, quality, interaction, resource utilization and social functionality of projects, including the investments.
The number of respondents at the individual projects is presented in the attachment 2.
The analysis of the poll responses indicates that the total social evaluation of final projects was good and averaged 4.8 (on a scale up to 8 pts.), which means that their impact has been positively assessed by the majority of respondents, both according to the objectives as well as other parameters declared in applications.
According to the respondents the surveyed projects met the criteria formulated within the Operational Programme.
Respondents have noticed the positive impact of investment on improvement of the quality of transport and tourism infrastructure, transport accessibility, touristic attractiveness, the entrepreneurial conditions, quality of life of inhabitants, the resumption of contacts between the inhabitants of the border region.
On the other hand, the overall evaluation of responses indicates the difference between the actual level of achievement of the objectives/parameters (the actual level of impact), and the level expected by respondents.
This also applies to the assessment of the individual effects; in some cases the difference is significant.
The results of the survey were consistent with the opinions of the participants of panel discussions (focus groups), carried out within the NIK audit on the Polish side, who pointed to the need of the implementation of projects and confirmed their positive public perception and the achievement of the expected results.
C. Assessment of legality of audited projects
At the beneficiary level, the audit focused particularly on material and timely implementation of a project and the compliance with the schedule and contents of the project application, fulfilment of project pre-set goals and objectives and mandatory monitoring indicators, management of project amendments, handling of potential project revenues, identification of project transactions, prohibition of cross-financing from various EU resources, implementation of the project partnership and fulfilment of its conditions, required publicity related mainly to advertising the role of EU financial resources, eligibility of project expenditure and public procurement process.
The total financial amount of ascertained shortcomings qualified by NIK and NKU as expenditure ineligible for the support from EU funds was EUR 85 094.
The amount however did not exceed the materiality threshold set in relation to the total volume of audited financial resources in the sample of projects.
Despite the identified irregularities, the NIK and the NKU evaluated positively actions taken by the beneficiaries for the implementation of selected projects.
In the vast majority of cases, the obligations arising from contracts for financing were properly implemented by the beneficiaries.
The funds for the implementation of the audited projects were expended in accordance with the provisions of the EU and national law.
However, in seven out of eight audited beneficiaries audited by the NIK, the irregularities were found in the implementation of material and financial responsibilities.
These were individual cases of non-system nature and concerned in particular the unreliable preparation of tender documentation and infringement of the regulations of public procurement, but without effect on the selection of contractor or delivery of contracted works.
Only in one of all the projects audited by NIK, irregularity, which concerned non-compliance with reporting obligations, may result in the assessing the expenditure in the amount of PLN 43 003 as ineligible (of which EUR 8 231 were financed from ERDF).
On the other side of the border, the NKU identified in three out of 19 audited projects ineligible expenditure in the amount of CZK 2 098 053 (out of which EUR 76 863 were financed from ERDF).
The irregularities included non-delivery of financed material and works and expenditure for upgrading a property in the ownership of a party unrelated to the project (either as a project beneficiary or a partner).
RECOMMENDATIONS
A common recommendation of the NKU and the NIK concerns an improvement of the monitoring system specifically by consistent assignation of proper monitoring indicators for all specific objectives of priority axis of the Operational Programme.
Generally, it is also necessary to aim for designing monitoring indicators both on the programme and project level which would enable more operative verification of the achievement of set effects.
Remarks and recommendations resulting from the audits carried out on both sides of the border are included in the separate audit reports of NKU and NIK on CD.
COMMUNIQUÉ
The report has been drawn up in Czech, English and Polish and signed by the Presidents of supreme audit institutions of the Czech Republic and Poland.
