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 evolving community of the people of Europe 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 provide the opening word on this joint report by the two supreme audit institutions of neighbouring countries:
"185 million EU citizens (37% of the population) live in border areas.
These areas are usually underdeveloped and peripheral territories, often relics of 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 to 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 programmes are bilateral, but some involve more than two neighbouring countries. "
The programmes last for seven years and receive a total of EUR 5.7 billion from the EU budget.
"The programmes include the following activities: repairing and reconstructing cross-border roads, cycling paths and bridges, investing in cross-border waste management systems, health facilities, research centres, flood prevention measures, etc., joint management of natural sites or development of tourist destinations, development of joint 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 (such as regional authorities, universities or SMEs) come together to implement projects that are 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 come to an end.
Funding is provided on condition that project partners from both sides of the border work together in a way that fulfils at least two of the following four features: 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.
Key attributes of the partnership include: joint choice of lead partner, joint project preparation and application, conclusion of a joint partnership agreement signed by all partners, taking overall responsibility for project implementation by the lead partner, overall support payments being accepted by the lead partner and transferred to the respective project partners.
Eligible projects carried out on the territory of the districts 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 has been 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 spent by the end of 2015.
Financial data on the uptake of EU funds from the Cross-Border Cooperation Operational Programme Czech Republic-Republic of Poland 2007-2013 at the end of 2013 are presented in the table below:
The agreement on cooperation between the 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, following previous mutual meetings at the meeting of the heads of supreme audit institutions of the Visegrad Four, Austria and Slovenia, which took place in Lovasberény, Hungary, in September 2012.
The aim of the cooperation was to check that the implementation of the operational programme was carried out in accordance with the legislation and with binding programming documents or agreements, that the management and control system was functioning reliably, that the objectives of the operational programme were being achieved and that the projects selected were being implemented in accordance with the conditions laid down for the aid granted.
This co-operation took the form of a parallel control, in which the supervisory authorities, on the basis of their legal mandate, independently examined topics the content of which had been jointly discussed beforehand.
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The audit carried out also included elements of a performance audit.
The selected topics were examined on a sample of projects with project partners on both sides of the border.
The checks carried out resulted in audit findings published in the usual way by both authorities.
This joint report is based on the two control conclusions set out in the Annex.
The selected common control sample included six projects (Annex 1) which fall within the support area 1.1 — Strengthening transport accessibility and the support area 2.2 — Promoting tourism development.
Prior to the start of the audit, the uptake of funds from these two areas of support represented more than 60% of the funds reimbursed to beneficiaries by the end of 2012 from the ERDF for all projects implemented under the entire OPPS ČR–POL.
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In addition to the control of a common sample of six projects, the SAO audited a further 13 projects and NIK audited two others (all from support areas 1.1 and 2.2).
The funds paid to beneficiaries of the ERDF, which were audited by the SAO and NIK, totalled €25,362,174 (SAO) and €8,450,784 (NIK).
The audited volume represented 41% of all funds paid to beneficiaries from aid areas 1.1 and 2.2.
MAIN CONTROL CONCLUSIONS
Both inspections carried out independently by the SAO on the Czech side and NIK on the Polish side showed that the level of irregularities identified did not exceed the level of materiality.
Implementation of OPPS ČR–POL, covering the operation of the management and control system and the implementation of selected projects, was successful.
The auditees who were part of the management and control system took steps to limit the risk of misuse of funds and under-use of ERDF funds.
Proof of the effectiveness of the projects implemented under the operational programme is the high level of achievement of the objectives set, which was also supported by the results of the survey of the social evaluation of project implementation.
SUMMARY OF CONTROL RESULTS
A. Evaluation of management and control system
The coordinated approach made it possible to carry out a check of the OPPS ČR–POL management and control system implemented by the following institutions in both countries: the managing authority (Ministry for Local Development of the Czech Republic), the national coordinator (Ministry for Local Development POL) and the controllers (Centre for Regional Development and Voivodship).
At the same time, the coordinated audit allowed for the 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 the activities carried out in relation to the set-up and performance of the functions of the managing authority and the national coordinator, in particular in relation to the setting of the objectives of the programme and the monitoring of the progress made, the evaluation activities and annual reports, the assessment, evaluation, selection and approval of project applications, the absorption of programme funds and the fulfilment of the obligation to publish correct, complete and up-to-date information on subsidies, the control activities of the managing authority, the set-up of the performance of activities and outputs from the audits of the entrusted body and the system for reporting and monitoring irregularities and compliance with it, while the coordination of the OPL was examined.
Furthermore, the activities of the competent authorities in the area of risk analysis and establishment of control plans at the site of project execution were examined and 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 the approval of e.g. supplies of goods and co-financed services, the eligibility of expenditure submitted for reimbursement, while the compliance of the disbursement of these funds and related activities (or parts thereof) with national and EU legislation.
Significant shortcomings were found by the SAO audit in the publication of correct, complete and up-to-date information on the subsidies granted.
In the area of project evaluation and approval, a risk of non-transparency of the process has been identified.
Other weaknesses were found in the setting of monitoring indicators and in the setting of the reporting system for irregularities.
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, which related to the operation of the management and control system in Poland in relation to violations of applicable laws and rules, were not assessed as significant.
These irregularities only had an impact 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 show a discrepancy between the indicators and targets set for individual projects and those defined by the operational programme.
In all the projects audited, the expected results were achieved, the funded activities were implemented and the indicators (measurable parameters) set out in the project applications of the operational programme were met.
The audit conclusions are in line with the outcome of the Social Assessment of Project Implementation survey described below.
An important aspect that the SAO and NIK paid attention to in their conclusions is the limited possibility of an objective evaluation of the performance of the anticipated results of individual projects, taking into account both the objectives of the individual projects and the objectives of the entire operational programme.
On initiative The Supreme Audit Chamber conducted an opinion poll conducted in the summer of 2013 at the site of the implementation of projects selected for the common 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 carried out on both sides of the border between 2,820 respondents, both to the public in Poland in relation to the part of the project carried out by Polish project partners and to the Czech public in relation to the part of the project carried out in the Czech Republic.
The survey covered in particular the suitability, quality, exchange of information, use of funds and social function of projects including investments made.
The number of respondents per project is given in Annex 2.
An assessment of the survey responses indicated that the overall social rating of the projects was good, reaching 4.8 points (on a scale with a maximum of 8 points), meaning that project results were viewed positively by the majority of respondents both in terms of 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 investments in improving the quality of transport and tourism infrastructure, transport accessibility, tourist attractiveness, business conditions, quality of life of citizens and re-establishing contacts between residents of the border region.
On the other hand, the overall assessment of responses indicated a certain difference between the actual level of achievement of objectives/parameters (actual impact rate) and the level expected by respondents.
This difference applies 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 (focus groups) carried out as part of NIK's control on the Polish side, who pointed to the need to implement the projects and confirmed their positive public acceptance and delivery of the expected results.
C. Evaluation of legality of audited projects
The beneficiaries were checked for the consistency of the substantive and time execution of the project with the project application schedule and content, the fulfilment of the set objectives and purpose of the project, the fulfilment of mandatory monitoring indicators, the management of changes in the projects, the handling of potential project revenues, the fulfilment of the obligation to keep a separate accounting record of project transactions, compliance with the ban on project funding from other EU sources, the implementation of the project partnership and compliance with its terms and conditions, the fulfilment of mandatory publicity relating in particular to the dissemination of the sources of EU project funding, compliance with the conditions for eligibility of project expenditure, the selection of contractors and the verification of deliverables delivered.
The total financial value of the deficiencies qualified by the SAO and NIK as expenditure ineligible for EU funding was found to be €85,094.
However, that amount did not exceed the established level of materiality relating to the total audited volume of funds for the sample of projects.
Despite the irregularities found, the SAO and NIK evaluated the implementation of the selected projects positively by the beneficiaries.
In most cases, commitments under the terms of the aid were duly met by the beneficiaries.
The funds intended for the implementation of the audited projects were spent in accordance with EU regulations and national law.
However, seven of the eight beneficiaries audited by NIK were found to be irregular in the implementation of substantive and financial obligations.
These were individual cases of a non-systemic nature and concerned particularly inconsistent preparation of project documentation and breaches of public procurement rules, but did not affect the choice of contractor or the delivery of contractually agreed works.
In only one of all projects audited by NIK, an irregularity found to relate to non-compliance with reporting obligations may qualify as ineligible expenditure, amounting to PLN 43 003 (of which €8 231 funded by the ERDF).
On the other side of the border, the SAO identified ineligible expenditure of CZK 2 098 053 in three of the 19 audited projects (of which €76 863 was funded by the ERDF).
Irregularities included a failure to deliver the materials and works paid for or an expense 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 in particular 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 must also be made to establish such indicators at both programme and project level that allow more reliable verification of the implementation of the identified impacts.
Comments and recommendations from checks carried out on both sides of the border are included in separate audit conclusions of the SAO and NIK on the CD.
COMMUNICATES
The report was drawn up 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.
