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Avec la participation de l Union
Européenne Programme cofinancé par le FEDER
INTERREG IIIB 2000 - 2006 ATLANTIC
AREA Weaknesses identified within the UK
financial management and control
systems EUROPEAN COMMISSION SPAIN FRANCE
IRELAND PORTUGAL UNITED KINGDOM
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Systems audit June 2006

• General assessment of UK system- key points
• 1 The outsourcing mechanism (for article 4
  checks) does have several weaknesses
• Possibility of using the partners internal
  auditors where they are outside the project
  funded and they have the necessary diplomas
• There are no procedures for ensuring that
  auditors are aware of the certification guide
  produced by the national authority

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Systems audit June 2006

• General assessment of UK system- key points
• 2 Additions are necessary to certification
  guidelines
• Reminder of the principle of comprehensive
  controls and the implementation of a procedure
  for informing the NC and/or the Managing
  Authority of the implementation of sampling.
• Need for a control on any revenue resulting from
  the project

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Project audits 2006/2007

• Main weaknesses identified on project level
• SDEA (Spain, France)
• Expenditure audited 520 000 Euros
• Ineligible expenditure 1 000 Euros
• Irregularity rate 0
• Relating exclusively to insignificant allocation
  errors

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Project audits 2006/2007

• Main weaknesses identified on project level
• CULTURAT (Spain, France, Portugal, United
  Kingdom)
• Expenditure audited 1 980 000 Euros
• Ineligible expenditure 39 500 Euros
• Irregularity rate 2
• A few points for possible improvement On-site
  control, Payment control, Income control

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Project audits 2006/2007

• Main weaknesses identified on project level
• RED TELECEM (Spain, United Kingdom)
• Expenditure audited 379 000 Euros
• Ineligible expenditure 56 000 Euros
• Irregularity rate 15
• Ineligible expenditure mainly relating to the
  defective audit trail of one partner (UK)

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Project audits 2006/2007

• Main weaknesses identified on project level
• ICREW (France, Ireland, Spain,United Kingdom)
• Expenditure audited 6 800 000 Euros
• Ineligible expenditure 2 290 000 Euros
• Irregularity rate 34
• Ineligible expenditure mainly relating to the
  lack of audit trail and insufficient expenditure
  documentation (UK)
• One case of suspected fraud (FR)

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ICREW Dysfunctions in the control system 1

• Weak audit trail and several cases of
  insufficient expenditure documentation
• Article 4 control not formal enough which
  precludes confirming that the due care was
  actually taken
• No control over expenditure payment in far too
  many cases
• Non-rationalised discrepancies between the
  coordination costs of the Lead Partner adjudged
  against the partners and those deducted from the
  Lead Partner's eligible expenditure
• One fraudulent declaration

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ICREW Dysfunctions in the control system 2

• no payment dockets due to a grouped business card
  system which prevents required payment
  traceability
• no documentation on salaries paid
• no explanation on structural charges calculations
• general difficulties in providing invoices due to
  a defective archiving system and numerous changes
  in personnel in charge of the project

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Key Figures

• Total of 24 partners audited (Irl, Fr, Sp, Pt,
  UK)
• Total of 6 UK partners audited (25 of total)
• Total ineligible expenditure 2 435 000 euros
• Total UK ineligible expenditure 2 311 000 euros
  (95 of total)

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Consequences

• 1 - Suspension of all payments to UK partners
• 2 - New audits on project level will specifically
  target UK partners to check that improvements
  have been introduced
• 3 - If this is not demonstrated then ERDF
  repayment requests may be issued to all UK
  partners
• 4 Possible flat-rate penalty by the European
  Commission