Structural Funds Training SF 3 Predeal Romania

Structural Funds Training – SF 3 Predeal, Romania I Financial management and Control Erwin Reister forestierh@hotmail. com June 2006 1

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics (I) Course Introductory part ØPresentation of the Course Ø Introduction to Structural funds (Dr. Dimitra G. Ioannou) Ø Presentation of trainees Ø Context for Financial Management and control for SF Ø Financial Perspective 2007 -2013/Budget Framework, Annual Budget EC Ø From Financial perspective to annual budgets Ø Overall Budget context for FM Ø Group discussion 2

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Context for Financial Management and control for Structural funds ØFinancial Perspective 2007 -2013 ØBudget Framework > Annual Budget EC : • Relation with national budgetary context • Relevance regarding FM and control 3

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics FM context : From Financial perspective to annual budgets Long term Financial Perspective 2007 -2013 (+ annual breakdown) Multi-annual indicative and normative financial planning Commitment appropriation Medium term (3 -5 years) Commitment Annual appropriations Budget Annual Payment appropriations Agreed indicative ceilings with member states Budget Recovered amounts Disbursements to member states 4

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Overall Budget context for FM Fiscal Policy Macro – fiscal framework Fiscal and budgetary context for FM Institutional Set up/budget authorities Budgetary framework Convergence process Multi-annual State Budget Debt, deficit Medium term Budget Framework NSRF Operational Programmes General Budget EC Budgets of Municipalities/ Local Governments Programme budgeting Revenues Ministries, CAs, MAs, PAs, IBs Paying units Benficiaries 5

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Baseline test; Understanding of FM and control Baseline test Ø Overall function and key objectives of FM (Lecture +basic exercise) Ø Key functions and tasks Ø Required capacities, competencies/skills >>> Group discussion 6

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Overall function and key objectives of FM Performance orientation High level objectives –FM oversight Responsive and transparent service delivery through Sound Financial management > Achieve strategic objectives and programme goals managing fund resources based on information provided by systems Ø Adherence to and compliance with laws, regulations and contract specifics Ø Client support through accurate, reliable and relevant financial reporting Ø Informed decision-making through effective and efficient financial planning Ø Result –oriented effective and efficient use of fund resources >>>> Basic exercise –Worksheet 1 -1 7

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Key functions and tasks Major tasks: Capture, record , summarize and report financial information>Internal control> as related to authorization of resources, disbursement of funds, incurrence of liabilities, collection and receipt of revenues, > control and accountability over assets and appropriated funds, financial status and results of programme operations > safeguarding against unauthorized use, misappropriation and mismanagement carryover balances and performance measurement, > Support to decision -making >support of baselines of programme and project management; Breakdown of core functions: payment function – financial planning -Accounting function-Reporting function-Internal Control function-Internal Audit function-Supervision and performance monitoring-External Audit Which of the tasks are less relevant for SF financial management? ? 8

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Required capacities, competences/skills Required capacities In terms of Total Quality Management (TQM) coherent set up linking organization -tasks and resources in terms of Ø infrastructure, Ø knowledge base, Ø support systems Ø human resources sufficient in number, qualification and structure > > • Financial departments • Management Information System • in particular Integrated Financial management Information System component 9

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Competencies/skills Core Competences/skills Management education Analytical skills >financial planning and financial analysis Competences in accounting and reporting Computer literacy and skills Public Finance and budgeting know how >>>>Critical discussion on items and participants situation 10

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Results baseline test; Understanding SF specific FM and control against legal and regulatory framework Results Baseline test Overview legal framework for FM and control Key principles of framework for FM and control >>>Group exercise- Responsibilities(selected authorities) – worksheet 2 -1 >>>>Participants identified roles in the FM system – Guided discussion 11

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Overview Legal and regulatory framework for Financial Management and control ØTreaty, 5 new Regulations SF Ø General, Fund specific • National Rules • New Financial Regulation (Council) and Implementation Regulation (Commission) • Protection of Financial Interests of the European Communities ØSpecific provisions FM ØDraft General Regulation (DGR) > Ø Titel VI Management, Monitoring and Controls Ø Title VII Financial Management ØFund specific Regulation provisions >Group discussion 12

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Key principles Relevant general principles for SF and specific FM principles ØShared management ØSubsidiarity ØAdditionality Ø Complementarity, Consistency, and Compliance ØTransparency, differentiation, proportionality ØSound financial management , Legality and regularity ØAutomatic de-commitment 13

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics SF specific Financial control and internal audit ØClarification of terms and concepts ØInternal Audit versus Internal Control ØExternal Audit, Audit Authority, Ø Financial Control Internal audit ØRisk based audit framework ØAudit process characteristics ØAudit trail ØAudit Manuals, Guides 14

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Audit process characteristics 15

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Key functions/core processes 1 The payment function –Processes >sub functions of payment cycles financial flows between the European Commission and Romania (payments and repayments; for pre-financing, interim and final payment categories Ø, financial flows for payments (repayments) between paying authority, paying unit and beneficiary, Øfinancial flows to and from contractors 2 The financial planning function, > processes ØStarting from Financial tables, their update during implementation ØFinancial analysis and use of indicators ØBreakdown of budget figures for respective periods into planned/expected payment/cash flows ØPreparation of mandatory forecasts and reports for informed decision- making ØAnticipation of synchronized payment cycles and operations related to co-financing mechanisms >>> Context for Financial Planning 16

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Context for Financial planning Allocations/Spending limits/Fund reservation (Based on financial tables and Authorizations) Budget appropriations (EU Budget commitments, national public expenditure part (co-finances) Commitments Fund release Payments 17

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Key functions core processes contin. 3 Accounting and reporting function, processes Øto participate in shared and automated accounting system and related processes Ø to capture, record , summarize and report on financial information of financial transactions and events in automated form and according to accounting standards Øin particular processes for Financial management accounting cash accounting, modified cash base, Øaccruals, accounts receivable (incl. specifics as Recovery/Debtor ledger) , accounts payable, Carry over balances Ølink to budgetary accounting Processes to deal with inputs to MIS/IFMIS and outputs from MIS/ IFMIS Processes to handle required information for mandatory and ad hoc reporting 18

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Key functions core processes contin. 4 Internal Control function, Built –in control processes in operations ex-ante and concomitant Ø For major FM related processes inside respective authorities and bodies 5 Internal Audit function, Processes of internal audit activities To ensure independent, objective assurance Øconsulting /advice on continuous improvements of systems and procedures and total process quality of FM and control ØProcesses for risk based audit framework 6 Supervision and performance management, Processes within authorities and bodies involved in FM Øto keep control over achievement of objectives and for financial management oversight ØProcesses for performance management in relation to FM ØProcesses to assure legal base mandatory responsibilities of management and control framework related to FM 19

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Key functions core processes contin. External Control/Audit, Processes regarding external /independent control activities >mandatory involvement (Winding –up/statement of validity) >basic external control functions related to SF >processes for ad hoc interventions and ex –post control Group discussion 20

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Irregularities, Financial Corrections Member States in first instance have the responsibility to investigate irregularities (DGR Article 57 (j)- reporting and monitoring procedures and recovery of unduly paid amounts), Article 99 > under “Financial Corrections ØFunds released may be re-used Financial corrections, by Member States consisting of recovering all or part of the Community contribution when required for detected individual or systemic irregularities in operations/OPs; > by Commission after examination> serious deficiency in management and control system>irregular payment contained in a certified statement of expenditure>not corrected prior to opening of correction procedure, >non compliance of MS (Article 69) prior to opening of correction procedure; 21

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Irregularities/Financial corrections contin. Repayment before due date indicated in recovery order (in accordance with Article 72 actual Implementing rules of the Financial Regulation) , Øotherwise interest on account for late payment; Ø financial correction shall not prejudice MS obligation to recover state aid (under Article 14 of Regulation(EC)No 659/1999 ØNew Financial Regulation > higher interest for late payments ØMain types of irregularities > Cohesion Fund >>>>>> Ø Group discussion/evaluation of ERDF case- Decommitment> Irregularity. Recovery (Worksheet for session 3. 4) 22

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Irregularities/Financial corrections contin. European Court of Auditors special report Cohesion Fund 23

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Specific aspects- State Aid ØPrinciples of assistance (Chapter IV /DGR)> ØOperations financed by the Funds shall comply with the provisions of the Treaty and of acts adopted under them (Article 8 -3. )> ØAccordingly Operational Programmes must respect rules for Competition Policy and State aid > Articles 87 and 88 of the Treaty and > ØA financial correction by the Commission shall not prejudice the Member State's obligation to pursue recoveries under Article 100 and to recover state aid under Article 14 of Regulation (EC) No 659/1999 (Article 103 DGR >Obligations of Member States) ØIf State aid rules compliance not fully guaranteed> block of contributions to or priorities by Commission> Ø NSRF (under 6. Implementation and Complementarity) refers to DGR>Title III Programming Chapter II Programming content Section 1 Operational programmes Article 36> OPs “contain table with indicative list of the proposed aid schemes” > ØMAs responsibility > “ensure compliance with State aid rules” ØMAs Annual implementation reports – MA “will detail the measures undertaken to ensure compliance of operations 24

Structural Funds Training – SF 3 Financial management and Control Introductions to training sessions and topics Specific aspects -State aid contin. Monitoring and Financial control obligations Member States and Commission > Financial control activities > That Competition rules are observed Suspense of payments and eventual financial correction in case of granted aid not conform to State aid rules > State aid exemple and calculation exercise / Group work > See worksheet 25