Annual Examination Meeting

OP «Entrepreneurship and Innovation»

OP «Infrastructure and Services»

5 December 2012

1. Management and control system

2. Closure and strategic reporting

3. Evaluation

4. Communication strategy

5. Any other issues

2

Improvements in management and control system I

Improvements made:• Strengthening the independence of the Audit Authority• Strengthening of EU funds’ procurement monitoring system. Since January

2012 IBs are performing procurement ex-ante controls. This mechanisms allows to prevent ineligible expenditure from procurement procedures within projects, which is one of most common irregularity type;

• Improved procedures for risk management & application of financial corrections• Improved regulation regarding irregularities• Restricted use of individual contractor agreements with existing/ former

employees• Improved supervision over MA delegated functions:

- Regular checks of I’B internal procedures;- Strenghtening of methodological support;- Systemic improvements considering results of delegated functions

verifications.3

Improvements in management and control system II• Till November, 2012 the MA has accomplished the delegated function

verifications in 8 IBs implementing projects co-financed by ERDF and CF through operational programmes „Entrepreneurship and Innovation” and “Infrastructure and Services” (MoT, MoE, MoES, MoERD, LIDA,  CFCA, SEDA, SRDA).

• At the moment MA has the confidence that the IBs perform their on-spot checks in accordance with the current regulations and the methodology approved by MA. In some cases MA has identified some non-important failures with no impact on the results of the on-spot checks.

• Main conclusions made during delegated function verifications relate to the:– evaluation process of the project application forms;– terms of payment request examination;– ex-ante procurement checks;– internal procedure compliance with existing legislation and regulations;– publicity requirements. 4

Improvements in management and control system III

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Planned improvements:

• Improve methodology regarding controls of delegated functions to put emphasise on risky issues and to mitigate risk of overlapping of controls;

• To unify and to share good practice within institution involved in the EU funds administration regarding 2007-2013 planning period and take conclusion in to the account for planning management and control system for next planning period;

• Strengthen role of the Internal audit in the EU funds management and control system.

Risk management and control I

• To ensure the quality of Risk Management of EU Fundsadministration system, was established Risk Management strategy and Risk Management group;

• The risk management strategy includes:- risk prevention, risk reduction and risk taking

• To obtain a systematic, integrative and evaluative view of the Risk management system it is created:- risk register, which contains information on risks, controls, monitoring and

responsible persons; and - Procedure of the risk management.

• MA risk assessment for delegated function verifications:- According to Procedure MA carries out monthly risk assessment and annual

risk assessment;- Based on the results of risk assessment, MA develops a plan for the

verifications of delegated functions and monitoring of implementation of recommendations.

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Latest development regarding public procurement• Lately amendments in Public Procurement Law has come in force, int.al.,

– MA has initiated improvements of national regulation regarding public procurement to mitigate conflict of interest exists in the public procurement cases where services could be procured from employees of the beneficiary.

– In addition more clearly defined action when there only one bidder for the contract and more clearly set actions in and preconditions for the amendment of the contract.

• Improvement in Regulations regarding the Procurement Procedure and the Procedures for the Application thereof to the Projects Financed by the Commissioning Party also is in process. – Improvements include also extension of minimum deadline to submit the offers.

– These actions are taken to mitigate situation when deadline is insufficient, especially when projects are of a complex nature.

– As well as it is planned to set an obligation to beneficiaries to include in the tender documents the estimation of project price before launching the procurement procedure. Already pro-active actions are taken. E.g., the MA has invited Ibs to inform FB about good practice and ensure that deadline of submitting of the offer is set appropriate and proportional to the object and project of the contract is published. 7

State aid issues

Improvements made:• Updated Methodology for performing on-the-spot checks, by including

additional and more specific conditions and questions for checking accordance of: – Avoiding double financing; – Ensuring proper and sufficient audit trail; – Work quality of procurement commission; – Accordance of Procurement rules; – Proper implementation of State aid conditions.

• Additional annex- sample of State aid checklist has been added, including list of every activity according to granted State aid type, a block of questions, which should be checked, is set.

• Proper application of state aid conditions is being checked during supervision checks, delegated function controls and inner procedure evaluations performed by MA.

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CA: Desk checks and on the spot checks

Measures taken to improve verification performed by the CA: • The analyses and evaluation of the IB procedures were

expanded including also performing on- the- spot checks, verification of double financing, verification of public procurement, verification of state aid rules and de minimis;

• The checklist for the verification of randomly selected reimbursement claim was updated including verification of public procurement and double financing;

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CA: desk checks and on the spot checks (II)

• To get assurance that proper project selection process is in place and state aid rules are respected, the CA plans to do the verification at the MA level (in the end of April we have performed checks at the MA- have analysed their procedures and done random checks on MA actions in project selection phase and MA actions regarding state aid rules in the process of elaboration of CoM regulations on activity, the analysis of the reports of supervision of on-the –spot verifications. We have also received expanded MA report and plan to perform additional checks)

• To get assurance that the IB provides all necessary information in

its confirmation which should be taken into account for certification purposes, we have done verification of the process established by the IB for preparation of confirmation.

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05 December 2012

Audit AuthorityEU Funds Audit Department

Ministry of Finance

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Contents

Overview of systems and operations audits, in particular: eligibility, public procurement, state aid and financial engineering:

1. System audits (ACR 2012)• Implementation of the system audit plan• State aid system audit• Public procurement system audit

2. Audits of Operations (ACR 2012)• Sample of audit of operations • Results of audit of operations• Complementary audits of operations

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System audits (ACR 2012)

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ACRYear

Type of audits Approach

2012

System audits

- All Institutions involved in EU funds administration

- Key requirements and criteria with highest risks

Horizontal system audits

- Public procurement- IT systems- State aid- Financial engineering

Management and Control System Audits for the Period from 01.01.2012. to 30.06.2012.Annual Control Report 2012

Horizontal system audits

1. ERDF, CF, ESF Procurement system audit (managing authority/ responsible authorities/ cooperation authorities)Done 23.10.2012.

1DP/2DP/3DP-IEP-12/9

2. ERDF, CF, ESF State aid system audit (managing authority/ responsible authorities/ cooperation authorities)Done 23.04.2012

1DP/2DP/3DP-VI-12/2

3. ERDF, CF, ESF IT system audit (managing authority/ responsible authorities/ cooperation authorities)Done 28.03.2012.

1DP/2DP/3DP-IT-11/49

4. ERDF The Ministry of Economics – Financial engineeringContradictory procedure1DP/2DP-EM/LIAA-11/54

System audits5. ERDF, CF, ESF Certifying authority and Paying authority Combined in one recommendation follow up and action plan review audit

Done 26.04.2012.1DP/2/DP/3DP/-VI/SEI-12/116. ERDF, CF, ESF Managing authority

7. ERDF, CF, ESF The Ministry of Environmental Protection and Regional DevelopmentDone 06.09.2012.

1DP/3DP-VARAM-12/14

8. ERDF, ESF The Ministry of Science and Education and State Employment AgencyDone 11.05.2012.

1DP/2DP/3DP-IZM/VIAA-12/1

9. ERDF, CF, ESF The State Regional Development AgencyDone 09.05.2012.

1DP/3DP/VRAA-12/4

10. ERDF, ESF Latvian Investment Development AgencyDone 05.07.2012.

1DP/2DP/3DP-LIAA-12/3

11. ERDF, ESFThe Ministry of Health (System audit in The Centre of Health Economics is cancelled due to the institution liquidation)

Done 13.06.2012.1DP/3DP-VM-12/6

12. ERDF, ESF The Ministry of Welfare and State Education Development AgencyDone 07.09.2012.

1DP/3DP-LM/NVA-12/12

13. ERDF, CF, ESF The Central Financing and Contracting AgencyDone 02.07.2012.

1DP/2DP/3DP-CFLA-12/8

14. ESF The State Chancellery and Society Integration FoundationDone 08.08.2012.

1DP-Vkanc/SIF-12/16

15. ERDF The Ministry of CultureDone 19.07.2012.3DP-KM-12/15

16. ERDF, CF The Ministry of TransportDone 22.10.2012.

3DP-SM-12/18

17. ERDF, ESF The Ministry of EconomicsDone 28.08.2012.

1DP/2DP/3DP-EM-12/17

18. ERDF, CF, ESF The Public Procurement BureauCancelled

Included in the procurement system audit 14

Implementation of the system audit plan

State aid system audit

AA got assurance that:• State aid are identified at the EU funds planning stage. All EU funds

regulations are harmonised with State aid control department.• State aid are controlled during EU funds project implementation stage,

but the «grey area» are state aid controls outside EU funds.

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Procurement system audit

• In order to strengthen public procurement controls, ex-ante checks have been implemented in 2012.

• Ex-ante checks of procurements have positive impact as they:– are preventive – legality of procurement is checked before the public

procurement agreement is signed; easy to correct deficiencies, no irregularities.

– reduce mistakes in public procurements: 67 % of public procurements contain deficiencies and mistakes, that have been detected and corrected at the stage of ex-ante check.

• Recommendations in order to: – improve the methodology and supervision of ex-ante checks– increase the amount of ex-ante checks– facilitate the quality of public procurement documents and process (e.g.

standartised forms, training of the beneficiaries)

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Audits of Operations (ACR 2012)

1. ESFAudit of Operations (expenditures declared during 1st half of the year 2011 )

Done 07.03.2012.AI/SAI-ESF-11/41

2. ESF, ERAF, KFAudit of Operations (expenditures declared during 2nd half of the year 2011)

Done 02.11.2012.AI/SAI-ESF/ERAF/KF-12/5

3. ESF, ERAF, KFComplementary Audit of Operations (due to sample of regular audits representativeness)

Contradictory procedurePDR-12/19

4. ERAF, KF Complementary Audit – Follow-up of advance paymentsContradictory procedure

PDR-ERAF/KF-12/20

5 ERAF, KF Complementary Audit – individually significant unitsContradictory procedure

PDR-12/21

6. ESF, ERAF, KFAudit of technical assistance project NoVSID/TP/CFLA/08/10/013

Done 02.11.2012.PDR-TP-12/22

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Sample of audit of operations (expenditures declared during the year 2011)

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Population size (Expenditure declared

during year 2011)Selected sample Exact verified expenditures

units LVL units LVL % units LVL %

Expenditure declared from 01.01.2011. till 30.06.2011.

60147 703 259,41 46 30 757 931,40 64,48 46 19 230 868,42 40,31

Expenditure declared from 01.07.2011. till 31.12.2011.

4 178 467 548 800,25 95 103 858 044,29 22,21 94 96 026 576,13 20,54

Total:

4 779 515 252 059,66 141 134 615 975,69 26,13 127 115 257 444,55 22,37

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Results of audit of operations (expenditures declared during the year 2011)

Certified expenditures

(LVL)

Sample (units)

Audited expenditure

(LVL)

Irregular expenditure found

within sample

Error within sample

Expenditures declared from 1 January till 30 June 2011

47 703 259,41 46 19 230 868,42 17 909,70 0,09%

Expenditures declared from 1 July till 31 December 2011

467 548 800,25 95 96 026 576,13 1 436 082,7 0,86%

TOTAL: 515 252 059,66 141 115 257 444,55 1 453 992,40 1,26%

Main areas/fields of errors:• Procurement – 29 cases• Publicity – 6 cases• Project selection process – 3 cases• Storage of supporting documents – 3 cases• Eligibility of expenditures – 10 cases• Supervision of project implementation – 3 cases• Not achieved the objective of the project – 1 case

Complementary audits of operations

• Representativeness of regular sample22 units (payment claims) selected since there were several deficiencies found within projects administrated by particular IB

• Follow-up of advance payments 6 units (payment claims) that had been selected within previous regular audits of operations

• Individually significant units36 units (payment claims) within 10 projects that are considered as high risk projects

Results are under contradictory procedure

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1. Management and control system

2. Closure and strategic reporting

3. Evaluation

4. Communication strategy

5. Any other issues

21

• By 31.12.2014. – establish national working group for closure issues (LV experience from previous period) + formal work plan

• 30.06.2015. – proposals to EC for dividing projects into phases (on-going examination of major projects)

• 30.09.2015. – submit to EC modification of the financing plans (most probably necessary for overcommitments)

• 30.06.2016. – submit to EC last interim payments• 31.03.2017. – submit to EC closure documents (Application of the

final payment; final report; closure declaration supported by final control report)

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Closure and strategic reporting

According to EC Guidelines & MA plans

Plans and progress of preparation of Strategic report

• The preparation of strategic report is at final stage (coordination procedures):– 10th of December, Strategic Report is submitted MC for comments– 17th of December, MC makes necessary amendments in report regarding the

comments by MC– 21th of December, final version of Strategic Report and related annexes is

uploaded in SFC system• The current architecture of the report corresponds to main indicative points

set out in the Guidance note• 4 main chapters + conclusions and annexes:

A. The socio-economic situation and trends

B. Achievements and future prospects

C. Progress and challenges in implementation of the agreed priorities and strategy

D. Examples of good practice

Contents of Strategic report

• The socio-economic situation and trendsa) Effect of cohesion policy on GDP growth, employment, inflation b) Trends in territorial disparities and social situation among most vulnerable

groups.

• Achievements and future prospectsa) Contribution of OPs to different strategies and planning documents (NSRF, EU

2020).b) Financial performance and achievement level of core indicators

• Progress and challenges in implementation of the agreed priorities and strategy

a) Impact of economic crisis and policy response regarding OPsb) OPs contribution in recovery with respect to financial stability

• Examples of good practice

1. Management and control system

2. Closure and strategic reporting

3. Evaluation

4. Communication strategy

5. Any other issues

25

Overview of evaluations carried out in 2011 and 2012

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Year Evaluation Responsible institution

2011 Evaluation of the results and impact of EU funded investments in the field of education and science, active labour and support to business during the period of 2004-2009 in order to streamline further investments in the area (ex-post evaluation)

MoF

2011 Mid-term evaluation on implementation efficiency of NSRF priorities, measures and activities in the EU funds programming period 2007-2013

MoF

2011 Evaluation of the impact of EU funds on the economy of Latvia MoF2011 Evaluation of the EU funds impact on implementation of Horizontal priority

"Equal Opportunities" defined in planning documentsMoW

2011 Evaluation of the horizontal priority "Information Society" MoEPRD2012-2013

Evaluation of EU fund impact on territorial development in Latvia in the period 2007-2013

MoEPRD

The main conclusions from the mid-term

• overall performance of the institutions involved in EU funds management has been successful

• support of EU funds has been successfully adjusted to the negative changes of economic situation of Latvia, ensuring additional financial resources for the areas which have experienced the most rapid fall during the economic recession

• EU funds support coincides with the Latvian medium-term strategic development tasks as well as with the EU 2020 targets

• approximately 80% of the active and completed activities/sub-activities achieve or have achieved the monitoring indicators and aims set for them at the beginning of the planning period.

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The main recommendations for 2014-2020 from the mid-term

•centralization level of the EU funds management system has to be increased

• focus more on a results-based approach, achieving direct correlation between the objectives and the achievement of specified indicators

•implementation of the measures of the promoting the employment must be connected with actual needs of education system contributing support to students from higher education institutions for their participation in professional practices

•development of the professional skills for students from higher and vocational education systems must be especially promoted in sectors where is the highest rate of the unemployment 20–24 years old young people

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Planned evaluations

MA plans to carry out 4 evaluations in 2012, 2013:

1.Ex-ante evaluation of OP for 2014-2020 programming period

2.Evaluation on data availability for impact assessment of EU CP of programming period 2014-2020

3.Evaluation of EU CP management and monitoring systems

4.Active labour-market measures

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Quality control, improvements

• More result-oriented CP after 2013, increasing the role of evaluation

• Quality of evaluations always has been important aspect to Latvian authorities

• Evaluation became integral in policy making process only after Latvia’s accession to EU

• 2 main issues:– Dissemination of the evaluations results – Strengthening of evaluation capacity

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Dissemination of the results I

Recommendation implementation plan (RIP)RIP (excel file) essential value and level of relevance, responsible institution, deadline for implementation (if possible), state of play and planned actions, implementation status and result.

MA updates RIP twice a year before MC on base of information from the steering group.

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Dissemination of the results II

Effective way of dissemination – publicity and discussions• Publications of evaluations

http://www.esfondi.lv/page.php?id=906• Conferences on strategic evaluation results: impact

evaluation, ex-posts, mid-term, horizontal issues, CP priorities.

• Political discussions on evaluation results to improve/ simplify process or to make better choice

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Strengthening of evaluation capacity – measures carried out (I)

• In November 2012, seminar „Measuring Tools and Evaluation Techniques for EU Funds”

• In May 2012, MA in co-operation with European Commission organized discussion where new indicator system and results from the pilot study about 2007-2013 result indicators were discussed

• On 14th and 15th of December, MA organized EU funds seminar on impact evaluation methods

• On 1st December 2011, MA organized training for the Society Integration Foundation on evaluation methods

• In September 2011, MA organized capacity building work-shop for the members AWGTE

• .33

Strengthening of evaluation capacity – planned activities (II)

• MA plans to organise 2 evaluation capacity building activities in 2013

• Regarding suggestions of MA, State Chancellery, at the start of 2013, plans to organize the seminar on EU funds’ evaluation indicators and necessary data for programming period 2014-2020

• MA will prepare the guidelines of EU funds’ indicators to increase methodological support for interested parties

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1. Management and control system

2. Closure and strategic reporting

3. Evaluation

4. Communication strategy

5. Any other issues

35

Review of activities carried out (I)

• 2011 activities as per AIRs 2011 • 2012 activities: audio visual:

– 26 min. TV programme ‘Eurobus’ on national TV, 22 broadcasts in 2012 (MA)

– 15 min TV spots on Latgale regional TV about Latgale region’s development (MoEPRD)

– Photo&video archive on 20 transport projects (MoT)– 3 min. radio spots ‘Europe-Funds’ on national radio,

72 short stories in 2012 (MA & SEDA)

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• 2012 activities: articles:– 12 feature articles to promote national science / monthly magazine

Illustrated Science (MoES)– 5 success stories of entrepreneurs / monthly magazine Klubs (LIDA)– 8 publications of investments in health area in a national newspaper

Latvijas Avīze (MoH)

• 2012 activities: conferences, seminars, publications:– 3 regional forums Industrial policy & support to businesses – annual business forum, EU Funds implementation conference,

yearly conference on e-administration – Project application and implementation related seminars– annual review „Regional development in Latvia”

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Review of activities carried out (II)

• 2012 activities: www, media– Map of ESF&ERDF investments in education & science – web portal www.esfinanses.lv – Electronic newsletters– Maintaining www.esfondi.lv & SF sections of related www– media relations, twitter accounts

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Review of activities carried out (III)

Major event of 2012• Open days of ESF, ERDF and CF projects ,Sept. 8-9• Whole territory of Latvia, access to

170 ESF, ERDF and CF projects • ~3170 visitors

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Review of activities carried out (IV)

Planning for next year and update of the Communication strategy

• Proposals for the communication plan of OPs for 2013 to be submitted by all ESF, ERDF, CF institutions and Regional SF Information Centres until 20.12.2012. and to be approved by the MA until 20.01.2013.

• Update of the Communication strategy conditional upon approved modifications in the CoM Regulation for implementation of the TA (expected in January 2013) regarding the TA allocations; consecutively modifications in TA projects updating TA budget and indicators for communication

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Success stories and failures

+ 12 feature articles to promote national science / monthly magazine Illustrated Science

+ 5 success stories of entrepreneurs / monthly magazine Klubs

+ Creation of an innovative communication tool – map of SF investments in education and science area

+ Creation of a web portal www.esfinanses.lv

Open project days:

+ a good number (170) of ESF, ERDF and CF projects for public visits

- didn’t attract a big number of participants regardless the informational activities provided by the MA and regions- more involvement of municipalities needed to offer attractive

activities in the project- suggested to complement sites with EAFRD, cross-border projects 41

1. Management and control system

2. Closure and strategic reporting

3. Evaluation

4. Communication strategy

5. Any other issues

42

Launch event and preparation of the Partnership Agreement

• Lauch event at 4th of December. MoF ensure the discussion of Position paper at national level

• In designing the Partnership Agreement MoF actively cooperates with authorities of Cross-Sectoral Coordination centre, Ministry of Agriculture and Ministry of Environmental Protection and Regional Development

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Thank you!

Any Questions?

www.esfondi.lv

www.fm.gov.lv

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