galvin report pt4

8/6/2019 Galvin Report Pt4

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Internal Audit ServiceInternal Audit Keport no. 06/02 to the Ins titutionPart 3 : Key Findings and Detailed Action PlansAction PlanC-4.I The inherent requirements of parliamentary assistance include (he ability of theassistant to respond on a day-to-day basis to the Member's needs and therefore work under hisdirect authority. This chain of authority is, under labour law, a fundamental characteristic ofan employment rclatiunslup between the Member and the assistant. Parliam entary assistantsshould therefore, as a rule, be contracted as employees. Jn a first step, (see action plan B-2.2),the employment contracts would continue to be ruled by national law. In a second ste p (secaction plan A-3), the employment of parliamen tary assistants could be ruled by the conditionsot employment thai apply to otherservants engaged under contract by the EuropeanCommunities.As a result, contracts w ith service providers shou ld only be used in the follow ing twosituations:- To contract the services of paying agents who are entrusted'with the adm inistra tive

management of the employed assistant's contract.- To cover the purchase nf specific J,CJ vice's under shoi^term contracts. Th is would, forexample, be the case for a study requiring speciflc~expcrtise that the Members' 'assistantsdo rioVpossess.Such contracts.wpuld need to define the precise delive rables to be.provided and payment would take place on submission of those deliverables.DG Finance should draft, fur discussion in the Members' Statute Working Party and Torsubsequent submission to the Bureau for adoption , the proposal for a co rresp ond ingamendment of the l'EAM rules which would cniil'iiiu this principle.(The Autho rising Officer by Delegation confirmed his agreem ent in principle with Interna lAudit's proposa l. He also indica ted that, as the. Mcr/thers'Statute Working Party is currentlyexamining a number of proposals in relation to the status and the wo rking conditions ofMembers' assistants, he considers it appropriate to wail or the outcome of that work whichcould reflect the same concerns,)

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Internal Audit ServiceInterna l Audit Report no. 06/02 lo the InstitutionPart 3 : Key Findings and Detailed Action Plans

Findings and IssuesThe risk that payments made are not wholly, exclusively add necessarily incurred for thepurpose of parliamentary assistance coufd increase if there is a potential conflict of interest 3'1arising from [lie relationship between the Member and the contracted assistance provider.This risk becomes particularly relevant if other issues arise simultaneously as, for example,(he lack of precision in the definition of the assistan ce work lo be performed (se e alsofindings reported unde r point B -l ) or the relative completeness of a M ember's declaration offinancial interests (including the lack of such a published declaration as was noticed onEuroparl in 5% of the audited case s).The following issues identified in the audit samp le illustrate the risk of conflict of interest;- In one case, it could be established that the legal entity contracted for the provis ion ofparliamenlary assistance belonged to the (former) Member.

This case presented such a high conjunction of serious issues," 0 (hat Internal Auditadvjsed ihc'A'uiWrising Officer by Delegation to refer the case lo-OLA F. T h e, ,Authorising Officer by Delegation agreed and duly sent the case to OLAF, which is stillinvestigating (he matter.Another Member concluded two contracts for the provision of services w ith twoindividuals. Th e contractual definition of Hit: tasks was very va#ue and the re wa s noevidence of the self-employed status of the individuals. The nudir showed that theMember was a director in an investment con sulting company and that the two contractedindividuals arc senior managers in thai same company.Another M ember concluded a contract for the provision of services w ith an individualwhose name is identical to that of his wife. The M ember's curriculum virae mentions hiswife's professional activity: it is not one of a self-employed service provider.In three cases, it was noted that payments to the assistance pioviders were m ade, as perthe contract, onb an k accounts that were also found (u be registcied (or to have beenregister.ed) in th e CIO application of DG Finance as belonging to the contracting Member.

For six payments in the audit sample , the contractors w ere national political parties and foranother 41 payments, links were found between the contractors and the national politicalparties. This is not forbidden by the PEAM rules (the only restriction that the rules foreseeapplies to political groups in Ihc Parliament, which can only act as a paying a gen t).(continued)

M Arriclc 52.2 of llie Financial Regulation defines Ihc conflict of inirresl as a situation "...nherc the impartial amiobjective ex ercise of functions is compromised for reasons inwluint; family, emotional life, political or nationalaffinity, economic interest or any oilier shared interest mill the beneficiary.*"'Transfer of ihc c;iiiic allowance lo a company wh ich, on [fw lu sn


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In te rna l Aud i t Serv iceInterna] Aud i t Re por t no . 06 /02 to the Ins t i tu t ionPart 3 : Key Findin gs and Detai led Act ion P lans;

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Findings an d Issues (continued) ,However, certain audit findings reduce the assurance thai such payments always cover costswhich arc wholly, exclusively and necessarily incurred for the purpose of parliamentaryassistance. The following was noted:* Political bodies contracted as service providers received from several Members identicalmonthly paym ents , which presented characteristics of a flat-rale contribution to thepolitical body ralhcr than being the rcmuncralipa for specific parliamentary assistanceprovided to the individual Member. The following examples iHiistraie'lhis issue:

* i " ' ' ' - ' " * ' .. ' All the Members of one national political party have'requested an identical amountto be paid monthly to an association linked to thai party.According to the available documentation, these payments are based on contracts inwhich the description of tasks is one of a payin g agent foremployed assistants and,b , which foresee that received amounts are to b^ managed on a trust basis. Dut for the two.'correspbnding'paymenLs inclup"ed in the audit sample, nolin k could be \established with tljc cftiployment of assisfants. Mprepver, minuies of a members'.assembly of the association ind icate tfiat I h ^ ^ j ^ ^ l E ^ ' l b & . p ^ i n i i p n ) ^ ^ ;

provision of services (orpsee Jhat lite assislinicc'lasks are to be per forme of by, staff jS.'put at ihe disposal of (hc.Mcmbcr. ;- ;- .. .. .- It was found-in the audit population that tjie full monthlyalloWances of 21 Members frppthe same national political party are paid to'that.poliiic'al body: However, Whereas thecontractual fee was identical, the numbctlof accredited assistants put at'thc'd isposa l hf

each Member by the service provider, in return for that fee differs significantly; .*woMembers had three such Assistants, ten Members tw o assistants arid n ine Mem bers only , o n e -- Service provide rs w ho are not political bodies can have links to political parties. .FoJIpwing a rc examples of such cases :

. In one case, a contract far lli'fc provision ofscfVicps was concluded with anassociation for the purpose of ".managing an d Writiiig.an'ln'tcrnct sit e" .(witl)Outmentioning explicitly that it would be the Member's Internet site) . Tha t association .had been created three months earlier to promote the opinions of a national politicalmovement through the Internet.No Internet site of the former Member (who was.not re-elected under the sixth term)could be identified. But it was found that Ih c national polilicat movement had set-upsuch an Internet site which it ran until November 2005.(sincc closed).(Fallowing the query, DG Finance indicated thatiMernbers who conclude contracts rela ting to the Internet are now required to'sign. a'declaration that the services areintended solely as an aid to their parliamentary, mandatciand that (hey will not beused for the benefit of Ihc political group or party lo which the Member belongs, orfor election campaigning at cither national or European level.)In two cases, contracts for the provision of services (with a weak definition of tasks)were concluded with individuals for whom there was no evidence ol an activity as a.. professional service provider. But these people were found lo be, respectively; aregional representative and a regional politician of the Member'se 7*66a partyy4 90 Tc(^ ) TjET53570 Tc74997 T


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In l e rn a ly \u d i t .Se rv iceIn te rn a l Au d i t Rep o r t h o . 06/02 to the. lnst i tu l ior iTart 3 : Key Findings and Detai led Action Plans - .

ImplicationsReduced assurance that theparliarr.entary assistance allowance is only used to cover cost*which are w holly,; exclusively and necessarily incurred fo rlhe purpose of p arliamen taryassistance.FotenoaLbreach of Ihe'provisions of the Financial Regulation (Article 27) on the use ofbudget ap propriations in accordance wilh the principle of sound financial mana gem ent.Associated lejjal, financial and reputational risks.

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Action Plans 'Several action p lans which have been developed to address other issues identified in thi s auditreport also contribute to preventing situations of conflict of interest. This is in particular thecase for the following action plans:- A- 3 whicrj aim s at'a. genuine simplification and rationalisation of the parliamentary.

assistance'sad ministrative management through-the employment, pf parliament a I yassislaiils'ynder the conditions of employment thai apply tn other servants cngagpd uijdercontract by the'Europcan Oimmunitieii...: tf-l ;l ^ t? i eft r e. I atcs/to. the; ;prp v i s i op of a^^q u a I e d K0) i t J^ i h e;. co n. trac f o a j d?fi p' *j>P'V P', i ^ ^ ^ f S ^ ? ^ ^ ^ ^ V :.-"'.' ' f M 0 $ ' - & i i p j i; ' : l } $-* C-AA whie K-fbrcs ecs' r est r itt in >s on the i| se o f obh t r acts fo r t he p ro vis iq/V of s


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Internal Audit ServiceInternal Audit Report no. 06/02 to the InstitutionV'Mt 3: Key Findings and Detailed Action PlansD. PARLIAMENTARY ASSISTANCE PROVIDED UNDER ACONTRACT' FOR EMPLOYMENTD-l. OBTAINING EVIDENCE OF EMPLOYED ASSISTANTS'SOCIAL SECURITY COVERFindings t IssuesArticle 14.5 of the PEAM Rules sets outs the documentary evidence that must be provided toprove that employed assistants arc covered for social security1":

" Hie employment contract must include the following details:...- social security scheme of which the assistant is u memberWithin three months of the. assistant taking up his or her duties, the Member shall forwardto the management service a certificate of the assistant's membership of a social securityscheme and, where the national taw applicable so provides, a certificate of insurancecovering accidents at work, failing which payments relating to the assistant concernedshall be suspended,"

When the .employment contract is managed through a paying agent, Article 14.5(e) of theI'EAM rules foresees, in addition, that the paying agent has to forward aflcast annually tothe Member statements which include expenditure incurred in respect of social securitycontributions.Similat provisions lo those lor employed .assistants apply under the 1'EAJvf rules (Article14.6(c)) where a service provider places human resources at the disposal of a Member lor aperiod exceeding six months. In such a case "the relevant invoices'or fee statements shall btiaccompanied by statements certifying that the staff concerned are duly affiliated to a socialsecurity scheme and that tax and social security contributions have been duly paid",On 03/07/2006, the Bureau decided to extend until 01/0.1/2007 the deadline "for presenting.the supporting documents accompanied by the. appropriate declarations according to therelevant rules on reimbursement of parliamentary assistance expenses'r.The audited sample of employment contracts gave rise to the follov/ing finding!,;- Whereas, for 58 contracts forjhe employment of assistants, more than 2 years had ejapscd

between the conclusion of the contracts and the drafting of the present audit report, in 15*"1(26%) of these cases, no ccrliljcate of the assistant's membetship of a social security scheme had been submitted as of January 2007 (when the situation was reviewed byInternal Audit). DG Finance explained that, because ihc PEAM tules do not specify whoshould establish thai certificate and what form it should take, the managing servicesaccept other documents as proof of the assistants' membership in a social security scheme,such as Salary slips mentioning a social security registration number or declarations ofregistration with social security established by the employer.

(continued)The rules thai where applicable when the audited paymenrs were made foresa'w

* "The application {for the parliamentary assistance allowance} must specify t)\c social security scheme ofwhich the Assistant is a member. No payment shall be made unlets the application is accompanied by a copyof the official declaration made to the national bo


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Internal Auclii ServiceInternal AucJil Report no. 06/02 to the Institu tionPa rt 32 Key bindings and Detailed Action PlansFindings & Issues (continued)

Following a review of those cases, Internal Audit is of the opinion that such documentsdo not have the same evidential value as a certificate established by ihc social securitybody and should therefore not be considered to constitute a certificate ol" the assistant'smembership in a social security scheme its foreseen in the PEAM rules.I In the case of the paying agenf c ontracts, statements of expen diture showing also paym entsmade for social security had not been provided in 36 cases (64 % of the audited cases ) as of| January 2007.

As regards service providers p lacing human resources at ihe disposal of a M emb er, 22 casesI (relating lo Ihe 6th Term) w ere identified in Ihc audit sample, for wh ich it could b e concludedthat the accredited assistants were put at the Members disposal by the contracted serviceproviders concerned, as these w ere paid (he full p arliamentary assistance allow ance.However, in 11 of those cases (50%), the statements certifying that ihc staff concerned wereI duly affiliated to a social security scheme, and that tax and social security contributions hadbeen duly paid, had not been provided as of January 2007.ImplicationsRisk that the Members do not comply with ihe. relevant national legislation,on, social security| applicable iGthecraptoymeni of Staff. ' .Associated legal, financial and rcputational risks.

i fI Action Plans

D-1.1D C Finance should review all cases of employed assistants in order to ascertain that acertificate of Ihc employed assistants'memb ership in a social security schem e have beenprovided for all employment contracts concluded at least three months previously.Where the required supporting docum entation has not been made av ailable , Mem bers shouldbe asked to provide it within Iwo months of the corresponding notification at the.latest.

i Where Members fail to comply with that request in res]>ect of a contract concluded al leastthree months before, the proc edu re for suspending reimbursement of p arliame ntary assistanceexpenses (see Article 2 7.4 of the PEAM rules) should be initiated by the Autho rising Officerby D elegation.(See also action plans D-2.1 to D -2.2 relating to the legality of the social secu rity covera ge.)[DC Finance indicated that there are well established procedures to identify contracts forwhich the evidential requirements on social security have not been complied with. In suchcases, Members are requested by ormal letter to provide ihis evidence. It is DG Finance'sview that there are currently v ery few isolated cases ofMembers who have not yet prov idedthe required documents. For those cases, DG Finance indicated that, should the situationremain unchanged, suspension procedures would be launched. See also the observations afterD-L2 below, which describe the differing interpretations of DG Finance and Internal A uditas to what constitutes sufficient evidence.)

(continued)

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Interna l Audit ServiceInternal Audit Report no. 06/02 to (lie InstitutionPart 3 : Key Findings and Detailed Action PlansAction Plans (continued)I)-1.2 DG Finance should put in place internal management and c ontrol procedu res whichprovide assurance that:

- Applications for the reimbursement of parliamentary assistance expenses relating lo theemployment of assistants are not accepted if they are not accompanied by a contract thatspecifies the social security scheme of which the assistant is a member and by a certificateof insurance covering accidents at work.The provision of a certificate of the assistant's membership in a social security schemethat has been established by the responsible social security bo dy, no later than threemonths following the conclusion of the contra ct, constitutes the general r ule . This shouldinclude the send ing of reminders to the Memb ers who have not com plied with thaiobligation, preferably'before the three months have elapsed,

(DG Finance indicated that At tide 14.5. of the PEAM rules only mentions that " ...{heMember shall forward to the management service.... a certificate of the assistant's membershipof a social security scheme...", without specifying who should establish that certificate and.What form it should hav e, D.G Finance.explained that ify established firuclice is to a ccept asproof of assistQnts':social security .coverage documents such as salary slips, provided, the .name of the assistant and his/her registration number with a sociafsixurity scheme-are indicated. It is DG Finance's view that these kinds of documents provide sufficient evidence ofIke assistant's social security coverage. DG Finance has also drawn attention to the differentsituationson social security iliat can apply in the M embers States and to the fact that, in somecases, certificates are delivered too late.)Internal Audit does not share the view thai Ihc provision of a certificate established by thesocial security body would imply loo much bureaucracy for Ihe Member. Social securitybodies provide a certificate of coverage 10 their affllinles. In prac tice, the assistant jusl has toprovide a copy of the certificate he has cither received automatically or requested, InternalAudit considers that the acceptance of such evidence as a salary slip docs not meet the PEAMrequirements or prov ide conclusive proof of affiliation. In particular, foi die m ajority of theassistants who work in Brussels (and for whom Belgian social securily cover would berequired -see Section D-2), provision of such a certificate should not be a problem. H owever,Internal Audit ag rees that, if Ihc timely provision of such a certi licaie pres ents, in certainMember Slates, a genuine problem, alternative interim means of proof could be consideredpending the establishment of the certificate by ihe social secuiity bod y and its p resentation by(he a ssistant.

Action plans C-2.1 to C-2.3 and E-l.l to E-1.3 address the issues arising from the failure losubmit ihe supp orting do cum ents required by the PEAM rules, both for serv ice providersplacing human reso urces al the disposal of a Member and for payin g agenls.

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Internal Audit .ServiceInternal Audit Report no. 06/02 to the InstitutionPa r t 3 : Key Findings and Detailed Action Plans

| D-2 KiysumNc; THAT ISMI'LOYKP ASSISTANTS' SOCIALSECURITY coVERAKECOMPLIES WITH COMMU NITY LEGISLATION

Findings & IssuesCouncil Regulations (EEC) No 1408/7141 and 574/724i define the fundamental principlesunderlying the application of social security schem es to employed (and self-employed)persons includ ing, in particular, Ihe legislation npp licable. Provisions wh ich appe ar to beparticularly relevant for assistan ts' employmen t contracts can bfl summ arised as fallow s:

The general p rinciple is thai a worker shall be subject to the social legislation of a singleMember State- As a rule, this is the legislation of (he Member Slate in the terrilory ofwhich he is employed (place of work). Th is rem ains the caF,e even if the worker resides inIhe territory of another Member State.A person normally em ployed in !he te/ritory of two or more Member States shall besubject to the legislation of the Member S tate in wlityte terrilory he re sides , if he pursueshis activity partly in thai territory.Spepial rules may apply to temporary ass ignmen ts abroad if ihese are fo r less than twelvemonths only. (U nder exceptidnal.cirrumstances this duration can extend, lo up to 2


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Internal Audit ServiceInternal Audit Report no. 06/02 to (lie InstitutionPart 3 : Key Findings and Detailed Action PlansImplicationsRisk that the Members would not comply with the relevant national legislation on socialsecurity applicable lo Ihe employment of staff.Associated legal, financial and reputations! risks.A ction PlansD-2.1 DG Finance should provide guidance to Mem bers on the determination of thelegislation applicable to employed assistants' social security coverage.(DG Finance indicated that a guidance note on social security obligations has recently beenprepared in cooperation with the relevant department of the Belgian government. The opinionof Parliam ent's Legal Se rvice will be obta ined be fore it is transmitted to Members and theirassistants.)D-2.2DG Finance should submit, (or discussion in the Members'Slalirfc Working Party andfor subsequent submission lo the Bureau lor adoption, a proposal for the PftAM rules toconfirm '"at, for new app lications for jhcn-.im burseme nj of parliamentary ;i?;;;isfnnofi expen s esrf'annfltd the employment of an assistant, DC finance needs lo cnsurc.that the correctnational social security scheme has been selected (based on-trie 'mandatory official declarationmade to the national body responsible). If this is not ihc case, DC finan ce should draw.(lieMember's attention to the issue, provide specific guidan ce and insist on a declaration beingmade to Ihe coticci naliunal body (which could include the granling of an exception lo Ihestandard rules by rhft competent authority). Applications for the reimbursement ofparliamentary assistance expenses should only be accepted if the application for socialsecun ty coverage has been m ade under ihe correct legislation applicable,

(It is the Autho rising Officer by Delegation's view that a wide consultation must be sought onthis important ma tter before putting forward specific propo sals. As a first step, he considersthai the issue should be submitted for discussion within Ihc terms of the social dialoguebetween Ihe members of (he Bureau responsible for mutters relating to assistants and theelected representatives of the assistants.)

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Internal Audit ServiceIn ter na ! Au dit Report no . 06/02 to the InstitutionPart 3: Key Findings and Detailed Action Plans

i D-3 ENSURINGi'ttKCONsi5nT,vrAMI)'ritANSPAKPjn'APPLICATION or THE PEAMRULES ON TRAVELAND SUBSISTENCE COSTS

| bindings & IssuesI 15 of the audited employm ent contracts foresee Ihe reimbursement of assistan t's travel and/orsubsistence costs.Four payments in Ihe audit sample specifically covered the reimbursement of costs incurredby employed assistants. One w as for removal expen ses and the three others were for travelcosts.j Article M.5. (d) of the PEAM rules confirms that assistants' travel and subsistence costs areeligible expenditure. Article 14.5. (d) also specifics thai such expenditure may only bereimbursed tojjicjyigipber "on production of original, duly receipted supporting documen ts".H owever, no further guidance is provided by the rules as lo the principles governing ihepayment of such costs and the nature of the supporting documents to be provided when suchpnymenis arc made directly to the assistant..Trv. audit gave rise lo the following findings:- Seven of Ihe audited employment contracts foresee that the monthly paym ent of travelcosts is made on a flat rate basis wirliuut a n^fnireracni m submit supporting docum ents.

,'t was found ih.it supporting documentation confirming at least formally thaicorresponding travel had actually taken place was-not available to DC Finance,- The amount of contractual monlhly flat rates covering reimbursem ents pf iravel cos ts wasfound to be variable, ranging from 3 50 lo 2 20 0. Such differences may partly beexplained by the number and nature of ou rneys ma de.

However, it was also found thru rhe methods .applied to define the amount of Ihe Hal ralepayment are specific tn each contract (for example; amount per km, national scale, dailyrale).In four of ihe cases, no explana tion of the basis for calculation was provided.- In one cas e, the amount of the contractual travel and subsistence costs payment wa s foundto be three times higher than the salary of the assistant.- As regards the reimbursemen t of ihe assistants'removal costs, it is not evident from thei liAM rules thai Ihese constitute eligible expenditure.ImplicationsPotential breach of the provisions of Ihe Financiaj_Regulation (Article 27) on the use ofbudget appropriations in accordance with the principle of sound financial ma nagem ent.Inconsistency of treatment between parliamentary assistants-Risk uf allowing the legislation on social security and taxation to be circumvented, if hightravcfcosls paid on a flat rate basis cover in reality a portion of the p arliamentary a ssista nt'sremuneration.

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http://ih.it/http://ih.it/


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Infernal Audit ServiceInternal A udit Report no. 06/02 to the Ins titutionPari 3: Kty Findings and Detailed Action PlansAction PlansD-3.3 The provisions of the PEAM rules sho ulde nsu re that;

ihcrc is reasonable assurance thai payments for assistants travel and subs istence coslsforeseen in contracts cover travel that has actually laken place and are in line with rea lcosts incurred; - travel costs are reimbursed under Ihe parliamentary assistance allow anc e on a consistenl

basis.To this effecl, Ihc rules should specify the conditions for ihe reimbursement of travel coslsI (olherthan Ihe one already foreseen under Article 15.5 for the twice-annual home return ofassistants) and sub sistence costs. They should include the maximum level of reimbursem entand the supporting documents to be presented. Th e reimbursement o f travel e xpe nses shouldbe m ade on the production of supporting docum ents (as is already the case in Article 14.5.(d)for the reimbursemen t of such expenses to Mem bers). Parliamentary a ssista nce con tracts thatpiovide for the periodic (for example mo nthly) payment of travel costs on a flat rate basiswithout [he need to provide any supporting docum ents should not be allowe d.

TliESC tides could be eslablished by ana lo gy iot hc rules foreseen in the-Stair Re gula hpu s.. - . . > * < .This appiQnch would be consistent with the action plan A-3 which aims al having theemployment of parliamentary assistants ruled by ihc conditions ot'em ploy m ent ihnr apply tooti'icr.seivanls engaged under contract by the liuropeau Com munities. As.is also the ca seunder Ihe Staff Re&'jiationy, this approach would not exclude the leiinbursements of certainexpenses on a lump sum basis. However, in such a case, DC Finance should at least beb.'ovided with confirmation that travel has actually taken place.P 3.2 One purpose of Ihe provision u l travel supporting documents (tickets) is to provid eevidence that Ihe travel has actually taken place. When (ravel takes place by ca r, sup portin gdit':uments evidencing the iravel should con sist cither of a corresponding hotel invoiceshowing ihe dates of stay, or, if not available, the assistant should be req uired lo provid e aformal confirmation by ihc contracting Member that the travel has taken place as declared.O-J.3 Th e PEAM rules should be amended to clarify the nature of misc ellan eou s e xpe nses ofprmiamentary assistants (as, for example, removal expenditure) that are eligible forreimbursemeni and which provisions apply to such reimbursements. This clarification couldeither take ihe form of a restrictive list ol expenses or provide the criteria which expenseshave to fulfil to be eligible.(F.:- the three actions D-3.I D-3.3, the Authorising Officer by Delegation considers that, asthe underlying issues affect directly the working conditions and terms of rem uneration ojassistants, the proposals shou ld ftrst be subm itted for co nsultation between the mem bers of:.'. 3urea it responsible for matters relating to assistants and the elected representatives ofthe assistants within the terms of the social dialogue in accordance with Article 21 of theCc ;cx.)

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Internal A u d i ! ServiceInternal Audit Report no. 06/02 to the InstitutionPart 3 : Key Findings ami Detailed Action Plans

!:. PAYING AGENTS CONTRACTED TO HANDLE THEADMINISTRATIVE MANAGEMENT OF ASSISTANTSEMPLOYMENT CONTRACTS

i:T SUBMISSION OI- STATEMENTS OK EXPENDITURE INCURRED BY PAVING AGEN TSI ladings A IssuesAs regards expendituie incurred by paying agents in relation lo assistants'employment

I c:intracis (payment of salaries, social security, etc.), the PEAM tules that were initiallyapplicable when Ihe audited payments look place laid down that a statement of expenditure

i v "Id have to be provided by the paying agent twice a year. The audit-showed that nonej)fths contracts in the audit sample complied with tin';; initial requtrenienl. Following |JIR Bureaudecision ofl3/12/2(XM, this periodicity was then extended to once a year (sec also point 2.0

i Dj the Report to-Management for J'urttier details on Ihe successive extension:; ul deadlines).II vaudit.sample included 56 paying ageni contracts for which- a firsl payment had been mad:;

I 'A \ least twelve months previously (46 of these related to the parliamentary assistanceail wancc of Members elected under Ihc 6th Term and 10 were "lay-off" payments to paying| nr-. nis of Members who were nol re-elected). As of January 2007, on I of these 56_cascs, nV-i; ilatoty requi lament for the submission of a statement of expenditure has not beenfv.ii plied with in 36 cases. (Of those 36 cases, 27 related lo the allowance of Members electedui. icr the 6th Tcrtn and 9 to "lay-off" payments.)D ; Finance's position, which was expressed in its reply to Ihe first rhafl of tins audit report, is

as the dc.adlinc to present thestalPincnrs of expenditure by ihc paying agents wasmodified several limes by the Bureau and the Quaestors in 2005 and 2006;IS the Bureau decided at its meeting of 1.3/12/2006 lo amend the TEAM rules to Ihc effecthal the requirement!; concerning the supporting documents which need to be submitted

by Members have changed;as , according to DG expe90a00.7c( Ih) Tj0 Tc(e) Tj0.369 T( leas) Tajor18 Tw-0.288 Tc( w) Tj0 Tc(f) Tj0.309 Tw-


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Internal Audit ServiceInte rna l Audit Report no . 06/02 to the InstitutionPnrtS: Key Findings and Detailed Action Plansimplications

j I 'reach of the provisions of the PEAM rules on the submission of statements of expenditureincurred by paying a gcnls (Article 14.5)./Hernial breach of thepiovisionsof the Financial Regulation (Article 27) on the use ofiidgct appropriations in accordance wilh the principle ofsound linancial management due to:

the lack of assurance regarding the entitlement of the paying a genl to Ihc prc-financingpayments received because the absence of statements of expenditure preventsreconciliation between the sums received and the expeudiiuie incurred by the payingagent;ihe associated risk of undue payments.

A tion plans1 1.1 DO Finance sho uld draw up a record of all con tracts wilh. pay ing ag ents where transfersI funds to be managed on behalf of the Mcmhcis made have not been regularised by theAmission of stateme nts of expenditure diawn up in accord ance with d ie provisions dft licle 14.5 of the PEAM rules as last ai:iended;by the flure;iu decision of 13/12/2006.This list would form the basis for (he proposal of a Qu aesto rs' decision which would foresee: .le as es of non-compliance should be notified to Ihe Me mb ers who have concluded ther..nirnas with the request that missing statements of expend iture should be provided to DG1 inariCfl within two months (if required, after having tequBSted llu'in from Ilu; paying agents),1: 1.2 The proposal for a decision mentioned under action planE-1.1 should confirm thai,

r expiry of the dead line set and pending submissio n of ihe required statem ents ofc i;cndiruic, DG F inance should suspend all transfers of lun ds (inclu ding the pay ment ofI *.) In ihe paying acnt.E-1J The proposal for Lho decision should also confirm that, if the required Statements oft'.. xn U itu ica rc noc.sulmlitted williin n month of that dead line, DG F inance should:

Initiate the procedure to recover the amounts that have not been regularised.Invite the Member to cancel the contract with the paying agent and conclude a contractwith a new paying agent to ensure that all obligations relating lo ihe payment of theremuneration, social security and taxes for the employment contracl(s) concluded by iheMember are complied with.

(1 r actions E-l.I, F.-I.2 and -1.3, DC Finance indicated that similar proposals arein -'tided in the draft of the implementing measures for the Memb ers' Statute that have been,v: mittedto the W orking Party.)

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Internal Audit ServiceInternal Audit Report no. 06/02 to the InstitutionP a rt 3 : Key Findings an d Detailed Action Plans\'.-2 K.TrAKLrSf-lIW:TANSJ ,AtiEN ,l' AND SECURE ARlMNGRMENT.S F OlC 'nfE

M A N A G E M K O T O K A S S I S f t V i ^Findings & Issues ' ''V'ng agent co ntra cts:

l lowance paym ents lo paying agents arc based on estimates of the funds required for theInunistrative management of one or more employment contracts concluded by the Member.. major interna l co ntr ol ohjecJive is to obtain assurancejhat the amounts of these paymentst i paying agents are w ho lly, necessarily and exclusively justified by Ihe management o fiientified .parlia me nta ry assistants'employment contracts. One con dition for the achievemento; this conlro l ob ject ive is the provision , with pa ying agent contracts, o f a ll the detailsi quired to recon cile the. amounts iransferrfid lo the paying agent with the remuneration1 ireseen in the managed employment contracis.- (no n-com pulsory) model paying agent contract provided by the Parliament contains

r juircments tha t contribute to that objec tive:- Ihc indic atio n of ihe namc(s)o f the ass istan ts) whose employment coniract is managedby ihe pa yin g agen t, and,

- Ihe pro visio n, in an annex to the paying agent contract, of a copy of Ihc managedemployment co ntract.I' ,vevei, oiher characteristics ot Ihe model contracts applicable du ring the audited pc.'iod didis . facilitate transpa rency. For example, the Standard lext provided for the pay ing agent's ownf.. ;obe m entioned, but not the amount of funds munaged on behalf o f the M em ber ."i\: reover, whe re the model contraci was used, several of its provisions were simply left blankin the signed version .TJi audited sam ple o f payments to paying agents gava rise to the fo llo w in g fin din gs:

The assistants wh os e employment coniract were t o be managed by th e pa ying agent werenot na m ed jn the pa ying agent con traci in 14 cases, icpreseming 28%. of the cases forvhich such contracts were available. The corresponding field was left blank, a nd the"Onlract inclu de d on ly a general reference lo the assistants' contracts con cluded b y theMem ber. T hi s does not facilitate transparency and provides insu fficient assurauce.lhal Ihe.mounts transfe rred on a provisional basis to the paying agent can be reconciled w ith theremuneration or the employed assistants. (Inte rna l Audit notes that D G F inance accepts;.uch cases as being in line w ilh the minimu m legal requirements.)

i 13 cases, the contrac i did not specify t o wh ich perio d the stated fee related (mo nth ly,arly, etc.).

_

*t ; 'i . =: sines been improved in new vcisionJ Of model contracts.8 8


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Internal Audit ServiceInte rnal Audit Report no . 06/02 to the InstitutionPart 3 : Key Findings and Detailed Action Plans/' dings & Issues (continued)

I - The sums transferred to paying agents usually agreed lo ihe corresponding allowanceapplication form. However, reconciliation between these transfers of funds and the salaryloreseen in the managed employm ent contraci(s) cannot be done systemalically. Mostfrequently, the difference between the am ounls is likely to have its origin in the addition alemployer's on-cosis for social security. H owever, neither adeq uate explanations norsupporting docum entation w ere provided for Ihis in 42 cases (75%) of the audited paying.igcnl contracts (see also findings under point E-l).

i_ tracts for Ihe prov ision of serv ices :All .ougli apparently not in breach of the PEAM rules, additional issues of transparency canansS when services contracted in relalion to Ihc employment of assistants not only coverpacing agent lasks but also Ihe conclusion of the employment contracts by servic e providersoi: l-ehalfnf Ihe Member.F; sjgbl cases in Ihe audit sample, this appeared to be the purpose of the contract lor thepi ision of serv ices .Wan one exception, none of these contracts for the provision of sei vices specified the numberof: .iff employed 10 assist the Member.In 'ner al(2 ex ccp lion s wore found), they did not distinguish between the sum s to be. used tofftn :;icratc the staff emp loyed to assist Hie Member and the serv ice provide r's ow n fee.(S also findings relating to contracts for ihc provision of services under point B-2 "Ensuringtlv ;vels of remuneration ate proportionate to the lasks performed".)-In: ieadons!>-:- of assurance that the pa rl ia m en t y assistance allowance is only used lo cover costswit. .1 are wholly, exclusively and necessarily incurred for Ihe purpose of parliamentaryas5: unce.Lcj ! insecurity as regard s the fees lo which paying agents are cntillcd.Pu ,:lial breach of the prov isions of ihe Financial Regu lation (Artic le 27) tin Ihe use of .!>.: at appropriations in accordance with the principle of sound financial managem ent.Ac;, nplans-.: . Thcpresenl action plan cove rs specific action required to ensu re that contracts withpay. i^ agents include all Ihc details needed lo reconcile the amounls transferred on apr ional basis to ihe paying agen t with the remu neration foreseen in ihe man agedti.' 'yment contracts. To provid e reasonable assurance of the justification for prc-financingpa' 'mis lo paying age nts before they arc matte, this reconciliation has lo be possible at thetin .f concluding the paying agent contract (notwithstanding the later submission ofS.tal tents of expenditure by payin g agents).To : :, effect, DG Finance should su bmit, for discussion in the M em ber s'Si alu le Workingpflj nd for subsequ ent submission to Ihc Bureau for adoption , a proposal for Ihc CO DE X lofor' that any new contract and any amendment to an existing contract wilh a paying ageninei% > comply wilh ihe following requirements:

he assistants wh ose co nlracts arc managed by the paying agent have explicitly to becitified and the period covered by their employment con traci m entioned in Ihe body ot1 contraci. General references lo'"a [| assistant conlracts concluded by th e M ember" o rniployment co ntracts provided in annex do not provide sufficient transparency and arerefoie nol acceptab le.(Co ,.ied)

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Internal Audit ServiceInternal Audit Report no . 06/02 to the InstitutionPart 3; Key Findings and Detailed Action PlansAction plans (contained)

There needs to be a clear contractual distinclion between the paying agent's lee and thefunds managed by ihe paying agent on behalf of the Member.The calculations on which the transfer of funds to paying agents is based need 10 beformalised for each managed employment contract in annexes lo the paying agentcontraci. These annexes should preferably be based on a template provided by DGFinance.Changes to (he contractual amounts lo be transferred to paying agents need to beformalised.

G Finance should provide corresponding updated templates of paying agent conlracts..:; foreseen underaction plan A-2, in order lo p rovide assurance thai pay ing agent conlracts>mply, in the future, wilh all ihc mentioned requirem ents, ihe use of these temp lates should made m andatory. To accom modate specific provisions which Mem bers m ight want to.elude, Ihcse templates could include an optional article "special con ditions ". Such specialnditions should not, however, be in conflict with the contract's standard clauses.

. '1 Finance should reject contracts which do nut-comply with ihe.-requirements,^'Authorising Officer by Delegation indicated that the required (letaits are a lready beingmestcden the basis of an established procedure and that he has suggested additional:cific provisions to this end in the framewo rk of the work of he Mem bers' Statute Wo rkingrty.)mgards the issues linked lo seivice co ntrails cove ring the conclusion of the assi'slants': loyment contracts by service providers on behalf of the Member, se e action plans A-3 anil.2 which foresee that such contracts should no longer be concluded under the amendedVM rules.

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galvin report pt4

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