this project is co-financed by the european union and the republic of turkey

IPA Funds Programme Management 12-19 sept. 2011

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Bölgesel Rekabet Edebilirlik Operasyonel Programı’nın Uygulanması için Kurumsal Kapasitenin Oluşturulmasına Yönelik Teknik Yardım

Technical Assistance on Institutional Building for the Implementation of RCOP in Turkey

This project is co-financed by the European Union and the Republic of Turkey

Basics of Financial Management under IPA Programme

Ankara, 16 September 2011Ankara, 16 September 2011

[email protected]@ecorys.com.tr





ContentContent

1. Budget Allocations in IPA Structure2. Flow of Funds3. Functions and Role of the Finance Division

under the RCP-CID and RCOP4. Lifecycle of Expenditures5. General overview for payments 6. Plenary Discussion and Questions



1)Budget Allocations in IPA 1)Budget Allocations in IPA StructureStructure

Let’s start from the beginning

The Commission must keep tight control over the way the Community budget is executed since, under Article 274 of the EC Treaty, the Commission is ultimately responsible for budget implementation of both commitments and payments. The Commission has to take appropriate steps to ensure that the principles of sound financial management are being adhered to in all cases.

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When the Commission When the Commission gives gives moneymoney??

Implementation of the budget is only delegated to Member States (shared management) or third countries (decentralised management) if the Commission is satisfied that the countries in question will implement the budget in accordance with the rules in force and with the principles of sound financial management and that a clearance of accounts/financial correction mechanism is in place to correct potential irregularities.

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Before decidingBefore deciding

Before confer management powers the Commission is checking the fulfillment requirements to the management and control systems – Accreditation Process

If you need Commission money you should answer the requirements

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Requirement for implementation Requirement for implementation of IPA Programmeof IPA Programme

The Commission confers the management of certain actions on the beneficiary country, while retaining overall final responsibility for general budget execution.

For this purposes of assistance under the IPA Regulation decentralised management shall cover at least tendering, contracting and payments which at the same time refers to the life cycle of expenditures.

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Accreditation Criteria Annex to Accreditation Criteria Annex to the IPA Implementing Regulation the IPA Implementing Regulation 718718

Control EnvironmentPlanning and Risk ManagementControl ActivitiesMonitoring Activities (supervision of interventions)Communication (ensuring all actors receive information

necessary to fulfill their role)

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Remember the COSO Model?Remember the COSO Model?

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Control Activities mainly related with the financial management of IPA funds



Candidate StatusCroatia (Hırvatistan) the former Yugoslav

Republic of Macedonia (Makedonya)

Turkey (Türkiye)

Potential candidate status Albania, Bosnia&

Herzegovina (Arnavutluk, Bosna Hersek)

Iceand (İzlanda)Serbia and Montenegro

including Kosovo according to UNSCR 1244 (Sırbistan, Karadağ ve Kosova)

Budget Allocation (IPA) 2007-2013 Budget Allocation (IPA) 2007-2013 Instrument for Pre- Accession Instrument for Pre- Accession AssistanceAssistance

Budget: 11,468 billion euros

Allocation of IPA funds per component for TurkeyAllocation of IPA funds per component for TurkeySource: Instrument for pre- accession assistance (IPA) revised multi- annual indicative financial framework for 2011-2013

Component 2007 2008 2009 2010 2011 2012 2013

1: Support for transition and institution building (Kurumsal Kapasite Geliştirme)

257 250 233 211 231 234 238

2: Cross-border cooperation(Bölgesel ve Sınır Ötesi İşbirliği)

2 9 9 10 10 10 10

3: Regional development (Bölgesel Kalkınma)

168 174 183 238 291 368 378

4: Human resource development (İnsan Kaynaklarının Gelişimi)

50 53 56 63 78 90 96

5: Rural development (Kırsal Kalkınma)

21 53 86 131 173 198 213

Total in million EUROS

497 539 566 654 782 900 936



For Turkey: 2007-2013For Turkey: 2007-2013

Total Budget allocation for Turkey under all IPA Components: 4,874 billion euros

Total Budget allocation for Component 3,

Regional Development: 1,800 billion euros



For 2007-20For 2007-201313 (Ministry of Science, (Ministry of Science,

Industry and Technology) Industry and Technology)

Component 3: Regional Development 2007-2013

RCOP 2007 2008 2009 2010 2011 2007-2011

2012-2013

2007-2013

Priority 1 Business environment 36,5 37,9 47,7 80,1 98,5 300,7

Priority 2 Enterprise capacity and entrepreneurship

9,9 10,2 12,9 2,2 2,3 37,5

Priority 3 Technical Assistance 3,0 3,0 3,9 1,7 2,7 14,3

Totals 49,3 51,1 64,5 84,0 103,5 352,5 223,7 * 576,2*

* Estimation for 2012-2013 based on the MIFF and 33% share of RCOP in Component 3.



2) Flow of Funds(Logical 2) Flow of Funds(Logical Framework)Framework)

EU Contribution:

Fund transfer from the Commission to the NF

National Co- Financing: Fund transfer from the Line Ministries to the NF

For Both:

Fund transfer from the NF to Contracting Authority

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PLEASE

SEE THE ANNEX



FLOW OF FUNDSFLOW OF FUNDS



Request of Funds from the Commission Request of Funds from the Commission (Brussels)by the NF (Turkey)(Brussels)by the NF (Turkey)

Request of Funds from the Commission (Brussels)by the NF (Turkey)

Payments, transfer of funds from the Commission(Brussels) to the NF(Turkey)

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National Authorising Officer National Authorising Officer (Ulusal Yetkilendirme Görevlisi)(Ulusal Yetkilendirme Görevlisi)

• National Authorising Officer (NAO):

• is the head of the National Fund (NF)

• has the full responsibility for the financial management of EU funds

• responsible from the legality and regularity of transactions

• responsible from the effective functioning of management and control systems under IPA regulation

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The Responsibilities of the The Responsibilities of the NAO/NFNAO/NF

Responsibilities of NF&NAO according to Article 26 of the IPA regulation:

requesting funds from the Commission; organising the bank accounts;authorising the transfer of funds received from the Commission to the Contracting Authority/Operating Structures

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Request of Funds from the Request of Funds from the NFNF

According to Article 40 of the IPA regulation:

In relation to each IPA component&programme, each year by the 28 February, each Beneficiary country shall send to the commission a forecast of its likely payment applications for the financial year concerned and for the subdequent financial year.

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To request the fundsTo request the funds

Signature of the Financing Agreement, the Contracting Authority in close cooperation with the OS shall, on the basis of:

• The Procurement Plan and • Commitment and Disbursement forecasts provided

to the NAO / NF with their forecasts for payment to Contractors.

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Payments by the Comission Payments by the Comission to the NFto the NF

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Request of Funds from the Request of Funds from the Line Ministries (Brussels)by Line Ministries (Brussels)by the NF (Turkey)the NF (Turkey)

Request of Funds from the Line Ministries by the NF (Turkey)

Payments, transfer of funds from the Line Ministres to the NF(Turkey)

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The OS / Contracting The OS / Contracting Authority is responsible forAuthority is responsible for::

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The request for funds from the National Fund ensuring the national co-financing The payment to Contractor

Responsibility of OS/Contracting Authority



Ensuring the National co-Ensuring the National co-financingfinancing

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•As a general rule and unless otherwise agreed with the EC:

•Investment projects require national co-financing equivalent to at least 15% of total eligible expenditure under the relevant project

•Technical assistance projects require national co-financing equivalent to at least 10% of total eligible expenditure under the relevant project



Request of Funds from the NF Request of Funds from the NF by the Contracting Authorityby the Contracting Authority

Request of Funds from the NF (Turkey) by the Contracting Authority/OS

Payments, transfer of funds from the NF to the Contracting Authority/OS

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Request of Funds From the NF Request of Funds From the NF to the Contracting Authorithyto the Contracting Authorithy

The amounts of the Requests for Funds are established on the basis of detailed disbursement forecasts based on the invoices already checked and approved by the OS/Contracting Authority and end-recipients, derived from detailed commitment forecasts developed by the OS and payment schedules under signed contracts

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• Finance Division is preparing the Requests for Funds on a regular basis (generally quarterly basis)

• Finance Division is responsible to check the approved limit and if there is a difference between the requested and approved amount to clarify the issue with the National Fund

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Request of Funds from the NF Request of Funds from the NF by the OS/Contracting by the OS/Contracting AuthorityAuthority



3) Responsibilities of Finance 3) Responsibilities of Finance Division under RCP-CID / RCOPDivision under RCP-CID / RCOP

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Sound Financial Management



Overall Responsibilities of Overall Responsibilities of Finance DivisionFinance Division

1)Request for Funds from the National Fund

2)Payment Authorisation and Execution

3)Financial Reporting

4)Accounting

VERY IMPORTANT!

Clear segregation of duties between two functions-Finance-Accounting

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Segregation of DutiesSegregation of Duties

In accordance with the good internal control practice the following

shall be in place in relation to financial procedures:

– Segregation between payment authorisation and payment execution

– Segregation between financial management and accounting

Accountants responsible for maintaining the IPA accounting records are not involved in the approval nor in execution of payments

- Segregation between financial management and tendering

Accounting and payment approval functions are separated from the tendering function

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Responsibilities of Finance Responsibilities of Finance DivisionDivision

Finance Function

Staff

Chief of Finance Division

IPA Expert- Payment 1

IPA Expert- Payment 2

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Responsibilities•Preparation of Request for Funds•Execution of payments for service, framework, supply and works contracts•Provision of assistance to VAT exemption and other tax related issues•Financial Reporting



Responsibilities of Finance Responsibilities of Finance DivisionDivision

Accounting Function

Staff

Chief of Finance Division

IPA Expert- Senior Accountant

IPA Expert- Accounting

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Responsibilities•Organising book-keeping activities•Presto



Responsibilities of Finance Responsibilities of Finance 1) Request for Funds1) Request for Funds

• Request of Funds from NF

• Verification of availability of funds and checking if the funds are available under the relevant sub-account to execute the payment

• Checking if the amount requested in the Request of Funds are adequate for the reimbursements, in order to avoid a surplus balance of the funds and late payments.

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2) Payments2) Payments

• Receiving requests for payment from contractors, checking legitimacy of request

• Checking and verifying the payment dossier in accordance with the contract dossier and standard EU procedures in force at the time

• Double-checking of the Payment Dossier;

• Checking and verifying the “Good for Payment” amount proposed by the IPA Expert- Payment 1

• Checking the Transfer and Payment Order Form prepared by the IPA Expert- Payment 1 and make sure the sub-accounts, payment accounts, bank details of the Contractor and the payment amounts are correct,

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3) Reporting3) Reporting

• This function describes the activity of financial reporting performed through OS Accounting program, OS database - MIS and reports prepared manually based on supporting information from these systems.

• Reports submitted by the OS are the basis for the NF further reporting to the EC. All reports are provided in the standard format agreed by the NF

• Monthly Financial Report, providing to the National Fund, for distribution to the NAC and EC Representation in Ankara, monthly reports covering the status of projects being implemented and the financial status of each programme

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4) Accounting4) Accounting

• Establishing and maintaining the accounting system • Registration of the contracts with all necessary details;

such as Contract Number, Contractor, Contract Amount, Estimated Payment Amounts, Bank Details of the Contractor, bank guarantees, payment requests;

• Organises the book-keeping activity;• Ensures appropriate book-keeping and registration for

each programme, objective, component, contract;

Making records of payments under signed contracts

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4) 4) LifecycleLifecycle of Expenditures of Expenditures



Types of ComponentsTypes of Components

Service: Procurement of consultancy, research, know-how and training

Supplies: Procurement of equipment, materials

Works: infrastructure, superstructure and oher engineeringworks

Name of the Training 37

Fee based Global price Based on Direct Costs

Service

(FWC)

Supplies

Works

Twinning

Grants

(Direct Grants)



5) Payments to the Consultants 5) Payments to the Consultants /Contractors/Contractors



Sözleşme Türü(Component Type)

Avans ÖdemesiPre-financing payment

Ara ödemeInterim Payment

Nihai ödemeFinal Payment

Ücret bazlı Hizmet veya Birim Fiyat MüşavirlikService/FWC*Fee- based Service/TA*Unit Price Supervision

12 ay veya daha az %4012-24 (24 hariç) %3024 ay veya fazlası %20

6 ayda bir (%90’ a kadar)

% 10

Götürü Usulü HizmetGlobal Price

% 60 N/a %40

İnşaatWorks

SupplyMal Alımı

%10

%60

Hakedis Ödemeleri Aylık olarak yapılır.Ara ödemelerden %5 retention kesintisi yapılır.

Retention

%4040



Basic Terminology during the Basic Terminology during the payment process of the projectpayment process of the project

Contractor: For all types of contractsConsultant: For service contractsAn official commercial request for payment/payment claim/invoiceThe complete contract numberThe complete contract title Invoice numberDate of issue of the invoiceThe type of payment claimThe period covered by the payment claim



Types of PaymentsTypes of Payments

Pre-financing Further pre-financing

Interim PaymentBalance

Different in all components!!!



After the request of payment is After the request of payment is received from a Consultant by received from a Consultant by the Contracting Authority:the Contracting Authority:

The invoice of the Consultant is registered in the Invoice Register upon receipt by the OS

The original invoice is also registered into the accounting system

The Invoice is checked with Invoice Identification Control Sheet

If approved a payment order is prepared by Finance Manager

Once the payment to the contractor is done the Contracting Authority shall inform the Consultant about the payment



Time Frame for paymentTime Frame for payment

Within 45 days of receipt of the contract signed by all parties and all relevant documents (request for payment, financial guarantee if applicable).



The submission and approval of the below The submission and approval of the below documents are necessary to start to 45 days documents are necessary to start to 45 days payment deadline (Example service payment deadline (Example service contracts)contracts)

Invoice / request for paymentA detailed list of expenses for fees and incidentals which

form the financial report which shall indicate the cumulative expenditure and the balance available.

Related Progress ReportExpenditure Verification Report by external auditorsTimesheets for the related periodWorking at weekend or national holiday approvalsSubject to the approval of the interim report by end

recipient and Contracting Authority in accordance with Article 27 of General Conditions



The role of the end-recipient:The role of the end-recipient:

A copy of the front page of the invoices stating “Read and Approved” signed and dated by two authorised signatures one of which is the SRER is a pre-requisite for starting the payment request and execution of the payment deadline of 45 days.



Approval of the progress Approval of the progress reportreport

The approval of the progress report is a pre- requisite to proceed with the paymentThe period of the progress report should comply with the period of expenses in the request for payment/invoice.The progress reports should be accompanied by a financial report and an expenditure verification by the audit firm



Audit Firm for the expenditure Audit Firm for the expenditure verification & eligibility of costsverification & eligibility of costs

Notification from the Consultant related to the audit firm

The audit firm has to be a member of an internationally- recognised supervisory body for statutory auditing according to Atricle 20 of the contract

CPA or YMM in Turkey



Basic Terminology Basic Terminology During the implementation of the During the implementation of the projectproject



Verifications on fees/man-Verifications on fees/man-daysdays

To execute a payment there should be reliable and sufficient evidence that:

the experts employed by the consultant have actually been working on the contract for the number of days claimed in the Consultant’s invoices

Fees are paid for services actually rendered, the time worked.

STEs must have CFCU prior approval



Eligibility Verifications on IncidentalsEligibility Verifications on IncidentalsIncidental Budget Approval RequestsIncidental Budget Approval Requests

All incidental expenditure in contract is to be invoiced at actual cost

The invoice and /or other documents must be compatible with the Turkish regulations.

A number of items are ineligible, examples include:VAT, customs and import duties Types of administrationetc.



Exchange RatesExchange Rates

Conversion of expenses incurred in currencies other than Euro should be based on the monthly Info euro exchange rates published by the European Commission web site.

www.europa.eu.int/comm/budget/inforeuro/index.cfm?fuseaction=dsp_html_monthly_rates&lamguage=en

)



Physical Storage of the Physical Storage of the DocumentsDocuments

Relevant documentation must be kept for a 7-year period after the final payment made under the contract

All supporting documents are kept carefully





• Verification – ensuring double-check of all steps in a transaction

• Procedures for supervision by accountable management of tasks delegate to subordinates

• Payment procedures (including procedures for confirmation of output delivery and eligibility conditions “on-the-spot where necessary

AS YOU SEE AS YOU SEE Control Activities – Control Activities – mainly related with the financial mainly related with the financial management of IPA fundsmanagement of IPA funds





• Budgetary procedures – to ensure availability of funds (including funds necessary to maintain implementation if Commission funding is delayed or refused)

• Procedures for monitoring delivery of co-financing

• Procedures for continuity of operations

More....More....





• Accounting procedures – ensuring full and transparent accounting following accepted accounting principles

• Reconciliation procedures – ensuring that wherever possible accounting balances are reconciled against third-party information

• Security procedures – ensuring that assets and data are kept secure from interference or physical damage

• Archiving procedures ensuring that documents will be available and kept secure

And More....And More....





• Segregation of duties – ensuring that where different tasks in the life of the same transaction are allocated to different staff to ensure some automatic cross-checking controls

• Reporting of internal control weaknesses – ensuring that the registration of any internal control weakness identified from any source and that management responses are recorded and followed-up.

And More....And More....





Preminary DiscussionsPreminary Discussions

QuestionsQuestions



THANK YOU!THANK YOU!

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this project is co-financed by the european union and the republic of turkey

Documents

management powers

european union

ipa programme ankara

ipa structurelets

ipa regulation

management of certain

commission money

budget implementation