29 March 2011

Audit AuthorityAudit Department

Ministry of Finance

1

Contents

1. Functional independence

2. Capacity

3. The Annual Control Report and Opinion for the period from 1 July 2009 to 30 June 2010

4. Audit Strategy and Risk Assessment 2011

5. System Audits 2011

6. Audits of Operations

7. External Quality Assessment

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1. Functional independence

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Changes in 2010-20111.1. Already done

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• CentralizationThe CoM Regulations No 1153 of 21.12.2010 approved centralizing

all functions of the Audit Authority in the Ministry of Finance.

• Audit Committee Lliquidated with the MoF Decree No 699 of 15.12.2010.

• Authorization of Audit OpinionReports of the Audit Authority are signed by the Head of Audit

Authority in compliance with the MoF Decree No 679 of 02.12.2010.

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Minister of Finance

State Secretary

Head of Audit Authority - Director of

Audit Department

Audit Authority - Audit Department

Head of Management Authority - Deputy

State Secretary

EU Funds Strategic Department

EU Funds Supervision Department

State Aid Control Department

Certification Authority/Paying Authority - State

Treasury

Functional Independence of

the Audit Authority

Changes in 2010-20111.2. Planned:

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• Separation from IAThe Audit department of Ministry of Finance as of 01.01.2012 will be

splitt - Audit Authority function will be separated from the internal audit and CHU function.

• Reporting lineThe changes in the «Law On Management of European Union

Structural Funds and the Cohesion Fund» are initiated in order to approve at the legislation level rights of the Head of the Audit Authority to report on significant issues directly to the CoM (via minister of finance).

2. Human Resource Capacity of the Audit Authority

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Changes in 2010-20112.1. Already done:

• Internal separation of functionStarting from 01.09.2010 functions of the Audit authority are

concentrated in 3 divisions:– EU Funds and Foreign Financial Assistance System Audit

Division performs system audits;– EU Funds and Foreign Financial Assistance Financial Audit

Division performs audits of certified expenditure;– EU Funds and Foreign Financial Assistance Audit Policy

Planning Division performs the rest of the Audit Authority functions.

• Detailed resource plan: The Audit Authority’s capacity is enough to cover all the EU funds institutions in 2011

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Audit Authority’s – Audit Department’s structure

A – absent T – temp (in the absence of jobholder)

1 - Operational programme "Human Resources and Employment"

2 - Operational programme "Entrepreneurship and Innovations" 3 - Operational programme "Infrastructure and Services"

Head of the Audit Authority Head of Department Nata Lasmane

Nata Lasmane

Head of the Ministry System

Internal Audit Division

Laila Lazdāne

Head of Public Administration

Internal Audit Policy Planning Division

Vija Gurkovska

Deputy Head of

Division Elīna Gabranova

Deputy Head of Department in Public Administration Internal Audit Policy Planning issues Pēteris Strazdiņš

Deputy Head of Audit Authority Deputy Head of Department on European Union Funds and Foreign Financial Assistance Audit Policy Issues Olita Janberga

Head of the European Union Funds and Foreign Financial Assistance Financial Audit Division Laura Buivida 1,2,3

Head of the European Union Funds and Foreign Financial Assistance System Audit Division Maija Paškeviča 1,2,3

Deputy Head of Division Irita Vilciņa 1,2,3

Information Security Manager Vladislavs Minkevičs

Senior Expert Dagnija Baumane

Senior Expert Evita KrilovaA

Junior Expert Ilze Krūzīte

Deputy Head of Division Dana

Stauvere

Senior Auditor Jūlija Adamoviča

Senior Auditor Dace RekeA /

Agrita SalcevičaT

Senior Auditor Antra Bierne

Head of the European Union Funds and Foreign Financial

Assistance Audit Policy Planning Division Olga Guza

1,2,3

Deputy Head of Division Marita Markevica 1,2,3

Deputy Head of Division Antra Bogdanova 1,2,3

Senior Expert Jeļena Keirāne 1,2,3

SF

Senior Expert Laura Graudiņa 1,2,3

Senior Expert Ieva Grīnerte

Senior Expert Svetlana Kravčinska1,2,3

Senior Auditor Inga Mengote 1,2,3

Senior Expert Aiva Avota 1,2,3

SF

Senior Auditor Oksana Stepanova 1,2,3

Senior Auditor Diāna Vītoliņa 1,2,3

Senior Auditor Dace Bite, 1,2,3

Senior Auditor Svetlana Derjugina 1,2,3

Senior Auditor Agnese BraunbergaA

Auditor Una Gulbe 1,2,3

Auditor Daina KalniņaA / Elīna Mazā

Senior Auditor Inguna Kaupuža 2

SF Senior Auditor Raimonda Batņa 1

SF

Senior Auditor Dace Maļinovska 2

SF

Senior Auditor Andris Pierhurovičs 3

SF

Senior Auditor Nataļja Mancurova 3

Maļinovska SF

Auditor Elvīra Klarka 3

Auditor

Jolanta Vanadziņa 1

Auditor Inese AkmentiņaA/Natālija

KopovajaT 3

Senior Expert Anda ŠtegmaneA 1,2,3

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Functions of the Audit Authority

Performing audits of operations; Follow-up of audits’ recommendations Reporting Irregularities determined during the audits of operations to the Managing authority

Minister of Finance

Ministry of Finance Audit Authority (AA)

Managing Authority (MA)

State Secretary

EU Funds Strategy

Department

MA functions

EU Funds Monitoring Department

MA functions

Deputy State Secretary on EU

Funds Issues

Performing management

and control systems audits; Follow-up of audits’ recommendations

Reporting of Irregularities detected during the horizontal management and control systems audits to the Managing Authority

Audit Department Head of the Audit Authority

European Union Funds and Foreign Financial

Assistance System Audit Division

European Union Funds and Foreign Financial Assistance Financial

Audit Division

European Union Funds and Foreign Financial Assistance Audit Policy Planning

Division

Policy planning and development of the Audit Authority Preparation and development of Rules and regulations (MoC Reg., Methodology, Procedures, Guidelines,

Manuals) to ensure the functions of the Audit Authority Providing opinion on the legislative acts developed by institutions involved into management of EU funds Developing methodology and guidelines for performance of system audits and audits of operations, including

follow up of recommendations Maintaining and updating of the Audit Authority Manual Elaborating and annual updating of the Single audit Strategy Elaborating the Audit Authority’s annual plans Compliance assessment and quality review of the work performed by Internal audit units Preparation of the Annual Summary Developing the Final Control Report and Final declaration Ensuring trainings of the Audit Authority auditors Providing consultations and methodological assistance; Coordinating information in cooperation with the State Audit Office, EC, European Court of Auditors and

other external auditors. Monitoring and co-ordination of the implementation of the recommendations Input and monitoring of data in the Management Information System, data quality checks Elaborating the Annual Control Report and issuing an Opinion on the operation of the management and

control system Reporting irregularities using the Management Information System vis.esfondi.lv Ensuring the external assessment of the Audit Authority’s operation in compliance with the International

Standards on Auditing (Ernst&Young) Compliance assessment of the established management and control system SFC2007

Deputy Head of Audit Authority

Full time staff for system audits 6

Number of institutions to be audited 20

Man-days per 1 institution 65

Necessary man-days in total (20x65) 1300

1 auditor should work on system audits days per year (1300 / 6)

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In addition: part time auditors available, if necessary

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Changes in 2010-20112.2. Planned:

• Reallocation of resources after 01.07.2011Employees involved in Winding-up of Cohesion fund 2004-2006 will

be available for the system audits as of 01.07.2011.

• Additional staff2 extra staff units will be available in EU Funds and Foreign Financial

Assistance Audit Policy Planning Division.

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3. The Annual Control Report and Opinion for the period

from 1 July 2009 to 30 June 2010

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3.1. Preparation of the Annual Control Report and Opinion

1. Horizontal and system audits: 80% of key requirements covered by AA of MoF

2. Other Internal Audit Units’ work: 20% of key requirements covered

3. Quality Review – the Audit Authority reviewed files of Internal Audit Units

4. The additional audit: on procurement system in the Ministry of Transport was performed

5. The training of the AA staff was provided by the international auditor companies KPMG and PWC on International Standards on auditing

6. External expert contracted to consult the AA on preparation of Opinions

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KR 1 KR 2 KR 3 KR 4 KR 5 KR 6 KR 7

Managing Authority

MoFMoELIDAMoTMoWSEA

MoRDLGSRDAMoHCHE

MoEnvMoSESEDAMoC

SCSIF

CFCU

Paying Authority

Sertification Authority

Key requirements assessed by the AA of MoF

Intermediate Bodies

Procurement Bureau

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KR 1 KR 2 KR 3 KR 4 KR 5 KR 6 KR 7

Managing Authority

MoFMoELIDAMoTMoWSEA

MoRDLGSRDAMoHCHE

MoEnvMoSESEDAMoC

SCSIF

CFCU

Paying Authority

Sertification Authority

Key requirements assessed by the Internal Audit Units

Intermediate Bodies

Procurement Bureau

3.2. Summary of Audit Opinions

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Operational programme

Audit Opinion

Scope Limitation

LVL

Quantification of deficiencies/ Irregularities

LVL

Error rates from

audits ofoperations

%

2007LV151PO001 (ESF)

Unqualified - 24 211,06

 

0,15

2007LV161PO001 (ERDF)

Qualified 77 905 279,03 129 628,68 0,08

2007LV161PO002 (ERDF/CF)

Unqualified - 25 503,01 0,08

3.3. Assessment of the management and control system

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Institution Management and control system assessment

Management Authority 2

Intermediate Bodies 2

Certification Authority 1

Paying Authority 1

Public Procurement Bureau 2

3.4. Coverage from audits of operations

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Period

 

 

Operational Programme

ExpenditurePopulation, LVL Sample,LVL

 

%

2009

2007LV151PO001 (ESF) 16 632 922 14 992 724 90%

2007LV161PO001 (ERDF) 76 445 011 70 832 177 93%

2007LV161PO002 (ERDF/CF) 110 434 027 81 976 524 74%

Total 203 511 960 167 801 425 82%

4. Audit Strategy and Risk Assessment 2011

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Audit Strategy and Risk Assessment 2011

The main improvements•Risk assessment: per Operational Programmes and per Institutions

•Audit Plan»: for 2011 foresees to cover all Institutions involved in EU funds administration

•System audit report one per one institution including all key requirements

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5. System Audits 2011

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System audits 2011

• Basic standard for methodology: IFAC issued International Standards on Auditing (reporting:ISA 800)

• Sample selection• Audits in process:

– Ministry of Health, – Health Economics Centre, – Ministry of Transport, – Ministry of Environmental Protection and Regional

Development,– State Regional Development Agency

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6. Audits of Operations

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6.1. Further approach to Audits of Operations

• Updated methodology and more detailed checklists regarding:– expenditure eligibility;

– public procurement (evaluation of selection criteria and evaluation of too cheap offers);

– Risk of double accounting and double financing;

– State aid issues;

– checklist made referring to national legal acts and EC directives and regulations

• Audit field work and on-the-spot checks – checks are made upon documents original available at beneficiary

• Updated coverage and computation of error rate25

6.2. Sample for 2010 II half

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Period

 

 

Operational Programme

Expenditure

Certified, LVL Sample,LVL

 

%

2010

II half

2007LV151PO001 (ESF)

144 185 474,06 70 761 536,13 49,08%

6.3. Preliminary results of Audits of Operations

(2010 I half)

Systemic errors found regarding:•Transparency;•Storage of accounting documents;•Public procurement.

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 Period  Operational Programme

Expenditure Error rateCertified, LVL Sample, LVL  %

2010

I half

2007LV151PO001 (ESF) 54 953 831.08 31 635 796.19 57.57

1,87%2007LV161PO0

01 (ERDF) 11 595 569.02 3 691 090.68 31.83

2007LV161PO002 (ERDF/CF) 100 561 980.26 26 527 193.51 26.38

7. External Assessment of Audit Authority

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External Assessment of Audit Authority (carried out by

Ernst & Young)

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Key requirements Evaluation

 1 Clear definition, allocation and separation of functions 2

 

2 Adequate systems audits 2

 

3 Adequate audits of operations 2

 

4 Adequate annual control report and audit opinion 2

Thank you for your attention!

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Nata Lasmane

Head of Audit Authority

Director of Audit Deparment

Phone +371 67095669

Nata.Lasmane@fm.gov.lv