Financial Management and Control Financial Management and Control of an Objective 1 in Transition of an Objective 1 in Transition

Regional ProgrammeRegional Programme

Stephen Blair, DirectorStephen Blair, Director

D.G. Regio & Committee of the Regions D.G. Regio & Committee of the Regions Open DaysOpen Days

September 2004September 2004

OverviewOverview Presentation will focus on the structures which Presentation will focus on the structures which

been put in place in Ireland to ensure sound and been put in place in Ireland to ensure sound and efficient financial management & control systemsefficient financial management & control systems

Firstly I will briefly outline the regional structures Firstly I will briefly outline the regional structures in Ireland and give some facts about the region to in Ireland and give some facts about the region to put the presentation in context.put the presentation in context.

This will be followed by a description of the This will be followed by a description of the systems which have been developed and an systems which have been developed and an outline of various organisation’s respective outline of various organisation’s respective responsibilities.responsibilities.

The final section examines our experience of The final section examines our experience of operating the systems over the last four years operating the systems over the last four years and outlines some lessons learned.and outlines some lessons learned.

INTRODUCTION TO REGIONAL INTRODUCTION TO REGIONAL ASSEMBLIESASSEMBLIES

The Regionalisation arrangements The Regionalisation arrangements negotiated by Ireland in the context of the negotiated by Ireland in the context of the Agenda 2000 Agreement resulted in the Agenda 2000 Agreement resulted in the designation of two regions in Ireland for designation of two regions in Ireland for Structural Funds Purposes:Structural Funds Purposes:

The Southern and Eastern Region (S&E The Southern and Eastern Region (S&E Region) which qualifies for a six year Region) which qualifies for a six year phasing out regime for Objective 1 phasing out regime for Objective 1 Structural Funds up to the end of 2005, andStructural Funds up to the end of 2005, and

The Border, Midland and Western Region The Border, Midland and Western Region (BMW) Region which has retained Objective (BMW) Region which has retained Objective 1 status for Structural Funds for the full 1 status for Structural Funds for the full period to 2006. period to 2006.

REGIONAL ASSEMBLIES - REGIONAL ASSEMBLIES - ESTABLISHMENTESTABLISHMENT

To administer these two new super regions and To administer these two new super regions and to fulfill the E.U. Commissions requirements for to fulfill the E.U. Commissions requirements for some level of devolved administration, the some level of devolved administration, the Government created Regional AssembliesGovernment created Regional Assemblies

the two new Regional Assemblies were the two new Regional Assemblies were established and came into effect on the 21st established and came into effect on the 21st July 1999 under the local Government Act, 1991 July 1999 under the local Government Act, 1991 (Regional Authorities) (Establishment) Order, (Regional Authorities) (Establishment) Order, 1999.1999.

Assemblies comprise of nominated elected Assemblies comprise of nominated elected representatives of the Regional/ Local representatives of the Regional/ Local Authorities within their regionsAuthorities within their regions

Assemblies first met in Oct. 1999Assemblies first met in Oct. 1999

Regional Assembly - Principal Regional Assembly - Principal FunctionsFunctions

Promote co-ordination of public Promote co-ordination of public services in regionservices in region

manage the Regional Operational manage the Regional Operational ProgrammeProgramme

monitor and make proposals in monitor and make proposals in relation to general impact in region of relation to general impact in region of all E.U. Programmes of Assistanceall E.U. Programmes of Assistance

promote consideration by Public promote consideration by Public Authorities of the implication for, or Authorities of the implication for, or the effects of their decisions, and the effects of their decisions, and activities on the regionactivities on the region

Southern and Eastern Region - Southern and Eastern Region - ProfileProfile

Population: circa 3 million (approx. 75% of population of Population: circa 3 million (approx. 75% of population of the state)the state)

Area: circa 69,000 sq.km. (approx. 53% of state)Area: circa 69,000 sq.km. (approx. 53% of state) Population density: 73 per sq.km.Population density: 73 per sq.km. Urban : Rural ratio: 68%:32%Urban : Rural ratio: 68%:32% Contains 4 of the 5 cities in the state, including DublinContains 4 of the 5 cities in the state, including Dublin Economic profile: GVA at basic prices (2001)Economic profile: GVA at basic prices (2001)

EU (15) = 100EU (15) = 100S&E 128.6S&E 128.6State 118.0State 118.0

• GVA for region (per capita): €29,164GVA for region (per capita): €29,164• GVA for State (per capita) : €26,767GVA for State (per capita) : €26,767• Unemployment rate for region: 4.3%Unemployment rate for region: 4.3%

Southern and Eastern Regional Southern and Eastern Regional Operational Programme OutlineOperational Programme Outline

Under the National Development Plan there are three Under the National Development Plan there are three National and two Regional Operational ProgrammesNational and two Regional Operational Programmes

Southern and Eastern Regional O.P. has total budget Southern and Eastern Regional O.P. has total budget of €5.2 billion; of which CSF component accounts for of €5.2 billion; of which CSF component accounts for €1.7 billion€1.7 billion

Very complex programmes (mini NDPs) containing:Very complex programmes (mini NDPs) containing:• 4 Priorities4 Priorities• 65 Measures/Sub-measures65 Measures/Sub-measures• All four sources of EU Structural FundsAll four sources of EU Structural Funds• Involving 10 Government Departments and 30+ Involving 10 Government Departments and 30+

Implementing BodiesImplementing Bodies• Delegated tasksDelegated tasks

New Regional Bodies to manage these new Regional New Regional Bodies to manage these new Regional Programmes in Ireland.Programmes in Ireland.

Outline of Financial Management Outline of Financial Management and Control Systemand Control System

Financial Management & control system is based on a series Financial Management & control system is based on a series of interlocking certification and verification operations of interlocking certification and verification operations across the different tiers of management in the cascade across the different tiers of management in the cascade from final beneficiary (public body) through intermediary from final beneficiary (public body) through intermediary body to Managing Authority and Paying Authority.body to Managing Authority and Paying Authority.

The specific roles and responsibilities of these different tiers The specific roles and responsibilities of these different tiers in the cascade are set out in the attached flowchart.in the cascade are set out in the attached flowchart.

Designation of Authorities:Designation of Authorities:• Paying Authority – Have four different Government depts. for Paying Authority – Have four different Government depts. for

each of the funds.each of the funds.• Managing Authority – S&E Regional AssemblyManaging Authority – S&E Regional Assembly• Intermediary/Implementing Bodies – Government Depts. and Intermediary/Implementing Bodies – Government Depts. and

State AgenciesState Agencies• Final Beneficiaries – Variety of state and local public bodies.Final Beneficiaries – Variety of state and local public bodies.

Managing Authority functions delegated to relevant Paying Managing Authority functions delegated to relevant Paying Authorities for EAGGF and FIFG in respect of certification Authorities for EAGGF and FIFG in respect of certification procedures.procedures.

Flowchart on Financial Management and Control Arrangement for Drawdown of ERDF FundsFlowchart on Financial Management and Control Arrangement for Drawdown of ERDF FundsPays ERDF funds to the Paying Authority for the Pays ERDF funds to the Paying Authority for the Purpose of reimbursing ERDF expenditure actually Purpose of reimbursing ERDF expenditure actually incurredincurred

Examines ERDF expenditure declaration from Examines ERDF expenditure declaration from Managing Authorities and certifies payment claim to Managing Authorities and certifies payment claim to EU commission for drawdown of ERDF funds. Co-EU commission for drawdown of ERDF funds. Co-ordinates irregularity reports for all funds made by ordinates irregularity reports for all funds made by Managing Authorities. Disbursement of receipts.Managing Authorities. Disbursement of receipts.

Co-ordinates and examines expenditure reports from Co-ordinates and examines expenditure reports from implementing Departments/Agencies and submits implementing Departments/Agencies and submits certified expenditure declarations to Paying Authority. certified expenditure declarations to Paying Authority. Carries out Article 4 spot checks on expenditure Carries out Article 4 spot checks on expenditure returns made by Implementing returns made by Implementing Departments/Agencies. Co-ordinates irregularity Departments/Agencies. Co-ordinates irregularity reports for Transmission to Paying Authority.reports for Transmission to Paying Authority.

Co-ordinates & examines expenditure reports from Co-ordinates & examines expenditure reports from Implementing Agencies & submits certified Implementing Agencies & submits certified expenditure returns to Managing Authorities. Carries expenditure returns to Managing Authorities. Carries out Article 4 spot checks on expenditure returns made out Article 4 spot checks on expenditure returns made by Implementing Agenciesby Implementing Agencies..

Certifies payment claims from final beneficiaries & Certifies payment claims from final beneficiaries & pays out grants. Reports on ERDF expenditure to pays out grants. Reports on ERDF expenditure to Implementing Departments. Retains back-up Implementing Departments. Retains back-up documentation for payment claims.documentation for payment claims.

Carries out work & submits claims for payment Carries out work & submits claims for payment

to the Implementing agency. All payment to the Implementing agency. All payment

claims are backed with receipted invoices & claims are backed with receipted invoices & accounting documentationaccounting documentation

Implementing Departments

Verification check by Implementing Departments &

Systems Audit by Internal Audit Unit

Final Beneficiaries

EU Commission Audits carried out by EU Commission control Units

Managing Authorities for OP

Verification check by Managing Authority and

Systems Audit by Internal Audit Unit

Implementing AgenciesValidation of claims & Systems

Audit by Internal Audit Unit

ERDF & Cohesion Fund

Control UnitCarries out 5%

verification checks on

declared ERDF expenditure & systems audits

Paying AuthorityDepartment of Finance

Financial control check by Paying Authority & Systems Audit by Internal Audit Unit

National Requirements National Requirements Various circulars issued by the relevant Paying Various circulars issued by the relevant Paying

Authorities set out how the Commission implementing Authorities set out how the Commission implementing regulations are to be applied in Irelandregulations are to be applied in Ireland

Three elements to certification system:Three elements to certification system:• Form A: Over-arching certification of compliance with Form A: Over-arching certification of compliance with

regulations – signed by Intermediary Bodies and regulations – signed by Intermediary Bodies and Managing Authority annually.Managing Authority annually.

• Form B: Ex-ante expenditure certification at each Form B: Ex-ante expenditure certification at each level in cascade to confirm actuality and eligibility of level in cascade to confirm actuality and eligibility of expenditure declared.expenditure declared.

• Form C: Formal statement of expenditure declared Form C: Formal statement of expenditure declared to Commissionto Commission

System Audits: To be undertaken by independent System Audits: To be undertaken by independent internal audit units within organisations at each level in internal audit units within organisations at each level in cascade from Intermediary Body to Paying Authority cascade from Intermediary Body to Paying Authority

Ex-Ante Certification – Form B’sEx-Ante Certification – Form B’s B1 Level: Final Beneficiary/Grant Approving Body is B1 Level: Final Beneficiary/Grant Approving Body is

expected to do 100% checking of all expenditure (or on a expected to do 100% checking of all expenditure (or on a sample basis) and to certify that 14 specific controls have sample basis) and to certify that 14 specific controls have been performed before certifying expenditure.been performed before certifying expenditure.

B2 Level: Intermediary Body (generally government dept B2 Level: Intermediary Body (generally government dept or state agency) required to confirm that management and or state agency) required to confirm that management and control procedures are in place (procedures manual) and control procedures are in place (procedures manual) and that steps have been taken (include sample checking) to that steps have been taken (include sample checking) to give reasonable assurances on the declaration.give reasonable assurances on the declaration.

B3 Level: Managing Authority. In addition to the B3 Level: Managing Authority. In addition to the confirmation listed above for Level 2, it is obliged to confirm confirmation listed above for Level 2, it is obliged to confirm that such other matters are consistent with Measure that such other matters are consistent with Measure Financial tables, Programme Complement, Annual Financial tables, Programme Complement, Annual Implementing Report has been submitted and debtors Implementing Report has been submitted and debtors ledger is maintained.ledger is maintained.

Major Issues and Lessons Learned Major Issues and Lessons Learned

Cascade system relies very heavily on systems in Cascade system relies very heavily on systems in organisations.organisations. Therefore need for systems to be well documented i.e. Therefore need for systems to be well documented i.e.

procedures manuals are very important and to have procedures manuals are very important and to have systems regularly tested i.e. systems audits.systems regularly tested i.e. systems audits.

Cascade system requires that organisations at Cascade system requires that organisations at each level of the cascade and the employees each level of the cascade and the employees which work within them are familiar and which work within them are familiar and competent with both the certification procedures competent with both the certification procedures and the governing regulationsand the governing regulations Hence the need for regular training for all personnel Hence the need for regular training for all personnel

involved in the certification process.involved in the certification process. Even with good systems, human error will Even with good systems, human error will

always remain a feature. Hence the “four eyes” always remain a feature. Hence the “four eyes” principle is strongly recommended.principle is strongly recommended.

Contact DetailsContact Details

Southern & Eastern Regional AssemblySouthern & Eastern Regional Assembly

Assembly House Assembly House

O’Connell StreetO’Connell Street

Waterford Waterford

Tel: 051 - 860700 Tel: 051 - 860700 Fax: 051- Fax: 051- 87988778798877

Email : Email : info@seregassembly.ieinfo@seregassembly.ie

Web: Web: www.seregassembly.iewww.seregassembly.ie