CHAPTER II

SPECIFIC PROVISIONS FOR MANAGEMENT AND CONTROL SYSTEMS

Data to be recorded and stored in computerised form(Article 32(8) of Regulation (EU) No 223/2014)
Article 2
1
The information on data to be recorded and stored in computerised form for each operation in the monitoring system set up in accordance with Article 32(2)(d) of Regulation (EU) No 223/2014 is set out in Annex I to this Regulation.
2
Data shall be recorded and stored for each operation, including, in case of operations supported by OP II, data on individual participants, broken down by gender where available, in order to allow it to be aggregated where this is necessary for the purposes of monitoring, evaluation, financial management, verification and audit. It shall also allow the aggregation of such data cumulatively for the entire programming period.

Detailed minimum requirements for the audit trail(Article 32(9) of Regulation (EU) No 223/2014)
Article 3
1
The detailed minimum requirements for the audit trail in respect of the accounting records to be maintained and the supporting documents to be held shall be the following:
a
the audit trail shall allow the application of the selection criteria established in the food and/or basic material assistance operational programme (OP I), or by the monitoring committee for OP II to be verified;
b
in relation to grants under Article 25(1)(a) of Regulation (EU) No 223/2014, the audit trail shall allow the aggregate amounts certified to the Commission to be reconciled with the detailed accounting records and supporting documents held by the certifying authority, managing authority, intermediate bodies and beneficiaries as regards operations co-financed under the operational programme;
c
in relation to grants under Articles 25(1)(b) and (c), the audit trail shall allow the aggregate amounts certified to the Commission to be reconciled with the detailed data relating to outputs or results and supporting documents held by the certifying authority, managing authority, intermediate bodies and beneficiaries, including where applicable documents on the method of setting the standard scales for unit costs and the lump sums, as regards operations co-financed under the operational programme;
d
in relation to costs determined in accordance with Articles 25(1)(d) of Regulation (EU) No 223/2014, the audit trail shall demonstrate and justify the calculation method, where applicable, and the basis on which the flat rates have been decided, and the eligible direct costs or costs declared under other chosen categories to which the flat rate applies;
e
in relation to costs determined in accordance with Article 26(2)(b), (c), (e) and 26(3) second part, of Regulation (EU) No 223/2014, the audit trail shall allow the eligible direct costs or cost declared under other categories of costs to which the flat rate applies to be substantiated;
f
the audit trail shall allow the payment of the public contribution to the beneficiary to be verified;
g
for each operation, as appropriate, the audit trail shall include the technical specifications and financing plan, documents concerning the grant approval, documents relating to public procurement procedures, reports by the beneficiary and reports on verifications and audits carried out;
h
the audit trail shall include information on management verifications and audits carried out on the operation;
i
the audit trail shall allow data in relation to output indicators for the operation to be reconciled with reported data and result and, where appropriate, targets for the programme.
For costs referred to in points (c) and (d), the audit trail shall allow the calculation method used by the managing authority to be verified for compliance with Article 25(3) of Regulation (EU) No 223/2014.
2
The managing authority shall ensure that a record is available of the identity and location of bodies holding all the supporting documents required to ensure an adequate audit trail meeting all the minimum requirements laid down in paragraph 1.

Use of the data collected during audits carried out by Commission officials or authorised Commission representatives(Article 34(8) of Regulation (EU) No 223/2014)
Article 4
1
The Commission shall take all necessary measures to prevent any unauthorised disclosure of, or access to, the data collected by the Commission in the course of its audits.
2
The Commission shall use the data collected in the course of its audits for the sole purpose of fulfilling its responsibilities under Article 36 of Regulation (EU) No 223/2014. The European Court of Auditors and the European Anti-Fraud Office shall have access to the data collected.
3
The data collected shall not be sent to persons other than those in the Member States or within the Union institutions whose duties require that they have access to it in accordance with the applicable rules without the express agreement of the Member State supplying the data.

Audits of operations(Article 34(7) of Regulation (EU) No 223/2014)
Article 5
1
Audits of operations shall be carried out in respect of each accounting year on a sample of operations selected by a method established or approved by the audit authority in accordance with Article 6 of this Regulation.
2
Audits of operations shall be carried out on the basis of supporting documents constituting the audit trail and shall verify the legality and regularity of expenditure declared to the Commission, including the following aspects:
a
that the operation was selected in accordance with the selection criteria for the operational programme, was not physically completed or fully implemented before the beneficiary submitted the application for funding under the operational programme, has been implemented in accordance with the approval decision and fulfilled any conditions applicable at the time of the audit concerning its functionality, use, and objectives to be attained;
b
that the expenditure declared to the Commission corresponds to the accounting records and that the required supporting documentation demonstrates an adequate audit trail as set out in Article 3 of this Regulation;
c
that for expenditure declared to the Commission determined in accordance with Article 25(1)(b) and (c), outputs and results underpinning payments to the beneficiary have been delivered, participant data, where applicable, or other records related to outputs and results are consistent with the information submitted to the Commission and that the required supporting documentation demonstrates an adequate audit trail as set out in Article 3 of this Regulation.
Audits shall also verify that the public contribution has been paid to the beneficiary in accordance with Article 42(2) of Regulation (EU) No 223/2014.
3
Audits of operations shall, where applicable, include on-the-spot verification of the physical implementation of the operation.
4
Audits of operations shall verify the accuracy and completeness of the corresponding expenditure recorded by the certifying authority in its accounting system and the reconciliation of the audit trail at all levels.
5
Where problems detected appear to be systemic in nature and therefore entail a risk for other operations under the operational programme, the audit authority shall ensure further examination, including, where necessary, additional audits to establish the scale of such problems, and shall recommend the necessary corrective actions.
6
Only expenditure falling within the scope of an audit carried out pursuant to paragraph 1 shall be counted towards the amount of expenditure audited, for the purposes of reporting to the Commission on annual coverage. For those purposes, the model for the control report set out on the basis of Article 34(6) of Regulation (EU) No 223/2014 shall be used.

Methodology for the selection of the sample of operations(Article 34(7) of Regulation (EU) No 223/2014)
Article 6
1
The audit authority shall establish the method for the selection of the sample (the sampling method) in accordance with the requirements set out in this Article taking into account the internationally accepted auditing standards, INTOSAI, IFAC or IIA.
2
In addition to the explanations provided in the audit strategy, the audit authority shall keep a record of the documentation and professional judgement used to establish the sampling methods, covering the planning, selection, testing and evaluation stages, in order to demonstrate that the established method is suitable.
3
A sample shall be representative of the population from which it is selected and enable the audit authority to draw up a valid audit opinion in accordance with Article 34(5)(a) of Regulation (EU) No 223/2014. That population shall comprise the expenditure of an operational programme which is included in the payment applications submitted to the Commission in accordance with Article 41 of Regulation (EU) No 223/2014 for a given accounting year. The sample may be selected during or after the accounting year.
4
For the purpose of application of Article 34(1) of Regulation (EU) No 223/2014, a sampling method is statistical when it ensures:
1. a random selection of the sample items;
2. the use of probability theory to evaluate sample results, including measurement and control of the sampling risk and of the planned and achieved precision.
5
The sampling method shall ensure a random selection of each sampling unit in the population by using random numbers generated for each population unit in order to select the units constituting the sample or through systematic selection by using a random starting point and applying a systematic rule to select the additional items.
6
The sampling unit shall be determined by the audit authority, based on professional judgement. The sampling unit may be an operation, a project within an operation or a payment claim by a beneficiary. Information on the type of sampling unit determined and on the professional judgement used for that purpose shall be included in the control report.
7
Where the total expenditure relating to a sampling unit for the accounting year is a negative amount it shall be excluded from the population referred to in paragraph 3 above and shall be audited separately. The audit authority may also draw a sample of this separate population.
8
Where conditions for the proportional control provided for in Article 58(1) of Regulation (EU) No 223/2014 apply, the audit authority may exclude the items referred to in that Article from the population to be sampled. If the operation concerned has already been selected in the sample, the audit authority shall replace it using an appropriate random selection.
9
All expenditure declared to the Commission in the sample shall be subject to audit.
Where the selected sampling units include a large number of underlying payment claims or invoices, the audit authority may audit them through sub-sampling, selecting the underlying payment claims or invoices by using the same sampling parameters used to select the sampling units of the main sample.
In that case, appropriate sample sizes shall be calculated within each sample unit to be audited and, in any event, shall not be less than 30 underlying payment claims or invoices for each sampling unit.
10
The audit authority may stratify a population by dividing a population into sub-populations, each of which is a group of sampling units which have similar characteristics, in particular in terms of risk or expected error rate or where the population includes operations consisting of financial contributions from an operational programme to high-value items.
11
The audit authority shall evaluate the reliability of the system as high, average or low, taking into account the results of systems audits to determine the technical parameters of sampling so that the combined level of assurance obtained from the systems audits and audits of operations is high. For a system assessed as having high reliability the confidence level used for sampling operations shall not be less than 60 %. For a system assessed as having low reliability the confidence level used for sampling operations shall not be less than 90 %. The maximum materiality level shall be 2 % of the expenditure referred to in paragraph 3.
12
Where irregularities or a risk of irregularities have been detected, the audit authority shall decide on the basis of professional judgement whether it is necessary to audit a complementary sample of additional operations or parts of operations that were not audited in the random sample in order to take account of specific risk factors identified.
13
The audit authority shall analyse the results of the audits of the complementary sample separately, draw conclusions based on those results and communicate them to the Commission in the annual control report. Irregularities detected in the complementary sample shall not be included in the calculation of the projected random error of the random sample.
14
On the basis of the results of the audits of operations for the purpose of the audit opinion and control report referred to in Article 34(5)(a) and (b) of Regulation (EU) No 223/2014, the audit authority shall calculate a total error rate, which shall be the sum of the projected random errors and, if applicable, systemic errors and uncorrected anomalous errors, divided by the population.

Audits of accounts(Article 34(7) of Regulation (EU) No 223/2014)
Article 7
1
The audits of accounts referred to in Article 49(1) of Regulation (EU) No 223/2014 shall be carried out by the audit authority in respect of each accounting year.
2
The audit of the accounts shall provide reasonable assurance on the completeness, accuracy and veracity of the amounts declared in the accounts.
3
For the purposes of paragraphs 1 and 2, the audit authority shall take into account, in particular, the results of the system audits carried out on the certifying authority and of the audits on operations.
4
The system audit shall include verification of the reliability of the accounting system of the certifying authority and, on a sample basis, of the accuracy of expenditure of amounts withdrawn and amounts recovered recorded in the certifying authority's accounting system.
5
For the purpose of the audit opinion, in order to conclude that the accounts give a true and fair view, the audit authority shall verify that all elements required by Article 49 of Regulation (EU) No 223/2014 are correctly included in the accounts and correspond to the supporting accounting records maintained by all relevant authorities or bodies and beneficiaries during the audit work performed by the audit authority. The audit authority shall in particular, on the basis of the accounts to be provided to it by the certifying authority, verify that:
a
the total amount of eligible public expenditure declared in accordance with Article 49(1)(a) of Regulation (EU) No 223/2014 agrees with the expenditure and the corresponding public contribution included in payment applications submitted to the Commission for the relevant accounting year and, if there are differences, that adequate explanations have been provided in the accounts for the reconciling amounts;
b
the amounts withdrawn and recovered during the accounting year, the amounts to be recovered as at the end of the accounting year and the irrecoverable amounts presented in the accounts correspond to the amounts entered in the accounting systems of the certifying authority and are based on decisions by the responsible managing authority or certifying authority;
c
expenditure has been excluded from the accounts in accordance with Article 49(2) of Regulation (EU) No 223/2014, where applicable, and that all the required corrections are reflected in the accounts for the accounting year concerned.
Verifications referred to in points (b) and (c) may be carried out on a sample basis.