DRAFT

INDEPENDENT AUDIT REPORT

2008 NGOs Funding under Life+ Regulation

(European Commission)

Operating Grant Agreement No:
Beneficiary:

Auditor:

Firm:

Table of Contents

1. Context

2. Audit objectives

3. Declaration of auditor’s competence

4. Audit methodology

5. General work programme information

6. Audit results

7. Conclusions

1.  Context

In accordance with the multi-annual priorities defined in Annex 2 to the Regulation (EC) No 614/2007 of the European Parliament and of the Council of 23 May 2007 concerning the Financial Instrument for the Environment (hereinafter referred to as the LIFE+ Regulation), one of the principal objectives of the programme is to promote non-governmental organisations (NGOs) primarily active in the field of environmental protection and enhancement at a European level in the following priority areas of action:

·  strengthening the participation of NGOs in the dialogue process in environmental policy-making and in its implementation,

·  strengthening the participation of NGOs in the European standardisation process in order to ensure balanced stakeholder representation and the systematic integration of environmental aspects.

The LIFE+ Regulation constitutes the legal basis for the Commission to use the financial instrument to support NGOs' operating work programmes.

Operating Grant Agreement, (the agreement), is signed with each selected applicant (the beneficiary). The grant agreement contains the following elements:

·  total anticipated expenditure for the work programme and provisional budget

·  maximum amount of the Community financial funding (amount as a percentage of eligible expenditure)

·  work programme duration corresponding to the beneficiary's financial year.

·  the content of the work programme

·  standard reporting forms.

The Commission makes a first pre-financing payment equivalent to 60% of the maximum funding within 45 days of the date when the last of the two parties signs the agreement.

Within three months of completing the work programme, the beneficiary shall submit a request for payment of the balance accompanied by the following documents:

·  final report on implementation of the work programme;

·  final financial statement of the eligible costs actually incurred, following the structure of the estimated budget;

·  full summary statement of the receipts and expenditure in the beneficiary's accounts for the period of eligibility covered by the agreement;

·  certificate on the beneficiary's financial statements and underlying accounts, produced by an approved auditor.

2.  Audit objectives

According to Art. 180 (2) of the Implementing Rules (IR) to the FR, a certificate on the financial statements and underlying accounts, produced by an approved auditor or in case of public bodies, by a competent and independent public officer is compulsory for operating grants with a maximum Community contribution of €100.000 or more.

The purpose of the audit is to obtain sufficient evidence of the accuracy of the statement of expenditure and income in accordance with the provisions of the grant agreement, the provisions of the Commission’s Financial Regulation and in relation to the forecast for the work programme. The audit will cover the use of funds from all sources of financing.

The audit report shall certify that the costs declared by the beneficiary in the financial statements on which the request of payment is based are real, accurately recorded and eligible and that all receipts have been declared, in accordance with the agreement.

To this end, the auditor must reconcile all the expenses mentioned in the statements with the criteria mentioned in point 4.1.

The auditor must also verify that all the work programme income has been declared.

3.  Declaration of auditor’s competence

The following declaration shall be annexed to the audit report:

I, the undersigned,………., independent auditor, hereby declare:

(1) that I am independent of the……………..(name of the audited bodies) which are the object of this audit;

(2) that I am an active member of the national association (name) of (name of country) in which (name of the beneficiary) is established.

Date: ………

Membership no of the association:………………

Signature:

4.  Audit methodology

4.1 Verification of the eligibility of the declared costs on the basis of the following criteria:

The costs:

·  they are incurred during the duration of the work programme as specified in the agreement;

·  they are connected with the subject of the agreement and they are foreseen in the estimated overall budget of the work programme;

·  they are necessary for the implementation of the work programme which is the subject of the grant;

·  they are identifiable and verifiable, in particular being recorded in the accounting records of the beneficiary and determined according to the applicable accounting standards of the country where the beneficiary is established and according to the usual cost-accounting practices of the beneficiary;

·  they comply with the requirements of applicable tax and social legislation;

·  they are reasonable, justified, and comply with the requirements of sound financial management, in particular regarding economy and efficiency.

·  the beneficiary’s internal accounting and auditing procedures must permit a direct reconciliation of the costs and revenue declared in respect of the work programme with the corresponding accounting statements and supporting documents;

·  are in accordance with the LIFE + Regulation.

VAT amounts:

·  included in invoices are eligible costs only if the beneficiary cannot recover them and provides a certificate (or other appropriate document) on the VAT non-recoverability issued by the competent national authority.

4.2 Verification of the declaration of all work programme income

The audit will focus on:

·  interest on a pre-financing payment;

·  all sources of co-financing;

·  other income (action grants from the EC, procurements contracts from the EC, membership fees, publications, services, other donations, etc.).

4.3 Verification of the origin of the beneficiary's financing

Verification that the work programme does not benefit directly or indirectly from support from other Community financial instruments.

5.  General work programme information

Operating Grant Agreement no: / …………….
Beneficiary: / …………….
Work programme financial year: / …………….
Start date: / …………….
End date: / …………….
Approved budget[1]:
Total costs:
Eligible costs: / …………….
…………….
Funding as % of eligible costs: / …………….
Maximum funding: / …………….

Beneficiary's estimated operating budget approved

Breakdown by category / Total costs in € / Eligible costs in €
Personnel
Travel and subsistence expenses
Rental, equipment and depreciation
External assistance / Subcontracting
Other direct costs
Overheads / General administration
Total
Costs not included in the budget
Estimation of "in kind" contributions

Consolidated statement of expenditure submitted to the auditor:

Breakdown by category / Total costs in € / Eligible costs in €
Personnel
Travel and subsistence expenses
Rental, equipment and depreciation
External assistance / Subcontracting
Other direct costs
Overheads / General administration
Total
Costs not included in the budget
Estimation of "in kind" contributions

6.  Audit results

6.1 Verification of the beneficiary’s accounting system

The audit has examined:

·  whether the internal accounting (analytical or other suitable internal system) and auditing procedures permits direct reconciliation of the costs and revenues declared under the work programme,

·  whether the actual expenditure/income under the work programme has been recorded systematically using a numbering system specific to each action,

·  whether when costs are shared between several other projects, the appropriate allocation keys have been established that reflect the true burden for each project,

·  whether such allocation keys have been applied systematically and correctly.

It was found that: ………. (describe the accounting system, auditing procedures and specific provisions in brief as well as any omissions and their consequences for the declared costs).

6.2 Verification of the eligibility of the declared costs

6.2.1 General:

The arithmetic coherence within and between the tables in the final report has been verified. The audit has also examined, on the basis of a representative study and by interviewing the beneficiary:

·  whether the expenses were directly linked to the work programme and necessary for carrying it out,

·  whether the expenses were provided for in the initial budget[2] and were incurred directly by the beneficiary,

·  whether the costs have been correctly allocated,

·  whether the expenses are supported by accounting documents in accordance with current national accounting law,

·  whether the expenses have been recorded in the beneficiary’s accounts or tax documents,

·  whether the expenses were incurred during the financial year of the work programme,

·  whether the payments were made by the beneficiary,

·  whether the correct exchange rates were used (if applicable),

·  reasons of any substantial fluctuations of more than 20% per category.

It was found that: ………. (describe the expenses incurred outside the contractual period or incurred by bodies which were not beneficiary themselves and which are therefore ineligible. Invoices between members/ the beneficiary are not eligible, provided that they are subcontracted. Incurred costs must be recorded in the accounts of the beneficiary concerned. In the event of arithmetical differences and/or the reallocation of expenses, describe the corrections made).

Documentation:

·  Operating Grant Agreement ………….(ref…….)

·  Additional amendments / clauses (ref….)

·  The final report

6.2.2 Personnel costs

Personnel costs were examined to verify:

·  whether they were paid and charged in respect of the actual time devoted to the work programme and if they were calculated on the basis of the real annual gross salary or wages (plus obligatory social charges),

·  whether individuals’ contracts working as service providers in the beneficiary’s premises comply with the relevant national legislation and whether the costs declared are in compliance with the contract and the time devoted to the work programme,

·  whether the work was carried out during the financial year concerned,

·  whether the time sheets required have been properly filled in and approved by the person authorised to do so under the work programme.

Organisation: / Declared expenditure (D) / Audited expenditure (A) / % A/D
Beneficiary
TOTAL

It was found that: ……..(describe whether the expenditure was calculated in accordance with the provisions of the grant agreement or whether other costs were included. All costs other than gross salaries and obligatory social charges are to be considered as ineligible, as are all costs outside the financial year concerned or relating to persons who are not part of the personnel of the beneficiary. Any subsidies received for personnel must be deducted in order to calculate the personnel costs incurred. State whether the costs for personnel employed by subcontractors were correctly charged to the heading “External Assistance”. Give an assessment of the quality of the management and accounting system and the time sheets for ensuring the proper allocation of the personnel costs of the project).

Documentation:

·  Operating Grant Agreement………….(ref…….)

·  Additional amendments / clauses (ref….)

·  The final report

·  Salary slips

·  Time sheets

·  Contracts of employment

·  Other documents (e.g. personnel accounts, social security legislation, etc…)

6.2.3 Travel and subsistence costs

The travel costs were examined to verify:

·  whether the travel was necessary under the work programme and took place according to the plan in the work programme proposal,

·  whether they were paid and charged in accordance with the internal rules of the beneficiary.

Organisation: / Declared expenditure (D) / Audited expenditure (A) / % A/D
Beneficiary
TOTAL

It was found that: (any travel costs in excess of the limits specified in the internal rules are ineligible. Bills which are unpaid at the time of sending the final report are to be considered as ineligible).

Documentation:

·  Operating Grant Agreement ………….(ref…….)

·  Additional amendments / clauses (ref….)

·  The final report

·  Internal rules on travel

·  Transport invoices and tickets

6.2.4 Rental, equipment and depreciation

The purchase cost of equipment (new or secondhand), is eligible provided that it is written off in accordance with the tax and accounting rules applicable to the beneficiary and generally accepted for items of the same kind. Only the portion of the equipment's depreciation corresponding to the period of eligibility for Community funding covered by the agreement may be taken into account by the Commission, except where the nature and/or the context of its use justifies different treatment by the Commission.

The rental, equipment and depreciation were examined to verify:

·  that they were depreciated during the financial year concerted,

·  whether they were included in the inventory of the beneficiary’s durable goods with the (possible) exception of leased durable goods,

·  whether they are treated as capital expenditure in accordance with the tax and accounting rules applicable to the beneficiary,

·  whether they are purchased or leased at normal market prices,

·  whether the internal accounting depreciation rules of the beneficiary have been applied,

·  whether the amount of recoverable VAT has not been declared,

·  whether the costs have been paid.

It was found that: (Describe what goods have been purchased or leased at a price above the normal market price, and consider the surplus to be ineligible. If the depreciation is greater than those specified in the provisional budget, the depreciation should be adjusted accordingly and the surplus considered as an eligible costs. If the tendering procedures were not followed, the eligible amount is the maximum amount for which no call for tenders is required.

Documentation:

·  Operating Grant Agreement …(ref…….)

·  Additional amendments / clauses (ref….)

·  The final report

·  Tenders

·  Reports justifying the choice of supplier

·  Invoices and proofs of payment

6.2.5 External assistance / subcontracting costs

Any service undertaken by an external party in connection with the implementation of the work programme is considered to be subcontracting. Beneficiaries should have the operational capacity to complete the work programme. However, when justified and necessary, parts of the work programme may be subcontracted to another person or organisation. In this case, the beneficiary shall ensure that some of the terms applicable to itself under the agreement are also applicable to the subcontractors.

The total expenditure related to sub-contracting may not exceed 30 % of the total eligible costs. Higher percentages may be considered only in exceptional and well justified cases. It must be clearly specified in the work programme which tasks it is intended to subcontract and why this subcontracting is necessary.