M.4 Management verification of real costs

Controllers are responsible for verification of real costs declared under the following cost categories:

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CAT 4 External expertise and services costs,

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CAT 5 Equipment costs,

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CAT 6 Costs for infrastructure and works.

The MA/JS will check¹ that designated controllers verified the expenditure based on real costs.

¹REGULATION (EU) 2021/1059, Art 46 (5)

Management verification documentation of real costs

The management verification is documented in BAMOS+. It includes:

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Control certificate

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Control report and checklist

To allow a transparent work flow within the audit trail all management verification results and related documentation will be summarised in BAMOS+. These will be available for

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lead partner at project level,

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the MA/JS,

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the AA and relevant members of the Group of Auditors or service providers under their responsibility,

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audits by the European Commission, European Court of Auditors or service providers on their behalf,

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MC members.

M.4.1 Checks performed by the controllers

The controllers’ task is to verify that expenditure incurred under cost categories 4 – 6 and declared by the project partners in each progress report fulfils the following conditions:

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the costs are eligible according to the EU, Programme and national rules among others concerning

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information and publicity (visibility rules),

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public procurement

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productive investments and investments in infrastructure

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the conditions of the Programme, the approved project data and the subsidy contract were observed,

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the project partners maintain separate accounting records or use appropriate accounting codes for all transactions relating to the project,

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the invoices and payments are correctly recorded and supported by accounting documents or equivalent documentation,

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the related activities, sub-contracted supplies and services are in progress or were delivered or carried out,

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the community rules were respected, in particular regarding

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equal opportunities and

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protection of the environment.

Controllers play a key role in the Programme. A well-functioning verification system ensures lower risks of ineligible expenditure. This, consequently, may result in further financial implications for the projects, the project partners and the whole Programme.

Quality of management verification should cover two aspects:

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quality of checks of expenditure

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quality of documentation of checks carried out

The documentation and description of the verification carried out should be transparent, traceable and understandable. It should be of use also for third parties being involved in the system, e.g. for lead partners, MA/JS, auditors, and the European Commission for any checks they may need to carry out. The quality of the verification has a direct impact on the Programme and the project implementation. It may also have an effect on other projects and project partners.

Independence of the controllers

In every control system the controller must be independent from the project partner. This independence must be ensured both from the project’s finances as well as the activities. For example:

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Internal controllers:

in control systems where it is applicable, the controller must be placed in a clearly independent position from the project within the organisational structure, e.g. under the responsibility of a different director.

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External controllers:

in control systems where it is applicable, the controller should not be involved in providing other services to the respective project partner, e.g. as a tax advisor.

The Programme recommends that the controller also complies with the independence requirements of the ‘Code of Ethics for Professional Accountants’. The controllers must be functionally independent from the audit system, i.e. from the Audit Authority, Group of Auditors, and from the projects for which they carry out the management verification. Independency must be ensured in the terms of reference indicated by the European Commission¹ on statutory auditors’ independence in the EU.

¹ European Commission recommendation on statutory auditors’ independence in the EU: a set of fundamental principles according to 2002/590/EC; International standard on quality control N°1 (International Federation of Accountants); Code of ethics of the INTOSAI, Auditing standards chapter II-2.2. Standards with Ethical significance

Competence of the controllers

There are different verification systems in place that comply with specific national requirements. The competence of each particular controller must be ensured in each country.

The controllers, among others, have to be familiar with the content of the following documents:

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EU regulations and directives, among others including:

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REGULATION (EU) 2021/1059 (Interreg Regulation),

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REGULATION (EU) 2021/1060 (Common Provisions Regulation),

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EU Directives on public procurement,

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further national rules and guidance (e.g. national public procurement rules),

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programme manual,

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project data,

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subsidy contract,

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project partnership agreement.

Controllers should have knowledge of national accounting principles and a good command of the English language. The description of the national control system summarises the requirements to be met by controllers. It is available on the Programme portal.

The controller’s competence is crucial for a sound verification system. Therefore, the requirements set have to be met before controllers are appointed to verify expenditure. In addition, the competence should be ensured and updated via targeted training during the Programme implementation period (e.g. specific training on public procurement, seminars on Programme rules and reporting, exchange of experience with other controllers and the MA/JS).

Capacity of the controllers

The capacity of the controller is very important as there are a high number of project partners submitting their reports to the MA/JS. Project partners depend on each other in the reporting process. The lead partner collects all partner reports in order to submit the project progress report for the Programme’s co-financing. A reporting delay of one project partner can cause delays in the reporting of the whole project and consequently, the payment of funds to the project.

M.4.2 Control systems

There are two control systems applicable in the Interreg Baltic Sea Region Programme. Which system applies depends on the national set-up:

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Countries with a centralised system

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(Estonia, Finland (incl. Åland), Latvia, Poland, Sweden)

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Countries with a decentralised system

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(Denmark, Germany, Lithuania, Norway)

The MA/JS published a detailed description of the national control systems, including the requirements on the controllers, on the Programme portal.

The control system description defines the institutional set-up with clear responsibilities, procedures, considering allocation of resources (human and financial) and sets minimum requirements on the system and the controllers.

The control system description is a prerequisite for a secure and well-functioning verification system which, in turn, ensures quality and the timely verification of project expenditure. Each country is responsible for training, guidance and quality assurance of controllers on its territory throughout the whole implementation period of the Programme.

Countries with a centralised system

Estonia, Finland (incl. Åland), Latvia, Poland, Sweden have set-up centralised systems for the verification of real costs under costs categories 4-6., i.e. costs not declared under the category of simplified cost options. These countries appointed a central body to carry out the verification of expenditure. This body can be approbated at federal, national, regional level or a combination of those levels.

The controllers are civil servants or employees working within the approbated organisation. They can also be external controllers appointed for this specific task by the given country.

Eventual costs for management verifications by controllers charged to the project partners are described in the national control system descriptions on the Programme portal.

Countries with decentralised system

Denmark, Germany, Lithuania and Norway have set-up a decentralised system for the verification of real costs under categories 4-6, i.e. costs not declared under the category of simplified cost options.

Project partners will select a controller in accordance with the requirements set by the given country. In all cases the controller must:

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be independent from the project partner;

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hold the qualifications set by the respective country; and

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fulfil the requirements laid down in the EU regulatory framework and in the national legal framework.

REGULATION (EU) 2021/1059, Art 46(9)

In this system it is the respective country that designates the controllers.¹

¹ REGULATION (EU) 2021/1059, Art 46(3)

The controllers in the countries with the decentralised control systems usually charge the project partners for these services.

M.4.3 Designation of the controller

The expenditure of project partners is only admissible for Programme’s co-financing if it has been verified by a designated controller or, where appropriate, by the MA/JS.

Countries with a centralised system have already designated their controllers on a national level. Therefore, project partners from those countries do not have to obtain the designation of the controllers before submission of the expenditure for the Programme’s co-financing.

Project partners from countries with decentralised systems select their controllers in accordance with to the national requirements. They submit the information about the controller for confirmation to the designation body. This is an institution responsible for the control system on the territory of its country. The designation body checks the compliance of the controller and approves the controller. Only approved controllers can verify the project partners expenditure. Details on designation systems and procedures are available on the Programme portal. The designation process of the controllers in the decentralised systems is organised as follows:

Figure 7 Designation process of the controllers

The project partner fills in the Controller’s specification that is available on the Programme portal and submits it to the designation body. The designation body checks the compliance of the controller with the requirements and confirms the controller via BAMOS+.

The countries keep an overview of designated controllers. The participating countries monitor the performance of the controllers on their territories. Such checks ensure that the controllers verify the expenditure in compliance with the EU regulatory framework, Programme rules and in accordance with the national legislation.