Commission staff working paper

Control of use of funds

1. Internal control

Correct implementation of EU-funded operations is ensured by several layers of checks at various stages of the project cycle fro humanitarian operations. The main aspects of the control strategy developed by the Commission, its supervision and monitoring procedures and the ex-ante and ex-post controls are described below including:

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  Strict selection and quality control mechanisms for partners under the Framework Partnership Agreement (FPA) signed with NGOs and International organisations⁵³ that define the financial credentials and expertise required of implementing partners, combined with both regular and ad hoc assessments of FPA partners in order to ensure that these requirements are met continuously. Financial management and control requirements for UN bodies are defined in the EU-UN Financial Administrative Framework Agreement (FAFA);
  
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  Project monitoring by a network of field experts (technical assistants) worldwide. These specialists are based in the field in order to facilitate operations funded by the EU, regardless where, and maximise their impact. They closely monitor projects and write regular reports. In order to enhance the rapid reaction capacity and monitoring of operations, the number of field experts has gradually been increased in recent years. Currently about 100 field experts are based in the various field offices;
  
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  Regular field visits to projects by geographical desks, auditors and management;
  
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  An obligation for the partners to provide reports after the end of the operations to justify their expenses;
  
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  A thorough analysis of these reports and checks of eligible expenditure by both the operational and financial desk officers. Various procedures, such as check-lists and double checking, have been set up to ensure that all financial transactions are in line with the financial rules, comply with sound financial management and are recorded correctly in the accounting system. Expenditure which is not sufficiently supported in final reports is disallowed and deducted from the final payment;
  
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  Approximately ten evaluations are undertaken on average each year, focusing on major country operations (i.e. operations receiving funding totalling about €50 million and which have not been evaluated in the last three years), partners and thematic issues. The results of these evaluations can be found on ECHO's website at http://ec.europa.eu/echo/policies/evaluation/introduction_en.htm;
  
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  EU-funded activities implemented by external (partners and contractors) are subject to a financial audit. The audit strategy is based on a two-track approach: audits are performed both at partners' headquarters on a cyclical basis for finalised projects and in the field for ongoing projects.
  

In 2009, five members of ECHO's audit team and a budget of €2.5 million for contracts with external auditors were allocated to audits.

In 2009, 53 audits were performed at headquarters; 47 field audits were finalised on projects under way; 8 office audits were carried out and 4 humanitarian procurement centres were assessed.

Audit recommendations are a valuable channel for feed back for improvements to partners’ reporting systems. Furthermore, audit findings on the eligibility of expenditures are analysed by Commission officials and appropriate follow-up action is taken, such as recovery of funds.

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  ECHO also has an internal audit capability (IAC), which provides an independent and objective opinion on the quality of the internal control systems and helps the Director-General and management to control risks and monitor compliance.
  

The checks listed above should not be seen in isolation. Each of them contributes to providing overall reasonable assurance on the legality and regularity of the transactions.

2. External control

The Commission's operations and its financial management in the field of humanitarian assistance are further audited by the Internal Audit Service (IAS) of the European Commission and the European Court of Auditors.

The task of the Internal Audit Service is to audit the internal control systems that exist within the European Commission. In its 2008 annual Internal Audit Report, the IAS reported on implementation of the FAFA. In 2009, the IAS also audited the financial management of food assistance and endorsed without reservation, the internal control systems audited.

The European Court of Auditors audits the EU's finances. Its observations and recommendations are published in its annual report and in special reports to the European Parliament and the European Council.

For the 2008 financial year, the European Court of Auditors concluded that key internal controls of the Commission in relation to humanitarian aid were effective except for the internal audit capability which had only just been set-up that year. The Court nevertheless noted that 2008 was a transitional year for the IAC and that the full benefit of the new set-up was expected in 2009.

All Commission departments are accountable to the European Parliament and the Council, notably in annual reports giving details of their activities. Their budget management is also continuously audited by the Court of Auditors, which reports to Parliament and the Council. Every year, the Parliament and Council give their opinion on the discharge of past budgets.

Finally, the specialised committees of the budget authority exercise control over financial management in EU bodies and organise yearly hearings with the Commissioners concerned before deciding on the discharge of the Commission.

5. Co-operation with humanitarian aid's stakeholders

As in previous years, the Commission maintained an active relationship in the humanitarian area with other EU institutions, Member States and international organisations and continued to promote respect for international humanitarian law and humanitarian principles (humanity, impartiality, non-discrimination and neutrality), particularly in relation to developments under the Common Foreign and Security Policy. It also ensured that the necessity to respect the humanitarian space during emergencies was duly taken into account in the European and international debate.

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