Commission Delegated Regulation (EU) No 532/2014 of 13 March 2014 supplementing Regulation (EU) No 223/2014 of the European Parliament and of the Council on the Fund for European Aid to the Most Deprived

CHAPTER I

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation lays down the following provisions supplementing Regulation (EU) No 223/2014:

(a) rules specifying the information in relation to the data to be recorded and stored in computerised form within the monitoring system established by the managing authority;

(b) detailed minimum requirements for the audit trail in respect of the accounting records to be maintained and the supporting documents to be held at the level of the certifying authority, managing authority, intermediate bodies and beneficiaries;

(c) the scope and content of audits of operations and audits of the accounts and the methodology for the selection of the sample of operations;

(d) detailed rules on the use of data collected during audits carried out by Commission officials or authorised Commission representatives;

(e) detailed rules concerning the criteria for determining serious deficiencies in the effective functioning of management and control systems, including the main types of such deficiencies, the criteria for establishing the level of financial correction to be applied and the criteria for applying flat rates or extrapolated financial corrections.

CHAPTER II

SPECIFIC PROVISIONS FOR MANAGEMENT AND CONTROL SYSTEMS

Article 2

Data to be recorded and stored in computerised form

(Article 32(8) of Regulation (EU) No 223/2014)

Article 3

Detailed minimum requirements for the audit trail

(Article 32(9) of Regulation (EU) No 223/2014)

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.

Article 3a

Detailed minimum requirements for the audit trail for support provided indirectly to the most deprived, such as through vouchers, cards or other instruments

(Article 32(9) of Regulation (EU) No 223/2014)

In addition to the detailed minimum requirements for the audit trail set out in Article 3, the audit trail for operations providing food or basic material assistance, or both, to the most deprived, through vouchers, cards or other instruments in accordance with Article 23(4a) of Regulation (EU) No 223/2014 shall:

(a) allow to reconcile the total number of vouchers, cards or other instruments issued with the total number of vouchers, cards or other instruments delivered to end-recipients and used based on accounting records and supporting documents held by the certifying authority, managing authority, intermediate bodies and beneficiaries;

(b) allow, with regard to the eligible costs set out in Article 26(2), point (a), to reconcile the aggregate amounts certified to the Commission with the value of vouchers, cards or other instruments used by end-recipients;

(c) include documents concerning the granting of vouchers, cards or other instruments to end-recipients, their distribution to end-recipients and their use.

For the use of cards, vouchers, or other instruments, the audit trail shall demonstrate that the vouchers, cards or other instruments are used only for the purchase of food or basic material assistance, or both.

Where food and/or basic material assistance is provided to the most deprived through vouchers, cards or other instruments in a paper format, the audit trail shall also include the following:

(a) security measures avoiding falsification taken by the managing authority, intermediate bodies and beneficiaries;

(b) measures to safeguard the stock of vouchers;

(c) identification of the bodies identifying end-recipients and the bodies distributing the vouchers, cards or other instruments to end-recipients;

(d) documentation that the vouchers, cards or other instruments have been received by end-recipients.

Article 4

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 5

Audits of operations

(Article 34(7) of Regulation (EU) No 223/2014)

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.

Article 6

Methodology for the selection of the sample of operations

(Article 34(7) of Regulation (EU) No 223/2014)

For the purpose of application of Article 34(1) of Regulation (EU) No 223/2014, a sampling method is statistical when it ensures:

(i) a random selection of the sample items;

(ii) the use of probability theory to evaluate sample results, including measurement and control of the sampling risk and of the planned and achieved precision.

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.

Article 7

Audits of accounts

(Article 34(7) of Regulation (EU) No 223/2014)

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.

CHAPTER III

SPECIFIC PROVISIONS FOR FINANCIAL MANAGEMENT AND FINANCIAL CORRECTIONS

Article 8

Criteria for determining serious deficiencies in the effective functioning of management and control systems

(Article 55(4) of Regulation (EU) No 223/2014)

The assessment shall cover the internal control environment of the programme, the management and control activities of the managing and certifying authorities, monitoring by the managing and certifying authority, and the control activities of the audit authority and shall be based on verification of compliance with the key requirements set out in Table 1 of Annex II.

The fulfilment of these key requirements shall be assessed on the basis of the categories set out in Table 2 of Annex II.

Article 9

Criteria for applying flat rates or extrapolated financial corrections and criteria for determining the level of financial correction

(Article 55(4) of Regulation (EU) No 223/2014)

Notwithstanding the first subparagraph, extrapolated financial corrections shall be applied, for all or part of an operational programme, where the Commission identifies systemic irregularities in a representative sample of operations, allowing for a more accurate quantification of the risk for the Union budget. In this case, the results of the examination of the representative sample shall be extrapolated to the rest of the population from which the sample was drawn for the purpose of determining the financial correction.

The level of flat-rate correction shall be fixed taking into account the following elements:

(a) the relative importance of the serious deficiency or serious deficiencies in the context of the management and control system as a whole;

(b) the frequency and extent of the serious deficiency or serious deficiencies;

(c) the degree of risk of loss for the Union budget.

Taking into account these elements, the level of financial correction shall be fixed as follows:

(a) where the serious deficiency or serious deficiencies in the management and control system is so fundamental, frequent or widespread that it represents a complete failure of the system that puts at risk the legality and regularity of all expenditure concerned, a flat rate of 100 % shall be applied;

(b) where the serious deficiency or serious deficiencies in the management and control system is so frequent and widespread that it represents an extremely serious failure of the system that puts at risk the legality and regularity of a very high proportion of the expenditure concerned, a flat rate of 25 % shall be applied;

(c) where the serious deficiency or serious deficiencies in the management and control system is due to the system not fully functioning or functioning so poorly or so infrequently that it puts at risk the legality and regularity of a high proportion of the expenditure concerned, a flat rate of 10 % shall be applied;

(d) where the serious deficiency or serious deficiencies in the management and control system is due to the system not functioning consistently so that it puts at risk the legality and regularity of a significant proportion of the expenditure concerned, a flat rate of 5 % shall be applied.

Article 10

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

Article 3 shall apply from 1 December 2014, as regards information on data recorded and stored referred to in Annex I.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

ANNEX I

Data is required for operations supported by OP I and OP II (¹) and for all types of delivery unless otherwise specified in the second column.