First Level Control Office BiH VALIDATION OF THE EXPENDITURES

BOSNIA AND HERZEGOVINA

MINISTRY OF FINANCE AND

TREASURY

SECTOR FOR FINANCING EU ASSISTANCE PROGRAMMES AND PROJECTS - FLCO

The project is co-funded by the European Union, Instrument for Pre-Accession Assistance

First Level Control Office BiHVALIDATION OF THE EXPENDITURES

Sarajevo, 19 February 2013



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10.00 – 10.20: Start/Welcome/First Level Control (FLC)for SEE; definition, objective

10.20 – 10.45: Reporting procedure by Project Partners10.45 – 11.00: Coffee break11.00 – 12.00: First Level Control (FLC): areas of

attention under the various budget lines 12.00 – 13.00: Lunch break13.00 – 14.30: First Level Control (FLC): areas of

attention under the various budget lines14.30 – 14.45: Coffee break14.45 – 16.30: Q & A / evaluation of the training

Agenda



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To improve the quality of financial reporting by the Project Partners resulting in an increased level of

expenditure that can be validated by the national First Level Control Office (FLCO)

Training objective



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guarantee that expenditure reported and claimed by Project Partner is justified,

substantiated, real, actual, incurred and actually paid and in line with the provisions of the Subsidy Contract / Partnership Agreement

concerned and are in line with all legal provisions governing the Programme

First Level Control (FLC) - objective



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First Level Control – what is checked?

Requires a 100% desk-based administrative verification of documents complemented by on-the-spot checks on a sample basis

before the issuance of Declarations on the Validation of Expenditure (DVE)



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REPORTING PROCEDURE BY THE PROJECT PARTNERS TO FIRST LEVEL CONTROL

OFFICE



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Partner Report

Describes the activities fulfilled and the expenditure incurred and paid by the Project Partner in the given reporting period.

The Partner Reports must be submitted to the competent FLCO who will verify eligible costs



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Partner Report

Consists of two sections:

ACTIVITY REPORT: provides information on the achievement of the project’s activities, milestones and outputs

FINANCIAL REPORT: provides information on the project’s expenditure related to the activities per budget line and Work Package

Must be filled in:◦Description of the expenditure◦Activity fulfilled according to the approved AF



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The IPA project partners of the 3rd and 4th CfP shall use the SEE Partner Report template (IPA) annexe 4b

The standard tool template can be download from the SEE Programme website:

www.southeast-europe.net For any technical problem when filling in the Partner

Report please contact the SEE Joint Technical Secretariat

[email protected]

Partner Report

http://www.southeast-europe.net/

mailto:[email protected]



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It is recommended that the project partner starts to fill in and regularly updating the periodic Partner Report with respective data already during the reporting period

When the project partner receives the DVE from the Controller (2 copies of signed and stamped paper version) one original of the DVE should be forwarded to the LP together with the final version of the Partner Report

Partner Report



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A Microsoft Excel document containing:

Main data Activity report Activities per WPs Indicators Financial report Summary of expenditure◦ List of invoices

Revenues

Partner Report



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1 - Main data worksheet(Project code, Project acronym, Project title, Name of the PP, Starting and end dates of the project, Contact person and legal representative)

5 - Financial Report worksheet(Table ‘5.1 Total budget of the IPA Project Partner’ .Based on table 5.5 of the AF; Information on state contribution’.)

3 - Activities per WPs worksheet(Title of the WPs from WP3 on; qualitative and quantitative outputs and results -defined in the AF should be listed for different WPs.)

4 - Indicators worksheet(The base and target values of the indicators (based on the ‘7 Indicators’ of the AF)

The Basis Partner Report tool



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1 - Main data worksheet(Starting and end date of the respective reporting period; is there any change in main project data in comparison to the ‘basis Partner Report tool’ 2 - Activity Report worksheet

(Summary of the project activities; Project implementation timeframe; Spending targets; Other issues; Project changes)

3 - Project activities fulfilled in the reporting period by WPsThe actual implementation status of each WP - drop down lists; The titles of the WPs (from WP3 on); Activity description (field should be added to a certain WP when necessary; Public procurement fields should be added to a certain WP as necessary. 4 – Indicators

should be updated according to its status at the end of the reporting period.

5 - Financial Report(Financial progress by WPs table; Information on IPA transfers from LP to PP; Information on state contribution)

7 – List of invoices per Work Packages 8. – Revenues

The Partner Report



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Expenditure needs to be reported in euro

Expenditures shall be converted into Euro using the monthly accounting exchange rate of the Commission in force in the last month of the reporting period

BAM is pegged to € at rate of 1,9558

Rounding to two digits after the comma

Example:

BAM 1.768,89 equals € 904,4329 which is to be reported as € 904,43

Currency and exchange rates



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Timing for reporting



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4th Call Projects 28/9/2012-31/3/2013 1/4/2013-30/6/2013 1/7/2013-31/12/2013 1/1/2014-30/6/2014 1/7/2014-30/9/20143rd Call Projects 1/9/2012-28/2/2013 1/3/2013-31/5/2013 1/6/2013/-30/11/2013 1/12/2013-31/5/2014 1/6/2014-31/12/2014

Reporting period



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To be reported: Expenditures incurred and paid by the end of the

reporting period

Note: Invoices not paid by the end of the reporting period

should be reported with the next Report

Important: If the Partner Report is not tidy the FLCO can reject the

Report.

Reporting the expenditures



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Copy of the Subsidy Contract signed by both parties Copy of the Partnership Agreement signed by all project

partners Application Form - the electronic version Declaration on VAT status in original Addendums to SC or PA as well as revised Application forms if

applicable Partner Report All supporting documents which prove the eligibility of the

amount declared (original and copies) All invoices and other accounting documents of probative value

(they will be sent back to the PP with the DVE)

Reporting - Formal requirements



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The VAT exemption certificate is obligatory. VAT is not an eligible expenditure.

All project related expenses must be registrated with specific accounting codes or other transparent methods in the accounting system which allows the identification of costs allocated to the project

Important



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1. STAFF COSTS2. TRAVEL AND ACCOMMODATION3. OVERHEADS4. FINANCIAL CHARGES AND GURANTEE COSTS5. EXTERNAL EXPERTISE AND SERVICES6. EQUIPMENT7. SMALL SCALE INVESTMENTS

Budget lines



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Costs of the personnel for project management and/or tasks for project activities

Staff directly employed by regular working contract or similar type of contract according to national rules

Covers the salaries (gross salary = netto salary + all legal provisions such as holiday entitlement, provision for sick leave, all charges paid both by employee and employer, meal, transport cost, allowance for holiday and excluding voluntary contributions such as institutional pension schemes, fringe benefits, rewards, overtime) of staff of the Project Partner working either on a full-time or part-time basis on the project

STAFF COSTS



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Documents to be presented by PP / checked by FLCO with first Partner Report :

The PP will submitted with 1st Partner Report (to be updated during project lifetime) stating as a minimum: o full list of project staff (name of the employee)o work contract, decision on appointment orservice order in line with national eligibility ruleso job description (qualification, main task, start & end date), clear assignment to the projecto the person is working full time or part time on the projecto the institutional book of rules («pravilnik o platama i sistematizacija radnih mjesta» and / or « odluka o utvrđivanju koeficijenata i načinu obračuna plata »)

STAFF COSTS



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Documents to be presented by PP / checked by FLCO:

Proof on working time spent on the project: Monthly timesheets

The method for calculating the hourly rates and the calculation of staff costs (national guidance)

Payslip & payroll Proof of payment (salary and social charges)

STAFF COSTS



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Monthly timesheets proving the actual time worked on the project: (name of the employee, date, time, description of activity related to the project«Signed by both the employee and the employer, date« Template of timesheet (national guidance) Be careful with employee who works on more then

one project

Note: Beneficiaries are not obliged to use these templates and can use their own format but the minimum information

STAFF COSTS



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Obligatory minimum information on timesheets:

project acronym, title & code, time, date name & function of the person to which timesheet refers

to extent of employment on the project of person concerned name of the Project Partner name & function of the person approving the timesheet

on behalf of the Project Partner description of project activities extent to which the work is dedicated to the project

STAFF COSTS



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Obligatory : The calculation is based on real costs( real gross

salary proved by payslips) and real worked hours (time spent on the project proved by timesheets)

The Calculation method must be the same as the evidence in timesheet, can not be different

Hourly method of registration in timesheet, use the same method for calculation of monthly salary for reimbursement

STAFF COSTS



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Calculation of salary based on activities in WP When calculating the salary on WP, check the

amount in WP in budget (over-budget) During project, the amount of salary of project staff

can not be increased

STAFF COSTSMonthly salary + obligatory charges (gross salary) / total working hours in the given month x project worked hours in the given month



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EXAMPLE

Basis = gross salary of 2,500 KM for April 2012 for an employee working part time on the project:

Salary paid for April 2012: 2,500No of hours workable during April 2012: 176 Hourly rate: 2,500/176=14.20KMNo of hrs worked on project in April 2012:48hrs(27.27%)Total eligible cost: 48*14.20 = 681.60KM681.60KM / 1.95583 = 348,50 € Total to be reported (conversion into €): € 348,50

STAFF COSTS



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Proof of payment of both the salary and social charges whereby FLCO needs to be able to identify clearly to whom the salary was paid:

Nalog plaćanja Nalog blagajne kod gotovinskih isplata Registar plaćanja i faktura (budžetski korisnici) Izvod banke Specifikacija uz platu ovjerena od strane Poreske uprave (2001) Izjava odgovorne osobe da se iznos plate isplaćuje kumulativno za

sve uposlene u organizaciji i da u taj iznos ulaze i plate zaposlenih na projektu

STAFF COSTS



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MAIN PROBLEMS ENCOUNTERED SO FAR:

Insufficient supporting documentation (e.g. no list of staff or employment contracts submitted)

Lack of proof of actual payment of salaries and other obligatory charges

Lack of information as to how the hourly rate was calculated

No adequate calculation of gross salary (calculation the part of obligatory charges)

Incorrect timesheets

STAFF COSTS



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TRAVEL & ACCOMMODATION

Covers expenditure related to the travel and accommodation costs of the project staff (travel and accommodation costs of external experts participating in the project have to be charged against the budget line «External expertise» )

Travel directly related with project activities Travels within the eligible area Approved in line with the Project Partners rules, (authorisation of the

mission) Travelling costs of the Associated Strategic Partners are directly paid

by ERDF sponsoring Partner (daily allowance are not eligible)



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SOME BASIC RULES

Assignment of costs Costs have to be borne by the Project Partner and

therefore proof of direct payment by the employee is not sufficient as proof

The most economical way of transport normally public transport (travel by air, bus, train, boat) economic class is eligible, but business/first class

tickets always ineligible (even if allowed by the internal rules of the Project Partner)




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SOME BASIC RULES

Reasonability of board & lodging costs

Accommodation costs - Hotel costs (invoice) can be accepted without reservation if they are in the middle price ranges must be duly justified in each case

DurationAny travel should be reasonable and should normally startthe day before the event (e.g. meeting) until the day after

Note: this requires judgment by the First Level Controller who may ask additional clarifications




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SOME BASIC RULES

Reporting method Costs should be reported in line with national rules or specific internal regulations of the PP (pravilnik o službenim putovanjima) Daily allowance should be in line with entity legislation Mission report signed by the travelling person




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Start & end date and hours of travel Calculation of travel allowances ( in country or in

board, full or part 30%) Exchange rate (last month reporting period) All costs (accommodation, auto park, bus/train/plane

tickets (boarding pass-obligatory)fuel??, highway tickets) Invitation, Decision for mission, List of participants,

agenda and minutes




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TRAVEL BY OWN / COMPANY CAR

Calculation sheet prepared according to national or institutional rules stating at least: (20% of price fuel) distance unit rate total costIf necessary accompanied by additional proof documents




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Insufficient supporting documentation (e.g. no travel order, or economic way or clarification no submitted)

Lack of proof of payment Lack of information as to how the calculation rate was No adequate costs (extra meals in restaurant, washing

car) Incorrect calculation of exchange rate One travel order for two persons Not submitted invitation letter, participants list




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BUDGET LINE – OVERHEADS



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Covers expenditure such as:

OFFICE COSTS: electricity, heating, water, cleaning, office rent, office suppliesADMINISTRATIVE COSTS: telephone, fax, internet, mail/postal/courier services, bank charges for national financial transactions related to the normal bank account of the Beneficiary

OVERHEADS



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“Flat rate” basis up to 8% of staff costs: Overheads costs can be automatically declared using the flat rate defined at programme level without further justification or supporting documents!

“Real costs” basis up to 20% of staff costs: justified by invoices, supporting documents!

OVERHEADS



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TWO CATEGORIES

(i) Direct general costs = overheads directly allocated to the project (charged to the project at actual cost, no lump sums or estimations)

(ii) Indirect general costs = overheads allocated proportionally to the project (charged on the basis of a calculation method)

OVERHEADS



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CALCULATION METHODS/BASIS FOR APPORTIONMENT

(i) No. of people working on the project / No. of people working in the organisation

(ii) No. of hours worked on the project / No. of hours worked in total in the organisation during the period reported on

(iii) Surface used by the personnel working on the project / surface of the organisation

OVERHEADS



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Example of a calculation method to charge the costs of electricity and heating on the basis of surface of office space used for the purposes of implementing the project whereby:

space used for project purposes = 100 m² total office space at the disposal of the Project Partner (also for non-project related activities = 400 m²)

OVERHEADS



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Total cost of electricity & heating for the entire premises of the Project Partnery during the

period reported on equals to BAM 500

100/400*100=25%

25% (500)= 125 BAM

or 63,91 € (125/1,95583)

OVERHEADS



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Example of a calculation method to charge the costs of Internet on the basis of No. of people working on the project whereby:

3 full-time staff (100%) and one half-time staff (50%) are working on the project overall staff of the Project Partner (including

those not working on the project) is the equivalent of 12 full-time staff members

OVERHEADS



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Total cost of Internet for the entire premises of the Project Partner during the period reported on

equals to BAM 200

3,5/12*100=29,17%29,17% (200)= 58,34 BAMor 29,83 € (58,34/1,95583)

OVERHEADS



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Notes on calculation method used:

The choice of the method used to apportion overhead costs to the project must be attached to the Progress Report

If surface is used then general spaces such as toilet, corridors, canteen(s) etc needs to be excluded from total available space.

Method may become subject to verification during an on-the-spot check.

OVERHEADS



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Documents to be presented by PP/checked by FLCO:-Proof of payment-Invoices-Calculation method

OVERHEADS



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Refers to costs related to: charges for transnational financial

transactions, bank charges for opening and administering

the accounts if a separate account for the project has been opened and

cost of bank guarantee(s) if required

FINANCIAL CHARGES AND GUARANTEE COSTS



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Reporting: Documents proving that all costs are real,

directly related to the project and have not been declared under other budget line

Documents evidencing the opening of the bank account for the project

Proof of payment

FINANCIAL CHARGES AND GUARANTEE COSTS



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EXTERNAL EXPERTISEAND SERVICES



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BASIC RULES

the work of the external expert is essential to the project;

rates charged by the external expert are reasonable;

the selection of the external experts shall comply: IPA-I Partners (3rd and 4th call for proposals): with the provisions of Annex IV to the PRAG standard grant contract;



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BASIC RULES

additional contracts of external expertise nature signed with own staff of the partner institution must strictly apply transparent selection and, where applicable, public procurement procedures;

Project Partners cannot be contracted as external expert;

If applicable the deliverables respect the information and publicity requirements of the SEE Programme 2007-2013;



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EXTERNAL EXPERTISE

Covers costs paid for professional services of external experts or consultants exclusively engaged for the purposes of the project to perform certain activities outside the knowledge base of the Project Partner such as financial management, project managment, research, studies, surveys …



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PUBLIC PROCUREMENT

The recruitment of external experts needs to fully respect the programme procurement rules

(PRAG) Web site: PRAG: http://ec.europa.eu/europeaid/eprag/

EXTERNAL EXPERTISE

http://ec.europa.eu/europeaid/eprag/



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First Level Controllers will check whether there is sufficient written evidence that the evaluation of the offers and the award of contracts was carried out in a professional, objective, fair and transparent manner

EXTERNAL EXPERTISE



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WHAT WILL FLCO CHECK REGARDING PROCUREMENT?Existence of documents justifying the choice of the selected service provider such as:

Terms of ReferenceType of contracts: fee-based service or global priceInformation about potential Tenderers approachedRequest for OfferOffers received

EXTERNAL EXPERTISE



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Existence of documents justifying the choice of the selected service provider such as:

Evidence on the evaluation of the offers received (members of the Evaluation Committee, selection & award criteria, evaluation report)Contract with the selected external expertOutputs by the external expert

EXTERNAL EXPERTISE



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Lack of compliance with procurement rulesDoubts about the necessity and justification to engage an external expert for a particular activityMissing contractLack of evidence of the work done by the external expertLack of proof of payment to the external expert

EXTERNAL EXPERTISE



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Covers costs related to the organisation of conferences, seminars, meetings, workshops

directly related to the project and traceable from the latest approved Application Form.

Examples include: venue renting, renting of equipment, catering, translation of documents linked to specific events, printing of materials directly related to events, external speakers...

MEETINGS AND EVENTS



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For each event the Project Partner must clearly demonstrate:

purpose & agenda location & duration No. and list of participants minutes of the event copy of materials produced

MEETINGS AND EVENTS



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Eligibility of costs for meetings and events is subject to the full respect of procurement rules (proving that the most cost-efficient option has been

selected) and of visibility / publicity rules

MEETINGS AND EVENTS



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Refers to all costs related to information and communication activities (e.g. press releases, newspaper advertisements, TV shows, brochures, newsletters, project website, display panels, banners, photographs, audio-video production etc…)

PROMOTION COSTS



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Eligibility of promotion costs is subject to the full respect of procurement rules (proving that the most cost-efficient option has been selected)

and of visibility / publicity rules

PROMOTION COSTS



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Documents to be presented by PP/checked by FLCO:

First Level Controller will check whether :

The contract laying down the service to be provided, reference is made to the project & programme, contains the name of the expert, contains a description of the services to be provided, the total price, deadlines for the delivery of outputs

EXTERNAL EXPERTISE AND SERVICES



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Documents on the selection of the external expert or services are available (documents of the public procurement)

The evidence of the work carried out by the service provider is available (studies,researches,analysis)

Deliverables (brochures, photos, list of participants) Proof of payment: invoices and other accounting

documents for the provided services/works

EXTERNAL EXPERTISE AND SERVICES



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EQUIPMENT Refers to the purchase of equipment necessary

for the successful implementation of the project such as IT equipment (computer, printer, software,…), office furniture, machineries etc



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EQUIPMENT

SOME BASIC RULES

should not have been already financed by other subsidies (EU, national or regional)

should not have already been completely depreciated

should not be claimed in another category (e.g. overheads budget line)



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EQUIPMENT

have to respect the procurement and visibility / publicity rules

have to be clearly been foreseen in the Application Form and equipment is

necessary for the project implementation second hand equipment is ineligible



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EQUIPMENT

CONCEPT OF ORIGIN

For goods purchased under the grant contract with a unit price > € 5,000 , the Supplier needs to submit proof of origin at the latest when they

present their invoice to the Project Partner.



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EQUIPMENT

CONCEPT OF ORIGIN

Goods (or service providers when these are companies rather than individuals) need to

originate from an eligible country and these are:



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EQUIPMENT

MEMBER STATES OF THE EUROPEAN UNION - EU (27)+

COUNTRIES OF THE INSTRUMENT FOR PRE-ACCESSION ASSISTANCE - IPA (7)

+COUNTRIES OF THE EUROPEAN NEIGHBOURHOOD

PARTNERSHIP INSTRUMENT - ENPI (17)+

MEMBER COUNTRIES OF THE EUROPEAN FREE TRADE AGREEMENT - EFTA (4)



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EQUIPMENT

Two options re. equipment used EXCLUSIVELY for project purposes:

(i) 100% full cost chargeable to the project(ii) depreciation method

Note: depreciation costs can never exceed the purchase price of the equipment



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EQUIPMENT

Purchase price is 100% eligible if:

equipment is low value and thus not depreciable (in B&H defined as less than

1,000 KM)

period between purchase date and end of project is longer than or equal to the

normal depreciation method for the piece of equipment



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EQUIPMENT 3rd and 4th call projects: in case the total

economic life of the equipment is longer than the project duration, either the purchase price shall be proportionally reduced for the project period:

project period X total purchase total economic life of the equipment price

or the depreciation costs shall be declared according to the relevant national rules.



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SMALL SCALE INVESTMENTS

Refers to small scale investments with a demonstrated transnational impact and can include costs related to: technical infrastructure and technical investments, solution reducing land-base river pollution, efficient production and using of bio-mass, energy saving in buildings.



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SMALL SCALE INVESTMENTSSOME BASIC RULES

should not have been already financed by other subsidies (EU, national or regional)

Purchase of land are not eligible have to respect the procurement and visibility /

publicity rules have to be clearly been foreseen in the

Application Form and if not, must have been agreed by the programme management bodies.



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SMALL SCALE INVESTMENTSSupporting documents:

Documents on the selection of the contractor; The contract laying down the works; The evidence of the small scale investments; Invoices; Proof of payment;



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Thank you!www.cfcu.gov.ba

http://www.cfcu.gov.ba/