Analysis (of types) of errors in EU and National public procurement within the Structural Funds programmes

Report ID: 107

In 2013, the Contact Committee of the heads of Supreme Audit Institutions (SAIs) of the Member States of the European Union and the European Court of Auditors mandated the Working Group on Structural Funds to continue its review of issues relating to Structural Funds, more specifically, to carry out a parallel audit on the ‘Analysis (of types) of errors in EU and national public procurement within the structural funds programmes’.

The Working Group consisted of nine SAIs, while a further five SAIs and the European Court of Auditors acted as observers. The parallel audit was carried out in order to understand the reasons why beneficiaries fail to comply with public procurement rules. The comparison of the national results was intended to reveal differences or similar causes in the Member States. Most SAIs based their audit on errors already detected by their national management and control system.

Although this parallel audit was not designed to provide a full and accurate picture of the situation, the findings suggest a rather large number of errors in public procurement under Structural Funds. The following are the main conclusions and recommendations:

 Most authorities of the management and control systems do not systematically record the types of errors in public procurement procedures. They place focus on individual errors only. It is not always assured that all authorities, especially intermediate bodies, report every error detected.

We recommend national authorities to systematically record the types of errors detected in public procurement procedures. This is the only way to obtain a full picture of these errors and address them.

 In 2007, the Coordination Committee of the Funds (COCOF) issued guidelines for determining financial corrections with regard to irregularities in the application of public procurement regulations to contracts co-financed by the Structural Funds. Although the description of the categories is rather ambiguous and vague, most Member States used the COCOF guidelines in their original version without further developing them.

We recommend that national authorities refine the description of the categories and when needed elaborate categories and rates of the COCOF guidelines further in order to ensure a uniform and just application at national level. In addition to that, it would be helpful if the European Commission distributed good practices on how the guidelines are applied in the Member States.

 The national management and control systems detected more public procurement errors in contracts with values below the EU thresholds than above the EU thresholds. However, the average financial impact of errors was higher in procedures above the EU thresholds than below the EU thresholds.
Although most authorities already strive to prevent errors in public procurement procedures, we recommend national authorities to take more targeted action in order to reduce the most common errors in public procurement procedures and those with the highest financial impact.

 According to the findings of the Working Group “lack of knowledge” is the most common reason for errors in public procurement, followed by ‘interpretation difficulties’.
We recommend the Member States to request the European Commission to further clarify the legal framework and reduce the administrative burden for the contracting authorities and the bidders, but without resulting in limitation of the equal access, fair competition and efficient use of public funds. Further to that, we recommend Member States to take the following steps in order to prevent or reduce errors in the area of public procurement:

 They should keep public procurement rules as simple as possible and not change them too radically or too frequently.

 Some Member States should improve the knowledge of the staff of the national authorities in the field of public procurement in order that they are equipped to support beneficiaries and prevent errors.

 Member States should improve their communication policy and provide better information to beneficiaries.

They should try to ensure that beneficiaries exert due diligence at all stages of public procurement.

Efficiency of the process of issuing of biometric passports and supporting information systems

Report ID: 108

A. In the Republic of Latvia the EU funds administration and control system is established at several levels, which during the audit period enabled detection of public procurement errors in the indicative amount of 1%from the total amount declared to the EC, however:
A1. There is a risk that the actions of institutions involved in management of the EU funds in clarifying of the principles and legal framework of public procurement, as well as the impact of the detected errors on procurement procedure are insufficient and ineffective, since:
1.1. The biggest part of the errors or 57% from the total number of errors detected by institutions involved in management of the EU funds, which were subject to proportional financial corrections during the audit period, in all operational programmes were pertaining to unlawful restrictions for selection of tenderers (for example setting specific requirements that favour a single businessman) or unequal treatment of tenderers in awarding of the contract (for example, unjustified preferential treatment given to one of candidates invited to negotiate), indicating that the beneficiaries are not completely aware of the procurement procedures;
1.2. In 45% of the cases the reasons of errors indicated by the beneficiaries do not correspond to the reasons indicated by the audit authority, the responsible and cooperation authorities; for example, in cases when beneficiaries have not selected any of the six reasons of errors, they have indicated to “other reason of error” and in 50% of cases they described these errors as differences in opinion with the institution which had detected the error;
A2. The procedure for data entering and classification of errors in the EU funds management information system is inaccurate — information on public procurement errors is entered without specifying the type of error, as well as the EU funds management information system does not aggregate information on procurement contracts in order to enable determining whether the contracts are subject, not fully or not subject to EU Public Procurement Directives and to apply a respective financial correction.

B. At the result of the audit three recommendations were issued to the Ministry of Finance as the managing authority aimed at:
B.1. Ensuring that detailed information is being entered and accumulated within the EU funds management information system on public procurement errors, so that institutions involved in management of the EU funds can analyse this information and perform sufficient actions to eliminate the errors;
B.2. Ensuring that institutions involved in management of the EU funds provide purposeful support to the beneficiaries in respect to procurement procedures and detailed explanation of the substance of the detected errors in order to reduce the number of public procurement errors within projects financed by the EU funds;
B.3. Reduction of the number of unclassified errors by ensuring accurate classification and evaluation of errors according to their type.

AFROSAI-E and IDI Cooperative Audit on Extractive Industries

Report ID: 253

Under the framework of the IDI/AFROSAI-E Cooperative Audit Project on Extractive Industries,  a series of parallel performance audits on the topic of National Content in the oil and gas sector took place between 2014 and 2015 with the participation of the SAIs of Ghana, Kenya, Nigeria, South Africa, South Sudan, Tanzania and Uganda.

The original purpose of the project was to help SAIs identify risk areas in the Extractive Industries area and help them formulate an audit approach that they could execute. The ultimate goal was that each SAI should complete an audit on a topic related to public sector management of the extractive industries sector. 

The SAIs  conducted a performance audit to examine, among others, the benefits in terms of increased local employment and use of local suppliers that result from the oil and gas industry. The SAIs drew a distinction between local and national, because in some countries the governments were concerned with benefit accruing to nationals, whereas others had specific aims of seeing benefits accruing to local communities affected by the oil and gas industry. 

The report outlines the methods applied by the project, the results achieved and the experiences for future projects of this type.

Multilateral Audit on the Arctic States’ national authorities’ work with the Arctic Council

Report ID: 262

The SAIs of  Denmark, Norway, the Russian Federation, Sweden, and the United States of America collaborated on a multilateral audit of national participation in the Arctic Council - an intergovernmental forum to promote cooperation on Arctic issues.

The multilateral audit, coordinated by SAI Norway and SAI Russia, was carried out in accordance with a strategic plan signed by the participating SAIs in October 2012 and was aimed to inform Arctic governance and enhance the usefulness of the Council in understanding and managing Arctic issues.

In addition to the national reports, the SAIs issued a memorandum  highlighting the results of a cooperative audit. The audits conducted by the five SAIs where they are similar in scope, and does not necessarily represent the views or conclusions of each SAI.

Key findings include the following:

• Changes in the Arctic have elevated the importance of international cooperation in the Arctic
• The Arctic Council has contributed to enhanced cooperation, governance and Scientific knowledge
• The Council faces key challenges related to its organizational structure, establishing priorities, funding its work, and ensuring the effective implementation of voluntary recommendations adopted by member states
• Indigenous groups make important contributions to the council, but face Challenges participating

Source: https://oaarchive.arctic-council.org/handle/11374/1527