Leping

Annex I to Report of Factual Findings on expenditures declared under an Interim/Final Report Listing of procedures performed The ‘result’ column has three different options: ‘C’, ‘E’ and ‘N.A.’:  ‘C’ stands for ‘confirmed’ and means that the auditor can confirm the ‘standard factual finding’ and, therefore, there is no exception to be reported.  ‘E’ stands for ‘exception’ and means that the Auditor carried out the procedures but cannot confirm the ‘standard factual finding’, or that the Auditor was not able to carry out a specific procedure (e.g. because it was impossible to reconcile key information or data were unavailable). In either case, such case must be reported and described in the Report of factual findings with a reference to the expenditure number as indicated in the List of expenditure. The exception may refer to any expenditure under the specific budget heading or to the individual expenditure item. This implies that the expenditure is regarded as non-eligible.  ‘N.A.’ stands for ‘not applicable’ and means that the Finding did not have to be examined by the Auditor and the related Procedure(s) did not have to be carried out. The reasons of the non-application of a certain Finding must be obvious i.e. 1) if no cost was declared under a certain category then the related Finding(s) and Procedure(s) are not applicable; 2) if the condition set to apply certain Procedure(s) are not met then the related Finding(s) and Procedure(s) are not applicable. Fund operated by: 1  Procedures Standard factual findings Result (C, E, N.A.) General statements applicable to all project expenditures Reference / Criteria The issues to be verified versus all project expenditures:  Exclusion of ineligible costs  Adequate accounting system in place  Bank account  Net revenues  Irregularities The Auditor: 1) It is ensured that ineligible verified that no ineligible costs were declared costs are excluded according to the under any of the BHs: EEA and Norway Grants Fund for Regional Cooperation rules. o Reviewed the costs in terms of ineligibility o In case of costs with dates of invoicing/payments belonging to previous reporting periods: verified if these costs were declared only once, and only in the currently verified report/s. 2) All costs are declared only o Reviewed if the costs were charged in once, i.e. not already reported twice line with the Project Partner’s accounting policy, in the project. were correctly identified, allocated to the proper activity, budget heading, entered in the accounting system (traceable to underlying documents such as purchase orders, invoices 3) The costs were charged in and accounting), line with the Project Partner’s o Verified if separate accounting accounting policy and were system/code is used for all the project costs and adequately supported. is consistent with the presented accounting policy, o Verified if all project-related expenditures are identifiable in the accounting 4) The project partner uses, for system, the accounting purposes, a separate accounting system and/or an o Verified if net revenue is reported and if adequate accounting code and all so the net-revenue is properly calculated and project-related expenditures are deducted in the reporting period. identifiable. o Verified if net-revenue generated in the project is properly calculated, deducted in the Fund operated by: 2  Procedures Standard factual findings Result (C, E, N.A.) reporting period and recorded in the accounting 5) The dedicated bank account (LP) system. is used only for the project- The following costs shall not be considered eligible: related payments o Interest on debt, debt service charges and late payment charges; o Charges for financial transactions and other 6) The reported net revenue has purely financial costs, except costs specifically been properly calculated and required by the applicable law and costs of financial deducted from the total eligible services imposed by the project contract; expenditure and recorded in the o Costs related to purchase of land or real accounting system. estate; o Provisions for losses or potential future liabilities; 7) There was no evidence of o Exchange rate losses; irregularities found during the o Recoverable VAT; project’s verification. o Costs that are covered by other sources; o Fines, penalties and costs of litigation, except where litigation is an integral and necessary component for achieving the outcomes of the project; and o Excessive or reckless expenditure. Staff costs (BH1) Reference/Criteria The cost of staff assigned to the Project, either full- or part- time, comprising actual salaries plus social security contributions and other statutory costs included in the remuneration, provided that these costs are in line with each Project Partner’s usual policy on remuneration. Staff can either be already employed by the Project Partner entity or staff specifically employed for the Project. The Auditor: 8) There were no discrepancies between the personnel costs as o reviewed the contractual changes for presented in the Report and the staff working in the project, and the method for costs recalculated by the calculating staff costs, Auditor. o recalculated all staff costs based on national legislation, employment contract or equivalent and partner’s usual policy on remuneration. 9) The claimed Staff costs are Staff costs must be calculated individually for each adequate in quality and/or staff member charged to the project. quantity to the realised In case of contractual changes for staff working in the deliverables of the project. project, the method for calculating staff costs may also be adapted to the changed conditions. Fund operated by: 3  Procedures Standard factual findings Result (C, E, N.A.) The Auditor: 10) The incurred expenditures were appropriately assigned to the o Verified whether only permanent staff budget heading - Staff Cost. cost is calculated under this budget item; (any extra services provided on short-term basis by persons (external experts) are to be excluded from BH1). 11) Project partner’s staff was The Auditor: remunerated in accordance with o Reviewed the Project Partner’s usual the Project Partner’s usual policies and practices regarding payroll matters policy. (e.g. salary policy, overtime policy, variable pay),. o Verified whether unjustified ad-hoc salary increases or bonuses are excluded from the eligible expenditures. Unjustified ad-hoc salary increases or bonuses for project purposes are not eligible. Further procedures if there is part time Staff 12) There were no discrepancies employed between the part time personnel The Auditor: costs as presented in the Report and the costs recalculated by the o Recalculated salaries of part time staff Auditor. depending on the method applied by the project partner o Ensured that the method has been applied in consistent manner. Staff employed part-time in the project is dedicating only a part of its total working time to the project, such costs have to be calculated according to either of the following methods: o Part-time with a fixed percentage of time per month dedicated to the project; o Part-time with a flexible number of hours/days worked per month on the project. 1) A fixed percentage of the gross employment cost, in line with a fixed percentage of time worked on the project, with no obligation to establish a separate working time registration system (time-sheets); In such case, the employment / work contract has to specify the tasks and the percentage of the time Fund operated by: 4  Procedures Standard factual findings Result (C, E, N.A.) worked per month for the project. Alternatively, a specific document can be issued by the project partner for each employee setting out the percentage of time to be worked on the project (e.g. Job description); Or 2) A flexible share of the gross employment cost, in line with the number of hours/days spent on the project, based on a time registration system (time- sheets). Such costs shall be calculated multiplying the hourly/daily rate by the number of hours/days actually worked on the project (based on time- sheets). The hourly/daily rate (if not specified in the employment / work contract) to be applied for calculation is determined by dividing the monthly gross employment costs by the monthly working time fixed in the employment contract (or equivalent contract) expressed in hours/days. Further procedures if there is Staff employed on 13) For Staff employed on contract contract which is equivalent to employment contract which is equivalent to in accordance with the national legislation employment contract, costs and work conditions are not different The Auditor: from those for personnel o Reviewed the terms of “equivalent performing similar tasks under contracts” of every staff employed in this way an employment contract with (especially the cost, contract duration, work the project partner and the description, place of work, ownership of the result of the work carried out results and reporting obligations to the Project belongs to the project partner. partner); o Compared the terms of “equivalent contracts” to those of the employed under employment contract; o Compared the costs of “equivalent contracts” to those of the employed under employment contract; o Verified whether result of the work carried out belongs to the project partner. Costs for natural persons working under the contract which are equivalent to employment contract are eligible if: Fund operated by: 5  Procedures Standard factual findings Result (C, E, N.A.) (a) the person works under conditions similar to those of an employee (in particular regarding the way the work is organised and supervised, the tasks that are performed and the premises where they are performed); (b) the result of the work carried out belongs to the project partner and (c) the costs are not different from those for personnel performing similar tasks under an employment contract with the project partner. Costs arising from a contract stipulated with a natural person that results to be not equivalent to an employment contract according to national/institutional rules, belong to the ‘subcontracting cost’ budget heading and have to comply with all provisions applicable to that budget heading, including the respect of procurement rules. Voluntary work (BH1a) Reference/Criteria The voluntary work is allowed for non-governmental organisations only. Voluntary work is the work carried out for the benefit of the project, with a specific purpose, within limited time period, on the basis of the volunteer’s own will, and without receiving any financial compensation for it. Voluntary work cannot be part of the paid assignments, and it cannot be assigned to any person receiving remuneration from any of the project partners. The Auditor examined agreements between the 14) The volunteer work was volunteers and the project partner, signed time- appropriately calculated and sheets and calculation method of the monetary assigned to the budget heading value of voluntary work. 15) Volunteers did not receive Voluntary work cannot be part of the paid remuneration from any project assignments of the volunteers and should not be partner or any other assigned to employees receiving remuneration from organisation within the project. any project partner or any other organisation for the task (or tasks) to be considered volunteering under 16) The volunteer’s contract this project. specified a detailed role within Voluntary work should have a specific purpose, the project and the tasks that contribute to the content of the project and should were directly linked to project be limited to a certain time period. The results of the only. Fund operated by: 6  Procedures Standard factual findings Result (C, E, N.A.) unpaid work should be of added value to the project 17) The work was properly and contribute to the successful delivery of the documented by signed project outputs. agreement between the Voluntary work must be properly documented by volunteer and the project signed agreement between the volunteer and the partner), signed time-sheets and project partner (duration and conditions of unpaid calculation method of the work shall be specified here), signed time-sheets and monetary value of voluntary calculation method of the monetary value of work. voluntary work. 18) Calculation of voluntary work Calculation of voluntary work shall be objectively was objectively valued by the valued by the project partner and the hourly rates shall be similar but under no circumstances higher project partner and the hourly than the remuneration for equivalent work carried rates were not higher than the out in the region/country. remuneration for equivalent work carried out in the Project beneficiaries CANNOT be volunteers. region/country. 19) Project beneficiaries were not engaged within the project as volunteers. Travel expenses and related subsistence allowances (BH2) Reference/Criteria Travel expenses and related subsistence allowances of staff taking part in the Project, provided that these costs are in line with each Project Partner’s usual practices on travel. Any accommodation allowances must not exceed the per diem rates published on the following website http://ec.europa.eu/europeaid/funding/about-calls-tender/procedures-and-practical- guide-prag/diems_en in force at the moment of travel. As a general principle, the most cost- efficient means of transport shall be used. The Auditor: 20) Costs were incurred, approved reviewed the Project Partner’s usual practices or and reimbursed in line with policy regarding travelling. Project Partner’s usual In the absence of written policy, the Project Partner practise/policy for travels and/or provides the evidence of its practise outside the national legislation examined project costs to enable the Auditor to compare the travel costs charged with this practise. 21) The incurred expenditures have been appropriately calculated Travel expenses and related subsistence allowances and assigned to the budget of staff taking part in the project, must be in line with heading - Travel expenses and Project Partner’s usual practices on travel/national legislation related subsistence allowances. Fund operated by: 7  Procedures Standard factual findings Result (C, E, N.A.) The Auditor verified that travel costs: 22) The supporting documents were consistent with each other o are justified, regarding subject of the trip, o correctly identified and calculated, dates, duration and reconciled o allocated to the activity (e.g. directly with time records and linked to the activity, related only to travels of accounting. Costs partially the BH1 and BH1a staff) and budget heading covered by third parties have been deducted from eligible by reviewing relevant supporting documents expenditures. such as minutes of meetings, workshops or conferences, their registration in the correct 23) Travel and accommodation costs project account, their consistency with time only relate to missions necessary records or with the dates/duration of the for project implementation workshop/conference/activity. carried out by the permanent staff (BH1) and volunteers Travel and accommodation costs must be clearly (BH1a). linked to the project and be essential for its effective implementation. They must be justified by activities 24) Any accommodation and daily carried out within the project. As a general principle, allowances do not exceed the the most cost-efficient mean of transport shall be per diem rates published by the used (e.g. using economy class instead of business or EC. first class unless travels are done by train. If travels are by car, a reimbursement, based on the mileage 25) The most cost-efficient means of calculation sheet or invoice (in case of car rental), transport was used or less- based on national/internal rules as applicable to the efficient transport was duly entity. justified. Daily subsistence allowances cannot exceed the 26) Presented costs of travels relate official EU per diem rates. For reference, use per diem solely to travels performed by rates published on http://ec.europa.eu/europeaid/funding/about-calls- the staff presented under BH1 tender/procedures-and-practical-guide- and BH1a by the Project Partner prag/diems_en at the moment of travel. (costs of external experts/consultants/service Travel costs related to individuals other than staff providers are excluded). directly employed by Project Partners (such as consultants, experts, external service providers), must be included under “subcontracting costs” (BH6). Consumables and supplies (BH3) Reference/Criteria The costs of consumables and supplies are eligible, provided that they are identifiable and assigned to the Project; Fund operated by: 8  Procedures Standard factual findings Result (C, E, N.A.) The Auditor verified that: 27) Only nondurable goods were o Purchased goods were used for the purchased under this budget implementation of the project activities; heading. o The costs were allocated to the proper 28) Purchased goods and supplies activity, budget heading; were properly tied to the o Procurement rules were observed and implementation of project ensured best value for money, key elements to activities. appreciate the respect of this principle are the award of the contract to the bid offering best 29) The incurred expenditures were price-quality ratio, under conditions of appropriately assigned to the transparency and equal treatment. budget heading - Cost of consumables and supplies. The Auditor also confirmed that all goods and 30) Consumables/supplies are services were necessary for the project (it may clearly linked to the project and involve e.g. interviews, review of contracts and are essential for its effective the outputs of the services) and cannot be implementation. concerned indirect. 31) Procurement rules, principles If project activities need to be supported by and guides were followed. The additional purchases of consumables and supplies, purchases were made in then such a purpose should be classified under accordance with the principle of “consumables and supplies” budget heading (BH3). best value for money. Supplies – general purpose consumable items which commonly have a shorter life span in use than equipment and machines; Consumables (also known as consumable goods, nondurable goods, or soft goods) are goods that, are capable of being consumed, that may be destroyed, dissipated, wasted or spent. Consumables are in contrast to durable goods. Further procedures if ‘consumables and supplies’ 32) The share allocated to the used only partially by the project project is charged based on a The Auditor: transparent method set in place (In case of consumables and o reviewed the method of share allocation supplies used only partially by to the project the project). o recalculated the actual allocation to the project Equipment costs (BH4) Reference/Criteria Fund operated by: 9  Procedures Standard factual findings Result (C, E, N.A.) Cost of equipment provided that it is depreciated in accordance with generally accepted accounting principles applicable to the Project Partner and generally accepted for items of the same kind. Only the portion of the depreciation corresponding to the duration of the Project and the rate of actual use for the purposes of the Project may be eligible. In case the Project Partner determines that the equipment is an integral and necessary component for achieving the outcomes of the Project, the entire purchase price may exceptionally be eligible; The Lead Partner shall ensure that:  the equipment is kept in the ownership of the relevant Project Partner for a period of at least 5 years following the completion of the Project and continues to be used for the benefit of the Project’s overall objective for the same period;  the equipment is kept properly insured by the relevant Project Partner against losses such as fire, theft or other normally insurable incidents both during the implementation of the Project and for at least 5 years after the completion of the Project;  the relevant Project Partner sets aside appropriate resources for the maintenance of the equipment for at least 5 years after the completion of the Project. The Auditor for every asset, which costs are 33) There was a link between the claimed in the project, verified the existence, Project Contract and the asset audit trail in the booking records, including charged to the project. depreciation method and procurement process. 34) Equipment has not already been financed by other Donors and/or The equipment must: has not already been o be essential for the project; depreciated. o be not financed from any other financial 35) The incurred expenditures were instrument (e.g. EU, national, international); appropriately assigned to the o not be fully depreciated; budget heading - Equipment o not be included under any other budget costs. line; 36) Procurement rules, principles o not be purchased, rented or leased from and guides were followed and another project partner; equipment has not been o be purchased respecting the relevant purchased, rented or leased procurement procedures. from another project partner.. The purchases were made in As a general principle, for all project equipment accordance with the principle of (purchased before or during the project lifetime) only best value for money. depreciation costs shall be allocated to the project. Cost of equipment shall be depreciated in accordance 37) The reported expenditures are with generally accepted accounting principles traceable to the accounting applicable to the project partner and generally records and the underlying accepted for items of the same kind. The portion of documents. Fund operated by: 10  Procedures Standard factual findings Result (C, E, N.A.) the depreciation corresponding to the duration of the 38) The depreciation method used is project and the rate of actual use for the purposes of in line with generally accepted the project may be eligible. accounting principles applicable to the project partner and generally accepted for items of the same kind. 39) The reported expenditures corresponded to the duration of the project and the rate of actual use for the purposes of the project. 40) Equipment is available/ physically exists. For equipment rented or leased the auditor 41) The rental/leasing costs are verified, that rental or leasing costs are presented only for the presented only for the respective period. respective period The auditor verified that equipment is leased on the operational leasing basis. 42) According to the leasing/renting Leasing is eligible only for the respective period of the contract ownership of the project. Ownership cannot be transferred at the end equipment is not transferred at of the leasing period from the lessor to the lessee. the end of the leasing period to Therefore, operational leasing is eligible, while the Project Partner. financial leasing is not. Project contract requirements costs (BH5) Reference/Criteria Costs arising directly from the requirements imposed by the Project Contract (for instance: cost of report by an independent auditor, cost of financial guarantees etc.) The Auditor checked whether: 43) The incurred expenditures were o financial costs were required, appropriately assigned to the budget heading - Costs arising o other costs attributed to the BH5 were directly from the requirements required by the project contract imposed by the Project Contract. This budget heading covers the cost required by project contract as indicated in project contract: 44) Financial guarantee cost complied with the agreement with financial institution. Fund operated by: 11  Procedures Standard factual findings Result (C, E, N.A.) o Financial costs - limited to the financial guarantee (it is required in cases where advance 45) Procurement rules, principles payments are foreseen), and banking costs and guides were followed. The concerning the dedicated bank account (cf. Art. 7.1 of purchases were made in SC and Art. 31.2 of GC) that are specifically required accordance with the principle of by the applicable law and represent financial services best value for money. imposed by the project contract (e.g. bank charges for opening and administering the account, transnational financial transaction charges) o Audit cost (if required by the project contract)- costs related to the verification of each interim/final report (i.e. proof of expenditure) by each project partner which shall take the form of a report by an independent auditor or by a competent and independent public officer. o Other costs required by the project contract - all remaining costs not covered in other budget headings description and required by the project contract (civil liability policy, if only for the project purposes). Subcontracting costs (BH6) Reference/Criteria Costs entailed by other contracts awarded by a Project Partner for the purposes of carrying out the Project provided that the award complies with the Article 18 of General Conditions (Procurement, Annex I to the Project Contract). The Auditor verified if: 46) The subcontracting costs were o the use of subcontractors was foreseen foreseen in the project contract in the project contract, o supporting documents on the selection and award procedure were followed, The Auditor checked whether: o the subcontracts were not awarded to other Project Partner in the consortium, 47) The subcontracts were not o there were signed agreements between awarded to other Project the Project Partner and the subcontractor, Partners of the consortium. 48) All reported expenditures are based on the written agreements Fund operated by: 12  Procedures Standard factual findings Result (C, E, N.A.) o there was evidence that the services between the Project Partner and were provided by subcontractor, as stipulated in the subcontractor. the contract, o procurement rules were applied and 49) The incurred expenditures have ensured best value for money (key elements to been appropriately assigned to appreciate the respect of this principle are the the budget heading - External award of the contract to the bid offering best expertise and services costs. price-quality ratio, under conditions of transparency and equal treatment). 50) External expertise and services Subcontracting costs shall be paid based on contracts are clearly linked to the project or other written agreements of equivalent probative and are essential for its effective value and against invoices or requests for implementation. reimbursement to external service providers. Subcontracting costs shall be connected to certain 51) The share allocated to the project project tasks or activities that cannot be carried out is plausible, i.e. calculated by the project partners themselves (mainly to bring in according to a fair, equitable and more expertise or capacity) and are therefore outsourced to external service providers. verifiable method. (In case of experts or services that are NOT The awarding procedure should comply with exclusively used for the project). procurement rules and avoid any conflict of interest. Project partners shall always follow the strictest procurement rules applicable to them. ‘Subcontracting cost’ budget heading covers (and is limited to) the price paid for subcontracts and related taxes. Such price may include travel costs of external 52) Procurement rules, principles service providers and experts. Their participation in project meetings and events needs to be justified and and guides were followed. The contributing to the project content and activities. purchases were made in The activities to be implemented and the estimated accordance with the principle of cost for each subcontract must be set out in the best value for money. Project Description. Characteristics of subcontracting:  Based on business conditions (this means that the subcontractor charges a price, which usually includes a profit);  Subcontractor is not hierarchically subordinate to the project partner;  The project partner remains responsible for all its rights and obligations under the Project Contract, including the tasks carried out by a subcontractor; Fund operated by: 13  Procedures Standard factual findings Result (C, E, N.A.)  Subcontractor has no rights or obligations 53) The provision of services to the towards the Fund Operator or the other project partners (it has no contractual relation with them). target group was reasonable, justified and reflect the Project Partners are not allowed to contract each expected contribution to the other to carry out project activities. implementation of specific project activities and to the overall success of the project. Further procedure if cost related to provision of services to the target group are reported 54) The provision of services to the target group is properly The auditor verified if the amount of support is documented, all necessary reasonable, justified and reflects the expected agreements/contracts are duly contribution to the implementation of specific signed with the beneficiaries of project activities and to the overall success of the such support, timesheets and project other proofs are provided. The auditor checked if provision of services is based on formal agreements between the project partner and the end beneficiary and is properly documented. Here the costs for the provision of services to the target group are covered. Such services might take form of a subsistence allowances, scholarships, internships or other forms as specified in the project description. All the forms of such services should be within the context of a specific project idea and within the scope of planned activities (e.g. clearly defined training / education scheme), with the aim to create the measurable outputs in line with the outcomes of the project. Indirect Cost (BH7) Reference/Criteria A flat rate of 15% of the total eligible staff costs of the Project is eligible under the Budget Heading 7- Indirect Cost. The indirect costs represent the general administrative costs which cannot be attributed to the direct eligible expenditure of the Project. Indirect costs do not need to be supported by the proof of expenditure. Fund operated by: 14  Procedures Standard factual findings Result (C, E, N.A.) The auditor verified, if no indirect costs were 55) No indirect costs were presented presented for reimbursement under any direct for reimbursement under any Budget Heading (BH1-BH6). direct Budget Headings ( BH1- A flat rate of 15% of the total eligible staff costs BH6). (including voluntary work) of the project is eligible under indirect costs, representing the general administrative costs which can be regarded as chargeable to the project. Indirect costs shall normally include all administrative expenditure of the project which cannot be directly attributed to the project. For example: o Office rent; o Insurance and taxes related to the buildings where the staff is located and to the equipment of the office (e.g. fire, theft insurances); o Utilities (e.g. electricity, heating, water); o General professional services provided inside the Project Partner organisation; o Maintenance, cleaning and repairs; o Security; o IT systems (operating /administrative IT services of general nature, linked to the implementation of the project); o Communication (e.g. telephone, fax, internet, postal services, business cards); No proofs of expenditure are to be verified under this BH. Fund operated by: 15 Annex II to Report of Factual Findings on expenditures declared under an Interim/Final Report List of expenditures {EGREG table format} Fund operated by: 16  REPORT OF FACTUAL FINDINGS ON EXPENDITURES DECLARED UNDER AN INTERIM/FINAL REPORT <<The Report should be printed on auditor’s letterhead>> <<Fill in the fields in color with relevant data. Fields in brackets highlighted in grey should be removed from the final Report if not applicable. In case when you are required to choose one from proposed Options, remove other from the Report>> To [Name of contact person(s)], [Position] [The project partner name ] [Address] [dd-mm-yyyy] Dear [Name of contact person(s)], As agreed under the terms of reference dated [dd-mm-yyyy] with: [insert name of the Project Partner], we [name of the auditor] (‘the Auditor’), established at [full address/city/state/province/country], represented by [name and function of an authorised representative], have carried out the procedures agreed with you regarding the expenditures declared in the Interim/Final Report(s) covering period [dd-mm-yyyy] to [dd-mm-yyyy] submitted by the [Project Partner] concerning the Project Contract [insert Project Contract reference: number, title], and hereby provide our Report of Factual Findings (‘the Report’) using the compulsory report format agreed with you. Our engagement was carried out in accordance with the Terms of Reference (‘the ToR’) appended to this Report. The Report includes the agreed-upon procedures (‘the Procedures’) carried out and the standard factual findings examined. STANDARDS AND ETHICS Our engagement was undertaken in accordance with:  the Terms of Reference appended to this Report and: Fund operated by: 2   the International Standard on Related Services (‘ISRS’) 4400 (Revised) Engagements to perform Agreed upon Procedures regarding Financial Information as promulgated by the IFAC;  the IFAC Code of Ethics for Professional Accountants (developed and issued by IFAC's International Ethics Standards Board for Accountants, which establishes fundamental ethical principles for Auditors with regard to integrity, objectivity, independence, professional competence and due care, confidentiality, professional behaviour and technical standards. Although ISRS 4400 (Revised) provides that independence is not a requirement for agreed- upon procedures engagements, the FO requires that the Auditor is independent from the Project Partners and complies with the independence requirements of the IFAC Code of Ethics for Professional Accountants. PROCEDURES PERFORMED As requested, we have only performed the procedures listed in the model Report for this engagement and we have reported our factual findings on those procedures in the Annex I to the Report ("Listing of procedures performed"). These procedures have been determined solely by the FO and the procedures were performed solely to assist the FO in evaluating whether the expenditure claimed by the Project Partner in the accompanying Interim/Final Financial Part of the Report(s) is eligible in accordance with the terms and conditions of the Project Contract. Because the procedures performed by us did not constitute either an audit or a review carried out in accordance with International Standards on Auditing or International Standards on Review Engagements, we do not express any assurance on the accompanying Financial Report. Had we performed additional procedures or had we performed an audit or review of the financial statements of the Project Partner in accordance with International Standards on Auditing, other matters might have come to our attention that would have been reported to you. SOURCES OF INFORMATION The Report sets out information provided to us by you in response to specific questions or as obtained and extracted from Project Partner’s accounts and records. FACTUAL FINDINGS On the basis of the results of procedures, we found:  Total eligible project costs which are the subject of this expenditure verification amount to EUR <xxxxxx> [Fill in the total incurred eligible project costs (direct+indirect) of the Project Partner, applicable to the interim/final report(s) subject to verification within this Report. The value of total incurred project costs per partner is visible in financial part of interim/final report, section 2. Overview tables.] [Choose the appropriate option (other to be removed from the Report)] [Option A] The expenditures indicated in Annex II to the Report (‘the List of expenditures’) met the following criteria: Fund operated by: 3   they were incurred between the first and final dates of eligibility of the Project, unless otherwise specified in the Special Conditions;  they were related to the subject of the Project as described in Annex II and they were indicated in the budget of the Project;  they were proportionate and necessary for the implementation of the Project;  they were used for the sole purpose of achieving the objective(s) of the Project and its expected outcome(s), in a manner consistent with the principles of economy, efficiency and effectiveness;  they were identifiable and verifiable, in particular through being recorded in the accounting records of the Project Partners and determined according to the applicable accounting standards and generally accepted accounting principles; and  they complied with the requirements of applicable tax and social legislation,  they were supported by receipted invoices, or alternatively by accounting documents of equivalent probative value,  they were paid and the subject matter delivered (in case of goods) or performed (in case of services and works). Depreciation of equipment have been incurred when it was recorded on the accounts of the Project Partner. [Option B] The expenditures indicated in Annex 2 to the Report (‘the List of expenditures’) met the following criteria, with the execeptions listed below:  they were incurred between the first and final dates of eligibility of the Project, unless otherwise specified in the Special Conditions;  they were related to the subject of the Project as described in Annex II and they were indicated in the budget of the Project;  they were proportionate and necessary for the implementation of the Project;  they were used for the sole purpose of achieving the objective(s) of the Project and its expected outcome(s), in a manner consistent with the principles of economy, efficiency and effectiveness;  they were identifiable and verifiable, in particular through being recorded in the accounting records of the Project Partners and determined according to the applicable accounting standards and generally accepted accounting principles; and  they complied with the requirements of applicable tax and social legislation,  they were supported by receipted invoices, or alternatively by accounting documents of equivalent probative value,  they were paid and the subject matter delivered (in case of goods) or performed (in case of services and works). Depreciation of equipment have been incurred when it was recorded on the accounts of the Project Partner. With the following exceptions: [Describe here any case of ‘exception’. List any non-eligible project costs and add any information on the cause and possible consequences of each exception, if known Include the corresponding amount.] [Example: Fund operated by: 4 [The Project Partner was unable to substantiate the Expenditure presented in annex 2 under position [no XXX] with document number [document own number] in the amount of [amount of ineligible cost] reported under budget heading no […] because [description] Finding number [number of Standard factual findings] was not fulfilled because [description of the differences]. Total non-eligible direct project costs amount to EUR [amount] [fill in the total amount of costs found to be non-eligible] FURTHER REMARKS In addition to reporting on the results of the specific procedures carried out, the Auditor would like to make the following general remarks: [Example (to be removed from the Report): 1. Regarding Finding number 7, 9) we regard that there is a link between work and content of the project the conditions for additional remuneration because … 2. In order to be able to confirm the Finding number 15 we carried out the following additional procedures: ….] USE OF THIS REPORT This report is prepared solely for confidential use and for the purpose of submission to the FO. This report may not be relied upon for any other purpose, nor may it be distributed to any other parties. The FO may disclose this Report to others who have regulatory rights of access to it, in particular the FMO, the EFTA Board of Auditors, as well as the Auditor General of Norway. This Report relates only to the Interim/Final Report(s) specified above and does not extend to any of your financial statements. There was no conflict of interests1 in establishing this Report. Yours sincerely (…) Auditors’ signature [person or firm or both, as appropriate and in accordance with company policy] Name of Auditor signing [person or firm or both, as appropriate.Registration Number if applicable of the Auditor] 1 A conflict of interest arises when the Auditor's objectivity to issue the Report is compromised in fact or in appearance when the Auditor for instance: - was involved in the preparation of the Interim/Final Report; - stands to benefit directly should the expenditures be accepted; - has a close relationship with any person representing the Project Partner; - is a director, trustee or partner of the Project Partner or Lead Partner; or - is in any other situation that compromises his or her independence or to issue the Report impartially. Fund operated by: 5 Auditors’ address [office having responsibility for the engagement] Date of signature <dd-mm-yyyy> [date when the final report is signed] Fund operated by: 6  TERMS OF REFERENCE FOR REPORT OF FACTUAL FINDINGS ON EXPENDITURES DECLARED UNDER AN INTERIM/FINAL REPORT This document sets out the Terms of Reference (‘ToR’) under which Eesti Geoloogiateenistus (‘the Project Partner’) registry code 77000387, with registered address at F.R. Kreutzwaldi tn 5, Rakvere, represented by the Director Sirli Sipp Kulli agrees to engage Audit & Consult OÜ (‘the Auditor’) registry code 11505111, with registered address at Telliskivi 60/1, Tallinn, represented by the member of the Management Board Kairi Luigelaht-Teder to produce an independent Report of Factual Findings (‘the Report’) concerning the eligible expenditures declared within Final Report covering period from 01.07.2023 to 31.12.2023 by the Eesti Geoloogiateenistus for the EEA and Norway Grants Fund for Regional Cooperation under the Project Contract no 2018-1-0137 EU WATERRES “EU-intergrated management system of cross- border groundwater resources and anthropogenic hazards” 01.09.2020-31.12.2023 (‘the Project Contract’). General information The Project Contract has been concluded under the EEA and Norway Grants Fund for Regional Cooperation between the Lead Partner representing the Project Consortium and the Fund Operator (‘FO’). Where in these ToR, the FO is mentioned, this refers to ECORYS Poland, which has signed the Project Contract with the Lead Partner, and JCP Italy. The EEA and Norway Grants is not a party to this agreement. The Report is composed of the following: • The ToR to be signed by the Project Partner and the Auditor, • The Report to be issued on the Auditor’s letterhead, dated, stamped and signed by the Auditor which includes the agreed-upon procedures (‘the Procedures’) to be performed by the Auditor, and the standard factual findings (‘the Findings’) to be confirmed by the Auditor. Subject of the engagement The subject of this engagement is the Final Report related to the Project Contract for the period covering 01.07.2023 to 31.12.2023. Responsibilities of the Parties to the Engagement The Project Partner accepts that the ability of the Auditor to perform the procedures required by this engagement effectively depends upon the Project Partner, providing full and free access to project staff, its accounting and bookkeeping system, underlying accounts and records, as well as any relevant information. The Project Partner: • must draw up the financial part of the Final Report for the expenditures incurred under the Project Contract in compliance with the obligations under the Project Contract. The financial part of the report must be drawn up according to the Project Partner’s accounting and book- keeping system and the underlying accounts and records, • must provide the financial part of the Final Report to the Auditor including all supporting documents in originals, Fund operated by:  • is responsible and liable for the accuracy of the financial part of the Final Report, • is responsible for the completeness and accuracy of the information provided to enable the Auditor to carry out the Procedures, • accepts that the Auditor cannot carry out the Procedures unless it is given full access to the project partner’s staff and accounting as well as any other relevant information, records and documentation. The Auditor is responsible for performing the agreed-upon procedures as specified in these ToR. "Auditor" refers to: • the audit firm1 or the person, contracted for performing this engagement and for submitting a report of factual findings to the Project Partner and meeting at least one of the following conditions - is a member of a national accounting or auditing body or institution which in turn is a member of the International Federation of Accountants (‘IFAC’); - is a member of a national accounting or auditing body or institution. Although this organisation is not member of the IFAC, the Auditor holds valid internationally recognised certification, and commits him/herself to undertake this engagement in accordance with the IFAC standards and ethics; - is registered as a statutory auditor in the public register of a public oversight body in an EU member state in accordance with the principles of public oversight set out in Directive 2006/43/EC of the European Parliament and of the Council (this applies to auditors and audit firms based in an EU member state); - is registered as a statutory auditor in the public register of a public oversight body in a third country and this register is subject to principles of public oversight as set out in the legislation of the country concerned (this applies to auditors and audit firms based in a third country). • a competent and independent public officer recognised by the relevant national authorities as having a budget and financial control capacity over the entity incurring the costs and who has not been involved in the preparation of the financial statements, certifying that expenditure declared in an Interim/Final Report has been incurred in accordance with the provisions of the Project Contract, national law and relevant national accounting principles. Standards and Ethics The Auditor shall undertake this engagement in accordance with: • the International Standard on Related Services (‘ISRS’) 4400 (Revised) Engagements to perform Agreed upon Procedures regarding Financial Information as promulgated by the IFAC (Estonia); • the IFAC Code of Ethics for Professional Accountants (developed and issued by IFAC's International Ethics Standards Board for Accountants) (Estonia), which establishes fundamental ethical principles for Auditors with regard to integrity, objectivity, independence, professional competence and due care, confidentiality, professional behaviour and technical standards. Although ISRS 4400 (Revised) provides that 1 The Leader of the engagement team, signing the Report must meet at least one of the above conditions. Fund operated by:  independence is not a requirement for agreed-upon procedures engagements, the FO requires that the Auditor is independent from the Project Partners and complies with the independence requirements of the IFAC Code of Ethics for Professional Accountants. Procedures, Evidence and Documentation The scope of verification covers 100% of expenditures declared under a Final Report covering period from 01.07.2023 to 31.12.2023. The Auditor should plan the work so that the procedures can be effectively performed. The Auditor performs the procedures listed in Annex 1 to the Report ("Listing of specific procedures to be performed"). The Auditor is not liable for the appropriateness of these procedures for the purpose of the engagement. The evidence to be used for performing the procedures is all the information — financial and not financial related but relevant to the project implementation — which makes it possible to examine the expenditure claimed by the Project Partner in the Final Report. The Auditor uses the evidence obtained from these procedures as the basis for the report of factual findings. The Auditor documents matters which are important in providing evidence to support the Report, and evidence that the work was carried out in accordance with ISRS 4400 (Revised) and these ToR. The report on this expenditure verification should describe the purpose, the agreed-upon procedures and the factual findings of the engagement in sufficient detail to enable the Project Partner and the FO to understand the nature and extent of the procedures performed by the Auditor and the factual findings reported by the Auditor. As this engagement is not an assurance engagement the Auditor does not provide an audit opinion and expresses no assurance. The FO assesses for itself the factual findings reported by the Auditor and draws its own conclusions from these factual findings. Reporting The Report must be written in English. The use of the model Report integral to this ToR is compulsory. The FO, the Financial Mechanism Office (‘FMO’), the EFTA Board of Auditors, as well as the Auditor General of Norway have the right to audit any work that is carried out under the action and for which costs are declared from Norway Grants Fund for Regional Cooperation budget. This includes work related to this engagement. Within the period up to 5 years starting from the date of the Final Payment, The Auditor must provide all necessary explanations and access to all working papers (e.g. recalculation of hourly rates, verification of the time declared for the action) related to this assignment if the FO, the FMO, the EFTA Board of Auditors, as well as the Auditor General of Norway request them. If the Auditor believes, based on the collected evidence that there is high probability of the fraud in the examined project, he/she must report this in writing directly to the FO. Timing The Report should be provided by 30.03.2024. Fee Fund operated by: The fee for this engagement shall be 875 EUR plus value added tax. The amount payable for the engagement shall be paid by the Project Partner within 7 calendar days after the date of submitting the invoice by the Auditor. The fee for the engagement shall be deemed as covering all the expenses incurred by the Auditor. According to the estimation of the Auditor, the engagement is expected to take 20 hours. Other Terms Parties’ Liability The Project Partner shall be liable for the violation of obligations provided for in the ToR, unless it is caused by unforeseeable circumstances or circumstances independent of the activities of the Parties (Force majeure). The Auditor shall be liable for the Project Partner for direct proprietary damage wrongfully caused by the professional activities of the certified auditor. The maximum liability limit is a tenfold Contract fee. The maximum limit is not applied upon damage caused by gross negligence or deliberate violation. The Auditor shall not bear any liability if it is not culpable of causing the damage, among other things, if the damage arises from misleading information presented during the audit by the Project Partner either orally or in writing or by the Project Partner’s failure to present information. Confidentiality Documentation prepared by the Auditor in connection with the engagement and/or documents prepared by the Project Partner and submitted to the Auditor as well as other materials and/or information presented to the Auditor during the engagement is deemed as being working papers (incl. electronic working papers) that belong to the Auditor. Working papers are confidential and the Auditor shall store them in accordance with the requirements established by the legislation of the Republic of Estonia and internal principles and regulations established in the Auditor. The working papers may be disclosed in the cases prescribed by legislation. The Project Partner may not disclose the documents of the Auditor prepared during the engagement and/or submit them to third parties without the prior written consent of the Auditor, except in cases prescribed by the legislation of the Republic of Estonia. The confidentiality requirement is not applied to information that is publicly available or to the mutual relations between the Auditor and the Project Partner the existence of which may be disclosed by the Auditor to clients, potential clients and other third parties. The Auditor is required to keep the confidentiality of information and documents obtained during the performance of the professional activities. The obligation to keep the professional secret specified in the foregoing sentence is not limited in time and is also effective after the Auditor terminates its professional activities. There is no obligation to keep confidentiality, if the Auditor has the Project Partner’s written permit to disclose the circumstances or if the Auditor is required to disclose the information and documents due to legislation. The Auditor shall retain all the copyrights and other intellectual property rights to anything created, developed or designed prior to or during the audit, including, but not limited to the systems, methods, software, know-how and working documentation. The Auditor shall retain all the copyrights and other intellectual property rights to the reports, written advice and other materials submitted by the Auditor to the Project Partner. Fund operated by: The Auditor is only required to use the information obtained by it within the framework of this ToR for the purpose of performing the engagement and may not disclose it to other parties. Money laundering and terrorist financing prevention The Auditor is required to establish the identity of the Project Partner and the existence of passive legal capacity, establish and verify the identity and right of representation of the members of the management board of the Project Partner and identify the beneficial owner. At the request of the Auditor, the Project Partner is required to submit the necessary document and provide information relevant for application of diligence measures arising from the Money Laundering and Terrorist Financing Prevention Act, incl. information about the transactions concluded and funds used by the Project Partner that must be in compliance with the nature and scope of the Project Partner’s economic activities as well as information about the change in beneficial owners. Expiry and termination of the ToR The Parties may only cancel the ToR with good reason. The Project Partner may initiate the cancellation of the agreement when Project Partner becomes aware of the information about the Auditor that could damage the reputation of the Project Partner. The Parties must immediately notify the Auditors Activities Oversight Board of the cancellation of the ToR through the information system of the Auditors Activities register, providing their explanations regarding the reasons for cancellation of the ToR. Cancelling the ToR, the Project Partner is immediately required to pay the Auditor for all the work agreed in the Contract performed prior to the cancellation. The foregoing sentence shall not be applied, if the cancellation of the Contract is caused due to the suspension or expiry of the activity licence of the Auditor. The ToR shall expire after the conforming performance of the Auditor. Settlement of disputes The Parties shall perform and interpret the ToR in accordance with the legislation effective in the Republic of Estonia. The disagreements, disputes and claims arising from the ToR that the Parties fail to solve by way of an agreement are settled in Harju County Court. For the Project Partner: For the Auditor: /signed digitally/ /signed digitally/ Sirli Sipp Kulli Kairi Luigelaht-Teder Director Member of management board Appendix: (model) Report of factual findings on expenditures declared under an Interim/Final Report. Fund operated by: