TERMS OF REFERENCE FOR AN EXPENDITURE VERIFICATION OF

A GRANT CONTRACT
- EXTERNAL ACTIONS OF THE EUROPEAN UNION -
HOW TO USE THIS TERMS OF REFERENCE MODEL? All text highlighted in yellow in this ToR odel !nd
its !nnex " !nd # is $o% inst%&'tion only !nd (ene$i'i!%ies o$ g%!nt 'ont%!'ts sho&ld %eo)e it !$te% &se*
The +!%ts o$ the ToR +%esented in ,--**. /e*g* ,n!e o$ the (ene$i'i!%y. &st (e 'o+leted (y the (ene$i'i!%y*
The following are the terms of reference (ToR) on which <n!e o$ the 0ene$i'i!%y> the
Beneficiary agrees to engage <n!e o$ the !&dit $i%> the Auditor to perform an expenditure
verification and to report in connection with a uropean !nion financed grant contract for external
actions concerning <title of the action and number of the grant contract> (the "rant #ontract)$
%here in these ToR the #ontracting Authority is mentioned this refers to the Austrian
&evelopment Agency (A&A)' represented (y the )mplementation !nit of the Austrian m(assy in
Belgrade for ! financed *ro+ects which has signed the "rant #ontract with the Beneficiary and is
providing the grant funding$ The #ontracting Authority is not a party to this agreement$
1. RESPONSIBILITIES OF THE PARTIES TO THE ENGAGEMENT
The Beneficiar! refers to the organisation that is receiving the grant funding and that has signed
the "rant #ontract with the #ontracting Authority$
The Beneficiary is responsi(le for providing a ,inancial Report for the action financed (y the
"rant #ontract which complies with the terms and conditions of the "rant #ontract and for
ensuring that this ,inancial Report can (e reconciled to the Beneficiarys accounting and
(oo--eeping system and to the underlying accounts and records$ The Beneficiary is responsi(le
for providing sufficient and ade.uate information' (oth financial and non/financial' in support
of the ,inancial Report$
The Beneficiary accepts that the a(ility of the Auditor to perform the procedures re.uired (y
this engagement effectively depends upon the Beneficiary' and as the case may (e his partners'
providing full and free access to the Beneficiarys staff and its accounting and (oo--eeping
system and underlying accounts and records$
The A"#i$%r is responsi(le for performing the agreed/upon procedures as specified in these
ToR' and for su(mitting a report of factual findings to the Beneficiary$ Auditor refers to the
audit firm contracted for this engagement and in particular to the partner or other person in the
audit firm who is responsi(le for the engagement and for the report that is issued on (ehalf of
the firm' and who has the appropriate authority from a professional' legal or regulatory (ody$
By agreeing these ToR the Auditor confirms that he0she meets at least one of the following
conditions1
The Auditor and0or the firm is a mem(er of a national accounting or auditing (ody or institution
which in turn is mem(er of the )nternational ,ederation of Accountants (),A#)$
The Auditor and0or the firm is a mem(er of a national accounting or auditing (ody or
institution$ Although this organisation is not mem(er of the ),A#' the Auditor commits
him0herself to underta-e this engagement in accordance with the ),A# standards and ethics set
out in these ToR$
The Auditor and0or the firm is registered as a statutory auditor in the pu(lic register of a pu(lic
oversight (ody in an ! mem(er state in accordance with the principles of pu(lic oversight set
out in &irective 23340560# of the uropean *arliament and of the #ouncil (this applies to
auditors and audit firms (ased in an ! mem(er state
7
)$
7
&irective 2334056 of the uropean *arliament and of the #ouncil of 758 9ay 2334 on statutory
audits of annual accounts and consolidated' amending #ouncil &irectives 8:04430# and
:6065;0# and repealing #ouncil &irective :502<6 #$
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The Auditor and0or the firm is registered as a statutory auditor in the pu(lic register of a pu(lic
oversight (ody in a third country and this register is su(+ect to principles of pu(lic oversight as
set out in the legislation of the country concerned (this applies to auditors and audit firms (ased
in a third country)$
'. SUB&ECT OF THE ENGAGEMENT
The su(+ect of this engagement is the <interim or final= delete what is not applica(le> ,inancial
Report in connection with the "rant #ontract for the period covering <dd 9onth yyyy to dd 9onth
yyyy> and the action entitled <title of the action>' the ?Action?$ Annex 7 to these ToR contains
information a(out the "rant #ontract$
). REASON FOR THE ENGAGEMENT
The Beneficiary is re.uired to su(mit to the #ontracting Authority an expenditure verification
report produced (y an external auditor in support of the payment re.uested (y the Beneficiary
under Article 7< of the "eneral #onditions of the "rant #ontract$ The Authorising @fficer of the
#ommission re.uires this report as he ma-es the payment of expenditure re.uested (y the
Beneficiary conditional on the factual findings of this report$
*. ENGAGEMENT T+PE AND OB&ECTIVE
This expenditure verification is an engagement to perform certain agreed/upon procedures with
regard to the ,inancial Report for the "rant #ontract$ The o(+ective of this expenditure
verification is for the Auditor to carry out the specific procedures listed in Annex 2A to these ToR
and to su(mit to the Beneficiary a report of factual findings with regard to the specific verification
procedures performed$ Aerification means that the Auditor examines the factual information in the
,inancial Report of the Beneficiary and compares it with the terms and conditions of the "rant
#ontract$ As this engagement is not an assurance engagement the Auditor does not provide an audit
opinion and expresses no assurance$ The #ontracting Authority assesses for itself the factual
findings reported (y the Auditor and draws its own conclusions from these factual findings$
,. STANDARDS AND ETHICS
The Auditor shall underta-e this engagement in accordance with1
B the )nternational Ctandard on Related Cervices ()CRC) 5533 ngagements to perform Agreed/
upon *rocedures regarding ,inancial )nformation as promulgated (y the ),A#=
B the ),A# #ode of thics for *rofessional Accountants (developed and issued (y ),A#?s
)nternational thics Ctandards Board for Accountants ()CBA)' which esta(lishes fundamental
ethical principles for Auditors with regard to integrity' o(+ectivity' independence' professional
competence and due care' confidentiality' professional (ehaviour and technical standards$
Although )CRC 5533 provides that independence is not a re.uirement for agreed/upon
procedures engagements' the #ontracting Authority re.uires that the Auditor is independent
from the Beneficiary and complies with the independence re.uirements of the ),A# #ode of
thics for *rofessional Accountants$
-. PROCEDURES. EVIDENCE AND DOCUMENTATION
The Auditor plans the wor- so that an effective expenditure verification can (e performed$ The
Auditor performs the procedures listed in Annex 2A of these ToR (Disting of specific procedures
to (e performed) and applies the guidelines in Annex 2B ("uidelines for specific procedures to (e
performed)$ The evidence to (e used for performing the procedures in Annex 2A is all financial and
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non/financial information which ma-es it possi(le to examine the expenditure claimed (y the
Beneficiary in the ,inancial Report$ The Auditor uses the evidence o(tained from these procedures
as the (asis for the report of factual findings$ The Auditor documents matters which are important
in providing evidence to support the report of factual findings' and evidence that the wor- was
carried out in accordance with )CRC 5533 and these ToR$
/. REPORTING
The report on this expenditure verification should descri(e the purpose' the agreed/upon
procedures and the factual findings of the engagement in sufficient detail in order to ena(le the
Beneficiary and the #ontracting Authority to understand the nature and extent of the procedures
performed (y the Auditor and the factual findings reported (y the Auditor$
The use of the 9odel Report for an xpenditure Aerification of an ! "rant #ontract in Annex 6
of these ToR is compulsory$ This report should (e provided (y the Auditor to <name of the
Beneficiary> within <xx= num(er of wor-ing days to (e indicated (y the Beneficiary> wor-ing
days after the day of signature of these ToR$
0. OTHER TERMS
The fee for this engagement shall (e <fee amount and currency> <The Beneficiary may want to
agree a fixed fee for the engagement or otherwise$ The Beneficiary and the Auditor may want to
agree specific terms if the Auditor needs to extend verification coverage from 4<E to :<E$ The
Beneficiary should specify any reim(ursa(le expenses and allowances (e$g$ travelling' other)
agreed with the Auditor and whether AAT and0or other relevant taxes are included in the
fees0expenses$>
FThe Beneficiary and the Auditor can use this section to agree any other specific termsG
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Anne1 1 )nformation a(out the "rant #ontract
Anne1 'A Disting of specific procedures to (e performed
Anne1 'B "uidelines for specific procedures to (e performed
Anne1 ) 9odel report for an expenditure verification of an ! grant contract
F%r $2e Beneficiar3 F%r $2e A"#i$%r3
Cignature Cignature
<name and capacity> <name and capacity>
<date> <date>

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Anne1 1 Inf%r4a$i%n a5%"$ $2e Gran$ C%n$rac$
[Annex to be completed by the Beneficiary]
Inf%r4a$i%n a5%"$ $2e Gran$ C%n$rac$
Reference num(er and date of the "rant
#ontract
< #ontracting Authoritys reference of the
"rant #ontract>
"rant contract title
#ountry
Beneficiary < full name and address of the Beneficiary
as per the "rant #ontract>
Budget line #ontract < #ontracting Authority reference of the
(udget line and #ommission reference
where the #ontracting Authority is not the
#ommission >
Degal (asis for the #ontract
Ctart date of the Action
nd date of the Action
Total cost of the Action <amount in Art$ 6$7 of the Cpecial
#onditions of the "rant #ontract>
"rant maximum amount <amount in Art$ 6$2 of the Cpecial
#onditions of the "rant #ontract>
Total amount received to date (y the
Beneficiary from #ontracting Authority
< Total amount received as per
dd$mm$yyyy>
Total amount of the payment re.uest < provide the total amount re.uested for
payment as per Annex A of the "eneral
#onditions for "rant #ontracts (Re.uest
for payment for a grant contract uropean
!nion external actions) >
#ontracting Authority <*rovide the name' position0title' phone
and /mail of the contact person at the
#ontracting Authority$ To (e completed
only if the #ontracting Authority is not the
#ommission$>
uropean #ommission < provide the name' position0title' phone
and /mail of the contact person in the
&elegation of the uropean !nion in the
country concerned' or if applica(le at
Head.uarters>
Auditor < Iame and address of the audit firm and
names0positions of the auditors>
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Anne1 'A Li6$in7 %f S8ecific Pr%ce#"re6 $% 5e 8erf%r4e#
[This Annex is a standard listing of specific procedures to be performed and it shall not be modified]
1. GENERAL PROCEDURES
1.1. Ter46 an# C%n#i$i%n6 %f $2e Gran$ C%n$rac$
The Auditor o(tains an understanding of the terms and conditions of the "rant #ontract (y
reviewing the "rant #ontract and its annexes and other relevant information' and (y in.uiry of the
Beneficiary$ The Auditor o(tains a copy of the original "rant #ontract (signed (y the Beneficiary
and the #ontracting Authority) with its annexes$ The Auditor o(tains and reviews the Report
(which includes a narrative and a financial section) as per Article 2$7 of the "eneral
#onditions$
1.'. Financia9 Re8%r$ f%r $2e Gran$ C%n$rac$
B The Auditor verifies that the ,inancial Report complies with the following conditions of Article
2 of the "eneral #onditions the "rant #ontract1
B The ,inancial Report must conform to the model in Annex A) of the "rant #ontract=
B The ,inancial Report should cover the Action as a whole' regardless of which part of it is
financed (y the #ontracting Authority=
B The ,inancial Report should (e drawn up in the language of the "rant #ontract=
B The proof of the transfers of ownership of e.uipment' vehicles and supplies (Article 8$6 of the
"eneral #onditions of the "rant #ontract) should (e annexed to the final ,inancial Report$
1.). R"9e6 f%r Acc%"n$in7 an# Rec%r# :ee8in7
B The Auditor examines B when performing the procedures listed in this Annex / whether the
Beneficiary has complied with the following rules for accounting and record -eeping of Article
74 of the "eneral #onditions the "rant #ontract1
B The accounts -ept (y the Beneficiary for the implementation of the Action must (e accurate and
up/to/date=
B The Beneficiary must have a dou(le/entry (oo-/-eeping system=
B The accounts and expenditure relating to the Action must (e easily identifia(le and verifia(le=
B The accounts must provide details of interest accrued on funds paid (y the #ontracting
Authority$
1.*. Rec%nci9in7 $2e Financia9 Re8%r$ $% $2e Beneficiar;6 Acc%"n$in7 S6$e4
an# Rec%r#6
The Auditor reconciles the information in the ,inancial Report to the Beneficiarys accounting
system and records (e$g$ trial (alance' general ledger accounts' su( ledgers etc$) (Cee Article 74$7)$
1.,. E1c2an7e Ra$e6
The Auditor verifies that amounts of expenditure incurred in a currency other than the uro have
(een converted at the exchange rate which is made up of the average of the rates pu(lished in
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)nforuro for the months covered (y the ,inancial Report' unless otherwise provided in the Cpecial
#onditions of the "rant #ontract (Article 7<$: of the "eneral #onditions)
'. PROCEDURES TO VERIF+ CONFORMIT+ OF EXPENDITURE <ITH THE BUDGET
AND ANAL+TICAL REVIE<
'.1. B"#7e$ %f $2e Gran$ C%n$rac$
The Auditor carries out an analytical review of the expenditure headings in the ,inancial Report$
The Auditor verifies that the (udget in the ,inancial Report corresponds with the (udget of the
"rant #ontract (authenticity and authorisation of the initial (udget) and that the expenditure
incurred was indicated in the (udget of the "rant #ontract$
'.'. A4en#4en$6 $% $2e B"#7e$ %f $2e Gran$ C%n$rac$
The Auditor verifies whether there have (een amendments to the (udget of the "rant #ontract$
%here this is the case the Auditor verifies that the Beneficiary has1
B re.uested an amendment to (udget and o(tained an addendum to the "rant #ontract if such an
addendum was re.uired (Article ;$7 of the "eneral #onditions)$
B informed the #ontracting Authority a(out the amendment in case the amendment was limited
(Article ;$2 of the "eneral #onditions) and an addendum to the "rant #ontract was not
re.uired$
). PROCEDURES TO VERIF+ SELECTED EXPENDITURE
).1. E9i7i5i9i$ %f C%6$6
The Auditor verifies' for each expenditure item selected' the eligi(ility criteria set out (elow$
(1) Costs actually incurred (Article 1!1)
The Auditor verifies that the expenditure for a selected item was actually incurred (y and pertains
to the Beneficiary$ ,or this purpose the Auditor examines supporting documents (e$g$ invoices'
contracts) and proof of payment$ The Auditor also examines proof of wor- done' goods received or
services rendered and he0she verifies the existence of assets if applica(le$
(") Cut#off # $mplementation period (Article 1!1a)
The Auditor verifies that the expenditure for a selected item was incurred during the
implementation period of the Action$
(%) Budget (Article 1!1b)
The Auditor verifies that the expenditure for a selected item was indicated in the Action
(udget$
() &ecessary (Article 1!1c)
The Auditor verifies whether it is plausi(le that the expenditure for a selected item was necessary
for the implementation of the Action and that it had to (e incurred for the contracted activities of
the Action (y examining the nature of the expenditure with supporting documents$
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(') (ecords (Article 1!1d)
The Auditor verifies that expenditure for a selected item is recorded in the Beneficiary?s accounting
system and was recorded in accordance with the applica(le accounting standards of the country
where the Beneficiary is esta(lished and the Beneficiary?s usual cost accounting practices$
()) *ustified (Article 1!1e)
The Auditor verifies that expenditure for a selected item is su(stantiated (y evidence (see section 7
of Annex 2B' "uidelines for Cpecific *rocedures to (e performed) and nota(ly the supporting
documents as specified in Article 74$2 and 74$6 of the "eneral #onditions of the "rant #ontract$
(+) ,aluation
The Auditor verifies that the monetary value of a selected expenditure item agrees with underlying
documents (e$g$ invoices' salary statements) and that correct exchange rates are used where
applica(le$
(-) Classification
The Auditor examines the nature of the expenditure for a selected item and verifies that the
expenditure item has (een classified under the correct (su()heading of the ,inancial Report$
(.) Compliance /ith 0rocurement1 &ationality and 2rigin (ules
%here applica(le the Auditor examines which procurement' nationality and origin rules apply for a
certain expenditure (su()heading' a class of expenditure items or an expenditure item$ The Auditor
verifies whether the expenditure was incurred in accordance with such rules (y examining the
underlying documents of the procurement and purchase process$ %here the Auditor finds issues of
non/compliance with procurement rules' he0she reports the nature of such events as well as their
financial impact in terms of ineligi(le expenditure$ %hen examining procurement documentation
the Auditor ta-es into account the ris- indicators listed in Annex 2B and he0she reports' if
applica(le' which of these indicators were found$
).'. E9i7i5i9i$ %f Direc$ C%6$6 =Ar$ic9e 1*.'>
)f the expenditure for a selected item is recorded under one of the direct costs headings 7 to 4 of the
,inancial Report' the Auditor verifies that this type of expenditure is covered (y the direct costs as
defined in Article 75$2 (y examining the nature of the expenditure items concerned$
).). Pr%?i6i%n f%r C%n$in7enc Re6er?e =Ar$ic9e 1*.)>
The Auditor verifies that the provision for contingency reserve (heading : ,inancial Report) does
not exceed <E of the direct eligi(le costs of the Action and that the Beneficiary has o(tained prior
written authorisation of the #ontracting Authority for the use of this contingency reserve$
).*. A#4ini6$ra$i?e c%6$6 =Ar$ic9e 1*.*>
The Auditor verifies that the indirect costs to cover the administrative overheads (heading 73
,inancial Report) do not exceed 8E of the total amount of eligi(le direct costs of the Action$
).,. C%n$ri5"$i%n6 in :in# =Ar$ic9e 1*.,>
The Auditor verifies that costs in the ,inancial Report do not include contri(utions in -ind$
#ontri(utions in -ind are not eligi(le costs$
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).-. Ine9i7i59e c%6$6 =Ar$ic9e 1*.->
The Auditor verifies that the expenditure for a selected item does not concern an ineligi(le cost as
descri(ed in Article 75$4 of the "eneral #onditions$ The Auditor verifies whether expenditure
includes certain taxes' including AAT$ )f this is the case the Auditor verifies that the Beneficiary
(or' where applica(le the partners) cannot reclaim these taxes through an exemption system and0or
a refund a posteriori$ )f this is the case' taxes can (e considered as eligi(le costs' provided that the
(asic act which finances the !/contri(ution does not exclude payment of taxes$
)./. Acce8$e# c%6$6
%here the (asic act which finances the !/contri(ution excludes taxes as eligi(le costs' these
taxes may nevertheless (e ta-en into consideration as co/financing (y the grant (eneficiary$ The
Auditor verifies that the (eneficiary (or' where applica(le' the partners) cannot reclaim these taxes
through an exemption system and0or a refund a posteriori$
).0. Re?en"e6 %f $2e Ac$i%n
The Auditor examines whether revenues which should (e attri(uted to the Action (including inter
alia grants and funding received from other donors and other revenue generated (y the Beneficiary
in the context of the Action such as for example interest earned) have (een allocated to the Action
and disclosed in the ,inancial Report$ ,or this purpose the Auditor in.uires with the Beneficiary
and examines documentation o(tained from the Beneficiary$ The Auditor is not expected to
examine the completeness of the revenues reported$
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Anne1 'B G"i#e9ine6 f%r S8ecific Pr%ce#"re6 $% 5e 8erf%r4e#
[This Annex pro3ides standard guidelines for the specific procedures to be performed and these
guidelines shall not be modified]
1. VERIFICATION EVIDENCE
%hen performing the specific procedures listed in Annex 2A the Auditor may apply techni.ues
such as in.uiry and analysis' (re)computation' comparison' other clerical accuracy chec-s'
o(servation' inspection of records and documents' inspection of assets and o(taining
confirmations$
The Auditor o(tains verification evidence from these procedures to draw up his report of factual
findings$ Aerification evidence is all information used (y the Auditor in arriving at the factual
findings and it includes the information contained in the accounting records underlying the
,inancial Report and other information (financial and non/financial)$
The contractual re.uirements that relate to verification evidence are1
xpenditure should (e identifia(le' verifia(le and recorded in the accounting records of the
Beneficiary (Article 75$7$d) of the "eneral #onditions of the "rant #ontract)=
xpenditure must (e easily identifia(le and verifia(le and traced to and within the Beneficiarys
accounting and (oo--eeping systems (Article 74$7 of the "eneral #onditions)=
The Beneficiary will allow any external auditor to carry out verifications on the (asis of
supporting documents for the accounts' accounting documents and any other document relevant
to the financing of the Action$ The Beneficiary gives access to all documents and data(ases
concerning the technical and financial management of the Action (Article 74$2 of the "eneral
#onditions)=
Article 74$6 of the "eneral #onditions of the "rant #ontract provides a list of the types and
nature of evidence that the Auditor will often find in expenditure verifications$
9oreover' for the purpose of the procedures listed in Annex 2A' evidence1
9ust (e availa(le in documentary form' whether paper' electronic or other medium (e$g$ a
written record of a meeting is more relia(le than an oral presentation of the matters discussed)=
9ust (e availa(le in the form of original documents rather than photocopies or facsimiles=
Chould prefera(ly (e o(tained from independent sources outside the entity (an original suppliers
invoice or contract is more relia(le than an internally approved receipt note)=
%hich is generated internally is more relia(le if it has (een su(+ect to control and approval=
@(tained directly (y the Auditor (e$g$ inspection of assets) is more relia(le than evidence
o(tained indirectly (e$g$ in.uiry a(out the asset)$
)f the Auditor finds that the a(ove criteria for evidence are not sufficiently met' he0she should detail
this in the factual findings$
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'. OBTAINING AN UNDERSTANDING OF THE TERMS AND CONDITIONS OF THE
GRANT CONTRACT =ANNEX 'A - PROCEDURE 1.1>
The Auditor o(tains an understanding of the terms and conditions of the "rant #ontract and he0she
should pay particular attention to Annex ) of the "rant #ontract' which contains the &escription of
the Action' Annex )) ("eneral #onditions) and Annex )A' which provides rules for procurement
(including nationality and origin rules) (y grant (eneficiaries in the context of ! external actions$
,ailure to comply with these rules ma-es expenditure ineligi(le for ! financing$ These
procurement rules apply to all grant contracts (ut depending on the legal (asis for the "rant
#ontract (e$g$ TA#)C' ADA' ,ood Aid and &evelopment #o/operation )nstrument) nationality and
origin rules may vary$ The Auditor ensures with the Beneficiary that the applica(le nationality and
origin rules are identified and understood$ Applica(le rules of nationality and origin are set out' for
each legal (asis' in Annex A2 to the *ractical "uide
2
to contract procedures for external actions of
the uropean #ommunities$
)f the Auditor finds that the terms and conditions to (e verified are not sufficiently clear he should
re.uest clarification from the Beneficiary$
). SELECTING EXPENDITURE FOR VERIFICATION =ANNEX 'A - PROCEDURES ).1 @
)./>
The expenditure claimed (y the Beneficiary in the ,inancial Report is presented under the
following expenditure headings1 7 Human Resources' 2 Travel' 6 .uipment and Cupplies' 5 Docal
office' < @ther costs' services' 4 @ther' : *rovision for contingency reserve and 73 Administrative
costs$ xpenditure headings 7 to 4 represent direct costs of the Action$ xpenditure headings can
(e (ro-en down into expenditure su(headings such as for example 7$7 Calaries$
xpenditure su(headings can (e (ro-en down into individual expenditure items or classes of
expenditure items with the same or similar characteristics$ The form and nature of the supporting
evidence (e$g$ a payment' a contract' an invoice etc) and the way expenditure is recorded (i$e$
+ournal entries) vary with the type and nature of the expenditure and the underlying actions or
transactions$ However' in all cases expenditure items should reflect the accounting (or financial)
value of underlying actions or transactions no matter the type and nature of the action or
transaction concerned$
Aalue should (e the principal factor used (y the Auditor to select expenditure items or classes of
expenditure items for verification$ The Auditor selects high value expenditure items to ensure an
appropriate coverage of expenditure$
*. VERIFICATION COVERAGE OF EXPENDITURE =ANNEX 'A - PROCEDURES ).1 @
)./>
The Auditor applies the principles and criteria set out (elow when planning and performing the
specific verification procedures for selected expenditure in Annex 2A (procedures 6$7 B 6$8)$
Aerification (y the Auditor and verification coverage of expenditure items does not necessarily
mean a complete and exhaustive verification of all the expenditure items that are included in a
specific expenditure heading or su(heading$ The Auditor should ensure a systematic and
representative verification$ &epending on certain conditions (see further (elow) the Auditor may
o(tain sufficient verification results for an expenditure heading or su(heading (y loo-ing at a
limited num(er of selected expenditure items$
2
*ractical "uide (applica(le for Budget and &,) and annexes for Budget and &, see1
http100ec$europa$eu0europeaid0wor-0procedures0implementation0practicalJguide0indexJen$htm
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The Auditor may apply statistical sampling techni.ues for the verification of one or more
expenditure headings or su(headings of the ,inancial Report$ The Auditor examines whether
populations (i$e$ expenditure su(headings or classes of expenditure items within expenditure
su(headings) are suita(le and sufficiently large (i$e$ are made up of large num(ers of items) for
effective statistical sampling$
)f applica(le the Auditor should explain in the report of factual findings for which headings or
su(headings of the ,inancial Report sampling has (een applied' the method used' the results
o(tained and whether the sample is representative$
The xpenditure #overage Ratio (#R) represents the total amount of expenditure verified (y
the Auditor expressed as a percentage of the total amount of expenditure reported (y the
Beneficiary in the ,inancial Report and claimed (y the Beneficiary for deduction from the total
sum of pre/financing under the "rant #ontract$ This amount is reported in Annex A of the "rant
#ontract$
The Auditor ensures that the overall #R is at least -,A$ )f he finds an exception rate of less than
73E of the total amount of expenditure verified (i$e$ 4'< E) the Auditor finalises the verification
procedures and continues with reporting$
)f the exception rate found is higher than 73E the Auditor extends verification procedures until the
#R is at least 0,A. The Auditor then finalises verification procedures and continues with
reporting regardless of the total exception rate found$ The Auditor ensures that the ECR f%r eac2
e18en#i$"re 2ea#in7 an# 6"52ea#in7 in the ,inancial Report is at least 1(A$
,. PROCEDURES TO VERIF+ SELECTED EXPENDITURE =ANNEX 'A - PROCEDURES
).1 @ )./>
The Auditor verifies the selected expenditure items (y carrying out procedures 6$7 / 6$8 listed in
Annex 2A and reports all the factual findings and exceptions resulting from these procedures$
Aerification exceptions are all verification deviations found when performing the procedures set out
in Annex 2A$
The Auditor .uantifies the amount of the verification exception found and the potential impact on
the ! 0 Austrian contri(ution' should the #ommission declare the expenditure item(s) concerned
ineligi(le (where applica(le ta-ing into account the percentage of funding of the #ommission and
the impact on indirect expenditure (e$g$ administrative costs))$ The Auditor reports all exceptions
found including the ones of which he cannot .uantify the amount of the verification exception
found and the potential impact on the ! 0 Austrian contri(ution$
,or example1 if the Auditor finds an exception of 7$333K with regard to procurement rules for a
grant contract where the ! finances 43E of the expenditure and where administrative costs of
8E of total direct eligi(le expenses are foreseen' the Auditor reports an exception of 7$333K and a
financial impact of 452K (7$333K x 43E x 7$38)$
4pecific guidance for procedure %!1!. Compliance /ith 0rocurement1 &ationality and 2rigin
(ules
&an"ar '(1' *age 72 of 22
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The Auditor should verify whether the expenditure for a selected item was incurred in accordance
with the applica(le procurement' nationality and origin rules (y examining the underlying
documents of the procurement and purchase process$ Cuch documents relate to the opening of
tenders' the assessment of the eligi(ility of tenderers and conformity of tenders' the evaluation of
the offers and the decisions with regard to the awarding of the contract$ %hen examining these
procurement documents the Auditor ta-es into account the ris- indicators listed at the end of this
Annex and he reports' if applica(le' which of these indicators were identified$
4pecific guidance for procedure %!' Contributions in 5ind
The Auditor should verify that expenditure in the ,inancial Report does not include any
contri(utions in -ind$ )f contri(utions in -ind are foreseen they must (e indicated and valued in the
Action (udget$ )f this is not the case contri(utions in -ind are not eligi(le$ xamples1 salaries of
staff detached (y a 9inistry which is not part of the action or e.uipment and material received
from organisations which do not participate in the Action$

&an"ar '(1' *age 76 of 22
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RISB INDICATORS PROCUREMENT
)nconsistencies in the dates of the documents or illogical se.uence of dates$ xamples1
B @ffer dated after the award of contract or (efore the sending of the invitations to tender
B @ffer of the winning tenderer dated (efore the pu(lication date of the tender or dated
significantly later than offers of other tenderers
B @ffers of different candidates participating in the same tenders all having the same date
B &ates on documents not plausi(le0consistent with dates on accompanying documentation (e$g$
date on the offer not plausi(le0consistent with the postal date on the envelope= date of a fax not
plausi(le0consistent with the printed date of the fax machine)
!nusual similarities in offers of candidates participating in the same tender$ xamples1
B Came wording' sentences and terminology in offers of different tenderers
B Came layout and format (e$g$ font type' font siLe' margin siLes' indents' paragraph wrapping'
etc) in offers of different tenderers
B Cimilar letterhead paper or logos
B Came prices used in offers of different tenderers for a num(er of su(components or line items
B )dentical grammatical' orthographical or typing errors in offers of different tenderers
B !se of similar stamps and similarities in signatures
,inancial statement or other information indicating that two tenderers participating in the same
tender are related or part of a same group (e$g$ where financial statements are provided' the
notes to the financial statements may disclose ultimate ownership of the group$ @wnership
information may also (e found in pu(lic registers for accounts)
)nconsistencies in the selection and award decision process$ xamples1
B Award decisions not plausi(le 0 consistent with selection and award criteria
B rrors in the application of the selection and award criteria
B A regular supplier of the (eneficiary participates as a mem(er of a tender evaluation committee
@ther elements and examples indicating a ris- of privileged relationship with tenderers1
B A same tenderer (or small group of tenderers) is invited to different tenders with unusual
fre.uency
B A same tenderer (or small group of tenderers) wins an unusually high proportion of the (ids
B A tenderer is fre.uently awarded contracts for different types of goods or services
B The winning tenderer invoices additional goods not foreseen in the offer (e$g$ additional spare
parts invoiced without clear +ustification' installation costs invoiced while not foreseen in the
offer)$
@ther documentation' issues and examples indicating a ris- of irregularities1
&an"ar '(1' *age 75 of 22
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B !se of photocopies instead of original documents
B !se of pro/forma invoices as supporting documents instead of official invoices
B 9anual changes on original documents (e$g$ figures manually changed' figures MtippexedM' etc)
B !se of non/official documents (e$g$ letterhead paper not showing certain official and0or
compulsory information such as commercial registry num(er' company tax num(er' etc$)
&an"ar '(1' *age 7< of 22
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Anne1 ) 3 M%#e9 Re8%r$ f%r an E18en#i$"re Verifica$i%n %f an EU Gran$ C%n$rac$
H@% T@ !C TH)C 9@&D R*@RTN All text highlighted in yellow in this model report is for
instruction only and auditors should remove it after use$ )nformation re.uested in the following
form <OO$$> (e$g$ <name of the (eneficiary> must (e completed (y the auditor$
<To (e printed on A!&)T@R?C letterhead>
Re8%r$ f%r an E18en#i$"re Verifica$i%n %f a Gran$ C%n$rac$
E1$erna9 Ac$i%n6 %f $2e E"r%8ean Uni%n
CTi$9e %f an# n"45er %f $2e 7ran$ c%n$rac$ D
TABD @, #@ITITC
REPORT OF FACTUAL FINDINGSEEEEEEEEEEEEEEEEEEEEEE1)
1. INFORMATION ABOUT THE GRANT CONTRACT E.EEEEEEEEEEEE1F
'. PROCEDURES PERFORMED AND FACTUAL FINDINGS E.EEEEE.EEEE'(
). PROCEDURES TO VERIF+ SELECTED EXPENDITURE.. E.EEEEEEEEE'(
&an"ar '(1' *age 74 of 22
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Re8%r$ %f Fac$"a9 Fin#in76
6&ame of contact person(s)>1 6 0osition>
, 0ene$i'i!%y1s n!e.
6Address>
<dd 9onth yyyy>
&ear 6&ame of contact person(s)>
)n accordance with the terms of reference dated 6dd 7onth yyyy> that you agreed with us' we
provide our Report of ,actual ,indings (Pthe ReportQ)' with respect to the accompanying ,inancial
Report for the period covering 6dd 7onth yyyy # dd 7onth yyyy> (Annex 7 of this Report)$ Rou
re.uested certain procedures to (e carried out in connection with your ,inancial Report and the
uropean !nion 0 Austrian financed "rant #ontract concerning 6title and number of the
contract>' the "rant #ontract$
O5Gec$i?e
@ur engagement was an expenditure verification which is an engagement to perform certain
agreed/upon procedures with regard to the ,inancial Report for the "rant #ontract (etween you
and the Austrian &evelopment Agency (A&A)' represented (y the )mplementation !nit of the
Austrian m(assy in Belgrade for ! financed *ro+ects1 the #ontracting Authority$ The o(+ective
of this expenditure verification is for us to carry out certain procedures to which we have agreed
and to su(mit to you a report of factual findings with regard to the procedures performed$
S$an#ar#6 an# E$2ic6
@ur engagement was underta-en in accordance with1
B )nternational Ctandard on Related Cervices ()CRC) 5533 8ngagements to perform Agreed#
upon 0rocedures regarding 9inancial $nformation as promulgated (y the )nternational
,ederation of Accountants (),A#)=
B the Code of 8thics for 0rofessional Accountants issued (y the ),A#$ Although )CRC 5533
provides that independence is not a re.uirement for agreed/upon procedures engagements' the
#ontracting Authority re.uires that the auditor also complies with the independence
re.uirements of the Code of 8thics for 0rofessional Accountants=
Pr%ce#"re6 8erf%r4e#
As re.uested' we have only performed the procedures listed in Annex 2A of the terms of reference
for this engagement (see Annex 2 of this Report)$
These procedures have (een determined solely (y the #ontracting Authority and the procedures
were performed solely to assist the #ontracting Authority in evaluating whether the expenditure
claimed (y you in the accompanying ,inancial Report is eligi(le in accordance with the terms and
conditions of the "rant #ontract$
Because the procedures performed (y us did not constitute either an audit or a review made in
accordance with )nternational Ctandards on Auditing or )nternational Ctandards on Review
ngagements' we do not express any assurance on the accompanying ,inancial Report$
Had we performed additional procedures or had we performed an audit or review of the financial
statements of the Beneficiary in accordance with )nternational Ctandards on Auditing' other
matters might have come to our attention that would have (een reported to you$
&an"ar '(1' *age 78 of 22
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S%"rce6 %f Inf%r4a$i%n
The Report sets out information provided to us (y you in response to specific .uestions or as
o(tained and extracted from your accounts and records
Fac$"a9 Fin#in76
The total expenditure which is the su(+ect of this expenditure verification amounts to <xxxxxx> K$
The xpenditure #overage Ratio is <xx E>$ This ratio represents the total amount of expenditure
verified (y us expressed as a percentage of the total expenditure which has (een su(+ect of this
expenditure verification$ The latter amount is e.ual to the total amount of expenditure reported (y
you in the ,inancial Report and claimed (y you for deduction from the total sum of pre/financing
under the "rant #ontract as per your Re.uest for *ayment of <dd 9onth yyyy>$
%e report the details of our factual findings which result from the procedures that we performed in
#hapter 2 of this Report$
U6e %f $2i6 Re8%r$
This Report is solely for the purpose set forth a(ove under o(+ective$
This report is prepared solely for your own confidential use and solely for the purpose of
su(mission (y you to the #ontracting Authority in connection with the re.uirements as set out in
Article 7< of the "eneral #onditions of the "rant #ontract$ This report may not (e relied upon (y
you for any other purpose' nor may it (e distri(uted to any other parties$
The #ontracting Authority is not a party to the agreement (the terms of reference) (etween you and
us and therefore we do not owe or assume a duty of care to the #ontracting Authority who may
rely upon this expenditure verification report at its own ris- and discretion$ The #ontracting
Authority can assess for itself the procedures and findings reported (y us and draw its own
conclusions from the factual findings reported (y us$
The #ontracting Authority may only disclose this Report to others who have regulatory rights of
access to it in particular the uropean #ommission1 the uropean Anti ,raud @ffice and the
uropean #ourt of Auditors$
This Report relates only to the ,inancial Report specified a(ove and does not extend to any of your
financial statements$
%e loo- forward to discussing our Report with you and would (e pleased to provide any further
information or assistance which may (e re.uired$
Rours sincerely'
A"#i$%r6! 6i7na$"re [person or firm or both1 as appropriate and in accordance /ith firm
policies]
Na4e %f A"#i$%r 6i7nin7 [person or firm or both1 as appropriate]
A"#i$%r6! a##re66 [office ha3ing responsibility for the engagement]
Da$e %f 6i7na$"re Cdd Month yyyyD Fdate of when the final report is effectively signedG
&an"ar '(1' *age 7: of 22
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&an"ar '(1' *age 7; of 22
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Inf%r4a$i%n a5%"$ $2e Gran$ C%n$rac$
[Chapter 1 should include a brief description of the :rant Contract and the Action1 the
Beneficiary; implementing structure and 5ey financial;budget information! (maximum 1 page)]
Pr%ce#"re6 8erf%r4e# an# Fac$"a9 Fin#in76
%e have performed the specific procedures listed in Annex 2A of the terms of reference for the
expenditure verification of the "rant #ontract (?ToR?)$ These procedures are1
7$ "eneral *rocedures
2$ *rocedures to verify conformity of xpenditure with the Budget and Analytical Review
6$ *rocedures to verify selected xpenditure
%e have applied the rules for selection of expenditure and the principles and criteria for
verification coverage as set out in Annex 2B (sections 6 and 5) of the ToR for this expenditure
verification$
[8xplain here difficulties or problems encountered if any]
The total expenditure verified (y us amounts to <xxxx> K and is summarised in the ta(le (elow$
The overall xpenditure #overage Ratio is <xxE>$
[0ro3ide here a summary table of the 9inancial (eport in Annex 11 presenting for each (sub)
heading the total expenditure amount reported by the Beneficiary1 the total expenditure amount
3erified and the percentage of expenditure co3ered]
%e have verified the selected expenditure as shown in the a(ove summary ta(le and we have
carried out' for each expenditure item selected' the verification procedures specified at point 6$7 to
6$8 of Annex 2A of the ToR for this expenditure verification$ %e report our factual findings
resulting from these procedures (elow$
1. GENERAL PROCEDURES
1.1. Ter46 an# C%n#i$i%n6 %f $2e Gran$ C%n$rac$
%e have o(tained an understanding of the terms and conditions of this "rant #ontract in
accordance with the guidelines in Annex 2B (section 2) of the ToR$
[<escribe factual findings and specify errors and exceptions* 2%o'ed&%es "*" 3 "*4 in Annex #A*
I$ the%e !%e no $!'t&!l $indings this sho&ld (e ex+li'itly st!ted !s $ollows $o% e!'h +%o'ed&%e5
=&o factual findings ha3e arisen from this procedure=!]
&an"ar '(1' *age 23 of 22
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1.'. Financia9 Re8%r$ f%r $2e Gran$ C%n$rac$
1.). R"9e6 f%r Acc%"n$in7 an# Rec%r# :ee8in7
1.*. Rec%nci9in7 $2e Financia9 Re8%r$ $% $2e Beneficiar;6 Acc%"n$in7 S6$e4
an# Rec%r#6
1.,. E1c2an7e Ra$e6
'. PROCEDURES TO VERIF+ CONFORMIT+ OF EXPENDITURE <ITH THE BUDGET
AND ANAL+TICAL REVIE<
'.1. B"#7e$ %f $2e Gran$ C%n$rac$
'.'. A4en#4en$6 $% $2e B"#7e$ %f $2e Gran$ C%n$rac$
[<escribe factual findings and specify errors and exceptions* 2%o'ed&%es #*" 6 #*# in Annex #A*
I$ the%e !%e no $!'t&!l $indings this sho&ld (e ex+li'itly st!ted !s $ollows $o% e!'h +%o'ed&%e5
=&o factual findings ha3e arisen from this procedure=!]
). PROCEDURES TO VERIF+ SELECTED EXPENDITURE
%e have reported further (elow all the exceptions resulting from the verification procedures
specified at point 6$7 B to 6$8 of Annex 2A of the ToR for this expenditure verification insofar
these procedures did apply to the selected expenditure item$
%e have .uantified the amount of the verification exceptions found and the potential impact on the
! 0 Austrian contri(ution' should the #ommission declare the expenditure item(s) concerned
ineligi(le (where applica(le ta-ing into account the percentage of funding of the #ommission and
the impact on indirect expenditure (e$g$ administrative costs))$ %e have reported all exceptions
found including the ones of which we cannot .uantify the amount of the verification exception
found and the potential impact on the ! 0 Austrian contri(ution$
[4pecify for /hich expenditure amounts ; items exceptions bet/een facts and criteria /ere found1
the nature of the exception > this means /hich of the specific condition or conditions described
at point %!1 to %!+ of Annex "A of the To( /ere not respected! ?uantify the amount of
3erification exceptions found and the potential impact on the 8@ ; Austrian contribution1 should
the Commission declare the expenditure item(s) concerned ineligible]
).1. E9i7i5i9i$ %f C%6$6
%e have verified' for each expenditure item selected' the eligi(ility criteria set out at procedure 6$7
in Annex 2A of the ToR for this expenditure verification$
[<escribe factual findings and specify errors and exceptions! 2%o'ed&%e 7*" in Annex #AA
eligibility of costs and the eligibility criteria (1) to (.)! Ex!+leA /e found that an expenditure
amount of )!'BB C included in subheading %!" (furniture1 computer eDuipment) of the 9inancial
(eport /as not eligible! An amount of "!BBBC related to expenditure incurred outside the
implementation period! 4upporting e3idence /as not a3ailable for % transactions totalling
1!"BBC! The reDuired procurement rules for purchases of office computers for %!%BBC /ere
not respected! (&oteA rele3ant details such as accounting record references or documents
should be pro3ided)!]
&an"ar '(1' *age 27 of 22
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).'. E9i7i5i9i$ %f Direc$ C%6$6 =Ar$ic9e 1*.'>
).). Pr%?i6i%n f%r C%n$in7enc Re6er?e =Ar$ic9e 1*.)>
).*. A#4ini6$ra$i?e c%6$6 =Ar$ic9e 1*.*>
).,. C%n$ri5"$i%n6 in :in# =Ar$ic9e 1*.,>
).-. N%n-e9i7i59e c%6$6 =Ar$ic9e 1*.->
)./. Acce8$e# c%6$6
).0. Re?en"e6 %f $2e Ac$i%n
[<escribe factual findings and specify errors and exceptions* 2%o'ed&%es 7*# 3 7*8 in Annex #A]
Anne1 1 Financia9 Re8%r$ f%r $2e Gran$ C%n$rac$
[Annex 1 should include the Beneficiary=s financial report for the :rant Contract /hich has
been the subEect of the 3erification! The financial report should be d!ted and indicate the +e%iod
'o)e%ed!]
Anne1 ' Ter46 %f Reference E18en#i$"re Verifica$i%n
[Annex " should include a signed and d!ted copy of the terms of reference for the expenditure
3erification of this :rant Contract including Annex " (information about the :rant Contract)
and Annex #A (Fisting of the specific procedures to be performed)!]
&an"ar '(1' *age 22 of 22
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