AUDIT

DG ECHO is accountable for the use of the humanitarian aid funds, therefore audits are conducted to ensure that the funds provided to certified partners are being used effectively and efficiently to achieve their intended purpose.

The legal basis for DG ECHO audits is Council Regulation (EC) No 1257/96 of 20 June 1996 concerning humanitarian aid. The regulation states that all financing contracts concluded under this regulation must allow the Commission and the Court of Auditors to conduct checks on the spot and at the headquarters of humanitarian certified partner. In this regard, the aim of an audit is to allow auditors, upon examining the organisation’s financial documents and other items, to express an opinion on compliance with the rules, following the usual procedures established by the Commission under the rules in force.

The Audit Info Paper is the reference document designed by DG ECHO E2 External Audit Sector (EAS) to inform and explain partners about the procedures governing audits planned and undertaken by the EAS.

You can find it at the end of this page or in the reference documents page.   This document is the starting point when dealing with the audit process, because it describes the background to the audits, the different types of audit, the respective methodologies, and what DG ECHO expects from its partners. 

There are several types of audits that can be conducted by DG ECHO. The one that partners  will probably face most often are audits conducted on-site at the organisation's headquarters, so-called “headquarter audit”, or on project locations  interim field audit - to verify the information provided in the reports and to ensure compliance with the grant agreement.

Have a look at the eLearning on Be prepared for a DG ECHO Audit. You can find it at this link.

An interim field audit is an audit of an ongoing action in the country of operation and covers administrative and operational aspects of the project.

This is an important area to review; besides the financial, administrative, and operational aspects, the auditors also have the opportunity to visit ongoing projects and perform on-the-spot visits to project locations (e.g., refugee camps, health structures, and distribution points).

The interim field audit objective is two-fold:

• To identify any potentially ineligible expenditure and to provide the partner with corrective measures before the project ends.
• To analyse the project implementation, not only financially, and to verify that it is compliant with the applicable rules, procedures, and the Single Form.

As a certified partner, you will probably be subject to a field audit more than once.

Field audit plan is prepared yearly as part of the annual audit plan established by DG ECHO. It identifies the grant agreements  to be covered and partners to be audited. Partners to be audited at field level are selected based on the following criteria:

• Value of total DG ECHO funds awarded (e.g. per annum);
• Value of individual grant agreements;
• Results of HQ audits;
• Country of operation;
• Perceived risks (e.g. concerns raised by desks/experts).

If your organisation has been selected for a field audit, DG ECHO will send an opening letter informing  that an audit will be carried out. This letter officially sets the initial date of the field audit, and from this moment onwards, all direct contact will be undertaken by external auditors.

IMPORTANT! Remember that every action audited at field level is usually selected for an HQ audit. This is because the field interim audit is a snapshot of the running project. If that project is then selected for an HQ audit, it allows auditors to undertake full substantive testing and to follow up on whether the partner acted upon proposed recommendations based on the audit’s findings.

The partner's headquarters is considered a key place for auditing, because it is where the partner defines the procedures to be applied, where the finance department in charge of controlling financial returns is located, and where supporting documentation related to payments and transactions are generally stored.

A DG ECHO HQ audit is a detailed review of procedures and validation of expenditure claimed from DG ECHO and is undertaken by audit staff who have specific in-depth knowledge of DG ECHO’s procedures, practices, and outlook.

It will consist of:

• A review of the internal control procedures to issue recommendations for improvement;
•  A substantive testing of transactions: for all budget lines, the testing includes verification of eligibility of transactions, original supporting documents, accounting entries, procedural requirements, and verification of payments.

Usually at HQ level, several concluded projects can be audited. The selection of partners for HQ audits is either random-based or risk-based.

As per article 20 of the MGA, partners must keep records and other supporting documents to prove the proper implementation of the action in line with the accepted standards. The partners must keep records and other supporting documents to prove the proper implementation of the action in line with the accepted standards at least until the time-limit set out in Point 6 of the Data Sheet, which is set  for 5 years after final payment.

The auditors have to verify all the costs, meaning that for each budget line item, they will verify the related supporting documents to confirm that the expense is correct and reliable.

Auditors will check invoices and proof or payments, but these are not enough. There isn’t a DG ECHO official list of supporting documents requested, but the eLearning “Be prepared for an Audit” will provide

some suggestions to build and disseminate an internal list to make sure that supporting documents are properly stored at HQ level.