Sub-Project n° HR6 (2016)

GRANT AGREEMENT BETWEEN THE REPUBLIC OF CROATIA AND THE COUNCIL OF EUROPE DEVELOPMENT BANK IN RELATION TO THE REGIONAL HOUSING PROGRAMME

The parties to this Grant Agreement (hereinafter, the «Agreement») are the REPUBLIC OF CROATIA, through State Office for Reconstruction and Housing Care, Radnička 22, 10000 Zagreb, Croatia (the «Partner Country») and the COUNCIL OF EUROPE DEVELOPMENT BANK, International Organisation, with its headquarters at 55 avenue Kléber, 75116 Paris, France («CEB» or the «Finance Institution», jointly referred to hereinafter as the «Parties», each a «Party»).

WHEREAS

(A)    CEB and the Partner Country entered into a Framework Agreement in relation to the Regional Housing Programme which was signed on 3 December 2013 and ratified by the Parliament of the Republic of Croatia on 4 April 2014 (with reference numbers klasa: 022-03/14-01/44 and urbroj: 65-14-02 attributed to it by the Partner Country) and which, following CEB’s receipt of the Partner Country’s notice pursuant to Article 14 of such Framework Agreement, entered into force on 1 June 2014 (the «Framework Agreement»).

(B)    The Assembly of Donors approved on 14 April 2016 an investment subsidy grant to the Partner Country from the RHP Fund resources, as further described under Article 1 (the «Grant») for financing the sub-project under the Partner Country’s Country Housing Project called «Renovation, reconstruction or construction of 62 family houses», as further described under Appendix A (the «Sub-Project»).

(C)    The Partner Country has given its full agreement to the Grant and to the implementation of the Sub-Project.

(D)    The Parties have decided to conclude the Agreement to set out the terms and conditions concerning (i) the transfer and utilisation of the Grant; and (ii) the implementation of the Sub-Project.

NOW THEREFORE the Parties hereby agree as follows:

DEFINITIONS

In this Agreement the defined terms and expressions shall bear the same meaning as given to them in the Framework Agreement and the following defined terms and expressions shall bear the following meaning, unless the context requires otherwise.

«Final Beneficiaries» means the final beneficiaries of the Sub-Project as defined in Appendix A hereto.

Article 1
THE GRANT

1.1    CEB shall, in the manner referred to in Paragraph 1.2 of this Article, place at the disposal of the Partner Country the Grant in an aggregate amount of up to EUR 2 000 000, subject to Paragraph 1.8 of this Article.

1.2    Subject to the terms of this Agreement and to all conditions precedent for disbursement set out in Article 2 below being fulfilled, having received a duly completed and signed request for Grant Tranche disbursement from the Partner Country, substantially in the form set out in Appendix B (Request for Grant Tranche disbursement (Template)) hereto, CEB shall deposit the Grant in a minimum of two (2) Grant Tranches in the Special Account (as defined in Article 3.4 (Special Account) of the Framework Agreement):

    Account holder:    Ministry of Finance

    IBAN:     HR52 1001 0051 5100 0014 4

    Ref:     Regional Housing Programme

    Bank’s name:     Croatian National Bank

    Bank’s address:     Trg hrvatskih velikana 3,

        HR – 10002 Zagreb, Croatia

    SWIFT BIC:    NBHRHR2X

1.3    Any positive interest earned on the balance on the Special Account shall be used exclusively to fund the sub-project under the Grant Agreement mentioned above, and any negative interest accrued on the balance on the Special Account shall be borne by the Partner Country.

1.4    The Grant shall be paid in EURO (EUR). All financial accounts and statements shall be expressed in EUR.

1.5    The first Grant Tranche, representing an advance payment, shall be in an amount not exceeding 30% of the approved Grant amount, excluding the contingency reserve and the expenditure verification costs (set out in Appendix A hereto). It shall be disbursed to the Partner Country following the signature of the Agreement, subject to all conditions precedent for disbursement set out in Article 2 below being fulfilled.

1.6    The amount of each subsequent Grant Tranche shall be determined according to the Current State of Progress of Works and the Projected State of Progress of Works, as presented by the Partner Country in the Progress Reports pursuant to Article 5.

1.7    Each of the subsequent Grant Tranches can be disbursed only after the Partner Country presents a Progress Report to the CEB, subject to compliance with Article 5 below, confirming that 70%^[3](On an exceptional basis, this percentage may be subject to change as determined by the CEB at its sole discretion based on sub-project specific requirements.) of the funds already disbursed by CEB to the Partner Country have been disbursed in accordance with the provisions of the Framework Agreement and the Agreement.

1.8    It is expressly acknowledged and agreed that the CEB shall not be obliged to make any payment under and/or pursuant to this Agreement, except to the extent that an amount in respect of, and equal to, such payment is available in the RHP Fund account.

1.9    Pursuant to Article 3.3 (Completion Date) of the Framework Agreement the Completion Date with respect to the Sub-Project is estimated to be up to 17 months following the entry into force of the present Grant Agreement.

Article 2
CONDITIONS PRECEDENT FOR DISBURSEMENT

2.1    Pursuant to Article 3.2 (Conditions precedent for disbursement) of the Framework Agreement the conditions precedent for disbursement of the Grant are the following:

2.1.1    Prior to the disbursement of the first Grant Tranche:

    –     The Partner Country shall deliver a Legal opinion in the English language satisfactory to CEB covering the issues of capacity, power and authority of the Republic of Croatia to enter into the Framework Agreement and the Agreement and confirming that both Agreements constitute valid, binding and enforceable undertakings.

    –     The Partner Country’s Implementing Structure as defined in Articale 4 of the Framework Agreement and as further specified in Article 4 below has been established and is operational to the satisfaction of CEB in accordance with the criteria outlined in Appendix 3 to the Framework Agreement.

    –     Pursuant CEB’s Procurement Guidelines the Partner Country shall provide to CEB a procurement plan with respect to the Sub-Project approved by CEB.

    –     Pursuant to the Assembly of Donors’ decision of 11 October 2013, an 18 months’ time limit with respect to the period from the Assembly of Donors’ approval of a grant request for a sub-project and the first disbursement from the CEB to the Partner Country under the relevant Grant Agreement for such approved sub-project applies. Hence, should no disbursement have occurred under this Grant Agreement by 14 October 2017 (18 months from 14 April 2016), the Assembly of Donors, if it deems it appropriate, may (i) cancel a Grant approved in favour of this Sub-Project and (ii) re-allocate these funds in favour of other sub-projects.

2.1.2    Prior to the disbursement of any subsequent Grant Tranches:

    –     Prior to the disbursement of any subsequent Grant Tranches the Partner Country shall provide to the CEB information on the Grant implementation progress in the form of the Progress Report pursuant to Article 5 satisfactory to the CEB.

2.1.3    Prior to the disbursement of last Grant Tranche:

    –     Prior to the disbursement of the last Grant Tranche the Partner Country shall provide to the CEB in addition to the Progress Report an Expenditure Verification Report pursuant to Article 4.10.5 (Expenditure verification) of the Framework Agreement prepared by an external auditor whereby such auditor shall have been chosen and such Expenditure Verification Report shall have been prepared in accordance with the terms of reference set out in Appendix E (Terms of reference for an expenditure verification of a grant received from the RHP Fund) hereto, both satisfactory to the CEB.

Article 3
CONDITIONS FOR USE OF THE GRANT

3.1    The Partner Country acknowledges that this Agreement is subject to and incorporates by reference the terms and conditions of the Framework Agreement, including its Appendices, in full. In particular:

    –     Pursuant to Article 2 (Conditions for use of the Grant/CHP Support Grant) the Grant made available by CEB shall be used exclusively for the Sub-Project.

    –     The Grant shall not be used for financing non-eligible expenditure as outlined in Appendix F hereto.

    –     The Sub-Project shall be implemented in accordance with Article 2 (Conditions for use of the Grant/CHP Support Grant) and Article 4 (Country Housing Project undertakings) of the Framework Agreement.

    –     Pursuant to Article 7 (Consequences of failure to comply) of the Framework Agreement in the event of failure to comply with the provisions of Article 2 (Conditions for use of the Grant/CHP Support Grant) and Article 4 (Country Housing Project undertakings) of the Framework Agreement, CEB reserves the right to suspend, cancel or request immediate repayment of the Grant. Before such a claim is made, consultations shall be held between the Parties.

3.2    Allocation of Grant Tranches: Pursuant to Article 4.7.3 (Allocation of Grant Tranches) of the Framework Agreement (i) each Grant Tranche must be Allocated by the Partner Country to the component parts of the Sub-Project (identified by means of the Progress Reports as in the form set out in Appendix C hereto) within 12 months from its disbursement date (the «Allocation End Date») and (ii) any amount not so Allocated must be repaid to the RHP Fund account managed by CEB within 3 months from the Allocation End Date.

3.3    Latest date for implementation of works/supplies/services: Expenditure financed under this Grant Agreement must be incurred in the period from the entry into force of this Grant Agreement until and no later than 30 November 2017 («Latest date for implementation of works/supplies/services»), subject to further extension. The term ‘incurred’ means services rendered, supplies delivered or works carried out. For the avoidance of doubt, any expenditure incurred after 30 November 2017, if any, may only be financed under this Grant Agreement provided that the Latest date for implementation of works/supplies/services is extended beyond 30 November 2017.

3.4    Any balance remaining unspent upon the Completion Date of the Sub-Project or any repayment of the Grant in accordance with the Framework Agreement and the Agreement shall be deposited in EUR in the RHP Fund account within 6 months from the Completion Date, unless otherwise agreed. Such deposit into the RHP Fund account shall be made via the EUR account opened in the name of the Council of Europe Development Bank:

    Account holder:    Council of Europe Development Bank, Paris (SWIFT: CEFP FR PP)

    IBAN:    DE44 5007 0010 0928 7384 00

    Bank’s name:    DEUTSCHE BANK AG, Frankfurt

    Bank’s address:    Taunusanlage 12

        D – 60325 Frankfurt am Main

    SWIFT/BIC:    DEUT DE FF

with indication for further credit in EUR on the «RHP Fund Account».

Article 4
IMPLEMENTING STRUCTURE OF THE SUB-PROJECT

4.1    Pursuant to Article 4.1.1 (Lead Institution) of the Framework Agreement the Partner Country has designated the State Office for Reconstruction and Housing as the Lead Institution with respect to the Country Housing Project and this Sub-Project thereunder.

4.2    Pursuant to Article 4.1.2 (Project Implementing Unit) of the Framework Agreement the Partner Country entrusts the implementation of the Sub-Project to the Project Implementation Unit situated within the State Office for Reconstruction and Housing (the «PIU») and the project reporting to be made to CEB to the State Office for Reconstruction and Housing.

    In any event, the responsibility to comply with all obligations under the Agreement remains with the Partner Country.

4.3    If unforeseen increases in expenditures are expected or realised (whether due to inflationary factors, fluctuation in exchange rates, natural and human-made disasters or other unforeseen contingencies), the Partner Country shall duly inform CEB on a timely basis and proceed in accordance with Article 4.8 (Increased or revised cost of a sub-project under the Country Housing Project) of the Framework Agreement. In any event, pursuant to Article 4.8 (Increased or revised cost of a sub-project under the Country Housing Project) of the Framework Agreement CEB does not undertake to cover any expenses in excess of the aggregate amount of the Grant set out in Article 1 of the Agreement.

Article 5
PROGRESS REPORTS ON THE SUB-PROJECT

5.1    Progress Reports: Pursuant to Article 4.10.2 (Progress Reports on sub-projects/CHP Support) of the Framework Agreement the Partner Country through the Lead Institution, shall provide on a 4-monthly basis, with respect to the cut-off dates of 30 April, 31 August and 31 December of every year until the last disbursement request under this Grant Agreement (each such date, a «Cut-Off Date») on a date falling no later than 14 calendar days from the Cut-Off Date and if such date falls on a weekend or public holiday in the Partner Country then on the next following business day (each such date, a «Reporting Date») with the first Cut-Off Date under this Grant Agreement falling on 31 August 2016 and the first Reporting Date under this Grant Agreement falling on 15 September 2016, information to CEB on the Grant implementation progress in the framework of the Progress Reports.

    In addition to the regular 4-monthly Progress Reports, the Partner Country shall also provide information to the CEB on the Grant implementation progress, in the form of the Progress Report, prior to any request for disbursement of Grant Tranches. If the timing of the submission of the request for disbursement coincides with the timing of the submission of the regular 4-monthly Progress Report, than the later shall suffice. These Progress Reports shall be deemed satisfactory by the CEB before any disbursement may be made.

    Appendix C hereto is a template specifying the minimum information required by CEB for Progress Reports.

    In any case, the Progress Reports shall address:

    –     detailed description of activities, including beneficiary selection and protection elements, carried out during the reporting period;

    –     progress in the achievement of results against a set of indicators;

    –     impact (economic, social and environmental) prospects;

    –     sustainability;

    –     state of Allocation of the Grant Tranches, which are disbursed to the Partner Country by CEB (cost committed);

    –     progress of the procurement related activities;

    –     incurred and disbursed expenditure and forecast for future expenditure expected to be incurred and disbursed for a determined period of time; and

    –     visibility actions.

    Reporting on expenditure shall be expressed in EUR or, should payments be made in any other currency, reporting on expenditure shall be expressed in local currency and converted into EUR at the exchange rate of the date of conversion of the corresponding Grant Tranche into local currency.

5.2    Completion Report: Pursuant to Article 4.10.2 (Progress Reports on sub-projects/CHP Support) of the Framework Agreement the Completion Report, which shall be provided to CEB within three (3) months following the Completion Date under the Sub-Project, shall include an overall assessment of the performance of the Sub-Project against objectives, as well as an assessment of the use of the Grant. The Completion Report must be deemed satisfactory by the CEB.

Article 6
REPRESENTATIONS AND WARRANTIES

The Partner Country represents and warrants:

–     that it is authorized to enter into the Agreement and it has given the signatory(ies) the authorization therefor, in accordance with the laws, decrees, regulations and other texts applicable to it;

–     that the drawing up and execution of the Agreement does not contravene the laws, decrees, regulations and other texts applicable to it.

Article 7
NOTICES

7.1    Any notice to be given to either Party with respect to the Agreement shall be effectively given or sent by letter or facsimile to the Parties as addressed below. The address of either Party may be changed by notices in the manner set out in this provision.

7.2    Any notice to CEB shall be addressed to:

    Council of Europe Development Bank

    55, avenue Kléber

    75116 Paris – France

    Attention: Director, Directorate for Loans and Social Development (RHP)

    Fax: +33 1 47 55 37 52

    Email: ceb-RHP@coebank.org

    Copy to: Director, Directorate for European Cooperation and Strategy

    Fax: +33 1 47 55 71 55

    Email: ceb-donor-relations@coebank.org

7.3    Any notice to the Partner Country shall be addressed to:

    State Office for Reconstruction and Housing Care

    Radnička 22, 10000 Zagreb, Croatia

    Attention: Head of the State Office

    Fax: + 385 1 61 84 707

Article 8
AMENDMENTS

8.1. This Agreement may be modified by written amendment entered into by CEB and the Partner Country.

Article 9
DISPUTE RESOLUTION

9.1    Any dispute arising out of or in connection with the Agreement, including its existence, validity, interpretation or termination shall be settled amicably between the Parties.

9.2    In default of amicable settlement, disputes shall be subject to arbitration in accordance with the terms of Article 11 (Dispute resolution) of the Framework Agreement.

Article 10
ENTRY INTO FORCE

10.1 The Agreement shall enter into force upon signature by the Parties.

Article 11
INTERPRETATION

11.1    The Partner Country acknowledges that this Agreement is subject to and incorporates by reference the terms and conditions of the Framework Agreement in full.

11.2    In the event of discrepancies, inconsistencies and/or conflicts between the terms of the Framework Agreement and this Agreement, the documents shall prevail in the following order: (i) this Agreement; (ii) the Framework Agreement.

IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, have signed the Agreement in the English language in two (2) originals.

Signed in Zagreb on 27 July 2016

FOR THE REPUBLIC OF CROATIA

Nikola Mažar
Head of State Office for Reconstruction and Housing Care

Signed in Paris on 18 July 2016

FOR THE COUNCIL OF EUROPE DEVELOPMENT BANK

Apolonio Ruiz Ligero
Vice – Govemor

APPENDIX E

TERMS OF REFERENCE FOR AN EXPENDITURE VERIFICATION OF A GRANT RECEIVED FROM THE RHP FUND IN RELATION TO THE REGIONAL HOUSING PROGRAMME

HOW TO USE THIS TERMS OF REFERENCE (ToR) TEMPLATE: All text highlighted in yellow in this ToR template and in Annexes 1 and 2 thereto is for instruction only and beneficiaries of the Grant should remove and complete it as applicable. The parts of the ToR presented in <……..> (e.g. <name of the Partner Country Ministry/PIU/Lead Institution>) must be completed by the Partner Country Ministry/PIU/Lead Institution.

The following are the Terms of Reference («ToR») under which <name of the Ministry/PIU/Lead Institution> agrees to engage <name of the audit firm> (the «Auditor») to perform an expenditure verification and to report in connection with a Grant from the RHP Fund for the Sub-Project under the Partner Country’s Country Housing Project called <name of the Partner Country’s Housing Project and Project number> (the «Sub-Project») documented by way of a Grant Agreement entered into between the Partner Country and the Council of Europe Development Bank («CEB») dated <date of the Grant Agreement> (the «Grant Agreement») entered into pursuant to a Framework Agreement entered into between the Partner Country and the CEB dated <date of the Framework Agreement> (the «Framework Agreement»).

In these ToR the defined terms and expressions shall bear the same meaning as given to them in the Framework Agreement, unless the context requires otherwise.

1.1. Responsibilities of the Parties to the Engagement

The term «Beneficiary(ies)» refers collectively to all Beneficiaries, including the PIU, the Lead Institution, the municipalities and NGOs, to the extent the municipalities and NGOs are implementing the Sub-Project. When there is only one Beneficiary of the Sub-Project, the terms Beneficiary(ies), the PIU and the Lead Institution should be understood as referring to the only Beneficiary of the Sub-Project. Where applicable the term Beneficiary(ies) includes its affiliated entity(ies).

•    The PIU/Lead Institution is responsible for providing Progress Report (including narrative and financial part) on the progress in implementing the Sub-Project financed by the Grant as specified in the Grant Agreement. The Grant Agreement sets out the minimum information required by the CEB with respect to the Progress Reports (as further described under Appendix C of the Grant Agreement). These Progress Reports reconcile to the Beneficiary(ies)’s accounting and bookkeeping system and to the underlying accounts and records. The Beneficiary(ies) is responsible for providing sufficient and adequate information, both financial and non-financial, in support of the Progress Reports.

•    The PIU/Lead Institution accepts that the ability of the Auditor to perform the procedures required by this engagement effectively depends upon the Beneficiary(ies), and as the case may be its affiliated entity(ies), providing full and free access to its (their) staff and its (their) accounting and bookkeeping system and underlying accounts and records.

•    The Auditor is responsible for performing the agreed-upon procedures as specified in these ToR. ‘Auditor’ refers to the audit firm contracted for performing this engagement and for submitting a report of factual findings to the PIU/Lead Institution. ‘Auditor’ can refer to the person or persons conducting the verification, usually the engagement partner or other members of the engagement team. The engagement partner is the partner or other person in the audit firm who is responsible for the engagement and for the report that is issued on behalf of the firm, and who has the appropriate authority from a professional, legal or regulatory body.

By agreeing these ToR the Auditor confirms that he/she meets at least one of the following conditions:

•    The Auditor and/or the firm is a member of a national accounting or auditing body or institution which in turn is member of the International Federation of Accountants (IFAC).

•    The Auditor and/or the firm is a member of a national accounting or auditing body or institution. Although this organisation is not member of the IFAC, the Auditor commits him/herself to undertake this engagement in accordance with the IFAC standards and ethics set out in these ToR.

•    The Auditor and/or the firm 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^[4](Directive 2006/43 of the European Parliament and of the Council of 147 May 2006 on statutory audits of annual accounts and consolidated, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253 EEC.)).

•    The Auditor and/or the firm 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).

1.2. Subject of the Engagement

The subject of this engagement are all Progress Reports (financial part) in connection with the Sub-Project provided to the CEB prior to the disbursement of the last Grant Tranche for the period covering <dd.mm.yyyy to dd.mm.yyyy> (the «Review Period»). The subject of this engagement covers RHP Fund Donors’ contribution together with the Partner Country’s contribution. This engagement does not include expenditure related to the Country Housing Project (CHP) support. Annex 1 to these ToR contains information about the Sub-Project.

1.3. Reason for the Engagement

The PIU/Lead Institution is required to submit to the CEB an expenditure verification report produced by an external auditor in support of the request for the disbursement of the last Grant Tranche requested by the PIU/Lead Institution under Article 2.1.3 of the Grant Agreement. The CEB requires this report because the disbursement of the last Grant Tranche requested by the PIU/Lead Institution is conditional on the factual findings of this report.

1.4. Engagement Type and Objective

This expenditure verification is an engagement to perform certain agreed-upon procedures with regard to all the Progress Reports under the Grant Agreement that have been provided to CEB during the Review Period. The objective of this expenditure verification is for the Auditor to carry out the specific procedures listed in Annex 2A to these ToR and to submit to the PIU/Lead Institution a report of factual findings with regard to the specific verification procedures performed. Verification means that the Auditor examines the factual information in Progress Reports of the PIU/Lead Institution and compares it with the terms and conditions of (i) the Framework Agreement and (ii) the Grant Agreement. As this engagement is not an assurance engagement the Auditor does not provide an audit opinion and expresses no assurance. CEB assesses for itself the factual findings reported by the Auditor and draws its own conclusions from these factual findings.

1.5. Standards and Ethics

The Auditor shall undertake this engagement in accordance with:

–    the International Standard on Related Services (‘ISRS’) 4400 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 (IESBA), 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 provides that independence is not a requirement for agreed-upon procedures engagements, the CEB requires that the Auditor is independent from the Beneficiary(ies) and complies with the independence requirements of the IFAC Code of Ethics for Professional Accountants.

1.6. Procedures, Evidence and Documentation

The Auditor plans the work so that an effective expenditure verification can be performed. The Auditor performs the procedures listed in Annex 2A of these ToR (Listing of specific procedures to be performed) and applies the guidelines in Annex 2B (Guidelines for specific procedures to be performed). The evidence to be used for performing the procedures in Annex 2A is all financial and non-financial information which makes it possible to examine the expenditure claimed by the PIU/Lead Institution in the Progress Reports. 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 of factual findings, and evidence that the work was carried out in accordance with ISRS 4400 and these ToR.

1.7. Reporting

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 PIU/Lead Institution and CEB to understand the nature and extent of the procedures performed by the Auditor and the factual findings reported by the Auditor.

The use of the template for providing a Report on an expenditure verification of a Grant received from the RHP Fund as set out in Annex 3 of these ToR is compulsory. This report should be provided by the Auditor to <name of the PIU/Lead Institution> within <xx; number of working days to be indicated by the PIU/Lead Institution> working days after the day of signature of these ToR.

1.8. Other Terms

The fee for this engagement shall be <fee amount and currency>

[The PIU/Lead Institution may want to agree a fixed fee for the engagement or otherwise. The PIU/Lead Institution and the Auditor may want to agree specific terms if the Auditor needs to extend the verification coverage from 80% to 90%]

[The PIU/Lead Institution and the Auditor can use this section to agree any other specific terms]

Annex 1    Information about the Sub-Project

Annex 2A    Listing of specific procedures to be performed

Annex 2B    Guidelines for specific procedures to be performed

Annex 2C     List of non-eligible expenditure

Annex 3    Report on an expenditure verification of a Grant received from the RHP Fund (template)

For the PIU/Lead Institution:     For the Auditor:

Signature     Signature

<name and function>     <name and function>

<date>     <date>

Annex 1

INFORMATION ABOUT THE SUB-PROJECT

[Annex to be completed by the PIU/Lead Institution]

Information about the Sub-Project
Project number and date of the Grant Agreement	<PIU/Lead Institution’s reference for the Grant Agreement>
Grant Agreement title
Country
PIU/Lead Institution	<full name and address of the PIU/Lead Institution as per the Grant Agreement>
Beneficiary(ies) and affiliated entity(ies)	<full name and address of the Beneficiary(ies) and related affiliated entity(ies) as per the Grant Agreement>
Start date of the Sub-Project
End date of the Sub-Project
Total [accepted/eligible] cost of the Sub-Project	<total amount(s) in Art. 1.1 of Grant Agreement>
Total amount received to date by the PIU/Lead Institution from CEB	<total amount received as per dd.mm.yyyy>
Total amount of payment requests	<total amount requested for payment>
CEB	<name, position/title, phone and E-mail of the contact person in the CEB>
Auditor	<name and address of the audit firm and names/positions of the auditors>

Annex 2A

LISTING OF SPECIFIC PROCEDURES TO BE PERFORMED

[This Annex is a standard listing of specific proceduresto be performed and it shall not be modified]

1. GENERAL PROCEDURES

1.1 Terms and Conditions of the Grant Agreement

The Auditor:

–     obtains an understanding of the terms and conditions of (i) the Framework Agreement and (ii) the Grant Agreement by reviewing (i) the Framework Agreement and (ii) the Grant Agreement and their respective annexes and other relevant information, and by inquiry of the PIU/Lead Institution;

–     obtains a copy of the original Grant Agreement (signed by the Partner Country and the CEB) with its annexes;

–     obtains and reviews all Progress Reports (each of which pursuant to Article 5 of the Grant Agreement includes a narrative and a financial section)

1.2. Progress Reports for the Grant Agreement

The Auditor verifies that all Progress Reports for the Review comply with the following conditions:

–     Progress Reports must conform to the template set out in Appendix C to the Grant Agreement;

–     Progress Reports should cover the eligible costs of the Sub-Project as a whole, regardless of which part of it is financed by the CEB;

–     Progress Reports should be drawn up in the language of the Grant Agreement

1.3. Rules for Accounting and Record keeping

The Auditor examines — when performing the procedures listed in this Annex — whether the Beneficiary(ies) have complied with the following rules for accounting and record keeping:

–     The accounts kept by the Beneficiary(ies) for the implementation of the Sub-Project must be accurate and up-to-date;

–     The Beneficiary(ies) must have a double-entry book-keeping system;

–     The accounts and expenditure relating to the Sub-Project must be easily identifiable and verifiable and record all operations made showing, at any point, the state of progress of any Sub-Project under the Country Housing Project;

–     Accounting records must be backed by original supporting evidence and identify the assets and services financed with the help of any Grant

1.4. Reconciling Progress Reports to the Beneficiary(ies)’s Accounting System and Records    

The Auditor reconciles the information in Progress Reports to the Beneficiary(ies)’s accounting system and records (e.g. trial balance, general ledger accounts, sub ledgers etc.).

1.5. Exchange Rates

The Auditor verifies that amounts of expenditure incurred in a currency other than the Euro have been converted at the exchange rate applicable.

Reports shall be submitted in the currency set out in the Grant Agreement, and may be drawn from financial statements denominated in other currencies, on the basis of the Beneficiary(ies)’s applicable legislation and applicable accounting standards.

Reporting on expenditure shall be expressed in EUR or, should payments be made in any other currency, by converting the corresponding amounts into EUR at the exchange rate of the date of payment to the contractor in the non-EUR currency.

2. PROCEDURES TO VERIFY CONFORMITY OF EXPENDITURE WITH THE BUDGET AND ANALYTICAL REVIEW

2.1. Budget of the Sub-Project

The Auditor carries out an analytical review of the budget lines in the Progress Reports and in the Sub-Project budget.

The Auditor verifies that the budget in Progress Reports corresponds to the budget of the Sub-Project (authenticity and authorisation of the initial budget) and that the expenditure incurred was indicated in the budget of the Sub-Project.

2.2. Amendments to the Budget of the Sub-Project

The Auditor verifies whether there have been amendments to the budget of the Sub-Project, as defined in Appendix A-1 of the Grant Agreement. Where this is the case the Auditor verifies that the PIU/Lead Institution has:

–     requested an amendment to the budget from the CEB

–     obtained an amendment to the budget from the CEB.

3. PROCEDURES TO VERIFY SELECTED EXPENDITURE

3.1. Eligibility of Costs

The Auditor verifies, for each expenditure item selected, the eligibility criteria set out below.

(1) Actual costs incurred

The Auditor verifies that the actual expenditure for a selected item was incurred by and pertains to the Beneficiary(ies) or its (their) affiliated entity(ies). The Auditor should take into account the detailed conditions for actual costs incurred. For this purpose the Auditor examines supporting documents (e.g. invoices, contracts) and proof of payment. The Auditor also examines proof of work done, goods received or services rendered and he/she verifies the existence of assets if applicable.

The costs incurred prior to the disbursement of the last Grant Tranche but not yet paid can be accepted as actual costs incurred, provided that (1) a liability exists (order, invoice or equivalent) for services rendered or goods supplied prior to the disbursement of the last Grant Tranche of the Sub-Project, (2) the final costs are known and (3) these costs are listed in the Progress Report together with the expected date of payment (see Article 5.1 of the Grant Agreement). The Auditor verifies whether these cost items have effectively been paid or a commitment has been made at the moment of the Auditor’s verification.

(2) Cut-off —period

The Auditor verifies that the expenditure for a selected item was incurred prior to the disbursement of the last Grant Tranche of the Sub-Project.

(3) Budget

The Auditor verifies that the expenditure for a selected item was included in the Sub-Project budget.

(4) Necessary

The Auditor verifies whether it is plausible that the expenditure for a selected item was necessary for the implementation of the Sub-Project and that it had to be incurred for the contracted activities of the Sub-Project by examining the nature of the expenditure with supporting documents.

(5) Records

The Auditor verifies that expenditure for a selected item is recorded in the Beneficiary(ies)’s accounting system and was recorded in accordance with the applicable accounting standards of the country where the Beneficiary(ies) is established and according to the Beneficiary(ies)’s usual cost accounting practices.

(6) Applicable legislation

The Auditor verifies that expenditure complies with the requirements of tax and social security legislation where this is applicable.

(7) Justified

The Auditor verifies that expenditure for a selected item is substantiated by evidence (see section 1 of Annex 2B, Guidelines for Specific Procedures to be performed) and supporting documents.

(8) Valuation

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 applicable.

(9) Classification

The Auditor examines the nature of the expenditure for a selected item and verifies that the expenditure item has been classified under the correct budget line of Progress Reports.

(10) Compliance with Procurement Rules

The Auditor verifies whether the expenditure was incurred in accordance with CEB Guidelines for Procurement of supplies, works and services by examining the underlying documents of the procurement and purchase process. Where the Auditor finds issues of non-compliance with procurement rules, he/she reports the nature of such issues as well as their financial impact in terms of ineligible expenditure. When examining procurement documentation the Auditor takes into account the risk indicators listed in Annex 2B and he/she reports, if applicable, which of these indicators were found.

3.2. Eligible Costs

(1)    The Auditor verifies that expenditure for selected items which are recorded under Progress Reports, are covered by the costs by examining the nature of these expenditure items.

(2)    The Auditor verifies that the Partner Country applied to contractor the same rules on duties, taxes and charges having equivalent effect arising for «EC contractors» from the relevant framework agreement between the Partner Country and the European Union on the Instrument for Pre-Accession Assistance (IPA) (see Article 4.7.2 of the Framework Agreement).

The Auditor obtains evidence that the Beneficiary(ies) and or its affiliated entities cannot reclaim the duties, taxes or charges, including VAT through an exemption system and/or a refund a posteriori.

3.3. Contingency Reserve

The Auditor verifies that the provision for contingency reserve does not exceed 10 % of the direct eligible costs of the Sub-Project and that the PIU/Lead Institution has agreed with the CEB for the use of this contingency reserve.

3.4. In kind contributions

Contributions in kind can be accepted if presented in the Progress Report. The Auditor verifies whether such co-financing is applicable and whether it is properly stated in Progress Reports.

3.5. Non-eligible costs

The Auditor verifies that the expenditure for a selected item does not concern a non-eligible cost as described in Annex 2C of these ToR.

3.6. Revenues of the Sub-Project

The Auditor examines whether the revenues (if any) which should be attributed to the Sub-Project have been allocated to the RHP Fund and disclosed in the Progress Report. For this purpose the Auditor inquires with the Beneficiary(ies) and examines documentation obtained from the Beneficiary(ies). The Auditor is not expected to examine the completeness of the revenues reported.

Annex 2B

GUIDELINES FOR SPECIFIC PROCEDURES TO BE PERFORMED

[This Annex provides standard guidelines for the specific procedures to be performed and these guidelines must not be modified]

1. VERIFICATION EVIDENCE

When performing the specific procedures listed in Annex 2A, the Auditor may apply techniques such as inquiry and analysis, (re)computation, comparison, other clerical accuracy checks, observation, inspection of records and documents, inspection of assets and obtaining confirmations.

The Auditor obtains verification evidence from these procedures to draw up the report of factual findings. Verification evidence is all information used by the Auditor in arriving at the factual findings and it includes the information contained in the accounting records underlying Progress Reports and other information (financial and non-financial).

The requirements that relate to verification evidence are:

•    Expenditure should be identifiable, verifiable and recorded in the accounting records of the Beneficiary(ies);

•    The Beneficiary(ies) will allow any external auditor to carry out verifications on the basis of supporting documents for the accounts, accounting documents and any other document relevant to the financing of the Sub-Project. The Beneficiary(ies) give access to all documents and databases concerning the technical and financial management of the Sub-Project.

Moreover, for the purpose of the procedures listed in Annex 2A, records, accounting and supporting documents:

•    shall be easily accessible and filed so as to facilitate their examination;

•    shall be available in the original form, including in electronic form.

Guidance: records and accounting and supporting documents should be available in documentary form, whether paper, electronic or other medium (e.g. a written record of a meeting is more reliable than an oral presentation of the matters discussed). Electronic documents can be accepted only where:

–     the documentation was first received or created (e.g. an order form or confirmation) by the Beneficiary(ies) in electronic form; or

–     the Auditor is satisfied that the Beneficiary(ies) use an electronic archiving system which meets established standards (e.g. a certified system which complies with national law).

•    should preferably be obtained from independent sources outside the entity (an original supplier’s invoice or Agreement is more reliable than an internally approved receipt note);

•    which are generated internally are more reliable if they have been subject to control and approval;

•    obtained directly by the Auditor (e.g. inspection of assets) are more reliable than evidence obtained indirectly (e.g. inquiry about the asset).

If the Auditor finds that the above criteria for evidence are not sufficiently met, he/she should detail this in the factual findings.

2. OBTAINING AN UNDERSTANDING OF THE TERMS AND CONDITIONS OF THE FRAMEWORK AGREEMENT AND THE GRANT AGREEMENT

The Auditor should obtain an understanding of the terms and conditions of (i) the Framework Agreement and (ii) the Grant Agreement. He/she should pay particular attention to Appendix A (Sub-Project description) and Appendix C (Progress Report template). Moreover, the Auditor should obtain an understanding of General Conditions on the Regional Housing Programme (RHP) Fund (which are appended to the Framework Agreement in Appendix 2) which provide rules for procurement. Failure to comply with these rules makes expenditure ineligible for financing. These procurement rules apply to all Grant Agreements. The Auditor ensures with the Beneficiary(ies) that the applicable nationality and origin rules are clearly identified and understood.

If the Auditor finds that the terms and conditions to be verified are not sufficiently clear he/she should request clarification from the Beneficiary(ies).

3. SELECTING EXPENDITURE FOR VERIFICATION

The expenditure claimed by the PIU/Lead Institution in Progress Reports should be generally presented under the budget line.

The form and nature of the supporting evidence (e.g. a payment, an agreement, an invoice etc.) and the way expenditure is recorded (e.g. journal 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 the underlying actions or transactions, whatever the type and nature of the action or transaction concerned.

Value should be the principal factor used by 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.

4. VERIFICATION COVERAGE OF EXPENDITURE

The Auditor applies the principles and criteria set out below when planning and performing the specific verification procedures for selected expenditure stated in Annex 2A.

Verification by the Auditor and verification coverage of expenditure items do not necessarily mean a complete and exhaustive verification of all the expenditure items that are included in a specific expenditure budget line. The Auditor should ensure a systematic and representative verification. Depending on certain conditions (see further below) the Auditor may obtain sufficient verification results for a budget line by looking at a limited number of selected expenditure items.

The Auditor may apply statistical sampling techniques for the verification of one or more expenditure budget lines of Progress Reports. The Auditor examines whether ‘populations’ are suitable and sufficiently large (i.e. are made up of large numbers of items) for effective statistical sampling.

If applicable the Auditor should explain in the report of factual findings for which budget line of Progress Reports sampling has been applied, the method used, the results obtained and whether the sample is representative.

The Expenditure Coverage Ratio («ECR») is the total amount of expenditure verified by the Auditor, expressed as a percentage of the total amount of expenditure reported by the PIU/Lead Institution in Progress Reports during the Review Period.

The Auditor ensures that the overall ECR is at least 80%. If he/she finds an exception rate of less than 10% of the total amount of expenditure verified (i.e. 8%) the Auditor finalises the verification procedures and continues with reporting.

If the exception rate found is higher than 10% the Auditor extends verification procedures until the ECR is at least 90%. The Auditor then finalises verification procedures and continues with reporting regardless of the total exception rate found. The Auditor ensures that the ECR for each expenditure budget line in Progress Reports is at least 10%.

5. PROCEDURES TO VERIFY SELECTED EXPENDITURE

The Auditor verifies the selected expenditure items by carrying out procedures listed in Annex 2A and reports all the factual findings and exceptions resulting from these procedures. Verification exceptions are all verification deviations found when performing the procedures set out in Annex 2A.

The Auditor quantifies the amount of verification exceptions found and the potential impact on the total cost of a Sub-Project, should the CEB declare the expenditure item(s) concerned ineligible. The Auditor reports all exceptions found, including those for which he/she cannot quantify the amount of the verification exception found and the potential impact on the total cost of a Sub-Project.

Specific guidance for Compliance with Procurement Rules

The Auditor verifies whether the expenditure for a selected item was incurred in accordance with the CEB Guidelines for Procurement of supplies, works and services by examining the underlying documents on the procurement and purchase processes. These documents relate to the opening of tenders, the assessment of the eligibility of tenderers and conformity of tenders, the evaluation of the tenders and the decisions with regard to the awarding of the agreement. When examining these procurement documents the Auditor takes into account the risk indicators listed at the end of this Annex and he/she reports, if applicable, which of these indicators were identified.

RISK INDICATORS – PROCUREMENT

•    Inconsistencies in the dates of the documents or illogical sequence of dates. Examples (not limited):

–     Tender dated after the award of agreement or before the sending of the invitations to tender

–     Tender by the winning tenderer dated before the publication date of the tender or dated significantly later than tenders from other tenderers

–     Tenders by different candidates all having the same date

–     Dates on documents not plausible/consistent with dates on accompanying documentation (e.g. date on the tender not plausible/consistent with the postal date on the envelope; date of a fax not plausible/consistent with the printed date of the fax machine)

•    Unusual similarities in tenders by candidates participating in the same tender. Examples:

–     Same wording, sentences and terminology in tenders from different tenderers

–     Same layout and format (e.g. font type, font size, margin sizes, indents, paragraph wrapping, etc.) in tenders from different tenderers

–     Similar letterhead paper or logos

–     Same prices used in tenders from different tenderers for a number of subcomponents or line items

–     Identical grammar, spelling or typing errors in tenders from different tenderers

–     Use of similar stamps and similarities in signatures

•    Financial statement or other information indicating that two tenderers participating in the same tender are related or part of the same group (e.g. where financial statements are provided, the notes to the financial statements may disclose ultimate ownership of the group. Ownership information may also be found in public registers for accounts.)

•    Inconsistencies in the selection and award decision process. Examples:

–     Award decisions not plausible / consistent with selection and award criteria

–     Errors in the application of the selection and award criteria

–     A regular supplier of the Beneficiary(ies) participates as a member of a tender evaluation committee

•    Other elements and examples indicating a risk of a privileged relationship with tenderers:

–     The same tenderer (or small group of tenderers) is invited with unusual frequency to tender for different contracts

–     The same tenderer (or small group of tenderers) wins an unusually high proportion of the bids

–     A tenderer is frequently awarded contracts for different types of goods or services

–     The winning tenderer invoices additional goods not provided for in the tender (e.g. additional spare parts invoiced without clear justification, installation costs invoiced although not provided for in the tender)

•    Other documentation, issues and examples indicating a risk of irregularities:

–     Use of photocopies instead of original documents

–     Use of pro-forma invoices as supporting documents instead of official invoices

–     Manual changes on original documents (e.g. figures manually changed, figures ‘tippexed’, etc.)

–     Use of non-official documents (e.g. letterhead paper not showing certain official and/or compulsory information such as commercial registry number, company tax number, etc.)

Annex 2C

LIST OF NON-ELIGIBLE EXPENDITURE

In conformity to article 1.3(e) of the General Conditions the following expenditure shall not be eligible to be financed by the RHP Fund:

(a) the acquisition of land;

(b) financial costs of investments (payment of debts, refinancing, interest charges etc.);

(c) value added tax paid in the EU Member States or in the Partner Countries; and

(d) any other costs which are not eligible under CEB’s policy for loans and project financing

In addition to article 1.3(e) of the General Conditions and in conformity to the IPA Implementing Rules, the following expenditure shall not be eligible to be financed by the RHP Fund:

(a) taxes, including value added taxes;

(b) customs and import duties, or any other charges;

(c) rent or leasing of land and existing buildings;

(d) fines, financial penalties and expenses of litigation;

(e) operating costs;

(f) second hand equipment;

(g) bank charges, costs of guarantees and similar charges (this does not apply to the management fee of CEB under art.3.6 of the RHP General Conditions.);

(h) conversion costs, charges and exchange losses associated with any of the component specific euro accounts, as well as other purely financial expenses;

(i) contributions in kind;

(j) any leasing costs;

(k) any depreciation costs

Annex 3

REPORT ON EXPENDITURE VERIFICATION OF A GRANT RECEIVED FROM THE RHP FUND (TEMPLATE)

HOW TO USE THIS REPORT TEMPLATE: All text highlighted in yellow in this report template is for instruction only and auditors should remove it after use. Information requested in pointed brackets <……..> (e.g. <name of the PIU/Lead Institution>) must be filled in by the auditor.

<To be printed on AUDITOR’S letterhead>

Report on expenditure verification of a
Grant received from the RHP Fund

<Title of and number of the Sub-Project>

TABLE OF CONTENTS

Report of Factual Findings

1 Information about the Sub-Project

2 Procedures performed and factual findings

Annex 1 Progress Reports on the Sub-Project

Annex 2 Terms of References for Expenditure Verification

Report of Factual Findings

<Name of contact person(s)>, < Position>

< name of the PIU/Lead Institution>

<Address>

<dd.mm.yyyy>

Dear <Name of contact person(s)>

In accordance with the Terms of Reference dated <dd.mm.yyyy> that you agreed with us, we provide our Report of Factual Findings (the «Report»), with respect to the accompanying Progress Reports for the period covering <dd.mm.yyyy — dd.mm.yyyy> (see Annex 1 of this Report) (the «Review Period»). You requested certain procedures to be carried out in connection with your Progress Reports and the Sub-Project under your Country Housing Project called <name of the Partner Country’s Housing Project and Project number> (the «Sub-Project») which received a Grant from the RHP Fund and was documented by way of a grant agreement entered into between the Partner Country and the Council of Europe Development Bank («CEB») dated <date of the Grant Agreement> (the «Grant Agreement») entered into pursuant to a framework agreement entered into between the Partner Country and the CEB dated <date of the Framework Agreement> (the «Framework Agreement»).

Objective

Our engagement was to perform an expenditure verification, which is an engagement to perform certain agreed-upon procedures with regard to Progress Reports during the Review Period with respect to the Sub-Project. The objective of this expenditure verification is for us to carry out certain procedures to which we have agreed and to submit to you a report of factual findings with regard to the procedures performed.

Standards and Ethics

Our engagement was undertaken in accordance with:

–     International Standard on Related Services (‘ISRS’) 4400 Engagements to perform Agreed-upon Procedures regarding Financial Information as promulgated by the International Federation of Accountants (‘IFAC);

–     the Code of Ethics for Professional Accountants issued by the IFAC. Although ISRS 4400 provides that independence is not a requirement for agreed-upon procedures engagements, the CEB requires that the Auditor also complies with the independence requirements of the Code of Ethics for Professional Accountants.

Procedures performed

As requested, 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 been determined solely by the CEB and the procedures were performed solely to assist the CEB in evaluating whether the expenditure claimed by you in the accompanying Progress Reports is eligible in accordance with the terms and conditions of (i) the Framework Agreement and (ii) the Grant Agreement.

Because the procedures performed by us did not constitute either an audit or a review made in accordance with International Standards on Auditing or International Standards on Review Engagements, we do not express any assurance on the accompanying Progress Reports.

Had we performed additional procedures or had we performed an audit or review of the financial statements of the Beneficiary(ies) 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 your accounts and records.

Factual Findings

The total expenditure which is the subject of this expenditure verification amounts to €<xxxxxx>.

The Expenditure Coverage Ratio is <xx%>. This ratio represents the total amount of expenditure verified by us, expressed as a percentage of the total expenditure which is the subject of this expenditure verification. The latter amount is equal to the total amount of expenditure reported by you in Progress Reports on the Sub-Project submitted to CEB during the Review Period as per your request of disbursement of <dd.mm.yyyy>.

We report the details of our factual findings which result from the procedures that we performed.

Use of this Report

This Report is solely for the purpose set forth above under objective.

This report is prepared solely for your own confidential use and solely for the purpose of submission by you to the CEB in connection with the requirements as set out in Article 2.1.3 of the Grant Agreement. This report may not be relied upon by you for any other purpose, nor may it be distributed to any other parties.

The CEB is not a party to the agreement (the Terms of Reference) between you and us and therefore we do not owe or assume a duty of care to the CEB, who may rely upon this expenditure verification report at its own risk and discretion. The CEB can assess for itself the procedures and findings reported by us and draw its own conclusions from the factual findings reported by us.

The CEB may disclose this Report to RHP Fund Donors, the European Anti-Fraud Office and the European Court of Auditors.

This Report relates only to Progress Reports specified above (see Annex 1) and does not extend to any of your financial statements.

We look forward to discussing our Report with you and would be pleased to provide any further information or assistance which may be required.

Yours sincerely,

Auditor’s 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]

Auditor’s address [office having responsibility for the engagement]

Date of signature <dd.mm.yyyy> [date when the report is signed]

1 Information about the Sub-Project

[Chapter 1 should include a brief description of the Sub-Project, the PIU/Lead Institution/Beneficiary(ies)/Affiliated entity(ies), and key financial/budget information (maximum 1 page).]

2 Procedures performed and factual findings

We have performed the following specific procedures listed in Annex 2A of the Terms of Reference for the expenditure verification of the Grant received from the RHP Fund («ToR»):

2.1 General Procedures

2.2 Procedures to verify conformity of Expenditure with the Budget and Analytical Review

2.3 Procedures to verify selected Expenditure

We have applied the rules for selection of expenditure and the principles and criteria for verification coverage as set out in Annex 2B (sections 3 and 4) of the ToR for this expenditure verification.

[Explain here any difficulties or problems encountered]

The total expenditure verified by us amounts to € <xxxx> and is summarised in the table below. The overall Expenditure Coverage Ratio is <xx%>.

[Provide here a summary table of Progress Reports in Annex 1, presenting for each budget line the total expenditure amount reported by the PIU/Lead Institution, the total expenditure amount verified and the percentage of expenditure covered]

We have verified the selected expenditure as shown in the above summary table and we have carried out, for each expenditure item selected, the verification procedures specified in Annex 2A of the ToR for this expenditure verification. We report our factual findings resulting from these procedures below.

2.1 General Procedures

2.1.1 Terms and Conditions of the Grant Agreement

We have obtained an understanding of the terms and conditions of (i) the Framework Agreement and (ii) the Grant Agreement as well as the General Conditions on the Regional Housing Programme (RHP) Fund (which are appended to the Framework Agreement in Appendix 2) in accordance with the guidelines in Annex 2B (section 2) of the ToR.

[Describe the factual findings and specify errors and exceptions. If there are no factual findings, this should be explicitly stated as follows for each procedure: ‘No factual findings have arisen from this procedure’.]

2.1.2 Progress Reports on the Sub-Project

2.1.3 Rules for Accounting and Record Keeping

2.1.4 Reconciling Progress Reports to the Beneficiary(ies)’s Accounting System and Records

2.1.5 Exchange Rates

2.2 Procedures to verify conformity of Expenditure with the Budget and Analytical Review

2.2.1 Budget of the Grant Agreement

2.2.2 Amendments to the Budget of the Grant Agreement

[Describe factual findings and specify errors and exceptions. If there are no factual findings this should be explicitly stated as follows for each procedure: ‘No factual findings have arisen from this procedure’.]

2.3. Procedures to verify selected Expenditure

We have reported further below all the exceptions resulting from the verification procedures specified in Annex 2A of the ToR for this expenditure verification insofar as these procedures applied to the selected expenditure item.

We have quantified the amount of the verification exceptions found and the potential impact on the total cost of a Sub-Project, should the CEB declare the expenditure item(s) concerned ineligible (where applicable taking into account the percentage of funding of the total cost and the impact on expenditure). We have reported all the exceptions found, including the ones for which we cannot quantify the amount or the potential impact on the total cost of a Sub-Project.

[Specify the expenditure amounts / items for which exceptions (= deviations between facts and criteria) were found, and the nature of the exception — this means which of the specific procedures(s)/condition(s) described in Annex 2A of the ToR were not respected. Quantify the amount of verification exceptions found and the potential impact on the RHP Fund contribution, should the CEB declare the expenditure item(s) concerned ineligible.]

2.3.1 Eligibility of Costs

We have verified, for each expenditure item selected, the eligibility criteria set out at procedure 3.1 in Annex 2A of the ToR for this expenditure verification.

2.3.2 Eligible Costs

2.3.3 Contingency Reserve

2.3.4 In kind contributions

2.3.5 Non-eligible costs

2.3.6 Revenues of the Sub-Project

[Describe factual findings and specify errors and exceptions.]

Annex 1 Progress Reports on the Sub-Project

[This Annex 1 should include the Beneficiary (ies)’s Progress Reports on the Sub-Project during the Review Period which are the subject of the expenditure verification. Each of these Progress Reports should be dated and indicate the period covered.]

Annex 2 Terms of Reference for Expenditure Verification

[This Annex 2 should include a signed and dated copy of the Terms of Reference for the expenditure verification of a Grant received from the RHP Fund including its Annex 1 (information about the Sub-Project) and its Annex 2A (Listing of the specific procedures to be performed).]

APPENDIX F

In conformity to article 1.3(e) of the General Conditions the following expenditure shall not be eligible to be financed by the RHP Fund:

(a) the acquisition of land;

(b) financial costs of investments (payment of debts, refinancing, interest charges etc.);

(c) value added tax paid in the EU Member States or in the Partner Countries; and

(d) any other costs which are not eligible under CEB’s policy for loans and project financing

In addition to article 1.3(e) of the General Conditions and in conformity to the IPA Implementing Rules, the following expenditure shall not be eligible to be financed by the RHP Fund:

(a) taxes, including value added taxes;

(b) customs and import duties, or any other charges;

(c) rent or leasing of land and existing buildings;

(d) fines, financial penalties and expenses of litigation;

(e) operating costs;

(f) second hand equipment;

(g) bank charges, costs of guarantees and similar charges (this does not apply to the management fee of CEB under art.3.6 of the RHP General Conditions.);

(h) conversion costs, charges and exchange losses associated with any of the component specific euro accounts, as well as other purely financial expenses;

(i) contributions in kind;

(j) any leasing costs;

(k) any depreciation costs