Financial controls relating to selected projects in Malta and Gozo under the European Regional Development Fund (ERDF) and European Social Fund (ESF)

Abstract

This dissertation analyses the financial controls implemented during the execution of the 2004-2006 projects funded by the European Regional Development Fund (ERDF) and European Social Fund (ESF) with particular emphasis on three different projects. The aim was to review the strengths and weaknesses of this system to improve upon the latter with the second wave of Structural Funds. To assess these controls the COSO 'Evaluation Matrix' (2005) was used together with the Public Internal Financial Control Framework (PIFC Expert Group 2004) and INTOSAI Guidelines (2004). Information was exclusively obtained through semi-structured interviews with twelve key players in the system. The Structural Funds control system passed the COSO test. It is to the Managing Authority's credit that the Structural Funds were managed so efficiently. However, Management cannot rest on its laurels. Despite this robust system, irregularities persist up to the Second Level of controls following six checks. Unless beneficiaries at grassroots level are empowered to do their work well, the irregularities, which hitherto have been immaterial, will escalate incurring heavy financial losses due to the numerous operations coupled with weakened controls brought about by understaffing and overload of work in the upper echelons. Prevention - of irregularities and loss of funds - is better than cure.