The EU is an international community of countries that have come together to reduce the devastating effects of wars throughout history in Europe, to increase economic prosperity by creating a common market, and to establish a political union that will allow Europe to take its place as a stronger actor on the world stage. 

The EU, whose main founding purpose is to increase economic prosperity, has created a single market by encouraging free movement and trade among member countries. The EU provides financial assistance to member countries to eliminate regional differences within the Union and ensure economic harmony, as well as to candidate and potential candidate countries through funds called the “Instrument for Pre-Accession Assistance- IPA” (Yılmaz, 2015).

IPA funds help create the structures that candidate countries should coordinate Union policies (Petrakos & Kallioras, 2017). The EU expects the countries that benefit from the funds to account for the funds in accordance with the principles and procedures in the legislation, considering the financial interests of the EU. Otherwise, fund payments may be interrupted or suspended.

To benefit effectively from EU funds without any interruption or suspension of funds, it is necessary to avoid errors and irregularities in spending, accounting and reporting processes.

Since EU pre-accession financial assistance is generally provided within the scope of projects within the framework of certain programmes, certain legal issues should be considered when accounting and reporting this assistance. These issues are regulated by documents prepared by EU institutions and forming a legal framework, agreements signed between the EU and the institutions of the country receiving financial assistance, and national legislation.

The procedures and principles regarding the monitoring, spending and accounting of grant funds transferred from the European Union to public administrations in Turkey in return for projects are determined by the “Regulation on the Spending and Accounting of Grant Amounts Transferred to Public Administrations from the Resources of the European Union and International Organisations in Return for Projects”. In this study, the accounting of IPA funds was examined through a hypothetical example within the framework of the procedures and principles in the regulation mentioned, and it was concluded that considering the following issues in the proper execution of the accounting process would be beneficial in terms of the effective use of funds.

• Since the scope of the assistance and expenditure items are included in the project contract, expenditures should be made and accounted in a way that serves the purpose of the project in accordance with this contract.
• EU funds should be accounted separately from other resources of the institution receiving assistance and reports specific to these funds should be created.
• National and international standards should be considered in reporting.
• Each record made should be supported by a document and the documents should be preserved.
• Expenditures should be made according to the items budgeted with the project.
• Financial reporting related to the project is subject to audit; therefore, reports should be prepared on time and delivered within the period requested by the EU.
• The legal status of tax exemptions should be monitored and accounting records should be made accordingly.
• Since financial assistance is provided in the Euro, attention should be paid to the reflection of exchange rate changes in accounting records.

Paying attention to these issues will contribute to the accurate accounting of the funds provided and to the avoidance of errors and irregularities.

Circumstances such as irregularities in project-related expenditures, suspicious eligibility of expenditures, detection of system errors that make the reliability of the internal control system and the use of assets in accordance with the project purpose questionable may result in the interruption or suspension of fund payments (IPA III Financial Framework Partnership Agreement articles 38-39). In addition, the fund beneficiary institution may face administrative and financial sanctions, which may impose additional workload and costs on the institution, result in criminal sanctions, cause loss of reputation, and restrict the institution's access to new funds. 

As a result, since incorrect accounting of funds may have serious financial, legal and reputational negative consequences for the beneficiary institution, transparency, accuracy and compliance with the legislation are of great importance in the accounting process of funds.