# Official Journal C 473/16 D

| | ISSN 1977-091X |
| --- | --- |
| Official Journal
  of the European Union | C 473 |
| | |
| English edition | Information and Notices | Volume 5916 December 2016 |

ISSN 1977-091X

Official Journal

of the European Union

C 473

English edition

Information and Notices

Volume 5916 December 2016

---

| Notice No | Contents | page |
| --- | --- | --- |
| | IV   Notices |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES |
| | Court of Auditors |
| 2016/C 473/01 | Summary of results from the Court’s 2015 annual audit of the European Research Joint Undertakings | 1 |
| 2016/C 473/02 | Report on the annual accounts of the Bio-based Industries Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply | 7 |
| 2016/C 473/03 | Report on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply | 15 |
| 2016/C 473/04 | Report on the annual accounts of the Electronic Components and Systems for European Leadership Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply | 24 |
| 2016/C 473/05 | Report on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2015, together with the Joint Undertaking’s reply | 33 |
| 2016/C 473/06 | Report on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply | 47 |
| 2016/C 473/07 | Report on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply | 57 |
| 2016/C 473/08 | Report on the annual accounts of the Single European Sky Air Traffic Management Research Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply | 66 |

Notice No

Contents

page

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

Court of Auditors

2016/C 473/01

Summary of results from the Court’s 2015 annual audit of the European Research Joint Undertakings

1

2016/C 473/02

Report on the annual accounts of the Bio-based Industries Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

7

2016/C 473/03

Report on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

15

2016/C 473/04

Report on the annual accounts of the Electronic Components and Systems for European Leadership Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

24

2016/C 473/05

Report on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2015, together with the Joint Undertaking’s reply

33

2016/C 473/06

Report on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

47

2016/C 473/07

Report on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

57

2016/C 473/08

Report on the annual accounts of the Single European Sky Air Traffic Management Research Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

66

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| EN | |
| --- | --- |

EN

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IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

Court of Auditors

| 16.12.2016 | EN | Official Journal of the European Union | C 473/1 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/1

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Summary of results from the Court’s 2015 annual audit of the European Research Joint Undertakings

(2016/C 473/01)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–7 | 2 |
| INFORMATION IN SUPPORT OF THE COURT’S OPINIONS | 8–9 | 2 |
| AUDIT RESULTS | 10–22 | 3 |
| Opinions on the reliability of the accounts | 10 | 3 |
| Opinions on the legality and regularity of the transactions underlying the accounts | 11–12 | 3 |
| Emphasis of matter on the EU contribution to the ITER project costs | 13 | 3 |
| Comments made in the Court’s audit reports | 14–20 | 3 |
| Follow-up of previous years’ comments | 21–22 | 4 |
| CONCLUSIONS | 23–25 | 4 |
| ANNEX I — | Joint Undertakings’ activities, budget and staff |

Paragraph

Page

INTRODUCTION

1–7

2

INFORMATION IN SUPPORT OF THE COURT’S OPINIONS

8–9

2

AUDIT RESULTS

10–22

3

Opinions on the reliability of the accounts

10

3

Opinions on the legality and regularity of the transactions underlying the accounts

11–12

3

Emphasis of matter on the EU contribution to the ITER project costs

13

3

Comments made in the Court’s audit reports

14–20

3

Follow-up of previous years’ comments

21–22

4

CONCLUSIONS

23–25

4

ANNEX I —

Joint Undertakings’ activities, budget and staff

5

| ANNEX II — | Comments made by the Court in 2015 |
| --- | --- |

ANNEX II —

Comments made by the Court in 2015

6

INTRODUCTION

| 1. | Pursuant to Article 287 of the Treaty on the Functioning of the European Union, the Court audited and issued opinions on the reliability of the accounts and on the legality and regularity of the underlying transactions for the financial year ended 31 December 2015 for seven European research Joint Undertakings (JUs):






  — | F4E (ITER) — Development of Fusion Energy, |
| --- | --- | --- |

1.

Pursuant to Article 287 of the Treaty on the Functioning of the European Union, the Court audited and issued opinions on the reliability of the accounts and on the legality and regularity of the underlying transactions for the financial year ended 31 December 2015 for seven European research Joint Undertakings (JUs):

—

F4E (ITER) — Development of Fusion Energy,

| — | BBI — Bio-based Industries, |
| --- | --- |

—

BBI — Bio-based Industries,

| — | Clean Sky — Clean Air Transport Technologies, |
| --- | --- |

—

Clean Sky — Clean Air Transport Technologies,

| — | IMI — Innovative Medicines Initiative, |
| --- | --- |

—

IMI — Innovative Medicines Initiative,

| — | FCH — Fuel Cells and Hydrogen, |
| --- | --- |

—

FCH — Fuel Cells and Hydrogen,

| — | SESAR — Single European Sky Air Traffic Management Research, |
| --- | --- |

—

SESAR — Single European Sky Air Traffic Management Research,

| — | ECSEL — Electronic components and Systems. |
| --- | --- |

—

ECSEL — Electronic components and Systems.

| 2. | This summary provides an overview of the results of these audits. It aims to facilitate the analysis and comparison of the Court’s 2015 audit reports on each of the Joint Undertakings. The Court’s complete opinions and comments, together with the Joint Undertakings’ replies, can be found in the published audit reports. This summary is not an audit report or opinion. |
| --- | --- |

2.

This summary provides an overview of the results of these audits. It aims to facilitate the analysis and comparison of the Court’s 2015 audit reports on each of the Joint Undertakings. The Court’s complete opinions and comments, together with the Joint Undertakings’ replies, can be found in the published audit reports. This summary is not an audit report or opinion.

| 3. | Apart from the European Union (EU), which is represented by the Commission, members of the Joint Undertakings may include various public and private partners who make contributions to the funding of the activities performed by the Joint Undertakings. The Joint Undertakings either follow a bipartite model with the participation of the European Commission and Industry partners, or a tripartite model with the participation also of the Member States. Joint Undertakings play an important role in implementing specific aspects of EU research policy. |
| --- | --- |

3.

Apart from the European Union (EU), which is represented by the Commission, members of the Joint Undertakings may include various public and private partners who make contributions to the funding of the activities performed by the Joint Undertakings. The Joint Undertakings either follow a bipartite model with the participation of the European Commission and Industry partners, or a tripartite model with the participation also of the Member States. Joint Undertakings play an important role in implementing specific aspects of EU research policy.

| 4. | The EU funding for the Joint Undertakings is provided by the EU research budget through the seventh research framework programme (FP7) and Horizon 2020 (H2020) (1). The other partners provide cash and in-kind contributions to the activities of the Joint Undertakings. |
| --- | --- |

4.

The EU funding for the Joint Undertakings is provided by the EU research budget through the seventh research framework programme (FP7) and Horizon 2020 (H2020) (1). The other partners provide cash and in-kind contributions to the activities of the Joint Undertakings.

| 5. | The Joint Undertakings’ total 2015 budget amounted to 1,3 billion euro (2014: 1,1 billion euro) or almost 1 % of the 2015 EU general budget (2014: 1,6 %). |
| --- | --- |

5.

The Joint Undertakings’ total 2015 budget amounted to 1,3 billion euro (2014: 1,1 billion euro) or almost 1 % of the 2015 EU general budget (2014: 1,6 %).

| 6. | The Joint Undertakings employed 455 (2014: 432) permanent and temporary officials at the end of 2015. |
| --- | --- |

6.

The Joint Undertakings employed 455 (2014: 432) permanent and temporary officials at the end of 2015.

| 7. | Information on the activities, budget and staff numbers of the Joint Undertakings is provided in Annex I. |
| --- | --- |

7.

Information on the activities, budget and staff numbers of the Joint Undertakings is provided in Annex I.

INFORMATION IN SUPPORT OF THE COURT’S OPINIONS

| 8. | For the audit of the reliability of the accounts, 2015 was the second year in which the annual accounts of two Joint Undertakings (F4E and SESAR) were verified by independent external auditors (audit firms) according to Article 208(4) of the EU Financial Regulation (2) and Article 107(1) of the new framework Financial Regulation for agencies and other bodies (3). In accordance with international auditing standards, the Court reviewed the work of the audit firms and obtained sufficient assurance that it could rely on the work of the audit firms as the basis for its audit opinions on the reliability of the accounts of the Joint Undertakings. For the other Joint Undertakings, the Court carried out its own audit work on the annual accounts. |
| --- | --- |

8.

For the audit of the reliability of the accounts, 2015 was the second year in which the annual accounts of two Joint Undertakings (F4E and SESAR) were verified by independent external auditors (audit firms) according to Article 208(4) of the EU Financial Regulation (2) and Article 107(1) of the new framework Financial Regulation for agencies and other bodies (3). In accordance with international auditing standards, the Court reviewed the work of the audit firms and obtained sufficient assurance that it could rely on the work of the audit firms as the basis for its audit opinions on the reliability of the accounts of the Joint Undertakings. For the other Joint Undertakings, the Court carried out its own audit work on the annual accounts.

| 9. | As in previous years, the Court audited the legality and regularity of the underlying transactions under its own responsibility. The Court’s audit approach comprises analytical audit procedures, testing of a sample of transactions at the level of each Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertakings at beneficiaries. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations. |
| --- | --- |

9.

As in previous years, the Court audited the legality and regularity of the underlying transactions under its own responsibility. The Court’s audit approach comprises analytical audit procedures, testing of a sample of transactions at the level of each Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertakings at beneficiaries. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations.

AUDIT RESULTS

Opinions on the reliability of the accounts

| 10. | The final accounts of all Joint Undertakings present fairly, in all material respects, their financial position as at 31 December 2015 and the results of their operations and their cash flows for the year then ended, in accordance with the provisions of the applicable Financial Regulations and the accounting rules adopted by the Commission’s Accounting Officer. |
| --- | --- |

10.

The final accounts of all Joint Undertakings present fairly, in all material respects, their financial position as at 31 December 2015 and the results of their operations and their cash flows for the year then ended, in accordance with the provisions of the applicable Financial Regulations and the accounting rules adopted by the Commission’s Accounting Officer.

Opinions on the legality and regularity of the transactions underlying the accounts

| 11. | In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 were legal and regular in all material respects for six Joint Undertakings (F4E, BBI, Clean Sky, IMI, FCH and SESAR). |
| --- | --- |

11.

In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 were legal and regular in all material respects for six Joint Undertakings (F4E, BBI, Clean Sky, IMI, FCH and SESAR).

| 12. | The Court issued a qualified opinion on the legality and regularity of the transactions underlying the accounts of the ECSEL Joint Undertaking. The arrangements in place for the implementation of ex post audits at the ECSEL Joint Undertaking do not allow the Joint Undertaking to calculate s single reliable weighted error rate or a residual error rate. Therefore, the Court was not in a position to conclude whether this key control provides sufficient assurance as to the legality and regularity of the underlying transactions for FP7 projects managed by the Joint Undertaking. |
| --- | --- |

12.

The Court issued a qualified opinion on the legality and regularity of the transactions underlying the accounts of the ECSEL Joint Undertaking. The arrangements in place for the implementation of ex post audits at the ECSEL Joint Undertaking do not allow the Joint Undertaking to calculate s single reliable weighted error rate or a residual error rate. Therefore, the Court was not in a position to conclude whether this key control provides sufficient assurance as to the legality and regularity of the underlying transactions for FP7 projects managed by the Joint Undertaking.

Emphasis of matter on the EU contribution to the ITER project costs

| 13. | The Court’s statement of assurance for the F4E Joint Undertaking includes an emphasis of matter (4) related to the EU contribution to the ITER project costs. In 2010, the Council approved 6,6 billion euro as the expected total amount of EU contribution to the ITER construction phase. The complexity of the ITER activities puts the amount of the EU contribution at significant risk of increasing, mainly resulting from changes in the scope of the project and delays in implementation. In 2015, the F4E Joint Undertaking launched a major exercise to calculate the estimated cost at completion (EAC) of the EU contribution to the construction phase of the project. The result was an expected cost increase of around 2 375 million euro. The F4E Joint Undertaking has not yet updated the valuation of its contribution to the ITER project beyond the construction phase. In its meeting of 15 and 16 June 2016 the ITER Council endorsed an updated integrated schedule for the ITER project which identifies the date of achievement of the strategic milestone of the construction phase of the project (‘First Plasma’) as December 2025. |
| --- | --- |

13.

The Court’s statement of assurance for the F4E Joint Undertaking includes an emphasis of matter (4) related to the EU contribution to the ITER project costs. In 2010, the Council approved 6,6 billion euro as the expected total amount of EU contribution to the ITER construction phase. The complexity of the ITER activities puts the amount of the EU contribution at significant risk of increasing, mainly resulting from changes in the scope of the project and delays in implementation. In 2015, the F4E Joint Undertaking launched a major exercise to calculate the estimated cost at completion (EAC) of the EU contribution to the construction phase of the project. The result was an expected cost increase of around 2 375 million euro. The F4E Joint Undertaking has not yet updated the valuation of its contribution to the ITER project beyond the construction phase. In its meeting of 15 and 16 June 2016 the ITER Council endorsed an updated integrated schedule for the ITER project which identifies the date of achievement of the strategic milestone of the construction phase of the project (‘First Plasma’) as December 2025.

Comments made in the Court’s audit reports

| 14. | Without calling its opinions into question, the Court made 61 comments (2014: 55) affecting all Joint Undertakings to highlight matters of importance and to indicate room for improvement. An overview of the comments is provided in Annex II. The main issues raised by the Court in its comments are summarised below. |
| --- | --- |

14.

Without calling its opinions into question, the Court made 61 comments (2014: 55) affecting all Joint Undertakings to highlight matters of importance and to indicate room for improvement. An overview of the comments is provided in Annex II. The main issues raised by the Court in its comments are summarised below.

| 15. | In three cases (BBI, FCH, ECSEL), the members of the Joint Undertakings other than the EU did not provide the required reports on the
  value of their in-kind contributions
  relating to their participation in H2020 projects. Consequently, in these cases, the amount of 2015 in-kind contributions entered in the accounts of the Joint Undertakings is based on estimates. |
| --- | --- |

15.

In three cases (BBI, FCH, ECSEL), the members of the Joint Undertakings other than the EU did not provide the required reports on the
  value of their in-kind contributions
  relating to their participation in H2020 projects. Consequently, in these cases, the amount of 2015 in-kind contributions entered in the accounts of the Joint Undertakings is based on estimates.

| 16. | The
  level of information on budgetary implementation
  varies between Joint Undertakings, demonstrating the need for clear guidelines from the Commission on the information to be provided by the Joint Undertakings in their annual accounts and in their annual reports on budgetary and financial management. |
| --- | --- |

16.

The
  level of information on budgetary implementation
  varies between Joint Undertakings, demonstrating the need for clear guidelines from the Commission on the information to be provided by the Joint Undertakings in their annual accounts and in their annual reports on budgetary and financial management.

| 17. | In four cases (Clean Sky, IMI, FCH, SESAR), the
  implementation rate for commitment/payment appropriations in 2015
  was lower than expected, due to delays in signing grant agreements. In four cases (BBI, FCH, SESAR, ECSEL), the majority of 2015
  commitments were made at a global level
  , reflecting the fact that individual grant award procedures were not completed during the year. |
| --- | --- |

17.

In four cases (Clean Sky, IMI, FCH, SESAR), the
  implementation rate for commitment/payment appropriations in 2015
  was lower than expected, due to delays in signing grant agreements. In four cases (BBI, FCH, SESAR, ECSEL), the majority of 2015
  commitments were made at a global level
  , reflecting the fact that individual grant award procedures were not completed during the year.

| 18. | The Court reports on the Joint Undertakings’
  multiannual budget implementation of the FP7, TEN-T and H2020 programmes
  . More detailed information on the multiannual implementation of commitments and payments may be found in the Joint Undertakings’ annual activity reports. |
| --- | --- |

18.

The Court reports on the Joint Undertakings’
  multiannual budget implementation of the FP7, TEN-T and H2020 programmes
  . More detailed information on the multiannual implementation of commitments and payments may be found in the Joint Undertakings’ annual activity reports.

| 19. | The Joint Undertakings have set up

  ex ante control procedures
  based on financial and operational desk reviews, and perform

  ex post audits of beneficiaries
  . These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions from members other than the EU. The ex post audits have permitted the Joint Undertakings (except F4E and ECSEL) to establish residual error rates, which are below 2 % in all cases. |
| --- | --- |

19.

The Joint Undertakings have set up

  ex ante control procedures
  based on financial and operational desk reviews, and perform

  ex post audits of beneficiaries
  . These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions from members other than the EU. The ex post audits have permitted the Joint Undertakings (except F4E and ECSEL) to establish residual error rates, which are below 2 % in all cases.

| 20. | As regards the
  F4E Joint Undertaking
  , significant progress has been made in addressing the issues related to the cost and schedule of the ITER project, although F4E continued to develop its
  monitoring and control systems
  during 2015. The F4E Joint Undertaking increased the
  competitiveness of its operational procurement procedures
  in 2015 (with 55 % of tenders using open procedures compared to 42 % in 2014), but further efforts are required to increase the competitiveness of the procedures. |
| --- | --- |

20.

As regards the
  F4E Joint Undertaking
  , significant progress has been made in addressing the issues related to the cost and schedule of the ITER project, although F4E continued to develop its
  monitoring and control systems
  during 2015. The F4E Joint Undertaking increased the
  competitiveness of its operational procurement procedures
  in 2015 (with 55 % of tenders using open procedures compared to 42 % in 2014), but further efforts are required to increase the competitiveness of the procedures.

Follow-up of previous years’ comments

| 21. | In most cases, in relation to the
  monitoring and reporting of project research results
  , the Joint Undertakings disclosed specific indicators on research results in their annual activity reports (performance indicators and indicators for monitoring cross-cutting issues), as required by H2020 rules. |
| --- | --- |

21.

In most cases, in relation to the
  monitoring and reporting of project research results
  , the Joint Undertakings disclosed specific indicators on research results in their annual activity reports (performance indicators and indicators for monitoring cross-cutting issues), as required by H2020 rules.

| 22. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on
  conflicts of interest
  , including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertakings into their procedures. |
| --- | --- |

22.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on
  conflicts of interest
  , including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertakings into their procedures.

CONCLUSIONS

| 23. | The Court issued unqualified opinions on the reliability of the accounts for the financial year ended 31 December 2015 for all of the Joint Undertakings. |
| --- | --- |

23.

The Court issued unqualified opinions on the reliability of the accounts for the financial year ended 31 December 2015 for all of the Joint Undertakings.

| 24. | The Court issued unqualified opinions on the legality and regularity of the underlying transactions for the financial year ended 31 December 2015 for six of the seven Joint Undertakings. The Court issued a qualified opinion on the legality and regularity of the underlying transactions for the ECSEL Joint Undertaking. |
| --- | --- |

24.

The Court issued unqualified opinions on the legality and regularity of the underlying transactions for the financial year ended 31 December 2015 for six of the seven Joint Undertakings. The Court issued a qualified opinion on the legality and regularity of the underlying transactions for the ECSEL Joint Undertaking.

| 25. | The Joint Undertakings improved their procedures by taking corrective actions in response to the Court’s comments from previous years. Nevertheless, a number of issues remain to be addressed by the Joint Undertakings, in order to ensure further improvement. |
| --- | --- |

25.

The Joint Undertakings improved their procedures by taking corrective actions in response to the Court’s comments from previous years. Nevertheless, a number of issues remain to be addressed by the Joint Undertakings, in order to ensure further improvement.

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(1)  The SESAR Joint Undertaking also received funding from the trans-European networks transport programme (TEN-T).

(2)  Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (OJ L 298, 26.10.2012, p. 1).

(3)  Article 107 of Commission Delegated Regulation (EU) No 1271/2013 (OJ L 328, 7.12.2013, p. 42).

(4)  An emphasis of matter paragraph is used to draw attention to a matter which is not materially misstated in the accounts, but is of such importance that it is fundamental to users’ understanding of the accounts.

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ANNEX I

Joint Undertakings' activities, budget and staff

| JOINT UNDERTAKING | Parent DG | Policy Area | Main Activity | Budget | Staff |
| --- | --- | --- | --- | --- | --- |
| 2014 (million euros) | 2015 (million euros) | 2014 Establishment plan | 2015 Establishment plan |
| BBI | DG RTD | Research | Research and development of bio-based products and biofuels | n/a | 21,1 | n/a | 10 |
| CLEAN SKY | DG RTD | Research | Aeronautical research and development | 153,6 | 245,9 | 37 | 42 |
| ECSEL (as from 27 June 2014) | DG CONNECT | Research | Electronic components and system research and innovation | n/a | 107,7 | 28 | 31 |
| F4E — FUSION FOR ENERGY | DG ENER | Research | Fusion energy research and development | 567,6 | 526,1 | 262 | 262 |
| FCH — FUEL CELLS AND HYDROGEN | DG RTD | Research | Fuel cells and hydrogen research and development | 97,5 | 95,1 | 26 | 24 |
| IMI — INNOVATIVE MEDICINES INITIATIVE | DG RTD | Research | Pharmaceutical research and development | 170,8 | 195,4 | 37 | 44 |
| SESAR | DG MOVE | Research | Research and development of air traffic management system | 121,9 | 140,1 | 42 | 42 |
| Total | 1 111,4 | 1 331,4 | 432 | 455 |

JOINT UNDERTAKING

Parent DG

Policy Area

Main Activity

Budget

Staff

2014 (million euros)

2015 (million euros)

2014 Establishment plan

2015 Establishment plan

BBI

DG RTD

Research

Research and development of bio-based products and biofuels

n/a

21,1

n/a

10

CLEAN SKY

DG RTD

Research

Aeronautical research and development

153,6

245,9

37

42

ECSEL (as from 27 June 2014)

DG CONNECT

Research

Electronic components and system research and innovation

n/a

107,7

28

31

F4E — FUSION FOR ENERGY

DG ENER

Research

Fusion energy research and development

567,6

526,1

262

262

FCH — FUEL CELLS AND HYDROGEN

DG RTD

Research

Fuel cells and hydrogen research and development

97,5

95,1

26

24

IMI — INNOVATIVE MEDICINES INITIATIVE

DG RTD

Research

Pharmaceutical research and development

170,8

195,4

37

44

SESAR

DG MOVE

Research

Research and development of air traffic management system

121,9

140,1

42

42

Total

1 111,4

1 331,4

432

455

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ANNEX II

Comments made by the Court in 2015

| JOINT UNDERTAKING | Budgetary and financial management | Key controls of the JU's supervisory and control systems | Other matters and follow-up of previous observations |
| --- | --- | --- | --- |
| Presentation of the accounts | Implementation of the 2015 budget | Multiannual budget implementation under FP7/TEN-T | Multiannual budget implementation under H2020 | Internal Control Systems and Accounting systems | Operational procurement and grants | Overall control and monitoring of operational procurement contracts and grants | Anti-fraud strategy | Legal framework | Monitoring and reporting of project research results | Conflict of interest | Commission’s Internal Audit Service (IAS) audits | Annual activity report | Intellectual property rights and industrial policy | Host State Agreement | Rules implementing the Staff Regulations |
| BBI | x | x | | x | x | | | x | | x | x | | | | | |
| CLEAN SKY | x | x | x | x | x | | | x | | x | x | x | | | | |
| ECSEL | x | x | x | x | x | | | x | | x | x | | | | | |
| F4E | x | x | | | x | x | x | x | x | | | | x | x | x | x |
| FCH | x | x | x | x | x | | | x | | x | x | x | | | | |
| IMI | x | x | x | x | x | | | x | | x | x | x | | | | |
| SESAR | | x | x | x | x | | | x | | x | x | x | | | | |
| Subtotals | 6 | 7 | 5 | 6 | 7 | 1 | 1 | 7 | 1 | 6 | 6 | 4 | 1 | 1 | 1 | 1 |
| Total | 24 | 9 | 28 |

JOINT UNDERTAKING

Budgetary and financial management

Key controls of the JU's supervisory and control systems

Other matters and follow-up of previous observations

Presentation of the accounts

Implementation of the 2015 budget

Multiannual budget implementation under FP7/TEN-T

Multiannual budget implementation under H2020

Internal Control Systems and Accounting systems

Operational procurement and grants

Overall control and monitoring of operational procurement contracts and grants

Anti-fraud strategy

Legal framework

Monitoring and reporting of project research results

Conflict of interest

Commission’s Internal Audit Service (IAS) audits

Annual activity report

Intellectual property rights and industrial policy

Host State Agreement

Rules implementing the Staff Regulations

BBI

x

x

x

x

x

x

x

CLEAN SKY

x

x

x

x

x

x

x

x

x

ECSEL

x

x

x

x

x

x

x

x

F4E

x

x

x

x

x

x

x

x

x

x

x

FCH

x

x

x

x

x

x

x

x

x

IMI

x

x

x

x

x

x

x

x

x

SESAR

x

x

x

x

x

x

x

x

Subtotals

6

7

5

6

7

1

1

7

1

6

6

4

1

1

1

1

Total

24

9

28

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| 16.12.2016 | EN | Official Journal of the European Union | C 473/7 |
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16.12.2016

EN

Official Journal of the European Union

C 473/7

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REPORT

on the annual accounts of the Bio-based Industries Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/02)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–4 | 8 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 5 | 8 |
| STATEMENT OF ASSURANCE | 6–13 | 8 |
| Opinion on the reliability of the accounts | 11 | 9 |
| Opinion on the legality and regularity of the transactions underlying the accounts | 12 | 10 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 14–20 | 10 |
| Presentation of the accounts | 14–16 | 10 |
| Implementation of the 2015 budget | 17–18 | 10 |
| BBI Joint Undertaking multiannual budget implementation under Horizon 2020 | 19–20 | 10 |
| OTHER MATTERS | 21–24 | 11 |
| Key controls and supervisory systems | 21 | 11 |
| Anti-Fraud Strategy | 22–24 | 11 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 25–26 | 11 |
| Monitoring and reporting of project research results | 25 | 11 |
| Conflicts of interest | 26 | 11 |
| ANNEX | 12 |

Paragraph

Page

INTRODUCTION

1–4

8

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

5

8

STATEMENT OF ASSURANCE

6–13

8

Opinion on the reliability of the accounts

11

9

Opinion on the legality and regularity of the transactions underlying the accounts

12

10

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

14–20

10

Presentation of the accounts

14–16

10

Implementation of the 2015 budget

17–18

10

BBI Joint Undertaking multiannual budget implementation under Horizon 2020

19–20

10

OTHER MATTERS

21–24

11

Key controls and supervisory systems

21

11

Anti-Fraud Strategy

22–24

11

FOLLOW-UP OF PREVIOUS OBSERVATIONS

25–26

11

Monitoring and reporting of project research results

25

11

Conflicts of interest

26

11

ANNEX

12

INTRODUCTION

| 1. | The Bio-based Industries (BBI) Joint Undertaking, located in Brussels, was set up in May 2014 (1) for a period of 10 years and started working autonomously on 26 October 2015. |
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1.

The Bio-based Industries (BBI) Joint Undertaking, located in Brussels, was set up in May 2014 (1) for a period of 10 years and started working autonomously on 26 October 2015.

| 2. | The objective of the BBI Joint Undertaking is to implement a programme of research and innovation activities in Europe that will assess the availability of renewable biological resources that can be used for the production of bio-based materials, and on that basis support the establishment of sustainable bio-based value chains (2). Those activities should be carried out through collaboration between stakeholders along the entire bio-based value chain, including primary production and processing industries, consumer brands, SMEs, research and technology centres, and universities. |
| --- | --- |

2.

The objective of the BBI Joint Undertaking is to implement a programme of research and innovation activities in Europe that will assess the availability of renewable biological resources that can be used for the production of bio-based materials, and on that basis support the establishment of sustainable bio-based value chains (2). Those activities should be carried out through collaboration between stakeholders along the entire bio-based value chain, including primary production and processing industries, consumer brands, SMEs, research and technology centres, and universities.

| 3. | The founding members of the Joint Undertaking are the European Union (EU), represented by the European Commission, and industrial partners represented by the Bio-based Industries Consortium (BIC). |
| --- | --- |

3.

The founding members of the Joint Undertaking are the European Union (EU), represented by the European Commission, and industrial partners represented by the Bio-based Industries Consortium (BIC).

| 4. | The maximum EU contribution to the BBI Joint Undertaking, for research activities and administrative costs (3), is 975 million euro to be paid from the budget of the Horizon 2020 Framework Programme for Research and Innovation (2014-2020) (4). Other members of the Joint Undertaking are to contribute resources amounting to at least 2 730 million euro over the period of the Joint Undertaking (5), including cash contributions of at least 182,5 million euro, in-kind contributions to additional activities (6) of at least 1 755 million euro and in-kind contributions to the Joint Undertaking’s activities (7). |
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4.

The maximum EU contribution to the BBI Joint Undertaking, for research activities and administrative costs (3), is 975 million euro to be paid from the budget of the Horizon 2020 Framework Programme for Research and Innovation (2014-2020) (4). Other members of the Joint Undertaking are to contribute resources amounting to at least 2 730 million euro over the period of the Joint Undertaking (5), including cash contributions of at least 182,5 million euro, in-kind contributions to additional activities (6) of at least 1 755 million euro and in-kind contributions to the Joint Undertaking’s activities (7).

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 5. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations. |
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5.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  6. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the Bio-based Industries Joint Undertaking, which comprise the financial statements (8) and the reports on the implementation of the budget (9) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

6.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the Bio-based Industries Joint Undertaking, which comprise the financial statements (8) and the reports on the implementation of the budget (9) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
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(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 7. | In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (10), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions:






  (a) | the management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (11), and making accounting estimates that are reasonable in the circumstances. The Executive Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects; |
| --- | --- | --- |

7.

In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (10), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions:

(a)

the management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (11), and making accounting estimates that are reasonable in the circumstances. The Executive Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects;

| (b) | the management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. |
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(b)

the management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 8. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (12) with a Statement of Assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

8.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (12) with a Statement of Assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 9. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
| --- | --- |

9.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 10. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its Statement of Assurance. |
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10.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its Statement of Assurance.

Opinion on the reliability of the accounts

| 11. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

11.

In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

| 12. | In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular. |
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12.

In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular.

| 13. | The comments which follow do not call the Court’s opinions into question. |
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13.

The comments which follow do not call the Court’s opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Presentation of the accounts

| 14. | By 31 January each year, the members of the BBI Joint Undertaking other than the Union are required to report to the Governing Board on the value of their in-kind contributions made in each of the previous financial years (13). On the basis of this information, and according to the guidance provided by the European Commission to the Joint Undertaking, the members’ in-kind contributions should be entered in the Joint Undertaking’s accounts. |
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14.

By 31 January each year, the members of the BBI Joint Undertaking other than the Union are required to report to the Governing Board on the value of their in-kind contributions made in each of the previous financial years (13). On the basis of this information, and according to the guidance provided by the European Commission to the Joint Undertaking, the members’ in-kind contributions should be entered in the Joint Undertaking’s accounts.

| 15. | At the time the final accounts were being prepared, the Joint Undertaking had not received the required reports from its members. Consequently, the total amount of in-kind contributions for 2015 entered in the accounts is based on estimates made by the Joint Undertaking of the costs incurred by members up to the end of 2015 (14). |
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15.

At the time the final accounts were being prepared, the Joint Undertaking had not received the required reports from its members. Consequently, the total amount of in-kind contributions for 2015 entered in the accounts is based on estimates made by the Joint Undertaking of the costs incurred by members up to the end of 2015 (14).

| 16. | The accounts issued by the BBI Joint Undertaking do not include the Budget Outturn Account, nor the reconciliation table with the Economic Outturn Account. The Budget Outturn Account is published in the Joint Undertaking’s report on budgetary and financial management for 2015 (15), although the level of information provided differs from that given by most other Joint Undertakings, which demonstrates the need for clear Commission guidelines for the Joint Undertakings’ budgetary reporting. |
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16.

The accounts issued by the BBI Joint Undertaking do not include the Budget Outturn Account, nor the reconciliation table with the Economic Outturn Account. The Budget Outturn Account is published in the Joint Undertaking’s report on budgetary and financial management for 2015 (15), although the level of information provided differs from that given by most other Joint Undertakings, which demonstrates the need for clear Commission guidelines for the Joint Undertakings’ budgetary reporting.

Implementation of the 2015 budget

| 17. | The final 2015 budget available for implementation included commitment appropriations of 209,4 million euro and payment appropriations of 21,1 million euro. The utilisation rates for commitment and payment appropriations were 87 % and 89 %, respectively (16). |
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17.

The final 2015 budget available for implementation included commitment appropriations of 209,4 million euro and payment appropriations of 21,1 million euro. The utilisation rates for commitment and payment appropriations were 87 % and 89 %, respectively (16).

| 18. | Total operational commitments in 2015 (180,4 million euro) were made at a global level and related to two 2015 calls for proposals, for which the award procedures were ongoing at 31 December 2015. |
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18.

Total operational commitments in 2015 (180,4 million euro) were made at a global level and related to two 2015 calls for proposals, for which the award procedures were ongoing at 31 December 2015.

BBI Joint Undertaking multiannual budget implementation under Horizon 2020

| 19. | Out of a total envelope of 975 million euro for the operational and administrative activities to be funded by the EU, the Joint Undertaking made operational commitments at 31 December 2015 amounting to 230 million euro (23,6 %). This amount includes 17,7 million euro in pre-financing payments made by the Commission before the Joint Undertaking obtained financial autonomy in October 2015. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 0,8 million euro. |
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19.

Out of a total envelope of 975 million euro for the operational and administrative activities to be funded by the EU, the Joint Undertaking made operational commitments at 31 December 2015 amounting to 230 million euro (23,6 %). This amount includes 17,7 million euro in pre-financing payments made by the Commission before the Joint Undertaking obtained financial autonomy in October 2015. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 0,8 million euro.

| 20. | Out of a total envelope of 975 million euro (17) for other members’ in-kind and cash contributions to cover operational activities, no amounts were reported by the members to the Joint Undertaking at 31 December 2015. The BBI Joint Undertaking entered in the 2015 accounts an estimated amount of 3,5 million euro of in-kind and 0,3 million euro of cash (18) contributions for the operational activities. Other members’ contributions to the Joint Undertaking’s administrative costs amounted to 0,8 million euro. |
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20.

Out of a total envelope of 975 million euro (17) for other members’ in-kind and cash contributions to cover operational activities, no amounts were reported by the members to the Joint Undertaking at 31 December 2015. The BBI Joint Undertaking entered in the 2015 accounts an estimated amount of 3,5 million euro of in-kind and 0,3 million euro of cash (18) contributions for the operational activities. Other members’ contributions to the Joint Undertaking’s administrative costs amounted to 0,8 million euro.

OTHER MATTERS

Key controls and supervisory systems

| 21. | The BBI Joint Undertaking has set up ex ante control procedures based on financial and operational desk reviews, and is developing a programme of ex post audits of grant beneficiaries to be implemented from 2017 (19). These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions to the Joint Undertaking by its members other than the EU. |
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21.

The BBI Joint Undertaking has set up ex ante control procedures based on financial and operational desk reviews, and is developing a programme of ex post audits of grant beneficiaries to be implemented from 2017 (19). These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions to the Joint Undertaking by its members other than the EU.

Anti-Fraud Strategy

| 22. | According to Article 12 of the BBI Joint Undertaking’s Financial Rules, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities. |
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22.

According to Article 12 of the BBI Joint Undertaking’s Financial Rules, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities.

| 23. | Following the adoption of an Anti-Fraud Strategy by the Commission in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (20). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings. |
| --- | --- |

23.

Following the adoption of an Anti-Fraud Strategy by the Commission in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (20). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings.

| 24. | Internal control procedures are already in place at the BBI Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex ante checks on payments, conflict of interest policy and planned ex post audits at final beneficiaries of grants). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (21), in accordance with the agreed timetable. |
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24.

Internal control procedures are already in place at the BBI Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex ante checks on payments, conflict of interest policy and planned ex post audits at final beneficiaries of grants). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (21), in accordance with the agreed timetable.

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Monitoring and reporting of project research results

| 25. | As required by Horizon 2020 rules (22), the BBI Joint Undertaking disclosed information on specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (23). However, for 2015, few details were given as the first BBI projects were in their initial phase. |
| --- | --- |

25.

As required by Horizon 2020 rules (22), the BBI Joint Undertaking disclosed information on specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (23). However, for 2015, few details were given as the first BBI projects were in their initial phase.

Conflicts of interest

| 26. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures. |
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26.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures.

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

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(1)  Council Regulation (EU) No 560/2014 of 6 May 2014 establishing the Bio-based Industries Joint Undertaking (OJ L 169, 7.6.2014, p. 130).

1

(2)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

2

Annex

(3)  The administrative costs of the BBI Joint Undertaking shall not exceed 58,5 million euro and shall be covered by financial contributions divided equally on an annual basis between the Union and members other than the Union.

3

(4)  Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).

4

(5)  Article 4(1) of Regulation (EU) No 560/2014.

5

(6)  As provided for in Article 4(2)(b) of Regulation (EU) No 560/2014, additional activities are contributions in kind for activities outside the work plan and the budget of the Joint Undertaking but contributing to the objectives of the BBI Initiative. In line with Article 4(4) of the same Regulation, the cost of additional activities must be certified by an independent external auditor and are not subject to audit by the Joint Undertaking or by any EU body.

6

(7)  The amount of in-kind contributions to the Joint Undertaking’s activities is dependent on the amounts of other contributions received.

7

(8)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of significant accounting policies and other explanatory notes.

8

(9)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

9

(10)  OJ L 38, 7.2.2014, p. 2.

10

(11)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

11

(12)  Article 47 of Delegated Regulation (EU) No 110/2014.

12

(13)  Articles 4(3) and 4(4) of Regulation (EU) No 560/2014.

13

(14)  The amount of in-kind contributions which is based on estimates is 3,5 million euro. While the Joint Undertaking used the most accurate information available to calculate the estimated in-kind contributions, this amount has not been certified by independent external auditors (Article 4(4) of Regulation (EU) No 560/2014), nor validated by the Executive Director of the Joint Undertaking.

14

(15)  Report on Budgetary and Financial Management 2015, p. 17.

15

(16)  In the 2015 annual accounts, the implementation rate shown for payments is only 2 %, considered from the date the Joint Undertaking became financially autonomous. However, for the full 2015 financial year, the implementation rate for payments is 89 %. Chapter 3 of the BBI Joint Undertaking 2015 Report on Budgetary and Financial Management provides a detailed overview of budget implementation.

16

(17)  792,5 million euro in kind and 182,5 million euro cash.

17

(18)  Financial contribution to operational costs by members other than the Union according to Article 12(3)(a) and (4) of the Annex to Regulation (EU) No 560/2014.

18

(19)  See BBI 2015 Annual Activity Report, p. 40. The audit approach for Horizon 2020 projects is set out in the Research common ex post audit strategy for Horizon 2020. Ex post audits for projects funded by the Joint Undertaking under Horizon 2020 will start in 2017.

19

ex post

Ex post

(20)  For example, the setting-up of a Common Support Centre, with a centralised audit service and harmonised business processes for EU research bodies.

20

(21)  This action also includes assessment of the use of non-EU funding sources to prevent double funding.

21

(22)  Article 31 of Regulation (EU) No 1291/2013 and Annex II to Council Decision 2013/743/EU (OJ L 347, 20.12.2013, p. 965).

22

(23)  BBI Joint Undertaking Annual Activity Report, Section 1.3.1, p. 8 to p. 16 and Annex 12, p. 47 to p. 58.

23

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ANNEX

Bio-based Industries Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 187 and 188 of the Treaty on the Functioning of the European Union) | Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) — and in particular Part III of Decision 2013/743/EU. Horizon 2020 aims to achieve a greater impact with respect to research and innovation by combining Horizon 2020 and private sector funds in public-private partnerships in key areas where research and innovation can contribute to the Union’s wider competitiveness goals, leverage private investment and help tackle societal challenges.
  Council Regulation (EU) No 560/2014 of 6 May 2014 setting up the Bio-based Industries Joint Undertaking (BBI JU). |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EU) No 560/2014) | Mission: implement, under Horizon 2020 rules, the Strategic Innovation and Research Agenda (SIRA) developed by the industry

  BBI JU organises calls for proposals to support research, demonstration and deployment activities enabling collaboration between stakeholders along the entire value chain covering primary production of biomass, processing industry and final use.
  Specifically in charge of:






  — | Annual Work Plan building coordination, |

Areas of Union competence deriving from the Treaty

(Articles 187 and 188 of the Treaty on the Functioning of the European Union)

Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) — and in particular Part III of Decision 2013/743/EU. Horizon 2020 aims to achieve a greater impact with respect to research and innovation by combining Horizon 2020 and private sector funds in public-private partnerships in key areas where research and innovation can contribute to the Union’s wider competitiveness goals, leverage private investment and help tackle societal challenges.

Council Regulation (EU) No 560/2014 of 6 May 2014 setting up the Bio-based Industries Joint Undertaking (BBI JU).

Competences of the Joint Undertaking

(Council Regulation (EU) No 560/2014)

Mission: implement, under Horizon 2020 rules, the Strategic Innovation and Research Agenda (SIRA) developed by the industry

BBI JU organises calls for proposals to support research, demonstration and deployment activities enabling collaboration between stakeholders along the entire value chain covering primary production of biomass, processing industry and final use.

Specifically in charge of:

—

Annual Work Plan building coordination,

| — | contribution to SIRA and KPI review, |
| --- | --- |

—

contribution to SIRA and KPI review,

| — | call management, |
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—

call management,

| — | project evaluation, |
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—

project evaluation,

| — | Grant Agreement Process, |
| --- | --- |

—

Grant Agreement Process,

| — | whole project management life cycle, |
| --- | --- |

—

whole project management life cycle,

| — | communication, dissemination & stakeholder management, |
| --- | --- |

—

communication, dissemination & stakeholder management,

| — | support policy development. |
| --- | --- |

—

support policy development.

Objectives: develop sustainable and competitive bio-based industries in Europe, based on advanced biorefineries that source their biomass sustainably by:

| (1) | demonstrating new technologies using European biomasses: new chemical building blocks, new materials, and new consumer products from European biomass; |
| --- | --- |

(1)

demonstrating new technologies using European biomasses: new chemical building blocks, new materials, and new consumer products from European biomass;

| (2) | developing business models integrating economic actors along the value chain; |
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(2)

developing business models integrating economic actors along the value chain;

| (3) | setting up flagship biorefinery plants deploying technologies & business models. |
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(3)

setting up flagship biorefinery plants deploying technologies & business models.

Governance

The BBI JU’s governance bodies are (i) the Governing Board; (ii) the Executive Director; (iii) the Scientific Committee; (iv) the States Representatives Group:

| (i) | the Governing Board shall be composed of five representatives of the Commission, on behalf of the Union; and five representatives of members other than the Union, at least one of which should be a Small and Medium Enterprise (SME) representative. The Governing Board has overall responsibility for the strategic orientation and operations of the BBI JU and supervises the implementation of its activities; |
| --- | --- |

(i)

the Governing Board shall be composed of five representatives of the Commission, on behalf of the Union; and five representatives of members other than the Union, at least one of which should be a Small and Medium Enterprise (SME) representative. The Governing Board has overall responsibility for the strategic orientation and operations of the BBI JU and supervises the implementation of its activities;

| (ii) | the Executive Director is the chief executive responsible for the day-to-day management of the BBI JU in accordance with the decisions of the Governing Board. The Executive Director is the legal representative of the BBI Joint Undertaking and is accountable to the Governing Board. The Executive Director is supported by a Programme Office composed of BBI JU staff; |
| --- | --- |

(ii)

the Executive Director is the chief executive responsible for the day-to-day management of the BBI JU in accordance with the decisions of the Governing Board. The Executive Director is the legal representative of the BBI Joint Undertaking and is accountable to the Governing Board. The Executive Director is supported by a Programme Office composed of BBI JU staff;

| (iii) | and (iv) the Scientific Committee and the States Representatives Group shall be advisory bodies of the BBI Joint Undertaking. |
| --- | --- |

(iii)

and (iv) the Scientific Committee and the States Representatives Group shall be advisory bodies of the BBI Joint Undertaking.

Resources available to the Joint Undertaking in 2015

Budget

209 422 797 euro for commitments

21 075 192 euro for payments

Staff at 31 December 2015

22 posts provided for in the establishment plan (temporary staff and contract staff), of which 13 posts were occupied; these were allocated to: operational activities (7); administrative tasks (2); mixed tasks (4).

Activities and services provided in 2015

See the BBI JU Annual Activity Report at www.bbi-europe.eu

Source: information supplied by the Bio-based Industries Joint Undertaking.

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THE JOINT UNDERTAKING’S REPLY

The Joint Undertaking has taken note of the Court’s report.

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| 16.12.2016 | EN | Official Journal of the European Union | C 473/15 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/15

---

REPORT

on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/03)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–6 | 16 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 7 | 17 |
| STATEMENT OF ASSURANCE | 8–15 | 17 |
| Opinion on the reliability of the accounts | 13 | 18 |
| Opinion on the legality and regularity of the transactions underlying the accounts | 14 | 18 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 16–22 | 18 |
| Presentation of the Accounts | 16 | 18 |
| Implementation of the 2015 budget | 17–18 | 19 |
| Clean Sky Joint Undertaking multiannual budget implementation under FP 7 | 19–20 | 19 |
| Clean Sky Joint Undertaking multiannual budget implementation under Horizon 2020 | 21–22 | 19 |
| OTHER MATTERS | 23–27 | 19 |
| Key controls and supervisory systems | 23 | 19 |
| Anti-Fraud Strategy | 24–26 | 20 |
| Commission’s Internal Audit Service (IAS) audits | 27 | 20 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 28–29 | 20 |
| Monitoring and reporting of project research results | 28 | 20 |
| Conflicts of interest | 29 | 20 |
| ANNEX | 21 |

Paragraph

Page

INTRODUCTION

1–6

16

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

7

17

STATEMENT OF ASSURANCE

8–15

17

Opinion on the reliability of the accounts

13

18

Opinion on the legality and regularity of the transactions underlying the accounts

14

18

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

16–22

18

Presentation of the Accounts

16

18

Implementation of the 2015 budget

17–18

19

Clean Sky Joint Undertaking multiannual budget implementation under FP 7

19–20

19

Clean Sky Joint Undertaking multiannual budget implementation under Horizon 2020

21–22

19

OTHER MATTERS

23–27

19

Key controls and supervisory systems

23

19

Anti-Fraud Strategy

24–26

20

Commission’s Internal Audit Service (IAS) audits

27

20

FOLLOW-UP OF PREVIOUS OBSERVATIONS

28–29

20

Monitoring and reporting of project research results

28

20

Conflicts of interest

29

20

ANNEX

21

INTRODUCTION

| 1. | The Joint Undertaking for the implementation of the Joint Technology Initiative in aeronautics (Clean Sky Joint Undertaking), located in Brussels, was set up in December 2007 (1) for a period of 10 years and started working autonomously on 16 November 2009. On 6 May 2014 (2), the Council adopted a new founding Regulation which repealed the original Regulation and entrusted the Joint Undertaking, referred to as ‘Clean Sky 2 Joint Undertaking’ (3), with new tasks under the Horizon 2020 Framework Programme for Research and Innovation (4) and extended the lifetime of the Joint Undertaking for the period up to 31 December 2024. |
| --- | --- |

1.

The Joint Undertaking for the implementation of the Joint Technology Initiative in aeronautics (Clean Sky Joint Undertaking), located in Brussels, was set up in December 2007 (1) for a period of 10 years and started working autonomously on 16 November 2009. On 6 May 2014 (2), the Council adopted a new founding Regulation which repealed the original Regulation and entrusted the Joint Undertaking, referred to as ‘Clean Sky 2 Joint Undertaking’ (3), with new tasks under the Horizon 2020 Framework Programme for Research and Innovation (4) and extended the lifetime of the Joint Undertaking for the period up to 31 December 2024.

| 2. | The objective of the Clean Sky Joint Undertaking is to contribute to the finalisation of research activities of the Seventh Research Framework Programme (FP7) (5) and to improving the environmental impact of aeronautical technologies, as well as to developing a strong and globally competitive aeronautical industry and supply chain in Europe. The objectives of the Clean Sky 2 Joint Undertaking fall under the societal challenge pillar in Horizon 2020 for Smart, Green and Integrated Transport (6). |
| --- | --- |

2.

The objective of the Clean Sky Joint Undertaking is to contribute to the finalisation of research activities of the Seventh Research Framework Programme (FP7) (5) and to improving the environmental impact of aeronautical technologies, as well as to developing a strong and globally competitive aeronautical industry and supply chain in Europe. The objectives of the Clean Sky 2 Joint Undertaking fall under the societal challenge pillar in Horizon 2020 for Smart, Green and Integrated Transport (6).

| 3. | The research activities coordinated by the Joint Undertaking are organised into (a) six ongoing technological and demonstration-focused areas or ‘Integrated Technology Demonstrators’ (ITDs) implementing FP7 projects and (b) nine new technological and demonstration-focused areas implementing Horizon 2020 projects:






  — | three Integrated Technology Demonstrators (ITDs) |
| --- | --- | --- |

3.

The research activities coordinated by the Joint Undertaking are organised into (a) six ongoing technological and demonstration-focused areas or ‘Integrated Technology Demonstrators’ (ITDs) implementing FP7 projects and (b) nine new technological and demonstration-focused areas implementing Horizon 2020 projects:

—

three Integrated Technology Demonstrators (ITDs)

| — | three Innovative Aircraft Demonstrator Platforms (IADPs) |
| --- | --- |

—

three Innovative Aircraft Demonstrator Platforms (IADPs)

| — | three transverse areas (TAs), including the Technology Evaluator |
| --- | --- |

—

three transverse areas (TAs), including the Technology Evaluator

| 4. | The members of the Joint Undertaking under the new Regulation are the European Union (EU), represented by the Commission, the industrial leaders of the ITDs/IADPs/TAs and 'core partners' selected via open and competitive calls (7). The Associate members of the Clean Sky Joint Undertaking under FP7 will retain that status until completion of their research activities and actions initiated under Regulation (EC) No 71/2008. |
| --- | --- |

4.

The members of the Joint Undertaking under the new Regulation are the European Union (EU), represented by the Commission, the industrial leaders of the ITDs/IADPs/TAs and 'core partners' selected via open and competitive calls (7). The Associate members of the Clean Sky Joint Undertaking under FP7 will retain that status until completion of their research activities and actions initiated under Regulation (EC) No 71/2008.

| 5. | The maximum EU contribution to the Clean Sky Joint Undertaking under FP7, to cover research activities and administrative costs (8), was 800 million euros. Other members of the Joint Undertaking were to contribute resources at least equal to the EU contribution excluding the amount allocated through calls for proposals (9). |
| --- | --- |

5.

The maximum EU contribution to the Clean Sky Joint Undertaking under FP7, to cover research activities and administrative costs (8), was 800 million euros. Other members of the Joint Undertaking were to contribute resources at least equal to the EU contribution excluding the amount allocated through calls for proposals (9).

| 6. | The EU financial contribution to the Clean Sky 2 Joint Undertaking under Horizon 2020 will be up to 1 755 million euros. The leaders and core partners must bring to the programme a minimum of 2 193,7 million euros in private contributions over the period of the Joint Undertaking (10), including, over the same period, contributions of at least 965,2 million euros for additional activities (11)
   (12). Administrative costs should not exceed 78 million euros and should be split equally between the EU and the private members of the Joint Undertaking. |
| --- | --- |

6.

The EU financial contribution to the Clean Sky 2 Joint Undertaking under Horizon 2020 will be up to 1 755 million euros. The leaders and core partners must bring to the programme a minimum of 2 193,7 million euros in private contributions over the period of the Joint Undertaking (10), including, over the same period, contributions of at least 965,2 million euros for additional activities (11)
   (12). Administrative costs should not exceed 78 million euros and should be split equally between the EU and the private members of the Joint Undertaking.

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 7. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex-post audits carried out by the Joint Undertaking at beneficiaries. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations. |
| --- | --- |

7.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex-post audits carried out by the Joint Undertaking at beneficiaries. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  8. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the Clean Sky 2 Joint Undertaking, which comprise the financial statements (13) and the reports on the implementation of the budget (14) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

8.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the Clean Sky 2 Joint Undertaking, which comprise the financial statements (13) and the reports on the implementation of the budget (14) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 9. | In accordance with Articles 16 and 22 of the model financial regulation applicable to the Clean Sky 2 Joint Undertaking (15), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.






  (a) | The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (16), and making accounting estimates that are reasonable in the circumstances. The Executive Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |
| --- | --- | --- |

9.

In accordance with Articles 16 and 22 of the model financial regulation applicable to the Clean Sky 2 Joint Undertaking (15), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.

(a)

The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (16), and making accounting estimates that are reasonable in the circumstances. The Executive Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.

| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. |
| --- | --- |

(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 10. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (17) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

10.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (17) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 11. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
| --- | --- |

11.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 12. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
| --- | --- |

12.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Opinion on the reliability of the accounts

| 13. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

13.

In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

| 14. | In the Court’s opinion, the transactions underlying the annual accounts of the Clean Sky Joint Undertaking for the year ended 31 December 2015 are, in all material respects, legal and regular. |
| --- | --- |

14.

In the Court’s opinion, the transactions underlying the annual accounts of the Clean Sky Joint Undertaking for the year ended 31 December 2015 are, in all material respects, legal and regular.

| 15. | The comments which follow do not call the Court’s opinion into question. |
| --- | --- |

15.

The comments which follow do not call the Court’s opinion into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Presentation of the accounts

| 16. | The amount of in-kind contributions entered in the final accounts is based on the information received from the members of the Joint Undertaking other than the EU (18). From the reported 47 million euros of in-kind contributions related to H2020 operational expenses, 19 million euros have been certified in accordance with the Council Regulation, but not yet validated by the Governing Board, and 28 million euros remained to be certified and validated (19). |
| --- | --- |

16.

The amount of in-kind contributions entered in the final accounts is based on the information received from the members of the Joint Undertaking other than the EU (18). From the reported 47 million euros of in-kind contributions related to H2020 operational expenses, 19 million euros have been certified in accordance with the Council Regulation, but not yet validated by the Governing Board, and 28 million euros remained to be certified and validated (19).

Implementation of the 2015 budget

| 17. | The final 2015 budget available for implementation included commitment appropriations of 440,7 million euros and payment appropriations of 245,9 million euros. The utilisation rates for commitment and payment appropriations were 99,5 % and 81 % respectively (20). The lower implementation rate for payment appropriations relates to delays in the implementation of the Clean Sky 2 programme (due to delayed signature of one significant grant agreement with a member of the Joint Undertaking, and delays in the start of projects selected by call for proposals). |
| --- | --- |

17.

The final 2015 budget available for implementation included commitment appropriations of 440,7 million euros and payment appropriations of 245,9 million euros. The utilisation rates for commitment and payment appropriations were 99,5 % and 81 % respectively (20). The lower implementation rate for payment appropriations relates to delays in the implementation of the Clean Sky 2 programme (due to delayed signature of one significant grant agreement with a member of the Joint Undertaking, and delays in the start of projects selected by call for proposals).

| 18. | Of the 430,6 million euros in total operational commitments made in 2015, 226 million euros (52,7 %) was for individual commitments based on completed award procedures for grants. The remaining 203,5 million euros (47,3 %) was for Horizon 2020 global commitments for two calls for core partners and two calls for proposals for which the award procedures were ongoing at 31 December 2015. |
| --- | --- |

18.

Of the 430,6 million euros in total operational commitments made in 2015, 226 million euros (52,7 %) was for individual commitments based on completed award procedures for grants. The remaining 203,5 million euros (47,3 %) was for Horizon 2020 global commitments for two calls for core partners and two calls for proposals for which the award procedures were ongoing at 31 December 2015.

Clean Sky Joint Undertaking multiannual budget implementation under FP7

| 19. | Out of the envelope of 800 million euros for the operational and administrative activities to be funded by the EU under FP7, the Joint Undertaking had made commitments amounting to 756,96 million euros (94,6 %) and payments amounting to 740,3 million euros (92,5 % of the operational envelope) by the end of 2015. As the Joint Undertaking is no longer entitled to launch calls for proposals under FP7, the remaining commitments will be used as appropriate for grant agreements with members (according to the funding list agreed by the Governing Board and the overall state of implementation of each ITD) (21). The EU cash contribution to the administrative costs of the Joint Undertaking was 12,6 million euros. |
| --- | --- |

19.

Out of the envelope of 800 million euros for the operational and administrative activities to be funded by the EU under FP7, the Joint Undertaking had made commitments amounting to 756,96 million euros (94,6 %) and payments amounting to 740,3 million euros (92,5 % of the operational envelope) by the end of 2015. As the Joint Undertaking is no longer entitled to launch calls for proposals under FP7, the remaining commitments will be used as appropriate for grant agreements with members (according to the funding list agreed by the Governing Board and the overall state of implementation of each ITD) (21). The EU cash contribution to the administrative costs of the Joint Undertaking was 12,6 million euros.

| 20. | The other members' contributions for operational activities at 31 December 2015 totalled 550,9 million euros, of which 501,6 million euros, or 91 %, had been validated by the Governing Board. The remaining amounts, pending validation, included 37,9 million euros from earlier years (2008-2014), and 12,6 million euros in in-kind contributions by the members in 2015. The other members’ cash contributions to the administrative costs of the Joint Undertaking came to 13,5 million euros. |
| --- | --- |

20.

The other members' contributions for operational activities at 31 December 2015 totalled 550,9 million euros, of which 501,6 million euros, or 91 %, had been validated by the Governing Board. The remaining amounts, pending validation, included 37,9 million euros from earlier years (2008-2014), and 12,6 million euros in in-kind contributions by the members in 2015. The other members’ cash contributions to the administrative costs of the Joint Undertaking came to 13,5 million euros.

Clean Sky Joint Undertaking multiannual budget implementation under Horizon 2020

| 21. | Out of a total envelope of 1 755 million euros for the operational and administrative activities to be funded by the EU under Horizon 2020, the Joint Undertaking made operational commitments of 436,7 million euros and payments of 89,8 million euros (20,5 % of the operational commitments). The low level of payments is mainly attributable to delays in negotiating the Horizon 2020 grant agreements. The EU cash contribution to the administrative costs of the Joint Undertaking was 3,3 million euros. |
| --- | --- |

21.

Out of a total envelope of 1 755 million euros for the operational and administrative activities to be funded by the EU under Horizon 2020, the Joint Undertaking made operational commitments of 436,7 million euros and payments of 89,8 million euros (20,5 % of the operational commitments). The low level of payments is mainly attributable to delays in negotiating the Horizon 2020 grant agreements. The EU cash contribution to the administrative costs of the Joint Undertaking was 3,3 million euros.

| 22. | Out of a minimum envelope of 1 229 million euros for the other members’ in-kind and cash contributions for operational and administrative costs (other than additional activities), 47 million euros of in-kind contributions to operational activities had been reported to the Joint Undertaking by 31 December 2015. The other members’ cash contributions to the Joint Undertaking’s administrative costs came to 3,5 million euros. |
| --- | --- |

22.

Out of a minimum envelope of 1 229 million euros for the other members’ in-kind and cash contributions for operational and administrative costs (other than additional activities), 47 million euros of in-kind contributions to operational activities had been reported to the Joint Undertaking by 31 December 2015. The other members’ cash contributions to the Joint Undertaking’s administrative costs came to 3,5 million euros.

OTHER MATTERS

Key controls and supervisory systems

| 23. | The Clean Sky 2 Joint Undertaking has set up ex-ante control procedures based on financial and operational desk reviews, and ex-post audits at beneficiaries of grants. These checks are a key tool to assess the legality and regularity of the underlying transactions, including the cash and in-kind contributions made to the Joint Undertaking by its members other than the EU. The residual error rate for the ex-post audits reported in the Clean Sky Joint Undertaking 2015 Annual Activity Report was 1,52 % (22). |
| --- | --- |

23.

The Clean Sky 2 Joint Undertaking has set up ex-ante control procedures based on financial and operational desk reviews, and ex-post audits at beneficiaries of grants. These checks are a key tool to assess the legality and regularity of the underlying transactions, including the cash and in-kind contributions made to the Joint Undertaking by its members other than the EU. The residual error rate for the ex-post audits reported in the Clean Sky Joint Undertaking 2015 Annual Activity Report was 1,52 % (22).

Anti-Fraud Strategy

| 24. | The Joint Undertaking Financial Rules state that the Joint Undertaking’s budget should be implemented in compliance with effective and efficient internal control standards, including prevention, detection, correction and follow-up of fraud and irregularities (23). |
| --- | --- |

24.

The Joint Undertaking Financial Rules state that the Joint Undertaking’s budget should be implemented in compliance with effective and efficient internal control standards, including prevention, detection, correction and follow-up of fraud and irregularities (23).

| 25. | Following the Commission’s adoption of an Anti-Fraud Strategy in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in 2015 to take account of changes introduced by Horizon 2020 (24). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings. |
| --- | --- |

25.

Following the Commission’s adoption of an Anti-Fraud Strategy in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in 2015 to take account of changes introduced by Horizon 2020 (24). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings.

| 26. | Internal control procedures are already in place at the Clean Sky 2 Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities (ex-ante checks on payments, conflict of interest policy, ex-post audits at beneficiaries of grants). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (25), in accordance with the agreed timetable. |
| --- | --- |

26.

Internal control procedures are already in place at the Clean Sky 2 Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities (ex-ante checks on payments, conflict of interest policy, ex-post audits at beneficiaries of grants). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (25), in accordance with the agreed timetable.

Commission’s Internal Audit Service (IAS) audits

| 27. | In 2015, the IAS carried out an audit on the dissemination of the results of EU-funded research by the Clean Sky Joint Undertaking, focusing on the Joint Undertaking’s processes for monitoring FP7 projects. The IAS recommended improvements in a number of areas: planning and reporting on the use and dissemination of members’ research results under the grant agreements with members; assessment of the core partners’ reporting on the dissemination and exploitation of research results; performance monitoring and reporting; and the Clean Sky 2 Joint Undertaking’s central dissemination of research results and quality control of beneficiaries’ publications. The IAS also recommended the establishment of a central repository of outputs of dissemination and exploitation plans and reported activities. The Joint Undertaking has set up an action plan to address these recommendations. |
| --- | --- |

27.

In 2015, the IAS carried out an audit on the dissemination of the results of EU-funded research by the Clean Sky Joint Undertaking, focusing on the Joint Undertaking’s processes for monitoring FP7 projects. The IAS recommended improvements in a number of areas: planning and reporting on the use and dissemination of members’ research results under the grant agreements with members; assessment of the core partners’ reporting on the dissemination and exploitation of research results; performance monitoring and reporting; and the Clean Sky 2 Joint Undertaking’s central dissemination of research results and quality control of beneficiaries’ publications. The IAS also recommended the establishment of a central repository of outputs of dissemination and exploitation plans and reported activities. The Joint Undertaking has set up an action plan to address these recommendations.

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Monitoring and reporting of project research results

| 28. | As required by Horizon 2020 rules (26), the Clean Sky Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (27). |
| --- | --- |

28.

As required by Horizon 2020 rules (26), the Clean Sky Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (27).

Conflicts of interest

| 29. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures. |
| --- | --- |

29.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures.

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

---

(1)  Council Regulation (EC) No 71/2008 of 20 December 2007 setting up the Clean Sky Joint Undertaking (OJ L 30, 4.2.2008, p. 1).

1

(2)  Council Regulation (EU) No 558/2014 of 6 May 2014 establishing the Clean Sky 2 Joint Undertaking (OJ L 169, 7.6.2014, p. 77).

2

(3)  This report refers to the ‘Clean Sky 2 Joint Undertaking’ unless it is necessary to distinguish between the two programmes.

3

(4)  The Horizon 2020 Framework programme for Research and Innovation, adopted by Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).

4

(5)  The Seventh Framework Programme, adopted by Decision No 1982/2006/EC of the European Parliament and of the Council (OJ L 412, 30.12.2006, p. 1).

5

(6)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

6

Annex

(7)  As a result of the first call for core partners, 76 new partners joined the programme in 2015, already making the membership of the Clean Sky 2 programme larger than that of Clean Sky (66 Associates). In 2015, the Joint Undertaking launched a second call for core partners.

7

(8)  The administrative costs of the Clean Sky Joint Undertaking were shared equally between, on the one hand, the EU and, on the other hand, the other members, which contributed the remaining 50 % in cash. The administrative costs of the Joint Undertaking could not exceed 3 % of the total cash contribution and the contributions in kind by the members and partners.

8

(9)  The EU contribution is distributed as follows: (a) an amount of up to 400 million euros is allocated to the ITD leaders and an amount of up to 200 million euros to the Associates. The ITD leaders and Associates are to contribute resources at least matching the EU contribution; (b) an amount of at least 200 million euros is to be allocated to the partners selected by way of competitive calls for proposals.

9

(10)  Article 4(1) of Regulation (EU) No 558/2014.

10

(11)  As provided in Article 4(2)(b) of Regulation (EU) No 558/2014, additional activities are activities outside the work plan of the Joint Undertaking but contributing to the objectives of the Clean Sky Joint Technology Initiative. Under Article 4(4) of the Regulation, the cost of additional activities must be certified by an independent external auditor and are not subject to audit by the Joint Undertaking or by any EU body.

11

(12)  Article 15(3) of the Annex to Regulation (EU) No 558/2014 stipulates that the ‘operational costs of the Clean Sky 2 Joint Undertaking shall be covered through (a) a financial contribution by the Union (b) in-kind contributions by Leaders and Core Partners and their affiliated entities consisting of the costs incurred by them in implementing indirect actions less the contribution of the Clean Sky 2 Joint Undertaking and any other Union contribution to those costs’.

12

(13)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of the significant accounting policies and other explanatory notes.

13

(14)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

14

(15)  Commission Delegated Regulation (EU) No 110/2014 of 30 September 2013 on the model financial regulation for public-private partnership bodies referred to in Article 209 of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council, (OJ L 38, 7.2.2014, p. 2).

15

(16)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

16

(17)  Article 47 of Delegated Regulation (EU) No 110/2014.

17

(18)  Article 4(3) of Regulation (EU) No 558/2014.

18

(19)  Final Accounts of the Joint Undertaking, p. 30.

19

(20)  The execution rate for payment appropriations is calculated without including 17,4 million euros of unused payment appropriations not required in 2015. With the inclusion of this amount in the total payments budget, the execution rate is 75 %. See Final Accounts of the Joint Undertaking, p. 58.

20

(21)  See Clean Sky Report on Budgetary and Financial Management 2015, p. 22.

21

(22)  Clean Sky Joint Undertaking Annual Activity Report, p. 90. The ex-post audits performed during 2015 covered projects funded by the Joint Undertaking under FP7. The audit approach for Horizon 2020 projects is set out in the Research common ex post audit strategy for Horizon 2020. The ex-post audits for projects funded by the Joint Undertaking under Horizon 2020 will start in 2016.

22

ex-post

ex post

ex-post

(23)  Article 12 of the Financial Rules of the Clean Sky 2 Joint Undertaking.

23

(24)  For example, the setting-up of a Common Support Centre, with a centralised audit department and harmonised business processes for the EU Research bodies and related IT systems.

24

(25)  This action also includes assessment of the use of non-EU funding sources to prevent double funding.

25

(26)  Article 31 of Regulation (EU) No 1291/2013 and Annex II of Council Decision 2013/743/EU (OJ L 347, 20.12.2013, p. 965).

26

(27)  Clean Sky Joint Undertaking Annual Activity Report, Annex 5, p. 134 to 137.

27

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ANNEX

Clean Sky 2 Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 187 and 188 of the Treaty on the Functioning of the European Union) | Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104). Horizon 2020 aims to achieve a greater impact with respect to research and innovation by combining Horizon 2020 and private sector funds in public-private partnerships in key areas where research and innovation can contribute to the Union’s wider competitiveness goals, leverage private investment and help tackle societal challenges.
  Council Regulation (EU) No 558/2014 of 6 May 2014 setting up the Clean Sky 2 Joint Undertaking (OJ L 169/77, 7.6.2014). |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EU) No 558/2014) | Objectives

  The Clean Sky 2 Joint Undertaking has the following objectives:






  (a) | to contribute to the finalisation of research activities initiated under Regulation (EC) No 71/2008 and to the implementation of Regulation (EU) No 1291/2013, and in particular the Smart, Green and Integrated Transport Challenge under Part III — Societal Challenges of Decision 2013/743/EU; |

Areas of Union competence deriving from the Treaty

(Articles 187 and 188 of the Treaty on the Functioning of the European Union)

Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104). Horizon 2020 aims to achieve a greater impact with respect to research and innovation by combining Horizon 2020 and private sector funds in public-private partnerships in key areas where research and innovation can contribute to the Union’s wider competitiveness goals, leverage private investment and help tackle societal challenges.

Council Regulation (EU) No 558/2014 of 6 May 2014 setting up the Clean Sky 2 Joint Undertaking (OJ L 169/77, 7.6.2014).

Competences of the Joint Undertaking

(Council Regulation (EU) No 558/2014)

Objectives

The Clean Sky 2 Joint Undertaking has the following objectives:

(a)

to contribute to the finalisation of research activities initiated under Regulation (EC) No 71/2008 and to the implementation of Regulation (EU) No 1291/2013, and in particular the Smart, Green and Integrated Transport Challenge under Part III — Societal Challenges of Decision 2013/743/EU;

| (b) | to contribute to improving the environmental impact of aeronautical technologies, including those relating to small aviation, as well as to developing a strong and globally competitive aeronautical industry and supply chain in Europe. This can be realised through speeding up the development of cleaner air transport technologies for earliest possible deployment, and in particular the integration, demonstration and validation of technologies capable of:






  (i) | increasing aircraft fuel efficiency, thus reducing CO emissions by 20 to 30 % compared to ‘state-of-the-art’ aircraft entering into service as from 2014; |
| --- | --- | --- |

(b)

to contribute to improving the environmental impact of aeronautical technologies, including those relating to small aviation, as well as to developing a strong and globally competitive aeronautical industry and supply chain in Europe. This can be realised through speeding up the development of cleaner air transport technologies for earliest possible deployment, and in particular the integration, demonstration and validation of technologies capable of:

(i)

increasing aircraft fuel efficiency, thus reducing CO emissions by 20 to 30 % compared to ‘state-of-the-art’ aircraft entering into service as from 2014;

| (ii) | reducing aircraft NOx and noise emissions by 20 to 30 % compared to ‘state-of-the-art’ aircraft entering into service as from 2014. |
| --- | --- |

(ii)

reducing aircraft NOx and noise emissions by 20 to 30 % compared to ‘state-of-the-art’ aircraft entering into service as from 2014.

Governance

The JU’s governing body is the Governing Board composed of:

| (a) | one representative of the Commission on behalf of the Union; |
| --- | --- |

(a)

one representative of the Commission on behalf of the Union;

| (b) | one representative of each leader; |
| --- | --- |

(b)

one representative of each leader;

| (c) | one representative of the core partner per ITD; |
| --- | --- |

(c)

one representative of the core partner per ITD;

| (d) | one representative of the Associates per ITD; |
| --- | --- |

(d)

one representative of the Associates per ITD;

| (e) | one representative of the core partners per IADP. |
| --- | --- |

(e)

one representative of the core partners per IADP.

The Board’s competences/tasks are set out in Article 8 of the Statutes (Annex I to the JU Regulation)

The EU holds 50 % of the voting rights. These voting rights are indivisible. Each other representative holds an equal number of votes.

The Programme Office is led by an Executive Director whose competences/tasks are set out in Article 10 of the Statutes.

The industry is directly represented on the Board and through the other bodies of the JU, which are the ITD and IADP Steering Committees and whose competences/tasks are set out in Article 11 of the Statutes. The States Representatives Group and the Scientific Committee are also bodies of the JU but have an advisory role only.

Resources available to the Joint Undertaking in 2015

Budget

440 705 606 euros (commitment appropriations)

245 990 262 euros (payment appropriations)

Staff at 31 December 2015

42 posts provided for in the establishment plan (36 temporary staff and 6 contract staff), of which 36 posts were occupied; these 36 were assigned to operational activities (21) and mixed tasks (15) including management, finance, audit, communication and HR tasks.

Activities and services provided in 2015

See the Clean Sky 2 Joint Undertaking’s Annual Activity Report 2015 at www.cleansky.eu

Source: Information supplied by the Clean Sky 2 Joint Undertaking.

---

THE JOINT UNDERTAKING’S REPLY

| 16. | While the members provided their estimates by 31 January 2016, the actual declarations were received later, as many members find it difficult to present their actual figures in such a short deadline, due to longer internal processes.
  By 30 September 2016, the Joint Undertaking (JU) has received and assessed most of the members’ financial reports which have already increased the validated in-kind contribution by EUR 17,4 million compared to the amount reported in the final accounts. All additional validated in-kind contributions related to H2020 operational expenses will be presented for opinion of the Governing Board before the end of 2016 and shall reflect the validated private members’ contribution in the net assets of the 2016 provisional accounts. |
| --- | --- |

16.

While the members provided their estimates by 31 January 2016, the actual declarations were received later, as many members find it difficult to present their actual figures in such a short deadline, due to longer internal processes.

By 30 September 2016, the Joint Undertaking (JU) has received and assessed most of the members’ financial reports which have already increased the validated in-kind contribution by EUR 17,4 million compared to the amount reported in the final accounts. All additional validated in-kind contributions related to H2020 operational expenses will be presented for opinion of the Governing Board before the end of 2016 and shall reflect the validated private members’ contribution in the net assets of the 2016 provisional accounts.

| 27. | The JU has received the audit report on the findings and recommendations of the Internal Audit Service of the Commission in January 2016. Until August, the JU has agreed with the IAS the partial closure of the issue concerning the planning and reporting on the use and dissemination of beneficiaries’ research results and has scheduled the deadlines for the complete implementation during the year 2017. The action concerning performance monitoring and reporting has been fully implemented and the issue has been closed by the IAS. The central dissemination of research results will be achieved by November 2016. |
| --- | --- |

27.

The JU has received the audit report on the findings and recommendations of the Internal Audit Service of the Commission in January 2016. Until August, the JU has agreed with the IAS the partial closure of the issue concerning the planning and reporting on the use and dissemination of beneficiaries’ research results and has scheduled the deadlines for the complete implementation during the year 2017. The action concerning performance monitoring and reporting has been fully implemented and the issue has been closed by the IAS. The central dissemination of research results will be achieved by November 2016.

---

| 16.12.2016 | EN | Official Journal of the European Union | C 473/24 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/24

---

REPORT

on the annual accounts of the Electronic Components and Systems for European Leadership Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/04)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–5 | 25 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 6 | 25 |
| STATEMENT OF ASSURANCE | 7–18 | 25 |
| Opinion on the reliability of the accounts | 12 | 26 |
| Basis for a qualified opinion on the legality and regularity of the underlying transactions | 13–16 | 27 |
| Qualified opinion on the legality and regularity of the transactions underlying the accounts | 17 | 27 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 19–26 | 27 |
| Presentation of the accounts | 19–20 | 27 |
| Implementation of the 2015 budget | 21–22 | 28 |
| ECSEL Joint Undertaking multiannual budget implementation under FP7 | 23 | 28 |
| ECSEL Joint Undertaking multiannual budget implementation under Horizon 2020 | 24–26 | 28 |
| OTHER MATTERS | 27–30 | 28 |
| Key controls and supervisory systems | 27 | 28 |
| Anti-Fraud Strategy | 28–30 | 28 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 31–32 | 29 |
| Monitoring and reporting of project research results | 31 | 29 |
| Conflicts of interest | 32 | 29 |
| ANNEX | 30 |

Paragraph

Page

INTRODUCTION

1–5

25

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

6

25

STATEMENT OF ASSURANCE

7–18

25

Opinion on the reliability of the accounts

12

26

Basis for a qualified opinion on the legality and regularity of the underlying transactions

13–16

27

Qualified opinion on the legality and regularity of the transactions underlying the accounts

17

27

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

19–26

27

Presentation of the accounts

19–20

27

Implementation of the 2015 budget

21–22

28

ECSEL Joint Undertaking multiannual budget implementation under FP7

23

28

ECSEL Joint Undertaking multiannual budget implementation under Horizon 2020

24–26

28

OTHER MATTERS

27–30

28

Key controls and supervisory systems

27

28

Anti-Fraud Strategy

28–30

28

FOLLOW-UP OF PREVIOUS OBSERVATIONS

31–32

29

Monitoring and reporting of project research results

31

29

Conflicts of interest

32

29

ANNEX

30

INTRODUCTION

| 1. | The Joint Undertaking for the implementation of the Joint Technology Initiative on Electronic Components and Systems for European Leadership (ECSEL Joint Undertaking), located in Brussels, was set up in May 2014 (1) under the Horizon 2020 Framework programme for Research and Innovation (2) for the period up to 31 December 2024. The ECSEL Joint Undertaking replaced and succeeded the ENIAC and ARTEMIS Joint Undertakings, established by Regulations (EC) No 72/2008 and (EC) No 74/2008, the official closure of which took effect on 26 June 2014. The ECSEL Joint Undertaking started working autonomously on 27 June 2014. |
| --- | --- |

1.

The Joint Undertaking for the implementation of the Joint Technology Initiative on Electronic Components and Systems for European Leadership (ECSEL Joint Undertaking), located in Brussels, was set up in May 2014 (1) under the Horizon 2020 Framework programme for Research and Innovation (2) for the period up to 31 December 2024. The ECSEL Joint Undertaking replaced and succeeded the ENIAC and ARTEMIS Joint Undertakings, established by Regulations (EC) No 72/2008 and (EC) No 74/2008, the official closure of which took effect on 26 June 2014. The ECSEL Joint Undertaking started working autonomously on 27 June 2014.

| 2. | The objective of the ECSEL Joint Undertaking is to contribute to the development of a strong and globally competitive electronics components and systems industry in the European Union (EU). It also aims to ensure the availability of electronic components and systems for key markets and for addressing societal challenges, and to maintain and grow semiconductor and smart system manufacturing capability in Europe. Finally, it aims to align strategies with Member States to attract private investment and contribute to the effectiveness of public support by avoiding unnecessary duplication and fragmentation of effort, and by facilitating the participation of actors involved in research and innovation (3). |
| --- | --- |

2.

The objective of the ECSEL Joint Undertaking is to contribute to the development of a strong and globally competitive electronics components and systems industry in the European Union (EU). It also aims to ensure the availability of electronic components and systems for key markets and for addressing societal challenges, and to maintain and grow semiconductor and smart system manufacturing capability in Europe. Finally, it aims to align strategies with Member States to attract private investment and contribute to the effectiveness of public support by avoiding unnecessary duplication and fragmentation of effort, and by facilitating the participation of actors involved in research and innovation (3).

| 3. | The founding members of the Joint Undertaking are the EU, represented by the Commission, the ECSEL Participating States (Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom) and private members represented by the AENEAS, ARTEMISIA and EPoSS Associations of companies and other research organisations active in the field of embedded and cyber-physical systems, smart system integration and micro- and nano-electronics. |
| --- | --- |

3.

The founding members of the Joint Undertaking are the EU, represented by the Commission, the ECSEL Participating States (Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom) and private members represented by the AENEAS, ARTEMISIA and EPoSS Associations of companies and other research organisations active in the field of embedded and cyber-physical systems, smart system integration and micro- and nano-electronics.

| 4. | The maximum EU contribution from Horizon 2020 to the ECSEL Joint Undertaking is 1 185 million euro. A similar amount should come from the ECSEL Participating States, and the private contribution should be at least 1 657,5 million euro. Administrative costs are to be covered entirely by financial contributions (4), whereas operational costs are covered by financial contributions from the EU and the ECSEL Participating States and by in-kind contributions from the private members. |
| --- | --- |

4.

The maximum EU contribution from Horizon 2020 to the ECSEL Joint Undertaking is 1 185 million euro. A similar amount should come from the ECSEL Participating States, and the private contribution should be at least 1 657,5 million euro. Administrative costs are to be covered entirely by financial contributions (4), whereas operational costs are covered by financial contributions from the EU and the ECSEL Participating States and by in-kind contributions from the private members.

| 5. | The ECSEL Joint Undertaking is responsible for the payment of commitments still open on ENIAC and ARTEMIS projects funded under the Seventh Research Framework Programme (FP7) at the time those two Joint Undertakings were officially wound up on 26 June 2014 (see paragraph 23 below). |
| --- | --- |

5.

The ECSEL Joint Undertaking is responsible for the payment of commitments still open on ENIAC and ARTEMIS projects funded under the Seventh Research Framework Programme (FP7) at the time those two Joint Undertakings were officially wound up on 26 June 2014 (see paragraph 23 below).

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 6. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls in the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertaking (or by private audit firms on its behalf) at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations. |
| --- | --- |

6.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls in the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertaking (or by private audit firms on its behalf) at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  7. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the ECSEL Joint Undertaking, which comprise the financial statements (5) and the reports on the implementation of the budget (6) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

7.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the ECSEL Joint Undertaking, which comprise the financial statements (5) and the reports on the implementation of the budget (6) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 8. | In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (7), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.






  (a) | The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (8), and making accounting estimates that are reasonable in the circumstances. The Executive Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |
| --- | --- | --- |

8.

In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (7), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.

(a)

The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (8), and making accounting estimates that are reasonable in the circumstances. The Executive Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.

| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, initiating legal proceedings to recover funds wrongly paid or used. |
| --- | --- |

(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, initiating legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 9. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (9) with a Statement of Assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

9.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (9) with a Statement of Assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 10. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
| --- | --- |

10.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its Statement of Assurance. |
| --- | --- |

11.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its Statement of Assurance.

Opinion on the reliability of the accounts

| 12. | In the Court’s opinion the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

12.

In the Court’s opinion the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Basis for a qualified opinion on the legality and regularity of the underlying transactions

| 13. | The ECSEL Joint Undertaking has taken over the FP7 projects of the ARTEMIS and ENIAC Joint Undertakings. The payments made for these projects by the ECSEL Joint Undertaking in 2015, against certificates of acceptance of costs issued by the national funding authorities (NFAs) of the ECSEL Participating States, amounted to 94,2 million euro, which represents 65 % of the total payments made by the Joint Undertaking in 2015. |
| --- | --- |

13.

The ECSEL Joint Undertaking has taken over the FP7 projects of the ARTEMIS and ENIAC Joint Undertakings. The payments made for these projects by the ECSEL Joint Undertaking in 2015, against certificates of acceptance of costs issued by the national funding authorities (NFAs) of the ECSEL Participating States, amounted to 94,2 million euro, which represents 65 % of the total payments made by the Joint Undertaking in 2015.

| 14. | Administrative agreements concluded by the ARTEMIS and ENIAC Joint Undertakings with the NFAs have continued to apply since those Joint Undertakings were merged to form the ECSEL Joint Undertaking. Under these agreements, the NFAs perform ex post audits of FP7 project payments on behalf of the Joint Undertaking. The ARTEMIS and ENIAC Joint Undertakings’ ex post audit strategies relied heavily on the NFAs to audit project cost claims (10). |
| --- | --- |

14.

Administrative agreements concluded by the ARTEMIS and ENIAC Joint Undertakings with the NFAs have continued to apply since those Joint Undertakings were merged to form the ECSEL Joint Undertaking. Under these agreements, the NFAs perform ex post audits of FP7 project payments on behalf of the Joint Undertaking. The ARTEMIS and ENIAC Joint Undertakings’ ex post audit strategies relied heavily on the NFAs to audit project cost claims (10).

| 15. | The ECSEL Joint Undertaking has taken steps to assess the implementation of ex post audits by the NFAs and has obtained written statements from the NFAs declaring that the implementation of their national procedures provides reasonable assurance on the legality and regularity of transactions. However, the significant variation in the methodologies and procedures used by the NFAs does not allow the ECSEL Joint Undertaking to calculate a single reliable weighted error rate or a residual error rate. Therefore the Court is not in a position to conclude whether ex post audits are functioning effectively and whether this key control provides sufficient assurance as to the legality and regularity of the underlying transactions for FP7 projects (11). |
| --- | --- |

15.

The ECSEL Joint Undertaking has taken steps to assess the implementation of ex post audits by the NFAs and has obtained written statements from the NFAs declaring that the implementation of their national procedures provides reasonable assurance on the legality and regularity of transactions. However, the significant variation in the methodologies and procedures used by the NFAs does not allow the ECSEL Joint Undertaking to calculate a single reliable weighted error rate or a residual error rate. Therefore the Court is not in a position to conclude whether ex post audits are functioning effectively and whether this key control provides sufficient assurance as to the legality and regularity of the underlying transactions for FP7 projects (11).

| 16. | This issue concerning the variation in the methodologies and procedures used by the NFAs is not relevant anymore for the implementation of Horizon 2020 projects, as the ex post audits will be undertaken either by the ECSEL Joint Undertaking or by the Commission (12). |
| --- | --- |

16.

This issue concerning the variation in the methodologies and procedures used by the NFAs is not relevant anymore for the implementation of Horizon 2020 projects, as the ex post audits will be undertaken either by the ECSEL Joint Undertaking or by the Commission (12).

Qualified opinion on the legality and regularity of the transactions underlying the accounts

| 17. | In the Court’s opinion, except for the possible effects of the matter described in paragraphs 13 to 15, the transactions underlying the annual accounts of the ECSEL Joint Undertaking for the financial year ended 31 December 2015 are, in all material respects, legal and regular. |
| --- | --- |

17.

In the Court’s opinion, except for the possible effects of the matter described in paragraphs 13 to 15, the transactions underlying the annual accounts of the ECSEL Joint Undertaking for the financial year ended 31 December 2015 are, in all material respects, legal and regular.

| 18. | The following comments do not call the Court’s opinions into question. |
| --- | --- |

18.

The following comments do not call the Court’s opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Presentation of the accounts

| 19. | By 31 January each year, the members of the Joint Undertaking other than the EU (and Associated Partners) are required to report to the Governing Board on the value of their in-kind contributions made in each of the previous financial years (13). On the basis of this information, and according to the guidance provided by the European Commission to the Joint Undertaking, the members’ in-kind contributions should be entered in the Joint Undertaking’s accounts. |
| --- | --- |

19.

By 31 January each year, the members of the Joint Undertaking other than the EU (and Associated Partners) are required to report to the Governing Board on the value of their in-kind contributions made in each of the previous financial years (13). On the basis of this information, and according to the guidance provided by the European Commission to the Joint Undertaking, the members’ in-kind contributions should be entered in the Joint Undertaking’s accounts.

| 20. | At the time the final accounts were being prepared, the private members of the Joint Undertaking were not in a position to report on the amount of costs actually incurred in implementing Horizon 2020 projects (14). Consequently, the amount of 2015 in-kind contributions for the Horizon 2020 programme entered in the accounts is based on estimates made by the Joint Undertaking of the costs incurred by members up to the end of 2015 (15). |
| --- | --- |

20.

At the time the final accounts were being prepared, the private members of the Joint Undertaking were not in a position to report on the amount of costs actually incurred in implementing Horizon 2020 projects (14). Consequently, the amount of 2015 in-kind contributions for the Horizon 2020 programme entered in the accounts is based on estimates made by the Joint Undertaking of the costs incurred by members up to the end of 2015 (15).

Implementation of the 2015 budget

| 21. | The final 2015 budget available for implementation included commitment appropriations of 108,5 million euro and payment appropriations of 168 million euro. The utilisation rates for commitment and payment appropriations were 99 % and 91 % respectively (16). |
| --- | --- |

21.

The final 2015 budget available for implementation included commitment appropriations of 108,5 million euro and payment appropriations of 168 million euro. The utilisation rates for commitment and payment appropriations were 99 % and 91 % respectively (16).

| 22. | All of the operational commitments made in 2015 (102,5 million euro) were global commitments for which grant agreements were yet to be signed. The level of global commitments reflects the time required for the negotiation procedure for the 2015 calls for Horizon 2020 projects. |
| --- | --- |

22.

All of the operational commitments made in 2015 (102,5 million euro) were global commitments for which grant agreements were yet to be signed. The level of global commitments reflects the time required for the negotiation procedure for the 2015 calls for Horizon 2020 projects.

ECSEL Joint Undertaking multiannual budget implementation under FP7

| 23. | By their closure on 26 June 2014, the ARTEMIS and ENIAC Joint Undertakings had made commitments of 623 million euro (17) for operational activities to be funded from FP7. Payments in the ECSEL Joint Undertaking accounts amounted to 293 million euro (18) (47 % of the operational commitments (19)) by the end of 2015. |
| --- | --- |

23.

By their closure on 26 June 2014, the ARTEMIS and ENIAC Joint Undertakings had made commitments of 623 million euro (17) for operational activities to be funded from FP7. Payments in the ECSEL Joint Undertaking accounts amounted to 293 million euro (18) (47 % of the operational commitments (19)) by the end of 2015.

ECSEL Joint Undertaking multiannual budget implementation under Horizon 2020

| 24. | For the activities launched by the ECSEL Joint Undertaking under Horizon 2020, out of the EU contribution of up to 1 185 million euro to cover operational and administrative costs (20), the Joint Undertaking had made commitments of 257,5 million euro (22 %) and payments of 56 million euro (22 % of the commitments) by the end of 2015. The EU’s cash contribution to the administrative costs of the Joint Undertaking was 1,4 million euro. |
| --- | --- |

24.

For the activities launched by the ECSEL Joint Undertaking under Horizon 2020, out of the EU contribution of up to 1 185 million euro to cover operational and administrative costs (20), the Joint Undertaking had made commitments of 257,5 million euro (22 %) and payments of 56 million euro (22 % of the commitments) by the end of 2015. The EU’s cash contribution to the administrative costs of the Joint Undertaking was 1,4 million euro.

| 25. | The 28 ECSEL Participating States are required to make a financial contribution to the operational costs of the ECSEL Joint Undertaking that is commensurate with the EU’s financial contribution and of at least 1 170 million euro (21). As at April 2016, of the 20 Participating States which took part in the 2014 calls for proposals, nine declared no payments made during the period, eleven declared payments (mainly pre-financings) worth a total of 15,8 million euro. |
| --- | --- |

25.

The 28 ECSEL Participating States are required to make a financial contribution to the operational costs of the ECSEL Joint Undertaking that is commensurate with the EU’s financial contribution and of at least 1 170 million euro (21). As at April 2016, of the 20 Participating States which took part in the 2014 calls for proposals, nine declared no payments made during the period, eleven declared payments (mainly pre-financings) worth a total of 15,8 million euro.

| 26. | The other members are expected to make in-kind contributions of at least 1 657,5 million euro (22). The amount of private members’ in-kind contributions for 2015 has been estimated at 58,7 million euro. The private members’ contributions in cash to the administrative costs of the Joint Undertaking, at 31 December 2015, amounted to 3,6 million euro (23). |
| --- | --- |

26.

The other members are expected to make in-kind contributions of at least 1 657,5 million euro (22). The amount of private members’ in-kind contributions for 2015 has been estimated at 58,7 million euro. The private members’ contributions in cash to the administrative costs of the Joint Undertaking, at 31 December 2015, amounted to 3,6 million euro (23).

OTHER MATTERS

Key controls and supervisory systems

| 27. | The ECSEL Joint Undertaking has set up ex ante control procedures based on financial and operational desk reviews, and is developing ex post audits at beneficiaries of Horizon 2020 grants. For FP7 projects, the ex post audits at beneficiaries have been delegated to the NFAs (24). These checks are key tools to assess the legality and regularity of the underlying transactions, including the cash and in-kind contributions made to the Joint Undertaking by its members other than the EU. |
| --- | --- |

27.

The ECSEL Joint Undertaking has set up ex ante control procedures based on financial and operational desk reviews, and is developing ex post audits at beneficiaries of Horizon 2020 grants. For FP7 projects, the ex post audits at beneficiaries have been delegated to the NFAs (24). These checks are key tools to assess the legality and regularity of the underlying transactions, including the cash and in-kind contributions made to the Joint Undertaking by its members other than the EU.

Anti-Fraud Strategy

| 28. | The Joint Undertaking Financial Rules state that the Joint Undertaking’s budget should be implemented in compliance with effective and efficient internal control standards, including prevention, detection, correction and follow-up of fraud and irregularities (25). |
| --- | --- |

28.

The Joint Undertaking Financial Rules state that the Joint Undertaking’s budget should be implemented in compliance with effective and efficient internal control standards, including prevention, detection, correction and follow-up of fraud and irregularities (25).

| 29. | Following the Commission’s adoption of an Anti-Fraud Strategy in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (26). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings. |
| --- | --- |

29.

Following the Commission’s adoption of an Anti-Fraud Strategy in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (26). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings.

| 30. | Internal control procedures are already in place at the ECSEL Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex ante checks on payments, conflict of interest policy, ex post audits at beneficiaries of grants). However, the Joint Undertaking has not yet made a comprehensive analysis of the new measures introduced by the updated Research Anti-Fraud Strategy. |
| --- | --- |

30.

Internal control procedures are already in place at the ECSEL Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex ante checks on payments, conflict of interest policy, ex post audits at beneficiaries of grants). However, the Joint Undertaking has not yet made a comprehensive analysis of the new measures introduced by the updated Research Anti-Fraud Strategy.

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Monitoring and reporting of project research results

| 31. | As required by Horizon 2020 rules (27), the ECSEL Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (28). |
| --- | --- |

31.

As required by Horizon 2020 rules (27), the ECSEL Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (28).

Conflicts of interest

| 32. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures. |
| --- | --- |

32.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures.

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

---

(1)  Council Regulation (EU) No 561/2014 of 6 May 2014 establishing the ECSEL Joint Undertaking (OJ L 169, 7.6.2014, p. 152).

1

(2)  The Horizon 2020 Framework programme for Research and Innovation, adopted by Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).

2

(3)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

3

Annex

(4)  The following contributions to the administrative costs of the ECSEL Joint Undertaking are to be paid over the period 2014-2017 to complete the actions launched under Regulations (EC) No 72/2008 setting up the ENIAC Joint Undertaking (OJ L 30, 4.2.2008, p. 21) and (EC) No 74/2008 on the establishment of the ARTEMIS Joint Undertaking (OJ L 30, 4.2.2008, p. 52): (a) 2 050 000 euro by the EU; (b) 1 430 000 euro by the AENEAS Association; (c) 975 000 euro by the ARTEMISIA Association.

4

(5)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of the significant accounting policies and other explanatory notes.

5

(6)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

6

(7)  OJ L 38, 7.2.2014, p. 2.

7

(8)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

8

(9)  Article 47 of Delegated Regulation (EU) No 110/2014.

9

(10)  According to the ex post audit strategies adopted by ARTEMIS and ENIAC, the Joint Undertaking must assess at least once a year whether the information received from the Member States provides sufficient assurance as to the regularity and legality of the executed transactions.

10

ex post

(11)  See also Chapter 9 of the ECSEL Joint Undertaking 2015 Annual Activity Report.

11

(12)  Article 13 of Regulation (EU) No 561/2014.

12

(13)  Articles 4(3) and 4(4) of Regulation (EU) No 561/2014.

13

(14)  Article 16(3) of the Statutes of the Joint Undertaking defines the in-kind contribution as the costs incurred by the private members less the financial contributions of the ECSEL Joint Undertaking, the Participating States and any other EU contribution to those costs. However, as recognised by European Commission guidance issued in July 2016, in the specific case of the ECSEL Joint Undertaking ‘the financial contribution to the projects can only be determined at the end of the project when the private members are in a position to calculate their respective in-kind contributions (i.e. many Participating States recognise costs only at the end of the project)’.

14

(15)  The amount of 2015 in-kind contributions for Horizon 2020 is estimated as 58,7 million euro. While the Joint Undertaking used the most accurate information available to calculate the estimated in-kind contributions, this amount has not been certified by independent external auditors (Article 4(5) of Regulation (EU) No 561/2014), nor validated by the Governing Board of the Joint Undertaking.

15

(16)  The implemented payment appropriations of 152,4 million euro (91 %) comprised 64,7 million euro for ENIAC FP7 projects, 27,5 million euro for ARTEMIS FP7 projects, 55,7 million euro for ECSEL 2014 calls for Horizon 2020 projects and 4,5 million euro in administrative expenditure.

16

(17)  181 million euro for ARTEMIS and 442 million euro for ENIAC.

17

(18)  114,5 million euro for ARTEMIS, 178,5 million euro for ENIAC.

18

(19)  63 % for ARTEMIS, 40 % for ENIAC.

19

(20)  Article 3(1) of Regulation (EU) No 561/2014.

20

(21)  Article 4(1) of Regulation (EU) No 561/2014.

21

(22)  Article 4(2) of Regulation (EU) No 561/2014.

22

(23)  At year’s end a cash contribution of 188 000 euro from one of the industry associations had not yet been received; the amount has been fully paid in 2016.

23

(24)  See also paragraph 14 above.

24

(25)  Article 12 of the ECSEL Joint Undertaking Financial Rules.

25

(26)  For example, the setting-up of a Common Support Centre, with a centralised audit service and harmonised business processes for EU research bodies.

26

(27)  Article 31 of Regulation (EU) No 1291/2013.

27

(28)  ECSEL Joint Undertaking 2015 Annual Activity Report, Annexes 5, 6 and 7, p. 71 to 77.

28

---

ANNEX

ECSEL Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 187 and 188 of the Treaty on the Functioning of the European Union) | Council Regulation (EU) No 561/2014 of 6 May 2014 establishing the ECSEL Joint Undertaking.
  Regulation (EU) No 1291/2013 of the European Parliament and of the Council. |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EU) No 561/2014) | Objectives

  The ECSEL Joint Undertaking shall have the following objectives:






  (a) | to contribute to the implementation of Regulation (EU) No 1291/2013, and in particular Part II of Decision 2013/743/EU; |

Areas of Union competence deriving from the Treaty

(Articles 187 and 188 of the Treaty on the Functioning of the European Union)

Council Regulation (EU) No 561/2014 of 6 May 2014 establishing the ECSEL Joint Undertaking.

Regulation (EU) No 1291/2013 of the European Parliament and of the Council.

Competences of the Joint Undertaking

(Council Regulation (EU) No 561/2014)

Objectives

The ECSEL Joint Undertaking shall have the following objectives:

(a)

to contribute to the implementation of Regulation (EU) No 1291/2013, and in particular Part II of Decision 2013/743/EU;

| (b) | to contribute to the development of a strong and globally competitive electronics components and systems industry in the Union; |
| --- | --- |

(b)

to contribute to the development of a strong and globally competitive electronics components and systems industry in the Union;

| (c) | to ensure the availability of electronic components and systems for key markets and for addressing societal challenges, aiming at keeping Europe at the forefront of technology development, bridging the gap between research and exploitation, strengthening innovation capabilities and creating economic and employment growth in the Union; |
| --- | --- |

(c)

to ensure the availability of electronic components and systems for key markets and for addressing societal challenges, aiming at keeping Europe at the forefront of technology development, bridging the gap between research and exploitation, strengthening innovation capabilities and creating economic and employment growth in the Union;

| (d) | to align strategies with Member States to attract private investment and contribute to the effectiveness of public support by avoiding unnecessary duplication and fragmentation of efforts and by facilitating the participation of actors involved in research and innovation; |
| --- | --- |

(d)

to align strategies with Member States to attract private investment and contribute to the effectiveness of public support by avoiding unnecessary duplication and fragmentation of efforts and by facilitating the participation of actors involved in research and innovation;

| (e) | to maintain and grow semiconductor and smart system manufacturing capability in Europe, including leadership in manufacturing equipment and materials processing; |
| --- | --- |

(e)

to maintain and grow semiconductor and smart system manufacturing capability in Europe, including leadership in manufacturing equipment and materials processing;

| (f) | to secure and strengthen a commanding position in design and systems engineering, including embedded technologies; |
| --- | --- |

(f)

to secure and strengthen a commanding position in design and systems engineering, including embedded technologies;

| (g) | to provide access for all stakeholders to a world-class infrastructure for the design and manufacture of electronic components and embedded/cyber-physical and smart systems; and |
| --- | --- |

(g)

to provide access for all stakeholders to a world-class infrastructure for the design and manufacture of electronic components and embedded/cyber-physical and smart systems; and

| (h) | to build a dynamic ecosystem involving small and medium-sized enterprises (SMEs), thereby strengthening existing clusters and nurturing the creation of new clusters in promising new areas. |
| --- | --- |

(h)

to build a dynamic ecosystem involving small and medium-sized enterprises (SMEs), thereby strengthening existing clusters and nurturing the creation of new clusters in promising new areas.

Governance

The JU’s governing body is the Governing Board. The Programme Office is led by an Executive Director. Industry is represented on the Private Members Board. The Commission (representing the EU) and the Participating States make up the Public Authorities Board.

Resources available to the Joint Undertaking in 2015

Budget

107 654 814,00 euro for commitments

161 500 000,00 euro for payments

Staff at 31 December 2015

30 posts provided for in the establishment plan (14 temporary staff, 15 contract staff and 1 seconded expert), of which 28 posts were occupied; these were allocated to: operational activities (13); administrative tasks (12); mixed tasks (3).

Activities and services provided in 2015

See the ECSEL Joint Undertaking Annual Activity Report for 2015 at www.ecsel.eu

Source: information supplied by the ECSEL Joint Undertaking.

---

THE JOINT UNDERTAKING’S REPLY

| 20. | The in-kind contributions for year 2015 have been entered in the final accounts for the financial year 2015, as adopted by the Governing Board, and in accordance with the provisions of the relevant methodology which has been as well validated by the Governing Board in June 2016. |
| --- | --- |

20.

The in-kind contributions for year 2015 have been entered in the final accounts for the financial year 2015, as adopted by the Governing Board, and in accordance with the provisions of the relevant methodology which has been as well validated by the Governing Board in June 2016.

| 30. | The common research anti-fraud strategy of the research family has been endorsed by the JU’s Governing Board on 13 May 2015 (Decision GB-2015-34). From autumn 2015, all staff members of the ECSEL JU involved in the grant management processes participated in the training sessions organised by the European Commission. New sessions are planned.
  In 2016, the ECSEL JU will continue undertaking a number of actions towards improving the internal control environment with regard to the internal policy on fraud prevention. |
| --- | --- |

30.

The common research anti-fraud strategy of the research family has been endorsed by the JU’s Governing Board on 13 May 2015 (Decision GB-2015-34). From autumn 2015, all staff members of the ECSEL JU involved in the grant management processes participated in the training sessions organised by the European Commission. New sessions are planned.

In 2016, the ECSEL JU will continue undertaking a number of actions towards improving the internal control environment with regard to the internal policy on fraud prevention.

---

| 16.12.2016 | EN | Official Journal of the European Union | C 473/33 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/33

---

REPORT

on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/05)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–3 | 34 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 4 | 34 |
| STATEMENT OF ASSURANCE | 5–17 | 34 |
| Opinion on the reliability of the accounts | 10 | 35 |
| Opinion on the legality and regularity of the transactions underlying the accounts | 11 | 35 |
| Emphasis of matter | 12–17 | 36 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 18–19 | 37 |
| Presentation of the accounts | 18 | 37 |
| Implementation of the 2015 budget | 19 | 37 |
| COMMENTS ON KEY CONTROLS IN THE JOINT UNDERTAKING’S SUPERVISORY AND CONTROL SYSTEMS | 20–25 | 37 |
| Operational procurement and grants | 21–22 | 38 |
| Overall control and monitoring of operational procurement contracts and grants | 23–25 | 39 |
| OTHER MATTERS | 26–30 | 39 |
| Anti-fraud strategy | 26 | 39 |
| Legal framework | 27–29 | 39 |
| Annual activity report | 30 | 40 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 31–36 | 40 |
| Intellectual property rights and industrial policy | 31–33 | 40 |
| Host State agreement | 34–35 | 40 |
| Rules implementing the Staff Regulations | 36 | 40 |
| ANNEX | 41 |

Paragraph

Page

INTRODUCTION

1–3

34

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

4

34

STATEMENT OF ASSURANCE

5–17

34

Opinion on the reliability of the accounts

10

35

Opinion on the legality and regularity of the transactions underlying the accounts

11

35

Emphasis of matter

12–17

36

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

18–19

37

Presentation of the accounts

18

37

Implementation of the 2015 budget

19

37

COMMENTS ON KEY CONTROLS IN THE JOINT UNDERTAKING’S SUPERVISORY AND CONTROL SYSTEMS

20–25

37

Operational procurement and grants

21–22

38

Overall control and monitoring of operational procurement contracts and grants

23–25

39

OTHER MATTERS

26–30

39

Anti-fraud strategy

26

39

Legal framework

27–29

39

Annual activity report

30

40

FOLLOW-UP OF PREVIOUS OBSERVATIONS

31–36

40

Intellectual property rights and industrial policy

31–33

40

Host State agreement

34–35

40

Rules implementing the Staff Regulations

36

40

ANNEX

41

INTRODUCTION

| 1. | The European Joint Undertaking for ITER (1) and the Development of Fusion Energy (F4E) was set up in March 2007 (2) for a period of 35 years. While the main fusion facilities were to be developed at Cadarache in France, the Joint Undertaking is located in Barcelona. |
| --- | --- |

1.

The European Joint Undertaking for ITER (1) and the Development of Fusion Energy (F4E) was set up in March 2007 (2) for a period of 35 years. While the main fusion facilities were to be developed at Cadarache in France, the Joint Undertaking is located in Barcelona.

| 2. | The tasks of the Joint Undertaking are (3):






  (a) | to provide Euratom’s contribution to the ITER International Fusion Energy Organisation (4); |
| --- | --- | --- |

2.

The tasks of the Joint Undertaking are (3):

(a)

to provide Euratom’s contribution to the ITER International Fusion Energy Organisation (4);

| (b) | to provide Euratom’s contribution to ‘Broader Approach’ (complementary joint fusion research) activities with Japan for the rapid development of fusion energy; |
| --- | --- |

(b)

to provide Euratom’s contribution to ‘Broader Approach’ (complementary joint fusion research) activities with Japan for the rapid development of fusion energy;

| (c) | to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities, including the International Fusion Materials Irradiation Facility. |
| --- | --- |

(c)

to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities, including the International Fusion Materials Irradiation Facility.

| 3. | The members of the Joint Undertaking are Euratom, represented by the European Commission, the Euratom Member States and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion (as of 31 December 2015: Switzerland). |
| --- | --- |

3.

The members of the Joint Undertaking are Euratom, represented by the European Commission, the Euratom Member States and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion (as of 31 December 2015: Switzerland).

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 4. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls in the supervisory and control systems. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations. |
| --- | --- |

4.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls in the supervisory and control systems. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  5. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the Joint Undertaking for ITER and the Development of Fusion Energy (5), which comprise the financial statements and the reports on the implementation of the budget (6) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

5.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the Joint Undertaking for ITER and the Development of Fusion Energy (5), which comprise the financial statements and the reports on the implementation of the budget (6) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 6. | In accordance with Articles 39 and 50 of Commission Delegated Regulation (EU) No 1271/2013 (7), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.






  (a) | The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (8), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |
| --- | --- | --- |

6.

In accordance with Articles 39 and 50 of Commission Delegated Regulation (EU) No 1271/2013 (7), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.

(a)

The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (8), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.

| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, initiating legal proceedings to recover funds wrongly paid or used. |
| --- | --- |

(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, initiating legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 7. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (9) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the Intosai International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

7.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (9) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the Intosai International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 8. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
| --- | --- |

8.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 9. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

9.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below.

Opinion on the reliability of the accounts

| 10. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

10.

In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

| 11. | In the Court’s opinion, the transactions underlying the annual accounts of the Joint Undertaking for the year ended 31 December 2015 are, in all material respects, legal and regular. |
| --- | --- |

11.

In the Court’s opinion, the transactions underlying the annual accounts of the Joint Undertaking for the year ended 31 December 2015 are, in all material respects, legal and regular.

Emphasis of matter

| 12. | Without calling into question the opinions expressed in paragraphs 10 and 11, the Court draws attention to the following. The Council conclusions adopted on 7 July 2010 (10) approved 6,6 billion euro (in 2008 values) for the Joint Undertaking contribution to the ITER construction phase of the project initially planned for 2020. This figure, which doubled the initial budgeted costs for this phase of the project, did not include 663 million euro proposed by the European Commission in 2010 to cover potential contingencies (11). |
| --- | --- |

12.

Without calling into question the opinions expressed in paragraphs 10 and 11, the Court draws attention to the following. The Council conclusions adopted on 7 July 2010 (10) approved 6,6 billion euro (in 2008 values) for the Joint Undertaking contribution to the ITER construction phase of the project initially planned for 2020. This figure, which doubled the initial budgeted costs for this phase of the project, did not include 663 million euro proposed by the European Commission in 2010 to cover potential contingencies (11).

| 13. | The complexity of ITER activities (12) puts the amount of the Joint Undertaking contribution to the construction phase of the project at significant risk of increasing (13). This risk mainly results from changes in the scope (14) of the project deliverables and delays in the current schedule, which was considered unrealistic (15). The release of a new ITER project baseline (scope, schedule and costs) by the ITER IO Council, initially planned for June 2015, was postponed first to November 2015 and then to June 2016. In its meeting of 15-16 June 2016 the ITER Council endorsed an updated integrated schedule for the ITER project which identifies the date of achievement of the strategic milestone of the construction phase of the project (‘First Plasma’) as December 2025. |
| --- | --- |

13.

The complexity of ITER activities (12) puts the amount of the Joint Undertaking contribution to the construction phase of the project at significant risk of increasing (13). This risk mainly results from changes in the scope (14) of the project deliverables and delays in the current schedule, which was considered unrealistic (15). The release of a new ITER project baseline (scope, schedule and costs) by the ITER IO Council, initially planned for June 2015, was postponed first to November 2015 and then to June 2016. In its meeting of 15-16 June 2016 the ITER Council endorsed an updated integrated schedule for the ITER project which identifies the date of achievement of the strategic milestone of the construction phase of the project (‘First Plasma’) as December 2025.

| 14. | In 2015, F4E launched a major exercise to calculate the estimated cost at completion (EAC) of the Joint Undertaking contribution to the construction phase of the project. The result was an expected cost increase of around 2 375 million euro (16) (using a 50 % confidence level as applicable to major engineering projects) (17). |
| --- | --- |

14.

In 2015, F4E launched a major exercise to calculate the estimated cost at completion (EAC) of the Joint Undertaking contribution to the construction phase of the project. The result was an expected cost increase of around 2 375 million euro (16) (using a 50 % confidence level as applicable to major engineering projects) (17).

| 15. | F4E has not yet updated the valuation of the Joint Undertaking contribution to the ITER project beyond the finalisation of the construction phase. |
| --- | --- |

15.

F4E has not yet updated the valuation of the Joint Undertaking contribution to the ITER project beyond the finalisation of the construction phase.

| 16. | As a result of the challenges faced by the ITER project, in 2015 the Director-General of ITER IO presented to the ITER Council an action plan with specific measures to address the main constraints affecting the development of the project (18). The F4E Governing Board adopted its own action plan, which largely supports that of ITER IO (19). While some key actions started in 2015 (20), the full implementation of both action plans is now subject to decisions adopted by the ITER Council at its meeting of June 2016 as regards the new schedule and resources for the ITER project. |
| --- | --- |

16.

As a result of the challenges faced by the ITER project, in 2015 the Director-General of ITER IO presented to the ITER Council an action plan with specific measures to address the main constraints affecting the development of the project (18). The F4E Governing Board adopted its own action plan, which largely supports that of ITER IO (19). While some key actions started in 2015 (20), the full implementation of both action plans is now subject to decisions adopted by the ITER Council at its meeting of June 2016 as regards the new schedule and resources for the ITER project.

| 17. | The comments which follow do not call the Court’s opinions into question. |
| --- | --- |

17.

The comments which follow do not call the Court’s opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Presentation of the accounts

| 18. | In the notes to the financial statements, the table and the information included under heading 4.3.1.1. ‘ITER Procurement Arrangement (ITER IO)’, reflect the procurement arrangements signed (column 3) and those credited so far (column 4). However, the table does not show the actual degree of advancement of the works in progress. In the 2015 annual accounts, F4E has supplemented this information with an estimate of the work in progress taking into account the total value of spending on contracts linked to PAs, and a chart showing the achievement of milestones for each procurement arrangement signed with ITER IO (21). Despite the estimate presented in the 2015 accounts, further work is needed to present more accurate information on the status and value of the activities carried out so far by the Joint Undertaking (22). |
| --- | --- |

18.

In the notes to the financial statements, the table and the information included under heading 4.3.1.1. ‘ITER Procurement Arrangement (ITER IO)’, reflect the procurement arrangements signed (column 3) and those credited so far (column 4). However, the table does not show the actual degree of advancement of the works in progress. In the 2015 annual accounts, F4E has supplemented this information with an estimate of the work in progress taking into account the total value of spending on contracts linked to PAs, and a chart showing the achievement of milestones for each procurement arrangement signed with ITER IO (21). Despite the estimate presented in the 2015 accounts, further work is needed to present more accurate information on the status and value of the activities carried out so far by the Joint Undertaking (22).

Implementation of the 2015 budget

| 19. | The final 2015 budget available for implementation included commitment appropriations of 467,9 million euro and payment appropriations of 586,08 million euro. The utilisation rates for commitment and payment appropriations were 100 % and 99,9 % respectively. However, the implementation rate for commitment appropriations with respect to the 2015 initial budget was 49 % (23). Out of the 467,9 million euro available for commitment appropriations, 52 % was implemented through direct individual commitments, and the remaining 48 % through global commitments (24). The implementation rate for payment appropriations with respect to the 2015 initial budget was 82 % (25). |
| --- | --- |

19.

The final 2015 budget available for implementation included commitment appropriations of 467,9 million euro and payment appropriations of 586,08 million euro. The utilisation rates for commitment and payment appropriations were 100 % and 99,9 % respectively. However, the implementation rate for commitment appropriations with respect to the 2015 initial budget was 49 % (23). Out of the 467,9 million euro available for commitment appropriations, 52 % was implemented through direct individual commitments, and the remaining 48 % through global commitments (24). The implementation rate for payment appropriations with respect to the 2015 initial budget was 82 % (25).

COMMENTS ON KEY CONTROLS IN THE JOINT UNDERTAKING’S SUPERVISORY AND CONTROL SYSTEMS

| 20. | Significant progress has been achieved in many areas, and the exercise carried out by F4E in 2015 to calculate the EAC for the construction phase of the project was a major achievement (see paragraphs 14 and 15). At the time of the Court’s audit (April 2016), a number of key actions for the management of the Joint Undertaking’s activities were being addressed:






  — | F4E is further developing a central and uniform system for the integration of all the operational, financial and budgeting data, which will allow regular monitoring and control of estimates, costs and deviations. At its meeting of 8-9 June 2015, the Governing Board endorsed a proposal by the Director to implement an Enterprise Resources Planning (ERP) system within 2 years, |
| --- | --- | --- |

20.

Significant progress has been achieved in many areas, and the exercise carried out by F4E in 2015 to calculate the EAC for the construction phase of the project was a major achievement (see paragraphs 14 and 15). At the time of the Court’s audit (April 2016), a number of key actions for the management of the Joint Undertaking’s activities were being addressed:

—

F4E is further developing a central and uniform system for the integration of all the operational, financial and budgeting data, which will allow regular monitoring and control of estimates, costs and deviations. At its meeting of 8-9 June 2015, the Governing Board endorsed a proposal by the Director to implement an Enterprise Resources Planning (ERP) system within 2 years,

| — | F4E has developed a system (Contract Tracker) to manage all the amendments made to contracts under implementation, and to report on deviations and cost impact, |
| --- | --- |

—

F4E has developed a system (Contract Tracker) to manage all the amendments made to contracts under implementation, and to report on deviations and cost impact,

| — | the system to provide information on the value of the degree of the implementation of activities (Earned Value Management) is under discussion with ITER IO with a view to improving the distribution of credit milestones during the life of a procurement arrangement (see paragraph 18), |
| --- | --- |

—

the system to provide information on the value of the degree of the implementation of activities (Earned Value Management) is under discussion with ITER IO with a view to improving the distribution of credit milestones during the life of a procurement arrangement (see paragraph 18),

| — | as regards the overall status of the action plans adopted by F4E in response to previous internal audits (26), at the time of the Court’s audit only five recommendations were still open (27), |
| --- | --- |

—

as regards the overall status of the action plans adopted by F4E in response to previous internal audits (26), at the time of the Court’s audit only five recommendations were still open (27),

| — | in 2015 the Joint Undertaking’s Internal Audit Capability (IAC) completed two engagements, — of neutral beam systems and cryoplant systems. The IAC also performed three follow-up engagements on audits (28) for which all recommendations had been formally closed, |
| --- | --- |

—

in 2015 the Joint Undertaking’s Internal Audit Capability (IAC) completed two engagements, — of neutral beam systems and cryoplant systems. The IAC also performed three follow-up engagements on audits (28) for which all recommendations had been formally closed,

| — | in 2015 the European Commission’s Internal Audit Service (IAS) performed a follow-up of its limited review on the competitive dialogue procedure for the procurement of Tender Batch 03 (Tokamak Complex), conducted in 2013. The IAS acknowledged the efforts made by F4E to implement the recommendations aiming at improving the procurement process in general. Two recommendations remained open (29). The IAS also followed up the outstanding recommendations of its audit of procurement arrangements, conducted in 2012. It concluded that, of the nine recommendations still outstanding after the first follow-up in 2014, seven had been adequately implemented; the other two would be reassessed through a new engagement on the implementation of procurement arrangements (30), |
| --- | --- |

—

in 2015 the European Commission’s Internal Audit Service (IAS) performed a follow-up of its limited review on the competitive dialogue procedure for the procurement of Tender Batch 03 (Tokamak Complex), conducted in 2013. The IAS acknowledged the efforts made by F4E to implement the recommendations aiming at improving the procurement process in general. Two recommendations remained open (29). The IAS also followed up the outstanding recommendations of its audit of procurement arrangements, conducted in 2012. It concluded that, of the nine recommendations still outstanding after the first follow-up in 2014, seven had been adequately implemented; the other two would be reassessed through a new engagement on the implementation of procurement arrangements (30),

| — | in 2015 the Joint Undertaking commissioned an independent assessment of F4E buildings contracts (31). Among other conclusions relating to the delays and cost deviations suffered by F4E in the area of buildings (see paragraphs 13 and 14), the authors reiterated the assessment that the schedule and contingency reserve were unrealistic owing to the low maturity design of the project, |
| --- | --- |

—

in 2015 the Joint Undertaking commissioned an independent assessment of F4E buildings contracts (31). Among other conclusions relating to the delays and cost deviations suffered by F4E in the area of buildings (see paragraphs 13 and 14), the authors reiterated the assessment that the schedule and contingency reserve were unrealistic owing to the low maturity design of the project,

| — | the F4E internal corporate risk management system did not identify any new risks in 2015. Of the 16 actions identified in 2015 to address very high risks, 11 have been implemented, three are still in progress and two have yet to start. |
| --- | --- |

—

the F4E internal corporate risk management system did not identify any new risks in 2015. Of the 16 actions identified in 2015 to address very high risks, 11 have been implemented, three are still in progress and two have yet to start.

Operational procurement and grants

| 21. | Negotiated procedures constituted 45 % of the 84 operational tendering procedures launched in 2015 (58 % in 2014). Although the Joint Undertaking reduced the percentage of negotiated procedures in 2015, efforts are needed to increase the competitiveness of its operational procurement procedures. For grants, the average number of proposals received was 1,4 per call. |
| --- | --- |

21.

Negotiated procedures constituted 45 % of the 84 operational tendering procedures launched in 2015 (58 % in 2014). Although the Joint Undertaking reduced the percentage of negotiated procedures in 2015, efforts are needed to increase the competitiveness of its operational procurement procedures. For grants, the average number of proposals received was 1,4 per call.

| 22. | The Court audited five operational procurement procedures. Significant progress has been achieved in the updating of cost estimates when procurement procedures are launched. However, the following weaknesses were identified:






  — | in one case, the EAC (32) was 21 % higher (4,7 million euro in 2008 values) than the budget allocated to the contract at the time the procedure was launched. In another case there was a 20 % increase (11,9 million euro in 2008 values), |
| --- | --- | --- |

22.

The Court audited five operational procurement procedures. Significant progress has been achieved in the updating of cost estimates when procurement procedures are launched. However, the following weaknesses were identified:

—

in one case, the EAC (32) was 21 % higher (4,7 million euro in 2008 values) than the budget allocated to the contract at the time the procedure was launched. In another case there was a 20 % increase (11,9 million euro in 2008 values),

| — | one procurement procedure was only completed 8 months after the date set out in the procurement strategy. One of the reasons was a three-month delay in completing the tender submission procedure. Consequently, the contract was signed in October 2015 rather than February 2015, as initially planned, |
| --- | --- |

—

one procurement procedure was only completed 8 months after the date set out in the procurement strategy. One of the reasons was a three-month delay in completing the tender submission procedure. Consequently, the contract was signed in October 2015 rather than February 2015, as initially planned,

| — | in one case, although the award notice was published in the Official Journal of the European Union, F4E failed to publish a reference to the notice on its website as required by its Financial Regulation. |
| --- | --- |

—

in one case, although the award notice was published in the Official Journal of the European Union, F4E failed to publish a reference to the notice on its website as required by its Financial Regulation.

Overall control and monitoring of operational procurement contracts and grants

| 23. | The Joint Undertaking has a system for performing audits (33) at contractors with the aim of checking compliance with quality assurance requirements (34). |
| --- | --- |

23.

The Joint Undertaking has a system for performing audits (33) at contractors with the aim of checking compliance with quality assurance requirements (34).

| 24. | The overall control and monitoring of operational contracts (including financial and compliance verification) were covered by the IAC and the European Commission’s Internal Audit Service in their 2015 audit plans (35). |
| --- | --- |

24.

The overall control and monitoring of operational contracts (including financial and compliance verification) were covered by the IAC and the European Commission’s Internal Audit Service in their 2015 audit plans (35).

| 25. | In 2015, F4E performed ex post audits on three beneficiaries of grants it had awarded (36). While F4E is taking the necessary action to correct the identified errors (37), a residual error rate has not been calculated due to the small number of ex post audits carried out so far (38) and the low impact of the grants awarded by F4E on its total budget (39). |
| --- | --- |

25.

In 2015, F4E performed ex post audits on three beneficiaries of grants it had awarded (36). While F4E is taking the necessary action to correct the identified errors (37), a residual error rate has not been calculated due to the small number of ex post audits carried out so far (38) and the low impact of the grants awarded by F4E on its total budget (39).

OTHER MATTERS

Anti-fraud strategy

| 26. | On 8-9 June 2015, the F4E Governing Board adopted an anti-fraud strategy and corresponding action plan. On 9 December 2015 the Joint Undertaking also adopted a Decision on Whistleblowing Rules. At the time of the Court’s audit (April 2016), most of the actions had been implemented and communication was in place, as well as training for all departments of the Joint Undertaking. |
| --- | --- |

26.

On 8-9 June 2015, the F4E Governing Board adopted an anti-fraud strategy and corresponding action plan. On 9 December 2015 the Joint Undertaking also adopted a Decision on Whistleblowing Rules. At the time of the Court’s audit (April 2016), most of the actions had been implemented and communication was in place, as well as training for all departments of the Joint Undertaking.

Legal framework

| 27. | The new Financial Regulation applicable to the general budget of the EU (40) was adopted on 25 October 2012 and took effect on 1 January 2013 (41). The framework financial regulation for the bodies (42) referred to in Article 208 of the new Financial Regulation entered into force on 8 December 2013. |
| --- | --- |

27.

The new Financial Regulation applicable to the general budget of the EU (40) was adopted on 25 October 2012 and took effect on 1 January 2013 (41). The framework financial regulation for the bodies (42) referred to in Article 208 of the new Financial Regulation entered into force on 8 December 2013.

| 28. | On 2 December 2015, the F4E Governing Board finally amended its Financial Regulation and Implementing Rules to align them with the new EU Financial Framework. In February 2016, the European Commission issued a positive opinion on the amendments introduced by F4E in its financial rules, but requested the Joint Undertaking to consider further developing certain provisions in its Implementing Rules relating to specific derogations from the EU Financial Regulation and from the framework financial regulation applicable to the Article 208 bodies (43). |
| --- | --- |

28.

On 2 December 2015, the F4E Governing Board finally amended its Financial Regulation and Implementing Rules to align them with the new EU Financial Framework. In February 2016, the European Commission issued a positive opinion on the amendments introduced by F4E in its financial rules, but requested the Joint Undertaking to consider further developing certain provisions in its Implementing Rules relating to specific derogations from the EU Financial Regulation and from the framework financial regulation applicable to the Article 208 bodies (43).

| 29. | The new F4E Financial Regulation and Implementing Rules entered into force retroactively on 1 January 2016. The new procurement and grant rules entered into force on 1 June 2016. F4E is currently revising those of its working procedures and processes that are affected by the new requirements. |
| --- | --- |

29.

The new F4E Financial Regulation and Implementing Rules entered into force retroactively on 1 January 2016. The new procurement and grant rules entered into force on 1 June 2016. F4E is currently revising those of its working procedures and processes that are affected by the new requirements.

Annual activity report

| 30. | The Chair of F4E Governing Board refers in the 2015 annual activity report of the Joint Undertaking to the cost overruns and delays suffered by the ITER project so far and the expectations to have a new budget and schedule in place by the end of 2016. In addition, the F4E Director confirms that the system of internal control is being further enhanced in order to appropriately mitigate the risks observed by the Court, in particular concerning the amount of the Joint Undertaking’s contribution to the construction phase of the ITER project (44). |
| --- | --- |

30.

The Chair of F4E Governing Board refers in the 2015 annual activity report of the Joint Undertaking to the cost overruns and delays suffered by the ITER project so far and the expectations to have a new budget and schedule in place by the end of 2016. In addition, the F4E Director confirms that the system of internal control is being further enhanced in order to appropriately mitigate the risks observed by the Court, in particular concerning the amount of the Joint Undertaking’s contribution to the construction phase of the ITER project (44).

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Intellectual property rights and industrial policy

| 31. | The Decision on the implementation of the Fusion for Energy Industrial Policy and the policy on intellectual property rights and dissemination of information was adopted by the Joint Undertaking's Governing Board on 27 June 2013. |
| --- | --- |

31.

The Decision on the implementation of the Fusion for Energy Industrial Policy and the policy on intellectual property rights and dissemination of information was adopted by the Joint Undertaking's Governing Board on 27 June 2013.

| 32. | The Joint Undertaking has developed a procurement strategy document for each procurement action. A checklist for monitoring the implementation of the procurement strategy as regards the ownership of the foreground for each procurement action has been drawn up. |
| --- | --- |

32.

The Joint Undertaking has developed a procurement strategy document for each procurement action. A checklist for monitoring the implementation of the procurement strategy as regards the ownership of the foreground for each procurement action has been drawn up.

| 33. | At the time of the audit (April 2016), F4E had implemented the majority of the provisions in the Governing Board Decision of 27 June 2013, though five were not yet fully implemented (45) and three were still pending (46). An impact assessment on the implementation of these policies is planned but has not yet been carried out. |
| --- | --- |

33.

At the time of the audit (April 2016), F4E had implemented the majority of the provisions in the Governing Board Decision of 27 June 2013, though five were not yet fully implemented (45) and three were still pending (46). An impact assessment on the implementation of these policies is planned but has not yet been carried out.

Host State agreement

| 34. | According to the Host State Agreement signed with the Kingdom of Spain on 28 June 2007, permanent premises should have been made available to the Joint Undertaking by June 2010. |
| --- | --- |

34.

According to the Host State Agreement signed with the Kingdom of Spain on 28 June 2007, permanent premises should have been made available to the Joint Undertaking by June 2010.

| 35. | Following contacts between F4E and the Spanish Government, a formal offer was presented to the Joint Undertaking on 10 March 2015. In December 2015, the Host State informed the F4E Governing Board that the discussions at ministerial level to formalise the offer of 10 March 2015 had not been concluded, and offered instead to start negotiations with the owner of the building where F4E is currently located with a view to making it the permanent headquarters of the Joint Undertaking. At the time of the audit (April 2016) this new proposal was under examination by the Joint Undertaking. |
| --- | --- |

35.

Following contacts between F4E and the Spanish Government, a formal offer was presented to the Joint Undertaking on 10 March 2015. In December 2015, the Host State informed the F4E Governing Board that the discussions at ministerial level to formalise the offer of 10 March 2015 had not been concluded, and offered instead to start negotiations with the owner of the building where F4E is currently located with a view to making it the permanent headquarters of the Joint Undertaking. At the time of the audit (April 2016) this new proposal was under examination by the Joint Undertaking.

Rules implementing the Staff Regulations

| 36. | During 2015, the Joint Undertaking continued with its adoption by analogy of several EU rules implementing the Staff Regulations (47). However, certain specific rules for the implementation of the Staff Regulations still remain to be adopted (48). |
| --- | --- |

36.

During 2015, the Joint Undertaking continued with its adoption by analogy of several EU rules implementing the Staff Regulations (47). However, certain specific rules for the implementation of the Staff Regulations still remain to be adopted (48).

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

---

(1)  International Thermonuclear Experimental Reactor.

1

(2)  Council Decision 2007/198/Euratom of 27 March 2007 establishing the European Joint Undertaking for ITER and the Development of Fusion Energy and conferring advantages upon it (OJ L 90, 30.3.2007, p. 58), amended by Council Decision 2013/791/Euratom of 13 December 2013 (OJ L 349, 21.12.2013, p. 100) and Council Decision (Euratom) 2015/224 of 10 February 2015 (OJ L 37, 13.2.2015, p. 8).

2

(3)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

3

Annex

(4)  The ITER International Fusion Energy Organisation was set up in October 2007 for an initial period of 35 years to implement the ITER project, which aims to demonstrate the scientific and technological feasibility of fusion energy. Its Members are Euratom, the People’s Republic of China, the Republic of India, Japan, the Republic of Korea, the Russian Federation and the United States of America.

4

(5)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of the significant accounting policies and other explanatory notes.

5

(6)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

6

(7)  OJ L 328, 7.12.2013, p. 42.

7

(8)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

8

(9)  Article 107 of Delegated Regulation (EU) No 1271/2013.

9

(10)  Council conclusions on ITER status of 7 July 2010 (Ref. 11902/10).

10

(11)  Communication from the Commission to the European Parliament and the Council of 4 May 2010 on ITER status and possible way forward (COM(2010) 226 final).

11

(12)  Resulting in particular from the innovative engineering solutions and technical challenges of many of the in-kind contributions to be provided to ITER International Organisation (ITER IO) and from changes in technical specifications and scope, which are the remit of ITER IO and over which F4E has little or no control.

12

(13)  As also reported in the Fusion for Energy Progress Report to the Council of the European Union of November 2015 and in the 4th Annual Assessment of Fusion for Energy — Report to the Council of the European Union of November 2015.

13

(14)  As regards the project changes request to the in-kind contributions to be provided to ITER IO, the previous system in place for the compensation of the cost increases resulting from these changes (based on the MAC-10 guidelines) proved to be inefficient in detriment of the cost of the F4E contribution to the project. In March 2015, the ITER Council agreed to replace it by a new reserve fund system designed to offset the cost deviations arising from changes in the scope of the domestic agencies’ contributions to the project.

14

(15)  Paragraph 12, footnote 12, of the Court's 2013 report (OJ C 452, 16.12.2014, p. 44).

15

(16)  This estimate includes an additional cash contribution to ITER IO before 2020 of 300 million euro, and 75 million euro related to the transfer of EU procurements to Japan, which was not foreseen in the initial cost baseline. See the Fusion for Energy Progress Report to the Council of the European Union of November 2015.

16

(17)  The new estimate represents an increase of 35 % over the figure approved by the Council in 2010. That it is also greater than the increase of 428 million euro reported by F4E in November 2014 (see paragraph 14 of our report for 2014) is due to the wider scope of the 2015 exercise, which aimed to determine the EAC of the entire construction phase, while the previous exercise only estimated cost deviations on awarded contracts.

17

(18)  On 5 March 2015 the ITER IO Council appointed a new Director-General and endorsed the 2015 ITER IO action plan.

18

(19)  The F4E Governing Board has endorsed the main principles set out in the F4E action plan, in particular the measures to support the creation of a new integrated organisation as envisaged by the new ITER IO Director-General, and has asked that any legal issue affecting the implementation of the action plan be examined.

19

(20)  In particular, the establishment of the reserve fund mechanism, the Executive Project Board and integrated project teams in the area of buildings.

20

(21)  See pages 33 to 35 of the 2015 Provisional Accounts of the Joint Undertaking.

21

(22)  At the time of the audit (April 2016), F4E was reaching an agreement with ITER IO on a modified framework for the distribution of credit throughout the life of a procurement arrangement so as to reflect more accurately the progress achieved by each domestic agency.

22

(23)  The initial budget available for commitment appropriations, adopted on 3 December 2014, was 953,6 million euro. It was reduced to 467,9 million euro in the amending budgets of 9 June and 2 December 2015 because of delays in the implementation of activities relating to the ITER construction budget chapter.

23

(24)  The low implementation rate for individual commitments is explained by the overall delays affecting the ITER project.

24

(25)  The initial budget available for payment appropriations, adopted on 3 December 2014, was 645,09 million euro. It was reduced to 526,08 million euro in the amending budgets of 9 June and 2 December 2015.

25

(26)  Internal audits on financial circuits, grant management, expert contracts, operational pre-procurement activities, procurement in the area of ITER buildings, selection and recruitment, monitoring of contract implementation in the area of ITER buildings, preparation of procurement arrangements, a review of the competitive dialogue procedure for the procurement of Tender Batch 03 (Tokamak Complex) and a limited review on contract management.

26

(27)  One recommendation from the audit of procurement in the area of ITER buildings, two from the review of the competitive dialogue procedure for the procurement of Tender Batch 03 and two from the limited review on contract management.

27

(28)  Follow-up of the audits on grant management, operational pre-procurement activities and financial circuits.

28

(29)  Recommendation 5 ‘improve documentation of public procurement’ (rated important) and recommendation 6 ‘ensure adequate acceptance of deliverables contributed by third parties assisting the procurement’ (rated very important).

29

(30)  Recommendation 7 ‘adopt and implement a Cost Estimate at Completion policy’ (rated critical) and recommendation 9 ‘upgrade the design and content of the IT tool(s) used for planning, reporting and monitoring of the project’ (rated very important).

30

(31)  Independent Project Assessment of the ITER buildings (September-November 2015), presented to F4E Governing Board in December 2015.

31

(32)  F4E defines the EAC as the expected total cost of a scheduled activity, a work breakdown structure component, or the project when the defined scope of work is completed. The cost estimate applied is EAC50: ‘the cost value for which there is a 50 % likelihood that the project will be realised at a cost below this figure and conversely a 50 % likelihood that it will be realised at a cost above this figure’.

32

(33)  Of the 19 quality audits carried out during 2015, 15 were completed by April 2016, three remained open and one was cancelled. The audits identified 33 situations of non-conformity with the procedures and 127 areas for improvement.

33

(34)  The audits cover the quality plan, any situations of non-compliance with a specific requirement, purchase control and subcontracting management, documentation and data management, changes and deviations management, the civil works quality control plan, the detailed project schedule, contract risk management and the technical works quality control plan.

34

(35)  See paragraph 20, third and fourth indents.

35

(36)  The nine grants checked (three for each beneficiary) came to a total of 1 million euro, representing 5 % of all grant beneficiaries and 1,4 % of the total value of signed grant agreements (66 beneficiaries as at April 2016 for a total committed amount of 76 million euro since F4E was established). The financial impact of the detected errors was 26 000 euro in favour of the Joint Undertaking.

36

(37)  Either by offsetting the amount or by issuing a debit note.

37

(38)  Five beneficiaries and a total audited amount of 5,7 million euro, representing 7,5 % of both total beneficiaries and total signed grant agreements since F4E inception.

38

(39)  1,7 % of the 4,4 billion euro in total budget commitments at 31 December 2015 since inception (see Annex I to the 2015 Budgetary and Financial Management Report).

39

(40)  Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (OJ L 298, 26.10.2012, p. 1).

40

(41)  Article 214 of Regulation (EU, Euratom) No 966/2012 with the exemptions referred to.

41

(42)  Commission Delegated Regulation (EU) No 110/2014 on the model financial regulation for public-private partnership bodies (OJ L 38, 7.2.2014, p. 2).

42

(43)  In particular: the criteria for establishing whether a legal commitment may be made before a budgetary commitment (Article 70(2) FR); the criteria for concluding contracts with ITER IO, domestic agencies or Member States hosting ITER IO or F4E without a public procurement procedure (Article 85b FR); the conditions justifying departing from the three-year maximum duration of contracts for additional deliveries under Article 85e FR; and the rules on the establishment by the Governing Board of a list of organisations to which grants may be awarded without a call for proposals, as well as the subsequent use of that list (Article 90c FR).

43

(44)  Annual Report concerning the financial year 2014, paragraph 27 (OJ C 422, 17.12.2015, p. 33).

44

(45)  Guidelines on financial compensation for participation in a competitive dialogue.

45

(46)  Extended waiver from nuclear liabilities; transition to mostly performance-based procurements; explore the possibility of a two-stage competitive dialogue.

46

(47)  In particular as regards recruitment, pensions, remuneration and allowances, working conditions, medical expenses, ethics and conduct, recruitment and staff assigned outside the EU.

47

(48)  Inter alia on recruitment of temporary agents, use and engagement of contract staff, the procedure for the appraisal and promotion of officials, disciplinary proceedings and administrative inquiries.

48

Inter alia

---

ANNEX

European Joint Undertaking for ITER and the Development of Fusion Energy (Barcelona)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 45 and 49 of the Treaty establishing the European Atomic Energy Community) | Chapter 5, on ‘Joint Undertakings’, of the Treaty establishing the European Atomic Energy Community, and in particular:
  Article 45

  ‘Undertakings which are of fundamental importance to the development of the nuclear industry in the Community may be established as Joint Undertakings within the meaning of this Treaty, in accordance with the following Articles ...’

  Article 49

  ‘Joint Undertakings shall be established by Council decision. Each Joint Undertaking shall have legal personality.’ |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Decision 2007/198/Euratom, amended by Council Decision 2013/791/Euratom and by Council Decision(Euratom) 2015/224) | Objectives







  — | to provide the contribution of the European Atomic Energy Community (Euratom) to the ITER International Fusion Energy Organisation, |

Areas of Union competence deriving from the Treaty

(Articles 45 and 49 of the Treaty establishing the European Atomic Energy Community)

Chapter 5, on ‘Joint Undertakings’, of the Treaty establishing the European Atomic Energy Community, and in particular:

Article 45

‘Undertakings which are of fundamental importance to the development of the nuclear industry in the Community may be established as Joint Undertakings within the meaning of this Treaty, in accordance with the following Articles ...’

Article 49

‘Joint Undertakings shall be established by Council decision. Each Joint Undertaking shall have legal personality.’

Competences of the Joint Undertaking

(Council Decision 2007/198/Euratom, amended by Council Decision 2013/791/Euratom and by Council Decision(Euratom) 2015/224)

Objectives

—

to provide the contribution of the European Atomic Energy Community (Euratom) to the ITER International Fusion Energy Organisation,

| — | to provide the contribution of Euratom to Broader Approach activities with Japan for the rapid realisation of fusion energy, |
| --- | --- |

—

to provide the contribution of Euratom to Broader Approach activities with Japan for the rapid realisation of fusion energy,

| — | to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities, including the International Fusion Materials Irradiation Facility (IFMIF). |
| --- | --- |

—

to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities, including the International Fusion Materials Irradiation Facility (IFMIF).

Tasks

| — | oversee preparation of the ITER project site, |
| --- | --- |

—

oversee preparation of the ITER project site,

| — | provide components, equipment, materials and other resources to the ITER Organisation, |
| --- | --- |

—

provide components, equipment, materials and other resources to the ITER Organisation,

| — | manage procurement arrangements vis-à-vis the ITER Organisation and, in particular, associated quality assurance procedures, |
| --- | --- |

—

manage procurement arrangements vis-à-vis the ITER Organisation and, in particular, associated quality assurance procedures,

| — | prepare and coordinate Euratom’s participation in the scientific and technical exploitation of the ITER project, |
| --- | --- |

—

prepare and coordinate Euratom’s participation in the scientific and technical exploitation of the ITER project,

| — | coordinate scientific and technological research and development activities in support of Euratom’s contribution to the ITER Organisation, |
| --- | --- |

—

coordinate scientific and technological research and development activities in support of Euratom’s contribution to the ITER Organisation,

| — | provide Euratom’s financial contribution to the ITER Organisation, |
| --- | --- |

—

provide Euratom’s financial contribution to the ITER Organisation,

| — | arrange to make human resources available for the ITER Organisation, |
| --- | --- |

—

arrange to make human resources available for the ITER Organisation,

| — | interface with the ITER Organisation and carry out any other activities in furtherance of the ITER Agreement. |
| --- | --- |

—

interface with the ITER Organisation and carry out any other activities in furtherance of the ITER Agreement.

Governance

Governing Board, Director and other bodies

The Governing Board is responsible for the supervision of the Joint Undertaking in the pursuit of its objectives and ensures close collaboration between the Joint Undertaking and its members in the implementation of its activities. Together with the Governing Board and the Director, who is the chief executive officer responsible for the day-to-day management of the Joint Undertaking and its legal representative, the Joint Undertaking has several bodies:

Bureau, Technical Advisory Panel, Procurement and Contracts Committee, Administration and Management Committee, Audit Committee, Internal Review Panel.

Internal auditor: internal audit capability and the European Commission’s Internal Audit Service (IAS) since 1 January 2012.

External auditor: European Court of Auditors.

Discharge authority: the European Parliament, on a recommendation from the Council.

Activities and services provided in 2015

For detailed information concerning the activities and services provided in 2015, please consult the F4E website at http://www.fusionforenergy.europa.eu/

Source: European Joint Undertaking for ITER and the Development of Fusion Energy.

---

THE JOINT UNDERTAKING’S REPLY

| 14. | The updated cost Estimate at Completion (EAC) for the direct expenses for the construction of the ITER project was reported in F4E’s 2015 Report to the Council of the European Union. However, it has to be noted that the preliminary figure reported did not include the cash contributions to the ITER Organisation (IO) beyond 2020. The reason for the uncertainty about the required level of the IO cash contributions is that the IO was still working on the revised ITER schedule and its resource requirements which at that time were not approved by the ITER Council.
  During 2016, F4E worked closely with the ITER IO to focus resources on the activities required to reach the First Plasma (FP) milestone.
  At the same time, a new schedule for a phased planning of ITER operations was developed by the ITER IO. The latter was reviewed by an independent expert group appointed by the ITER Council and an updated ITER schedule up to the FP in December 2025 was approved ad referendum
   (1) by the ITER Council in June 2016.
  While the EAC for the direct expenses of F4E for the construction of the ITER project according to the new schedule remains substantially unchanged compared to the estimates reported in December 2015, the work carried out together with ITER Organisation will make possible to determine with more confidence the level of the IO cash contributions beyond 2020.
  Furthermore, F4E has made an estimate of its indicative funding requirements for the completion of the construction phase, and presented this to the Governing Board in June 2016. This estimate is being further refined in view of the ITER Council meeting in November 2016.
  Finally, the Commission is preparing a Communication to the Council and Parliament on the way to progress the ITER project, requesting a mandate on the position the European Union will take in the ITER Council meeting of November 2016. |
| --- | --- |

14.

The updated cost Estimate at Completion (EAC) for the direct expenses for the construction of the ITER project was reported in F4E’s 2015 Report to the Council of the European Union. However, it has to be noted that the preliminary figure reported did not include the cash contributions to the ITER Organisation (IO) beyond 2020. The reason for the uncertainty about the required level of the IO cash contributions is that the IO was still working on the revised ITER schedule and its resource requirements which at that time were not approved by the ITER Council.

During 2016, F4E worked closely with the ITER IO to focus resources on the activities required to reach the First Plasma (FP) milestone.

At the same time, a new schedule for a phased planning of ITER operations was developed by the ITER IO. The latter was reviewed by an independent expert group appointed by the ITER Council and an updated ITER schedule up to the FP in December 2025 was approved ad referendum
   (1) by the ITER Council in June 2016.

While the EAC for the direct expenses of F4E for the construction of the ITER project according to the new schedule remains substantially unchanged compared to the estimates reported in December 2015, the work carried out together with ITER Organisation will make possible to determine with more confidence the level of the IO cash contributions beyond 2020.

Furthermore, F4E has made an estimate of its indicative funding requirements for the completion of the construction phase, and presented this to the Governing Board in June 2016. This estimate is being further refined in view of the ITER Council meeting in November 2016.

Finally, the Commission is preparing a Communication to the Council and Parliament on the way to progress the ITER project, requesting a mandate on the position the European Union will take in the ITER Council meeting of November 2016.

| 16. | While many of the actions laid down in the 2015 ITER and F4E actions plans are specific, there are several which are related to continuous improvement and are of an ongoing nature.
  Out of the six main groups of actions in the 2015 ITER action plan, four have been completed and two are ongoing. F4E has reviewed the 2015 action plan in the light of the decisions taken by the ITER Council in June 2016, and considers that the plan is substantially unaffected.
  In addition, the new F4E Director, upon the request of the Governing Board, is preparing an improvement plan which includes the elements of the 2015 action plan which are still being implemented together with the new priorities that have arisen during 2016, including among others the Straight Road to First Plasma project. |
| --- | --- |

16.

While many of the actions laid down in the 2015 ITER and F4E actions plans are specific, there are several which are related to continuous improvement and are of an ongoing nature.

Out of the six main groups of actions in the 2015 ITER action plan, four have been completed and two are ongoing. F4E has reviewed the 2015 action plan in the light of the decisions taken by the ITER Council in June 2016, and considers that the plan is substantially unaffected.

In addition, the new F4E Director, upon the request of the Governing Board, is preparing an improvement plan which includes the elements of the 2015 action plan which are still being implemented together with the new priorities that have arisen during 2016, including among others the Straight Road to First Plasma project.

| 18. | As for the value of work in progress, F4E uses the amount of achieved ITER credit versus the forecast ITER credit value. F4E is in discussion with ITER IO to agree a credit distribution profile more closely aligned with the progress on each Procurement Arrangement. |
| --- | --- |

18.

As for the value of work in progress, F4E uses the amount of achieved ITER credit versus the forecast ITER credit value. F4E is in discussion with ITER IO to agree a credit distribution profile more closely aligned with the progress on each Procurement Arrangement.

| 19. | The delays in the ITER project have required the ITER parties to adopt a new baseline which defined the First Plasma date as December 2025. The delays have directly affected both individual commitments and payments at F4E, with a final percentage of execution lower than expected at the beginning of the year. With the adoption of a more realistic schedule, the budget planning and implementation will be improved and match more closely the milestones F4E will have to deliver. |
| --- | --- |

19.

The delays in the ITER project have required the ITER parties to adopt a new baseline which defined the First Plasma date as December 2025. The delays have directly affected both individual commitments and payments at F4E, with a final percentage of execution lower than expected at the beginning of the year. With the adoption of a more realistic schedule, the budget planning and implementation will be improved and match more closely the milestones F4E will have to deliver.

| 20. | Central and uniform Data Monitoring and Control System
  In 2015 the F4E Governing Board was informed about the possible implementation of an information system. During the following months preparatory activities were carried out assessing the ‘as is’ status of F4E Information Systems, data quality and process maturity.
  At the beginning of 2016, upon the taking-up of duties of the new Director, an external assessment was carried out, which included an impact study as well as a cost-benefit analysis of various options.
  F4E was advised that the most cost-effective and lowest risk approach would be the step-by-step introduction of appropriate IT tools for cost management. In order to ensure the achievement of the desired improvements to the planning and controlling of costs, an overall data model will be used as the basis to integrate the various IT applications. This will enable the integration of data stemming from the existing modules in project management, Deviation Control, a database for the estimate-at-completion and the fund allocation table for the various projects of F4E. F4E has started to implement these recommendations of the external assessment.

  Contract Tracker

  F4E has indeed implemented Contract Tracker, a documentation exchange portal with the suppliers. It allows the project teams to monitor and control the contract deliverables. When coupled with the Primavera Scheduling platform, milestones and overall project progress can also be monitored. This system is already in its third generation and is adopted for all new contracts.
  In 2015, F4E also decided to develop a Deviation and Amendment to Contracts tool, to handle all contract changes. This tool was developed during 2015, tested in 2016 and its two main modules (F4E deviation towards Supplier and Supplier Deviation) started to be disseminated in July 2016.
  The Deviation and Amendment to Contracts tool covers the execution of the deviation process, including the correct recording of the financial impacts, the verification of the budget availability before creating a commitment and the connection with the Reserve Fund. It is connected to the Contract Tracker platform, so that for a given contract all deviations and its status can be visualised by F4E and the Supplier.

  EVM

  As for the value of work in progress, F4E uses the amount of achieved ITER credit versus the forecast ITER credit value (see reply to paragraph 18).

  Implementation of internal audits

  As of June 2016 F4E implemented all of the internal audit action plans. This was achieved thanks to the strong focus put by F4E management in this particular area of concern, which was noted by the F4E Audit Committee of June 2016.

  IAC reports

  The two engagements in Neutral Beam Systems and Cryoplant Systems were completed in June 2016. The audit on Contracts in the Area of Cryoplant and Fuel Cycle resulted in seven recommendations issued by the IAC, six of which were accepted by F4E management (two Very Important, two Important and two Desirable). The audit on Contracts in the Area of Neutral Beam and Electron Cyclotron Power Supplies and Sources resulted in 15 recommendations, 13 of which were accepted by F4E Management (five Very Important and eight Important).
  Both reports and the respective action plans proposed by F4E management were discussed and positively noted in the Audit Committee of June 2016.

  IAS reports

  The IAS performed a second follow-up of its limited review on the competitive dialogue procedure for the procurement of Tender Batch 03, to review the two actions which had not been closed during the first follow-up. In its final report of 15 June 2016, it acknowledged that for those two recommendations, F4E had recently designed appropriate mitigating actions.
  As the actions were recently implemented, the effectiveness of the measures taken could not be assessed during the IAS visit and will be reassessed in the second part of 2016 in view of closing the recommendations.
  The IAS engagement on the Implementation of Procurement Arrangements, for which the fieldwork took place in the first week of October 2015, is being finalised. F4E received an advance draft report on 7 June 2016 and the exit meeting closing this audit took place with the F4E Director on 8 July. No critical recommendation was reported in the preliminary draft.

  Corporate Risk Management

  As of June 2016 when the last update was carried out and presented to the F4E governance bodies, there are only three very high risks that are closely monitored by F4E Senior Managers. These three risks are being mitigated through seven actions. During the update of June 2016 F4E identified five new actions on top of the two existing ones which are taking more time to implement than initially planned.
  F4E stresses that managing corporate risks is a continuous process and part of the F4E control environment. |
| --- | --- |

20.

In 2015 the F4E Governing Board was informed about the possible implementation of an information system. During the following months preparatory activities were carried out assessing the ‘as is’ status of F4E Information Systems, data quality and process maturity.

At the beginning of 2016, upon the taking-up of duties of the new Director, an external assessment was carried out, which included an impact study as well as a cost-benefit analysis of various options.

F4E was advised that the most cost-effective and lowest risk approach would be the step-by-step introduction of appropriate IT tools for cost management. In order to ensure the achievement of the desired improvements to the planning and controlling of costs, an overall data model will be used as the basis to integrate the various IT applications. This will enable the integration of data stemming from the existing modules in project management, Deviation Control, a database for the estimate-at-completion and the fund allocation table for the various projects of F4E. F4E has started to implement these recommendations of the external assessment.

Contract Tracker

F4E has indeed implemented Contract Tracker, a documentation exchange portal with the suppliers. It allows the project teams to monitor and control the contract deliverables. When coupled with the Primavera Scheduling platform, milestones and overall project progress can also be monitored. This system is already in its third generation and is adopted for all new contracts.

In 2015, F4E also decided to develop a Deviation and Amendment to Contracts tool, to handle all contract changes. This tool was developed during 2015, tested in 2016 and its two main modules (F4E deviation towards Supplier and Supplier Deviation) started to be disseminated in July 2016.

The Deviation and Amendment to Contracts tool covers the execution of the deviation process, including the correct recording of the financial impacts, the verification of the budget availability before creating a commitment and the connection with the Reserve Fund. It is connected to the Contract Tracker platform, so that for a given contract all deviations and its status can be visualised by F4E and the Supplier.

EVM

As for the value of work in progress, F4E uses the amount of achieved ITER credit versus the forecast ITER credit value (see reply to paragraph 18).

Implementation of internal audits

As of June 2016 F4E implemented all of the internal audit action plans. This was achieved thanks to the strong focus put by F4E management in this particular area of concern, which was noted by the F4E Audit Committee of June 2016.

IAC reports

The two engagements in Neutral Beam Systems and Cryoplant Systems were completed in June 2016. The audit on Contracts in the Area of Cryoplant and Fuel Cycle resulted in seven recommendations issued by the IAC, six of which were accepted by F4E management (two Very Important, two Important and two Desirable). The audit on Contracts in the Area of Neutral Beam and Electron Cyclotron Power Supplies and Sources resulted in 15 recommendations, 13 of which were accepted by F4E Management (five Very Important and eight Important).

Both reports and the respective action plans proposed by F4E management were discussed and positively noted in the Audit Committee of June 2016.

IAS reports

The IAS performed a second follow-up of its limited review on the competitive dialogue procedure for the procurement of Tender Batch 03, to review the two actions which had not been closed during the first follow-up. In its final report of 15 June 2016, it acknowledged that for those two recommendations, F4E had recently designed appropriate mitigating actions.

As the actions were recently implemented, the effectiveness of the measures taken could not be assessed during the IAS visit and will be reassessed in the second part of 2016 in view of closing the recommendations.

The IAS engagement on the Implementation of Procurement Arrangements, for which the fieldwork took place in the first week of October 2015, is being finalised. F4E received an advance draft report on 7 June 2016 and the exit meeting closing this audit took place with the F4E Director on 8 July. No critical recommendation was reported in the preliminary draft.

Corporate Risk Management

As of June 2016 when the last update was carried out and presented to the F4E governance bodies, there are only three very high risks that are closely monitored by F4E Senior Managers. These three risks are being mitigated through seven actions. During the update of June 2016 F4E identified five new actions on top of the two existing ones which are taking more time to implement than initially planned.

F4E stresses that managing corporate risks is a continuous process and part of the F4E control environment.

| 21. | F4E is seeking to reduce the use of negotiated procedures as far as possible. However, the high-tech research-oriented nature of the activities related to the ITER project is such that limited competition is regrettably frequent.
  Most opportunities that were in F4E’s hands to increase competition and industrial engagement have been pursued. Exchange of information with similar, first of a kind high-tech frontier projects in Europe shows several commonalities and shared concerns in this area.
  A forum for discussion was initiated with several European organisations in order to develop a common strategy maximising return for all the players. |
| --- | --- |

21.

F4E is seeking to reduce the use of negotiated procedures as far as possible. However, the high-tech research-oriented nature of the activities related to the ITER project is such that limited competition is regrettably frequent.

Most opportunities that were in F4E’s hands to increase competition and industrial engagement have been pursued. Exchange of information with similar, first of a kind high-tech frontier projects in Europe shows several commonalities and shared concerns in this area.

A forum for discussion was initiated with several European organisations in order to develop a common strategy maximising return for all the players.

| 22. | F4E is of the opinion that the comments raised by the ECA on the procurement procedures selected respond to the following reasons:

  EAC

  The value indicated in the allocated budget field did not include any contingency for the risks but only the scope. The EAC50 was done at a later stage and it takes in account uncertainties and risks that may materialise or not during the Contract implementation.

  Delay in one procurement procedure

  The three-month delay was mostly caused by the extension of the date for submitting tenders and the extension of the period for clarification of the expressions of interest and tenders.

  Failure to publish a reference to the award notice at F4E website

  A mistake occurred in the award publication process. The award notice was correctly published in the Official Journal, which constitutes the legal reference for publication, while the website publication is a complementary channel. |
| --- | --- |

22.

F4E is of the opinion that the comments raised by the ECA on the procurement procedures selected respond to the following reasons:

EAC

The value indicated in the allocated budget field did not include any contingency for the risks but only the scope. The EAC50 was done at a later stage and it takes in account uncertainties and risks that may materialise or not during the Contract implementation.

Delay in one procurement procedure

The three-month delay was mostly caused by the extension of the date for submitting tenders and the extension of the period for clarification of the expressions of interest and tenders.

Failure to publish a reference to the award notice at F4E website

A mistake occurred in the award publication process. The award notice was correctly published in the Official Journal, which constitutes the legal reference for publication, while the website publication is a complementary channel.

| 28. | F4E plans to insert such provisions in its implementing rules, following consultation with the Commission, by the end of 2016. |
| --- | --- |

28.

F4E plans to insert such provisions in its implementing rules, following consultation with the Commission, by the end of 2016.

| 29. | The new requirements have been translated into the F4E working procedures (policies, processes, procedures, etc.). |
| --- | --- |

29.

The new requirements have been translated into the F4E working procedures (policies, processes, procedures, etc.).

| 30. | F4E is continuously enhancing its internal control by focussing resources on the ITER deliveries required for the First Plasma milestone while respecting the capped budget until 2020.
  Actions are also underway in F4E to optimise the allocation of human resources to priority areas and in collaboration with the ITER Organisation to freeze the designs and Interfaces as far as possible, as this has been a major cost driver in the past. A project cost control system is being developed to better monitor the evolution of the costs and to manage all the contract changes.
  F4E has also enhanced the monitoring of the project progress and its deliverables (achievement of key milestones, implementation of budget against plan, etc.) through the creation of the Project Management, Infrastructure and Control Department and the introduction of monthly project steering meetings.
  Finally, the structure for ownership and responsibility has been further enhanced as of October 2016 with the creation of a new department that is focusing on commercial and financial issues. The Senior Management team will be reinforced. Further organisational and process streamlining is being implemented in the coming months. |
| --- | --- |

30.

F4E is continuously enhancing its internal control by focussing resources on the ITER deliveries required for the First Plasma milestone while respecting the capped budget until 2020.

Actions are also underway in F4E to optimise the allocation of human resources to priority areas and in collaboration with the ITER Organisation to freeze the designs and Interfaces as far as possible, as this has been a major cost driver in the past. A project cost control system is being developed to better monitor the evolution of the costs and to manage all the contract changes.

F4E has also enhanced the monitoring of the project progress and its deliverables (achievement of key milestones, implementation of budget against plan, etc.) through the creation of the Project Management, Infrastructure and Control Department and the introduction of monthly project steering meetings.

Finally, the structure for ownership and responsibility has been further enhanced as of October 2016 with the creation of a new department that is focusing on commercial and financial issues. The Senior Management team will be reinforced. Further organisational and process streamlining is being implemented in the coming months.

| 32. | The Single Intellectual Property (SIP) document is adopted and in use since several months. In order to formalise SIP use, it was included as an explicit step in all new processes for procurement procedures under the new FR/IR, which were revised and updated in April-June 2016. |
| --- | --- |

32.

The Single Intellectual Property (SIP) document is adopted and in use since several months. In order to formalise SIP use, it was included as an explicit step in all new processes for procurement procedures under the new FR/IR, which were revised and updated in April-June 2016.

| 33. | F4E has completed the action plan and has implemented 28 out of the 32 actions. Four actions were cancelled: one became obsolete, one was superseded by project developments and two were cancelled after unsuccessful negotiation with stakeholders. An impact assessment of F4E’s activities (and the ITER project as a whole) will be performed by the Commission during 2016-2017. |
| --- | --- |

33.

F4E has completed the action plan and has implemented 28 out of the 32 actions. Four actions were cancelled: one became obsolete, one was superseded by project developments and two were cancelled after unsuccessful negotiation with stakeholders. An impact assessment of F4E’s activities (and the ITER project as a whole) will be performed by the Commission during 2016-2017.

| 35. | After the Spanish Ministry acknowledged that the previously proposed building could not provide the necessary working space for F4E staff in the Barcelona headquarters, they started negotiations for a new contract in the existing building.
  F4E received a formal offer for the existing building from the Ministry on 15 April 2016. This offer consisted of a long-term lease agreement for the current premises and an extension of the current office space by approximately 1 000 m2.
  On 28 April, this offer was presented and welcomed by the Bureau of the F4E Governing Board. On 17 May, the Ministry transmitted to F4E the new contract lease, already signed by the building owner.
  On 24 May, F4E Director signed the offer and on 8 June, the Ministry transmitted it back to F4E, signed by the Spanish Secretary of State for Research, Development and Innovation.
  In its meeting at the end of June 2016, the Governing Board of F4E took note of the conclusion of the long-term lease agreement for the F4E offices between the Kingdom of Spain and the building owner and endorsed the plans to refurbish the office space attributed to F4E. |
| --- | --- |

35.

After the Spanish Ministry acknowledged that the previously proposed building could not provide the necessary working space for F4E staff in the Barcelona headquarters, they started negotiations for a new contract in the existing building.

F4E received a formal offer for the existing building from the Ministry on 15 April 2016. This offer consisted of a long-term lease agreement for the current premises and an extension of the current office space by approximately 1 000 m2.

On 28 April, this offer was presented and welcomed by the Bureau of the F4E Governing Board. On 17 May, the Ministry transmitted to F4E the new contract lease, already signed by the building owner.

On 24 May, F4E Director signed the offer and on 8 June, the Ministry transmitted it back to F4E, signed by the Spanish Secretary of State for Research, Development and Innovation.

In its meeting at the end of June 2016, the Governing Board of F4E took note of the conclusion of the long-term lease agreement for the F4E offices between the Kingdom of Spain and the building owner and endorsed the plans to refurbish the office space attributed to F4E.

| 36. | In line with Article 110 of the Staff Regulations and in due respect with the deadlines established by the latter, F4E adopted and approved the following implementing rules in the course of 2015 and the first half of 2016:






  — | use and engagement of temporary agents, |
| --- | --- | --- |

36.

In line with Article 110 of the Staff Regulations and in due respect with the deadlines established by the latter, F4E adopted and approved the following implementing rules in the course of 2015 and the first half of 2016:

—

use and engagement of temporary agents,

| — | appraisal of officials, temporary agents and contract agents, |
| --- | --- |

—

appraisal of officials, temporary agents and contract agents,

| — | unpaid leave, |
| --- | --- |

—

unpaid leave,

| — | promotion, |
| --- | --- |

—

promotion,

| — | reclassification of temporary agents, |
| --- | --- |

—

reclassification of temporary agents,

| — | reclassification of contract agents, |
| --- | --- |

—

reclassification of contract agents,

| — | part-time work, |
| --- | --- |

—

part-time work,

| — | telework, |
| --- | --- |

—

telework,

| — | working time. |
| --- | --- |

—

working time.

The remaining implementing rules are either pending adoption of model decisions applicable to agencies and joint undertakings by the European Commission or under review with the European Commission.

---

(1)  The approval ad referendum is an approval process that is subject to the authorisation of the corresponding needed budgetary resources by the corresponding budgetary and/or financial authority (Budgetary Authority).

---

| 16.12.2016 | EN | Official Journal of the European Union | C 473/47 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/47

---

REPORT

on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/06)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–5 | 48 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 6 | 48 |
| STATEMENT OF ASSURANCE | 7–14 | 49 |
| Opinion on the reliability of the accounts | 12 | 50 |
| Opinion on the legality and regularity of the transactions underlying the accounts | 13 | 50 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 15–23 | 50 |
| Presentation of the accounts | 15–17 | 50 |
| Implementation of the 2015 budget | 18–19 | 50 |
| FCH Joint Undertaking multiannual budget implementation under FP7 | 20–21 | 50 |
| FCH Joint Undertaking multiannual budget implementation under Horizon 2020 | 22–23 | 51 |
| OTHER MATTERS | 24–28 | 51 |
| Key controls and supervisory systems | 24 | 51 |
| Anti-Fraud Strategy | 25–27 | 51 |
| The Commission’s Internal Audit Service (IAS) | 28 | 51 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 29–30 | 52 |
| Monitoring and reporting of project research results | 29 | 52 |
| Conflicts of interest | 30 | 52 |
| ANNEX | 53 |

Paragraph

Page

INTRODUCTION

1–5

48

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

6

48

STATEMENT OF ASSURANCE

7–14

49

Opinion on the reliability of the accounts

12

50

Opinion on the legality and regularity of the transactions underlying the accounts

13

50

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

15–23

50

Presentation of the accounts

15–17

50

Implementation of the 2015 budget

18–19

50

FCH Joint Undertaking multiannual budget implementation under FP7

20–21

50

FCH Joint Undertaking multiannual budget implementation under Horizon 2020

22–23

51

OTHER MATTERS

24–28

51

Key controls and supervisory systems

24

51

Anti-Fraud Strategy

25–27

51

The Commission’s Internal Audit Service (IAS)

28

51

FOLLOW-UP OF PREVIOUS OBSERVATIONS

29–30

52

Monitoring and reporting of project research results

29

52

Conflicts of interest

30

52

ANNEX

53

INTRODUCTION

| 1. | The Joint Undertaking for the implementation of the Joint Technology Initiative on Fuel Cells and Hydrogen (FCH Joint Undertaking), located in Brussels, was set up in May 2008 (1) for the period up to 31 December 2017 and was granted its financial autonomy on 15 November 2010. In May 2014 (2), the Council repealed the original Regulation and extended the lifetime of the Joint Undertaking, referred to as the ‘Fuel Cells and Hydrogen 2 Joint Undertaking’ (FCH 2 Joint Undertaking) (3), under the Horizon 2020 framework programme for research and innovation (4) for the period up to 31 December 2024. |
| --- | --- |

1.

The Joint Undertaking for the implementation of the Joint Technology Initiative on Fuel Cells and Hydrogen (FCH Joint Undertaking), located in Brussels, was set up in May 2008 (1) for the period up to 31 December 2017 and was granted its financial autonomy on 15 November 2010. In May 2014 (2), the Council repealed the original Regulation and extended the lifetime of the Joint Undertaking, referred to as the ‘Fuel Cells and Hydrogen 2 Joint Undertaking’ (FCH 2 Joint Undertaking) (3), under the Horizon 2020 framework programme for research and innovation (4) for the period up to 31 December 2024.

| 2. | The objectives of the FCH Joint Undertaking include supporting research, technological development and demonstration activities in the Member States and countries associated with the seventh research framework programme (FP7) (5) through coordination with industry and research organisations, with a focus on developing market applications and hence facilitating additional industrial efforts towards the rapid deployment of fuel cells and hydrogen technologies. Under Horizon 2020, the objective of the FCH 2 Joint Undertaking is to contribute to the implementation of the societal challenges for secure, clean and efficient energy and for smart, green and integrated transport, and to contribute to the objectives of the Joint Technology Initiative on Fuel Cells and Hydrogen, through the development of a strong, sustainable and globally competitive fuel cells and hydrogen sector in the Union (6). |
| --- | --- |

2.

The objectives of the FCH Joint Undertaking include supporting research, technological development and demonstration activities in the Member States and countries associated with the seventh research framework programme (FP7) (5) through coordination with industry and research organisations, with a focus on developing market applications and hence facilitating additional industrial efforts towards the rapid deployment of fuel cells and hydrogen technologies. Under Horizon 2020, the objective of the FCH 2 Joint Undertaking is to contribute to the implementation of the societal challenges for secure, clean and efficient energy and for smart, green and integrated transport, and to contribute to the objectives of the Joint Technology Initiative on Fuel Cells and Hydrogen, through the development of a strong, sustainable and globally competitive fuel cells and hydrogen sector in the Union (6).

| 3. | The members of the Joint Undertaking are the European Union (EU), represented by the European Commission, the Industry Grouping (Hydrogen Europe (7)) and the Research Grouping (New European Research Grouping on Fuel Cells and Hydrogen (N.ERGHY)). |
| --- | --- |

3.

The members of the Joint Undertaking are the European Union (EU), represented by the European Commission, the Industry Grouping (Hydrogen Europe (7)) and the Research Grouping (New European Research Grouping on Fuel Cells and Hydrogen (N.ERGHY)).

| 4. | The maximum EU contribution from FP7 to the activities of the FCH Joint Undertaking is 470 million euro (with a maximum of 20 million euro for administrative costs), to be matched by the contribution from the Industry and Research Groupings. |
| --- | --- |

4.

The maximum EU contribution from FP7 to the activities of the FCH Joint Undertaking is 470 million euro (with a maximum of 20 million euro for administrative costs), to be matched by the contribution from the Industry and Research Groupings.

| 5. | The maximum EU contribution from Horizon 2020 to the activities of the FCH 2 Joint Undertaking is 665 million euro (of which administrative costs must not exceed 19 million euro (8)). The Industry and Research Groupings are expected to contribute at least as much as the EU through in-kind contributions (9) to the projects funded by the FCH Joint Undertaking and additional activities (10), with a minimum amount of 380 million euro, of which at least 285 million euro should be related to additional activities. |
| --- | --- |

5.

The maximum EU contribution from Horizon 2020 to the activities of the FCH 2 Joint Undertaking is 665 million euro (of which administrative costs must not exceed 19 million euro (8)). The Industry and Research Groupings are expected to contribute at least as much as the EU through in-kind contributions (9) to the projects funded by the FCH Joint Undertaking and additional activities (10), with a minimum amount of 380 million euro, of which at least 285 million euro should be related to additional activities.

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 6. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertaking (or by private audit firms on its behalf) at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations. |
| --- | --- |

6.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertaking (or by private audit firms on its behalf) at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  7. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking, which comprise the financial statements (11) and the reports on the implementation of the budget (12) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

7.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking, which comprise the financial statements (11) and the reports on the implementation of the budget (12) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 8. | In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (13), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.






  (a) | The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (14), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |
| --- | --- | --- |

8.

In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (13), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.

(a)

The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (14), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.

| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. |
| --- | --- |

(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 9. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (15) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the Intosai International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

9.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (15) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the Intosai International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 10. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
| --- | --- |

10.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
| --- | --- |

11.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Opinion on the reliability of the accounts

| 12. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

12.

In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

| 13. | In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular. |
| --- | --- |

13.

In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular.

| 14. | The following comments do not call the Court’s opinions into question. |
| --- | --- |

14.

The following comments do not call the Court’s opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Presentation of the accounts

| 15. | By 31 January each year, the members of the Joint Undertaking other than the EU are required to report to the Governing Board on the value of their in-kind contributions made in each of the previous financial years (16). On the basis of this information, and according to the guidance provided by the European Commission to the Joint Undertaking, the members’ in-kind contributions should be entered in the Joint Undertaking’s accounts. |
| --- | --- |

15.

By 31 January each year, the members of the Joint Undertaking other than the EU are required to report to the Governing Board on the value of their in-kind contributions made in each of the previous financial years (16). On the basis of this information, and according to the guidance provided by the European Commission to the Joint Undertaking, the members’ in-kind contributions should be entered in the Joint Undertaking’s accounts.

| 16. | At the time the final accounts were being prepared, the Joint Undertaking had not received the required reports from its members implementing Horizon 2020 projects. Consequently, the amount of 2015 in-kind contributions for the Horizon 2020 programme entered in the accounts is based on estimates made by the Joint Undertaking of the costs incurred by members up to the end of 2015 (17). |
| --- | --- |

16.

At the time the final accounts were being prepared, the Joint Undertaking had not received the required reports from its members implementing Horizon 2020 projects. Consequently, the amount of 2015 in-kind contributions for the Horizon 2020 programme entered in the accounts is based on estimates made by the Joint Undertaking of the costs incurred by members up to the end of 2015 (17).

| 17. | The accounts issued by the FCH Joint Undertaking do not include the Budgetary Outturn Account, nor the reconciliation table with the Economic Outturn Account. However, both items are published in the Joint Undertaking’s report on budgetary and financial management for 2015, although the level of information provided differs from that given by most other Joint Undertakings, which demonstrates the need for clear Commission guidelines for the Joint Undertakings’ budgetary reporting. |
| --- | --- |

17.

The accounts issued by the FCH Joint Undertaking do not include the Budgetary Outturn Account, nor the reconciliation table with the Economic Outturn Account. However, both items are published in the Joint Undertaking’s report on budgetary and financial management for 2015, although the level of information provided differs from that given by most other Joint Undertakings, which demonstrates the need for clear Commission guidelines for the Joint Undertakings’ budgetary reporting.

Implementation of the 2015 budget

| 18. | The final 2015 budget available for implementation included commitment appropriations of 132,6 million euro and payment appropriations of 95,1 million euro. The utilisation rates for commitment and payment appropriations were 87 % and 83 %, respectively (18). The lower-than-expected implementation rate for commitment appropriations is mainly due to the outcome of the 2015 calls. A number of project proposals were rejected as they did not meet the required quality, resulting in unused commitment appropriations of 13,7 million euro. |
| --- | --- |

18.

The final 2015 budget available for implementation included commitment appropriations of 132,6 million euro and payment appropriations of 95,1 million euro. The utilisation rates for commitment and payment appropriations were 87 % and 83 %, respectively (18). The lower-than-expected implementation rate for commitment appropriations is mainly due to the outcome of the 2015 calls. A number of project proposals were rejected as they did not meet the required quality, resulting in unused commitment appropriations of 13,7 million euro.

| 19. | Of the total operational commitments made in 2015 (193,5 million euro), 42,6 % were individual commitments based on completed award procedures for grants and contracts. The remaining 57,3 % were global commitments for which the award procedure was not completed. The high level of global commitments in 2015 is due to the time required for the evaluation and negotiation procedures for the 2015 calls for proposals for Horizon 2020 projects. |
| --- | --- |

19.

Of the total operational commitments made in 2015 (193,5 million euro), 42,6 % were individual commitments based on completed award procedures for grants and contracts. The remaining 57,3 % were global commitments for which the award procedure was not completed. The high level of global commitments in 2015 is due to the time required for the evaluation and negotiation procedures for the 2015 calls for proposals for Horizon 2020 projects.

FCH Joint Undertaking multiannual budget implementation under FP7

| 20. | Out of a total envelope of 470 million euro for the operational and administrative activities of the FCH Joint Undertaking to be funded by the EU under FP7, the Joint Undertaking made operational commitments of 453,1 million euro and payments of 316 million euro (69,8 % of operational commitments) by the end of 2015. According to the Joint Undertaking’s payment plan for ongoing FP7 projects, the outstanding operational payments of 137 million euro (30,2 %) will be used by the end of 2019. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 9 million euro. |
| --- | --- |

20.

Out of a total envelope of 470 million euro for the operational and administrative activities of the FCH Joint Undertaking to be funded by the EU under FP7, the Joint Undertaking made operational commitments of 453,1 million euro and payments of 316 million euro (69,8 % of operational commitments) by the end of 2015. According to the Joint Undertaking’s payment plan for ongoing FP7 projects, the outstanding operational payments of 137 million euro (30,2 %) will be used by the end of 2019. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 9 million euro.

| 21. | Out of a total envelope of 470 million euro for the other members’ in-kind and cash contributions to cover operational and administrative costs, 342,3 million euro of in-kind contributions to operational activities had been reported to the FCH Joint Undertaking by 31 December 2015, of which 185,6 million euro or 54,2 % have been validated by the Governing Board. The high level of in-kind contributions still to be validated is due to the cost reporting and certification cycle for FP7 projects. The other members’ cash contributions to the administrative costs of the Joint Undertaking amounted to 13 million euro. |
| --- | --- |

21.

Out of a total envelope of 470 million euro for the other members’ in-kind and cash contributions to cover operational and administrative costs, 342,3 million euro of in-kind contributions to operational activities had been reported to the FCH Joint Undertaking by 31 December 2015, of which 185,6 million euro or 54,2 % have been validated by the Governing Board. The high level of in-kind contributions still to be validated is due to the cost reporting and certification cycle for FP7 projects. The other members’ cash contributions to the administrative costs of the Joint Undertaking amounted to 13 million euro.

FCH Joint Undertaking multiannual budget implementation under Horizon 2020

| 22. | Out of a total envelope of 665 million euro for the operational and administrative activities to be funded by the EU under Horizon 2020, the Joint Undertaking made operational commitments amounting to 83,6 million euro and payments amounting to 29,4 million euro (35 % of operational commitments). The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 781 000 euro. |
| --- | --- |

22.

Out of a total envelope of 665 million euro for the operational and administrative activities to be funded by the EU under Horizon 2020, the Joint Undertaking made operational commitments amounting to 83,6 million euro and payments amounting to 29,4 million euro (35 % of operational commitments). The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 781 000 euro.

| 23. | For the other members’ in-kind and cash contributions, out of a total envelope of 665 million euro, the Joint Undertaking estimated that 3,9 million euro of in-kind contributions to operational activities had been incurred by 31 December 2015. The other members’ cash contributions to the Joint Undertaking’s administrative costs amounted to 781 000 euro. |
| --- | --- |

23.

For the other members’ in-kind and cash contributions, out of a total envelope of 665 million euro, the Joint Undertaking estimated that 3,9 million euro of in-kind contributions to operational activities had been incurred by 31 December 2015. The other members’ cash contributions to the Joint Undertaking’s administrative costs amounted to 781 000 euro.

OTHER MATTERS

Key controls and supervisory systems

| 24. | The FCH Joint Undertaking has set up ex ante control procedures based on financial and operational desk reviews, and performs ex post audits of grant beneficiaries. These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions to the Joint Undertaking by its members other than the EU. The residual error rate for the ex post audits reported in the FCH Joint Undertaking Annual Activity Report in 2015 was 0,98 % (19). |
| --- | --- |

24.

The FCH Joint Undertaking has set up ex ante control procedures based on financial and operational desk reviews, and performs ex post audits of grant beneficiaries. These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions to the Joint Undertaking by its members other than the EU. The residual error rate for the ex post audits reported in the FCH Joint Undertaking Annual Activity Report in 2015 was 0,98 % (19).

Anti-fraud strategy

| 25. | According to Article 12 of the Financial Rules of the FCH Joint Undertaking, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities. |
| --- | --- |

25.

According to Article 12 of the Financial Rules of the FCH Joint Undertaking, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities.

| 26. | Following the adoption of an anti-fraud strategy by the European Commission in June 2011, the first common research anti-fraud strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (20). The research anti-fraud strategy includes an action plan to be implemented by the research Joint Undertakings. |
| --- | --- |

26.

Following the adoption of an anti-fraud strategy by the European Commission in June 2011, the first common research anti-fraud strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (20). The research anti-fraud strategy includes an action plan to be implemented by the research Joint Undertakings.

| 27. | Internal control procedures are already in place at the FCH Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities (ex ante checks on payments, conflict of interest policy and ex post audits of final beneficiaries of grants). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (21), in accordance with the agreed timetable. |
| --- | --- |

27.

Internal control procedures are already in place at the FCH Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities (ex ante checks on payments, conflict of interest policy and ex post audits of final beneficiaries of grants). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (21), in accordance with the agreed timetable.

The Commission’s Internal Audit Service (IAS)

| 28. | The IAS completed an audit on the evaluation and selection process for Horizon 2020 grant proposals at the FCH 2 Joint Undertaking in November 2015. The IAS recommended that the Joint Undertaking improve the clarity and transparency of its selection of topics for proposals. The FCH 2 Joint Undertaking is introducing improved procedures during 2016, for the next call for proposals in 2017. |
| --- | --- |

28.

The IAS completed an audit on the evaluation and selection process for Horizon 2020 grant proposals at the FCH 2 Joint Undertaking in November 2015. The IAS recommended that the Joint Undertaking improve the clarity and transparency of its selection of topics for proposals. The FCH 2 Joint Undertaking is introducing improved procedures during 2016, for the next call for proposals in 2017.

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Monitoring and reporting of project research results

| 29. | As required by Horizon 2020 rules (22), the FCH 2 Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (23). |
| --- | --- |

29.

As required by Horizon 2020 rules (22), the FCH 2 Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (23).

Conflicts of interest

| 30. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures. |
| --- | --- |

30.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures.

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

---

(1)  Council Regulation (EC) No 521/2008 of 30 May 2008 setting up the Fuel Cells and Hydrogen Joint Undertaking (OJ L 153, 12.6.2008, p. 1) amended by Council Regulation (EU) No 1183/2011 (OJ L 302, 19.11.2011, p. 3).

1

(2)  Council Regulation (EU) No 559/2014 of 6 May 2014 establishing the Fuel Cells and Hydrogen 2 Joint Undertaking (OJ L 169, 7.6.2014, p. 108).

2

(3)  This report refers to the ‘Fuel Cells and Hydrogen Joint Undertaking’ unless it is necessary to distinguish between the two programmes.

3

(4)  Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).

4

(5)  Decision No 1982/2006/EC of the European Parliament and of the Council (OJ L 412, 30.12.2006, p. 1).

5

(6)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

6

Annex

(7)  Formerly the New Energy World Industry Grouping (NEW-IG).

7

(8)  The administrative costs of the FCH 2 Joint Undertaking shall not exceed 38 million euro and shall be covered through financial contributions divided equally on an annual basis between the Union and the Members other than the Union.

8

(9)  Article 13(3) of the Annex to Regulation (EU) No 559/2014 stipulates that the ‘operational costs of the FCH 2 Joint Undertaking shall be covered through (a) a financial contribution by the Union (b) in-kind contributions by the constituent entities of the Members other than the Union or their affiliated entities participating in the indirect actions, consisting of the costs incurred by them in implementing indirect actions less the contribution of the FCH 2 Joint Undertaking and any other Union contribution to those costs’.

9

(10)  As provided for in Article 4(2)(b) of Regulation (EU) No 559/2014, additional activities are contributions in kind for activities outside the work plan and the budget of the Joint Undertaking but contributing to the objectives of the FCH Joint Technology Initiative. In line with Article 4(4) of the same Regulation, the costs of additional activities must be certified by an independent external auditor and are not subject to audit by the Joint Undertaking or by any EU body.

10

(11)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of the significant accounting policies and other explanatory notes.

11

(12)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

12

(13)  OJ L 38, 7.2.2014, p. 2.

13

(14)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

14

(15)  Article 47 of Delegated Regulation (EU) No 110/2014.

15

(16)  Articles 4(3) and 4(4) of Regulation (EU) No 559/2014.

16

(17)  The amount of 2015 in-kind contributions for Horizon 2020 which is based on estimates is 3,9 million euro. While the Joint Undertaking used the most accurate information available to calculate the estimated in-kind contributions, this amount has not been certified by independent external auditors (Article 4(4) of Regulation (EU) No 559/2014), nor validated by the Executive Director of the Joint Undertaking.

17

(18)  FCH Joint Undertaking Annual Activity Report, p. 28.

18

(19)  FCH Joint Undertaking Annual Activity Report, p. 41. The ex post audits performed during 2015 covered projects funded by the Joint Undertaking under FP7. The audit approach for Horizon 2020 projects is set out in the Research common ex post audit strategy for Horizon 2020. The ex post audits for projects funded by the Joint Undertaking under Horizon 2020 will start in 2016.

19

ex post

ex post

ex post

(20)  For example, the setting-up of a Common Support Centre, with a centralised audit service and harmonised business processes for EU research bodies.

20

(21)  This action also includes assessment of the use of non-EU sources to prevent double funding.

21

(22)  Article 31 of Regulation (EU) No 1291/2013 and Annex II to Council Decision 2013/743/EU (OJ L 347, 20.12.2013, p. 965).

22

(23)  FCH Joint Undertaking Annual Activity Report, Annexes 5, 6 and 7, p. 78 to 83.

23

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ANNEX

Fuel Cells and Hydrogen 2 Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 187 and 188 of the Treaty on the Functioning of the European Union) | Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 providing for public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 187 of the TFEU and Regulation (EU) No 1291/2013 of the European Parliament and of the Council (‘Horizon 2020’) which aims to have a greater impact on research and innovation by combining Horizon 2020 and private-sector funds within public-private partnerships in key areas where research and innovation can contribute to the Union’s wider competitiveness goals, leverage private investment, and help tackle societal challenges.
  Council Regulation (EU) No 559/2014 of 6 May 2014 establishing the FCH 2 Joint Undertaking. |
| --- | --- |
| Competences of the Joint Undertaking


  as defined in Council Regulation (EU) No 559/2014 | Objectives

  The Fuel Cells and Hydrogen 2 Joint Undertaking shall have the following objectives:






  (a) | to contribute to the implementation of Regulation (EU) No 1291/2013, and in particular the Secure, Clean and Efficient Energy Challenge and the Smart, Green and Integrated Transport Challenge under Annex I, Part III to Decision 2013/743/EU; |

Areas of Union competence deriving from the Treaty

(Articles 187 and 188 of the Treaty on the Functioning of the European Union)

Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 providing for public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 187 of the TFEU and Regulation (EU) No 1291/2013 of the European Parliament and of the Council (‘Horizon 2020’) which aims to have a greater impact on research and innovation by combining Horizon 2020 and private-sector funds within public-private partnerships in key areas where research and innovation can contribute to the Union’s wider competitiveness goals, leverage private investment, and help tackle societal challenges.

Council Regulation (EU) No 559/2014 of 6 May 2014 establishing the FCH 2 Joint Undertaking.

Competences of the Joint Undertaking

as defined in Council Regulation (EU) No 559/2014

Objectives

The Fuel Cells and Hydrogen 2 Joint Undertaking shall have the following objectives:

(a)

to contribute to the implementation of Regulation (EU) No 1291/2013, and in particular the Secure, Clean and Efficient Energy Challenge and the Smart, Green and Integrated Transport Challenge under Annex I, Part III to Decision 2013/743/EU;

| (b) | to contribute to the objectives of the Joint Technology Initiative on Fuel Cells and Hydrogen, through the development of a strong, sustainable and globally competitive fuel cells and hydrogen sector in the Union. |
| --- | --- |

(b)

to contribute to the objectives of the Joint Technology Initiative on Fuel Cells and Hydrogen, through the development of a strong, sustainable and globally competitive fuel cells and hydrogen sector in the Union.

It shall, in particular, aim to:

| (a) | reduce the production cost of fuel cell systems to be used in transport applications, while increasing their lifetime to levels which can compete with conventional technologies; |
| --- | --- |

(a)

reduce the production cost of fuel cell systems to be used in transport applications, while increasing their lifetime to levels which can compete with conventional technologies;

| (b) | increase the electrical efficiency and the durability of the different fuel cells used for power production to levels which can compete with conventional technologies, while reducing costs; |
| --- | --- |

(b)

increase the electrical efficiency and the durability of the different fuel cells used for power production to levels which can compete with conventional technologies, while reducing costs;

| (c) | increase the energy efficiency of the production of hydrogen mainly from water electrolysis and renewable sources while reducing operating and capital costs, so that the combined system of hydrogen production and conversion using the fuel cell system can compete with the alternatives for electricity production available on the market; |
| --- | --- |

(c)

increase the energy efficiency of the production of hydrogen mainly from water electrolysis and renewable sources while reducing operating and capital costs, so that the combined system of hydrogen production and conversion using the fuel cell system can compete with the alternatives for electricity production available on the market;

| (d) | demonstrate on a large scale the feasibility of using hydrogen to support the integration of renewable energy sources into energy systems, including through its use as a competitive energy storage medium for electricity produced from renewable energy sources; |
| --- | --- |

(d)

demonstrate on a large scale the feasibility of using hydrogen to support the integration of renewable energy sources into energy systems, including through its use as a competitive energy storage medium for electricity produced from renewable energy sources;

| (e) | reduce the use of the EU-defined ‘Critical raw materials’, for instance through low-platinum or platinum-free resources and through recycling or reducing or avoiding the use of rare earth elements. |
| --- | --- |

(e)

reduce the use of the EU-defined ‘Critical raw materials’, for instance through low-platinum or platinum-free resources and through recycling or reducing or avoiding the use of rare earth elements.

Governance

as defined in Council Regulation (EU) No 559/2014

The bodies of the FCH 2 Joint Undertaking are:

| | 1. | The Governing Board
  The Governing Board is the main decision-making body of the FCH 2 Joint Undertaking. |
| --- | --- | --- |

1.

The Governing Board is the main decision-making body of the FCH 2 Joint Undertaking.

| | 2. | The Executive Director
  The Executive Director is responsible for the day-to-day management of the Joint Undertaking and is its legal representative. He is accountable to the Governing Board. |
| --- | --- | --- |

2.

The Executive Director is responsible for the day-to-day management of the Joint Undertaking and is its legal representative. He is accountable to the Governing Board.

| | 3. | The Scientific Committee
  Composed of up to nine members reflecting a balanced representation of world-class expertise from academia, industry and regulatory bodies. Its tasks are to:






  (a) | advise on the scientific priorities to be addressed in the annual work plans; |
| --- | --- | --- | --- |

3.

Composed of up to nine members reflecting a balanced representation of world-class expertise from academia, industry and regulatory bodies. Its tasks are to:

(a)

advise on the scientific priorities to be addressed in the annual work plans;

| (b) | advise on the scientific achievements described in the annual activity report. |
| --- | --- |

(b)

advise on the scientific achievements described in the annual activity report.

The external advisory bodies to the FCH 2 Joint Undertaking are:

| | 4. | The FCH States Representatives Group
  It consists of one representative of each Member State and country associated to H2020.
  The States Representatives Group shall be consulted and, in particular, review information and provide opinions on the following matters:






  (a) | the programme progress in the FCH 2 Joint Undertaking and the achievement of its targets; |
| --- | --- | --- | --- |

4.

It consists of one representative of each Member State and country associated to H2020.

The States Representatives Group shall be consulted and, in particular, review information and provide opinions on the following matters:

(a)

the programme progress in the FCH 2 Joint Undertaking and the achievement of its targets;

| (b) | the updating of strategic orientation; |
| --- | --- |

(b)

the updating of strategic orientation;

| (c) | the links to Horizon 2020; |
| --- | --- |

(c)

the links to Horizon 2020;

| (d) | the annual work plans; |
| --- | --- |

(d)

the annual work plans;

| (e) | the involvement of SMEs. |
| --- | --- |

(e)

the involvement of SMEs.

The States Representatives Group shall also provide information to and act as an interface with the FCH 2 Joint Undertaking on the following matters:

| (a) | the status of relevant national or regional research and innovation programmes and identification of potential areas of cooperation, including deployment of FCH technologies to allow synergies and avoid overlaps; |
| --- | --- |

(a)

the status of relevant national or regional research and innovation programmes and identification of potential areas of cooperation, including deployment of FCH technologies to allow synergies and avoid overlaps;

| (b) | specific measures taken at national or regional level with regard to dissemination events, dedicated technical workshops and communication activities. |
| --- | --- |

(b)

specific measures taken at national or regional level with regard to dissemination events, dedicated technical workshops and communication activities.

| | 5. | The Stakeholder Forum
  The SF is an important communication channel for FCH 2 JU activities and is open to all public and private stakeholders and international interest groups in the Member States, associated countries and other countries. It is convened once a year. The SF is informed of the activities of the FCH 2 Joint Undertaking and is invited to provide comments. |
| --- | --- | --- |

5.

The SF is an important communication channel for FCH 2 JU activities and is open to all public and private stakeholders and international interest groups in the Member States, associated countries and other countries. It is convened once a year. The SF is informed of the activities of the FCH 2 Joint Undertaking and is invited to provide comments.

The internal and external auditors and the discharge authority of the FCH 2 Joint Undertaking are:

| | 6. | Internal audit
  Commission’s Internal Audit Service (IAS). |
| --- | --- | --- |

6.

Commission’s Internal Audit Service (IAS).

| | 7. | External audit
  European Court of Auditors. |
| --- | --- | --- |

7.

European Court of Auditors.

| | 8. | Discharge authority
  Parliament on a recommendation of the Council. |
| --- | --- | --- |

8.

Parliament on a recommendation of the Council.

Resources available to the Joint Undertaking in 2015

FCH 2 Joint Undertaking 2015 final accounts

Budget (commitment appropriations)

132,6  million euro

Budget (payment appropriations)

95,1  million euro

Staff at 31 December 2015

2015 establishment plan of 26 staff posts (24 temporary members of staff and 2 contract staff), entirely filled at year end 2015; these were assigned to support operational activities (18 FTE) and to administrative tasks (8 FTE).

Activities and services provided in 2015

See the FCH 2 JU Annual Activity Report for 2015 at

http://www.fch.europa.eu/page/annual-activity-reports

Source: information supplied by the FCH 2 Joint Undertaking.

---

THE JOINT UNDERTAKING’S REPLY

| 15-16. | In accordance with the H2020 IKOP methodology endorsed by the FCH 2 JU Governing Board in November 2015 and in line with the EC position of July 2016, the following was agreed:






  (1) | IKOP consists in eligible cost less FCH contribution; |
| --- | --- | --- |

15-16.

In accordance with the H2020 IKOP methodology endorsed by the FCH 2 JU Governing Board in November 2015 and in line with the EC position of July 2016, the following was agreed:

(1)

IKOP consists in eligible cost less FCH contribution;

| (2) | certification is done with CFS at the end of the project; |
| --- | --- |

(2)

certification is done with CFS at the end of the project;

| (3) | annual reporting will also include certified IKOP based on the costs certified and validated by the JU by 31/12. |
| --- | --- |

(3)

annual reporting will also include certified IKOP based on the costs certified and validated by the JU by 31/12.

In line with the methodology, the accounts as at 31 December 2015 include the estimated IKOP under liabilities.

As the first reporting under projects is due in September 2016, no costs have been validated by the JU in 2015.

| 17. | The EC will issue a guidance note on what should be included in the implementation reports and FCH will present the annual accounts accordingly in 2016. |
| --- | --- |

17.

The EC will issue a guidance note on what should be included in the implementation reports and FCH will present the annual accounts accordingly in 2016.

| 28. | The procedure for selection and drafting of topics was endorsed by the FCH 2 JU Governing Board on 29 June 2016 and is already implemented in 2016 for call for proposals 2017. |
| --- | --- |

28.

The procedure for selection and drafting of topics was endorsed by the FCH 2 JU Governing Board on 29 June 2016 and is already implemented in 2016 for call for proposals 2017.

| 30. | Approval of common rules for staff based on the EC template is in process. Similarly rules for other bodies of the JU will be submitted to the Governing Board for adoption by year end 2016. |
| --- | --- |

30.

Approval of common rules for staff based on the EC template is in process. Similarly rules for other bodies of the JU will be submitted to the Governing Board for adoption by year end 2016.

---

| 16.12.2016 | EN | Official Journal of the European Union | C 473/57 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/57

---

REPORT

on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/07)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–5 | 58 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 6 | 58 |
| STATEMENT OF ASSURANCE | 7–14 | 58 |
| Opinion on the reliability of the accounts | 12 | 60 |
| Opinion on the legality and regularity of the transactions underlying the accounts | 13 | 60 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 15–21 | 60 |
| Presentation of the accounts | 15 | 60 |
| Implementation of the 2015 budget | 16–17 | 60 |
| IMI Joint Undertaking multiannual budget implementation under FP7 | 18–19 | 60 |
| IMI Joint Undertaking multiannual budget implementation under Horizon 2020 | 20–21 | 60 |
| OTHER MATTERS | 22–26 | 61 |
| Key controls and supervisory systems | 22 | 61 |
| Anti-Fraud Strategy | 23–25 | 61 |
| The Commission’s Internal Audit Service (IAS) | 26 | 61 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 27–28 | 61 |
| Monitoring and reporting of project research results | 27 | 61 |
| Conflicts of interest | 28 | 62 |
| ANNEX | 62 |

Paragraph

Page

INTRODUCTION

1–5

58

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

6

58

STATEMENT OF ASSURANCE

7–14

58

Opinion on the reliability of the accounts

12

60

Opinion on the legality and regularity of the transactions underlying the accounts

13

60

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

15–21

60

Presentation of the accounts

15

60

Implementation of the 2015 budget

16–17

60

IMI Joint Undertaking multiannual budget implementation under FP7

18–19

60

IMI Joint Undertaking multiannual budget implementation under Horizon 2020

20–21

60

OTHER MATTERS

22–26

61

Key controls and supervisory systems

22

61

Anti-Fraud Strategy

23–25

61

The Commission’s Internal Audit Service (IAS)

26

61

FOLLOW-UP OF PREVIOUS OBSERVATIONS

27–28

61

Monitoring and reporting of project research results

27

61

Conflicts of interest

28

62

ANNEX

62

INTRODUCTION

| 1. | The Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (IMI Joint Undertaking), located in Brussels, was set up in December 2007 (1) for a period of 10 years and started working autonomously on 16 November 2009. In May 2014 (2), the Council repealed the original Regulation and entrusted the Joint Undertaking, referred to as the ‘Initiative on Innovative Medicines 2 Joint Undertaking’ (IMI 2 Joint Undertaking) (3), with new tasks under the Horizon 2020 Framework programme for Research and Innovation (4) and extended the lifetime of the Joint Undertaking for the period up to 31 December 2024. |
| --- | --- |

1.

The Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (IMI Joint Undertaking), located in Brussels, was set up in December 2007 (1) for a period of 10 years and started working autonomously on 16 November 2009. In May 2014 (2), the Council repealed the original Regulation and entrusted the Joint Undertaking, referred to as the ‘Initiative on Innovative Medicines 2 Joint Undertaking’ (IMI 2 Joint Undertaking) (3), with new tasks under the Horizon 2020 Framework programme for Research and Innovation (4) and extended the lifetime of the Joint Undertaking for the period up to 31 December 2024.

| 2. | The objective of the IMI Joint Undertaking under the Seventh Research Framework Programme (FP7) (5) is to significantly improve the efficiency and effectiveness of the drug development process, with the long-term aim that the pharmaceutical sector produces more effective and safer innovative medicines. Under Horizon 2020, the objective of the IMI 2 Joint Undertaking is to improve health by speeding up the development of, and patient access to, innovative medicines, particularly in areas where there is an unmet medical or social need. It does this by fostering collaboration between the key players involved in healthcare research, including universities, the pharmaceutical and other industries, small- and medium-sized enterprises (SMEs), patient organisations and medicines regulators (6). |
| --- | --- |

2.

The objective of the IMI Joint Undertaking under the Seventh Research Framework Programme (FP7) (5) is to significantly improve the efficiency and effectiveness of the drug development process, with the long-term aim that the pharmaceutical sector produces more effective and safer innovative medicines. Under Horizon 2020, the objective of the IMI 2 Joint Undertaking is to improve health by speeding up the development of, and patient access to, innovative medicines, particularly in areas where there is an unmet medical or social need. It does this by fostering collaboration between the key players involved in healthcare research, including universities, the pharmaceutical and other industries, small- and medium-sized enterprises (SMEs), patient organisations and medicines regulators (6).

| 3. | The Founding Members of the Joint Undertaking are the European Union (EU), represented by the European Commission, and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Other Members and Associated Partners may also join the programme. |
| --- | --- |

3.

The Founding Members of the Joint Undertaking are the European Union (EU), represented by the European Commission, and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Other Members and Associated Partners may also join the programme.

| 4. | The maximum EU contribution to the IMI Joint Undertaking, for research activities and administrative costs (7), is one billion euros to be paid from FP7. Contributions from pharmaceutical sector members must be equal to the EU contribution. |
| --- | --- |

4.

The maximum EU contribution to the IMI Joint Undertaking, for research activities and administrative costs (7), is one billion euros to be paid from FP7. Contributions from pharmaceutical sector members must be equal to the EU contribution.

| 5. | The maximum EU financial contribution from Horizon 2020 to the activities of the IMI 2 Joint Undertaking is 1 638 million euros, of which up to 1 425 million to match the contribution of the pharmaceutical sector and up to 213 million to match contributions from other companies that decide to join IMI 2 as Associated Partners. The members must contribute equally to the administrative costs (which should not exceed 85,2 million euros for the IMI 2 Joint Undertaking). |
| --- | --- |

5.

The maximum EU financial contribution from Horizon 2020 to the activities of the IMI 2 Joint Undertaking is 1 638 million euros, of which up to 1 425 million to match the contribution of the pharmaceutical sector and up to 213 million to match contributions from other companies that decide to join IMI 2 as Associated Partners. The members must contribute equally to the administrative costs (which should not exceed 85,2 million euros for the IMI 2 Joint Undertaking).

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 6. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex-post audits carried out by the Joint Undertaking at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations. |
| --- | --- |

6.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex-post audits carried out by the Joint Undertaking at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  7. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the Innovative Medicines Initiative Joint Undertaking, which comprise the financial statements (8) and the reports on the implementation of the budget (9) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

7.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the Innovative Medicines Initiative Joint Undertaking, which comprise the financial statements (8) and the reports on the implementation of the budget (9) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 8. | In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (10), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.






  (a) | The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (11), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |
| --- | --- | --- |

8.

In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (10), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.

(a)

The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (11), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.

| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. |
| --- | --- |

(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 9. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (12) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

9.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (12) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 10. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |
| --- | --- |

10.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts.

| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
| --- | --- |

11.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Opinion on the reliability of the accounts

| 12. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

12.

In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

| 13. | In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular. |
| --- | --- |

13.

In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular.

| 14. | The following comments do not call the Court’s opinions into question. |
| --- | --- |

14.

The following comments do not call the Court’s opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Presentation of the accounts

| 15. | The final annual accounts issued by the IMI Joint Undertaking do not include the Budget Outturn Account nor the reconciliation table to the Economic Outturn Account. However, both items are published in the Joint Undertaking’s report on budgetary an financial management 2015, although the level of information differs from that given by most other Joint Undertakings, which demonstrates the need for clear Commission guidelines for the Joint Undertakings’ budgetary reporting. |
| --- | --- |

15.

The final annual accounts issued by the IMI Joint Undertaking do not include the Budget Outturn Account nor the reconciliation table to the Economic Outturn Account. However, both items are published in the Joint Undertaking’s report on budgetary an financial management 2015, although the level of information differs from that given by most other Joint Undertakings, which demonstrates the need for clear Commission guidelines for the Joint Undertakings’ budgetary reporting.

Implementation of the 2015 budget

| 16. | The final 2015 budget available for implementation included commitment appropriations of 315,3 million euros and payment appropriations of 195,4 million euros. The utilisation rates for commitment and payment appropriations were 91 % and 73 %, respectively. The lower-than-expected implementation rate for payment appropriations was mainly due to delays in the negotiations for several Horizon 2020 projects, for which pre-financing payments were made in early 2016 (13). |
| --- | --- |

16.

The final 2015 budget available for implementation included commitment appropriations of 315,3 million euros and payment appropriations of 195,4 million euros. The utilisation rates for commitment and payment appropriations were 91 % and 73 %, respectively. The lower-than-expected implementation rate for payment appropriations was mainly due to delays in the negotiations for several Horizon 2020 projects, for which pre-financing payments were made in early 2016 (13).

| 17. | Of the total operational commitments made in 2015 (420,3 million euros), 50,2 % were individual commitments based on completed award procedures for grants and contracts. The remaining 49,8 % were global commitments for which the award procedure was not completed. The level of individual commitments in 2015 is due to delays in the negotiation procedure regarding the 2015 calls for Horizon 2020 projects. |
| --- | --- |

17.

Of the total operational commitments made in 2015 (420,3 million euros), 50,2 % were individual commitments based on completed award procedures for grants and contracts. The remaining 49,8 % were global commitments for which the award procedure was not completed. The level of individual commitments in 2015 is due to delays in the negotiation procedure regarding the 2015 calls for Horizon 2020 projects.

IMI Joint Undertaking multiannual budget implementation under FP7

| 18. | Out of one billion euros for the operational and administrative activities of the IMI Joint Undertaking to be funded by the EU under FP7, the Joint Undertaking made commitments of 966 million euros and payments of 538,1 million euros (55,7 % of operational commitments) by the end of 2015. The high level of outstanding operational payments of 427,9 million euros (44,3 %) was mainly due to the slow and delayed start of activities during the first years of the Joint Undertaking and will be used to cover future payments for the signed grant agreements running until the end of 2021. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 27,2 million euros. |
| --- | --- |

18.

Out of one billion euros for the operational and administrative activities of the IMI Joint Undertaking to be funded by the EU under FP7, the Joint Undertaking made commitments of 966 million euros and payments of 538,1 million euros (55,7 % of operational commitments) by the end of 2015. The high level of outstanding operational payments of 427,9 million euros (44,3 %) was mainly due to the slow and delayed start of activities during the first years of the Joint Undertaking and will be used to cover future payments for the signed grant agreements running until the end of 2021. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 27,2 million euros.

| 19. | Out of one billion euros for the other members’ in-kind and cash contributions, 503,1 million euros of in-kind contributions to operational activities had been reported to the IMI Joint Undertaking by 31 December 2015, of which 321,8 million euros or 63,9 % have been validated by the Governing Board. The other members’ cash contributions to the Joint Undertaking’s administrative costs amounted to 14,2 million euros. |
| --- | --- |

19.

Out of one billion euros for the other members’ in-kind and cash contributions, 503,1 million euros of in-kind contributions to operational activities had been reported to the IMI Joint Undertaking by 31 December 2015, of which 321,8 million euros or 63,9 % have been validated by the Governing Board. The other members’ cash contributions to the Joint Undertaking’s administrative costs amounted to 14,2 million euros.

IMI Joint Undertaking multiannual budget implementation under Horizon 2020

| 20. | Out of a total envelope of 1 638 million euros for the operational and administrative activities to be funded by the EU under Horizon 2020, the Joint Undertaking made operational commitments amounting to 351,7 million euros and payments amounting to 45,9 million euros (13 % of operational commitments). The low level of payments is mainly due to delays in negotiating the Horizon 2020 agreements with the industry partner. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 1,2 million euros. |
| --- | --- |

20.

Out of a total envelope of 1 638 million euros for the operational and administrative activities to be funded by the EU under Horizon 2020, the Joint Undertaking made operational commitments amounting to 351,7 million euros and payments amounting to 45,9 million euros (13 % of operational commitments). The low level of payments is mainly due to delays in negotiating the Horizon 2020 agreements with the industry partner. The EU cash contribution to the Joint Undertaking’s administrative costs amounted to 1,2 million euros.

| 21. | For the other members’ in-kind and cash contributions, out of a total envelope of 1 638 million euros, 68,6 million euros had been reported to the Joint Undertaking by 31 December 2015. The other members’ cash contributions to the Joint Undertaking’s administrative costs amounted to 2,8 million euros. |
| --- | --- |

21.

For the other members’ in-kind and cash contributions, out of a total envelope of 1 638 million euros, 68,6 million euros had been reported to the Joint Undertaking by 31 December 2015. The other members’ cash contributions to the Joint Undertaking’s administrative costs amounted to 2,8 million euros.

OTHER MATTERS

Key controls and supervisory systems

| 22. | The IMI Joint Undertaking has set up ex-ante control procedures based on financial and operational desk reviews, and performs ex post audits of grant beneficiaries. These checks are key tools for assessing the legality and regularity of the underlying transactions, including cash and in-kind contributions to the Joint Undertaking by members other than the EU. The residual rate for the ex-post audits reported in the IMI Joint Undertaking 2015 annual activity report was 1,5 % (14). |
| --- | --- |

22.

The IMI Joint Undertaking has set up ex-ante control procedures based on financial and operational desk reviews, and performs ex post audits of grant beneficiaries. These checks are key tools for assessing the legality and regularity of the underlying transactions, including cash and in-kind contributions to the Joint Undertaking by members other than the EU. The residual rate for the ex-post audits reported in the IMI Joint Undertaking 2015 annual activity report was 1,5 % (14).

Anti-Fraud Strategy

| 23. | According to Article 12 of the Joint Undertaking’s Financial Rules, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities. |
| --- | --- |

23.

According to Article 12 of the Joint Undertaking’s Financial Rules, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities.

| 24. | Following the adoption of an Anti-Fraud Strategy by the Commission in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (15). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings. |
| --- | --- |

24.

Following the adoption of an Anti-Fraud Strategy by the Commission in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012, and updated in March 2015 to take account of changes introduced by Horizon 2020 (15). The Research Anti-Fraud Strategy includes an action plan to be implemented by the research Joint Undertakings.

| 25. | Internal control procedures are already in place at the IMI Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex-ante checks on payments, conflict of interest policy and ex-post audits at grant beneficiaries). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (16), in accordance with the agreed timetable. |
| --- | --- |

25.

Internal control procedures are already in place at the IMI Joint Undertaking to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex-ante checks on payments, conflict of interest policy and ex-post audits at grant beneficiaries). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (16), in accordance with the agreed timetable.

The Commission’s Internal Audit Service (IAS)

| 26. | In February 2015, the IAS concluded an audit on ex-ante controls for grant management at the IMI 2 Joint Undertaking. The IAS recommended that the Joint Undertaking should make its ex-ante controls more effective by using a more risk-based and balanced approach, and should reinforce control procedures for the Certificates on Financial Statements (17). The IMI 2 Joint Undertaking is implementing the IAS audit recommendations, and taking the Court’s observations on these issues into account. |
| --- | --- |

26.

In February 2015, the IAS concluded an audit on ex-ante controls for grant management at the IMI 2 Joint Undertaking. The IAS recommended that the Joint Undertaking should make its ex-ante controls more effective by using a more risk-based and balanced approach, and should reinforce control procedures for the Certificates on Financial Statements (17). The IMI 2 Joint Undertaking is implementing the IAS audit recommendations, and taking the Court’s observations on these issues into account.

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Monitoring and reporting of project research results

| 27. | As required by Horizon 2020 rules (18), the IMI 2 Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (19). |
| --- | --- |

27.

As required by Horizon 2020 rules (18), the IMI 2 Joint Undertaking disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (19).

Conflicts of interest

| 28. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures. |
| --- | --- |

28.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures.

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

---

(1)  Council Regulation (EC) No 73/2008 of 20 December 2007 setting up the Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (OJ L 30, 4.2.2008, p. 38).

1

(2)  Council Regulation (EU) No 557/2014 of 6 May 2014 establishing the Innovative Medicines Initiative 2 Joint Undertaking (OJ L 169, 7.6.2014, p. 54).

2

(3)  This report refers to the ‘Initiative on Innovative Medicines Joint Undertaking’ unless it is necessary to distinguish between the two programmes.

3

(4)  Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).

4

(5)  Decision No 1982/2006/EC of the European Parliament and of the Council (OJ L 412, 30.12.2006, p. 1).

5

(6)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

6

Annex

(7)  Administrative costs shall be financed by the JU’s members. For JU activities under FP7, the founding members shall contribute on an equal level, each of them with an amount not exceeding 4 % of the total financial contribution by the EU to the IMI JU. Any other member shall contribute in proportion to its total contribution towards research activities.

7

(8)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of the significant accounting policies and other explanatory notes.

8

(9)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

9

(10)  OJ L 38, 7.2.2014, p. 2.

10

(11)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

11

(12)  Article 47 of Delegated Regulation (EU) No 110/2014.

12

(13)  See annex to the 2015 budgetary and financial report, p. 11.

13

(14)  For a detailed description of the underlying ex-post audit methodology, together with the number of ex-post audits and the amounts covered, see IMI 2015 Annual Activity Report, pp. 107-110. The ex-post audits performed during 2015 covered projects funded by the Joint Undertaking under FP7. The audit approach for Horizon 2020 projects is set out in the Research common ex-post audit strategy for Horizon 2020. The ex-post audits for projects funded by the Joint Undertaking under Horizon 2020 will start in 2016.

14

ex-post

ex-post

ex-post

ex-post

ex-post

(15)  For example, the setting-up of the Common Support Service, with a centralised audit service and harmonised business processes for the EU research bodies.

15

(16)  This action also includes assessment of the use of non-EU funding sources to prevent double funding.

16

(17)  The IMI model grant agreement (Annex II, Section 2 — Reporting and Payments, p. 7) states that: ‘[...] 4. A certificate on the financial statements shall be submitted by each participant when the amount of costs claimed is equal to or superior to EUR 375 000, when cumulated with all previous cost statements for which a certificate on the financial statements has not been submitted and in any case at the end of the project for any amount not previously certified’.

17

4. A certificate on the financial statements shall be submitted by each participant when the amount of costs claimed is equal to or superior to EUR 375 000, when cumulated with all previous cost statements for which a certificate on the financial statements has not been submitted and in any case at the end of the project for any amount not previously certified’.

(18)  Article 31 of Regulation (EU) No 1291/2013.

18

(19)  See IMI 2015 Annual Activity Report, Annexes 5, 6 and 7, pp. 118-132.

19

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ANNEX

Innovative Medicines Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  Extracts from Articles 187 and 188 of the Treaty on the Functioning of the European Union | The Union may set up joint undertakings or any other structure necessary for the efficient execution of Union research, technological development and demonstration programmes.
  The Council, on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, shall adopt the provisions referred to in Article 187.
  The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall adopt the provisions referred to in Articles 183, 184 and 185. Adoption of the supplementary programmes shall require the agreement of the Member States concerned. |
| --- | --- |
| Competences of the Joint Undertaking


  Council Regulation (EU) No 557/2014 of 6 May 2014 establishing the Innovative Medicines Initiative 2 Joint Undertaking (OJ L 169, 7.6.2014, p. 54). | Objectives

  According to Article 2 of Council Regulation (EU) No 557/2014, the IMI2 Joint Undertaking shall have the following objectives:






  (a) | to support, in accordance with Article 25 of Regulation (EU) No 1291/2013, the development and implementation of pre-competitive research and of innovation activities of strategic importance to the Union’s competitiveness and industrial leadership or to address specific societal challenges, in particular as described in parts II and III of Annex I to Decision 2013/743/EU, and in particular the challenge to improve European citizens’ health and well-being; |

Areas of Union competence deriving from the Treaty

Extracts from Articles 187 and 188 of the Treaty on the Functioning of the European Union

The Union may set up joint undertakings or any other structure necessary for the efficient execution of Union research, technological development and demonstration programmes.

The Council, on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, shall adopt the provisions referred to in Article 187.

The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall adopt the provisions referred to in Articles 183, 184 and 185. Adoption of the supplementary programmes shall require the agreement of the Member States concerned.

Competences of the Joint Undertaking

Council Regulation (EU) No 557/2014 of 6 May 2014 establishing the Innovative Medicines Initiative 2 Joint Undertaking (OJ L 169, 7.6.2014, p. 54).

Objectives

According to Article 2 of Council Regulation (EU) No 557/2014, the IMI2 Joint Undertaking shall have the following objectives:

(a)

to support, in accordance with Article 25 of Regulation (EU) No 1291/2013, the development and implementation of pre-competitive research and of innovation activities of strategic importance to the Union’s competitiveness and industrial leadership or to address specific societal challenges, in particular as described in parts II and III of Annex I to Decision 2013/743/EU, and in particular the challenge to improve European citizens’ health and well-being;

| (b) | to contribute to the objectives of the Joint Technology Initiative on Innovative Medicines, in particular to:






  (i) | increase the success rate in clinical trials of priority medicines identified by the World Health Organisation; |
| --- | --- | --- |

(b)

to contribute to the objectives of the Joint Technology Initiative on Innovative Medicines, in particular to:

(i)

increase the success rate in clinical trials of priority medicines identified by the World Health Organisation;

| (ii) | where possible, reduce the time to reach clinical proof of concept in medicine development, such as for cancer, immunological, respiratory, neurological and neurodegenerative diseases; |
| --- | --- |

(ii)

where possible, reduce the time to reach clinical proof of concept in medicine development, such as for cancer, immunological, respiratory, neurological and neurodegenerative diseases;

| (iii) | develop new therapies for diseases for which there is a high unmet need, such as Alzheimer’s disease, and limited market incentives, such as antimicrobial resistance; |
| --- | --- |

(iii)

develop new therapies for diseases for which there is a high unmet need, such as Alzheimer’s disease, and limited market incentives, such as antimicrobial resistance;

| (iv) | develop diagnostic and treatment biomarkers for diseases clearly linked to clinical relevance and approved by regulators; |
| --- | --- |

(iv)

develop diagnostic and treatment biomarkers for diseases clearly linked to clinical relevance and approved by regulators;

| (v) | reduce the failure rate of vaccine candidates in phase III clinical trials through new biomarkers for initial efficacy and safety checks; |
| --- | --- |

(v)

reduce the failure rate of vaccine candidates in phase III clinical trials through new biomarkers for initial efficacy and safety checks;

| (vi) | improve the current drug development process by providing support for the development of tools, standards and approaches to assess efficacy, safety and quality of regulated health products. |
| --- | --- |

(vi)

improve the current drug development process by providing support for the development of tools, standards and approaches to assess efficacy, safety and quality of regulated health products.

Governance

Governance bodies of the IMI2 JU are (i) the Governing Board, (ii) the Executive Director, (iii) the Scientific Committee, (iv) the States

Representatives Group, and (v) the Stakeholder Forum. Other advisory groups may be set up by the Governing Board.

The Governing Board is composed of 10 members representing equally the two Members of the Joint Undertaking: the European Union (represented by the European Commission) and the European Federation of Pharmaceutical Industries and Associations (EFPIA). The Governing Board has overall responsibility for the strategic orientation and the operations of the IMI2 Joint Undertaking and supervises the implementation of its activities.

The Executive Director is the chief executive responsible for the day-to-day management of the IMI2 JU in accordance with the decisions of the Governing Board and is supported by a Programme Office. The Executive Director is the legal representative of the IMI2 JU and shall implement the budget of the JU.

The Scientific Committee, the States Representatives Group and the Stakeholder Forum are advisory bodies of the IMI2 JU.

Strategic Governing Groups set up by the Governing Board ensure the coordination of IMI2 JU’s work in certain strategic areas and work to make the development of new topics for calls for proposals more transparent and efficient.

Resources available to the Joint Undertaking in 2015

Budget

315 255 931 euros for commitments

195 397 810 euros for payments

These amounts include appropriations carried over from 2014 and exclude amounts recovered during the year.

Staff as at 31 December 2015

The establishment plan for 2015 provided for 35 temporary staff and 9 contract staff positions. 31 temporary and 4 contract posts were occupied. 80 % of these resources are directly assigned to support operational activities.

Activities and services provided in 2015

The IMI2 JU’s 2015 Annual Activity Report 2015 will be available online at

www.imi.europa.eu

Source: Information supplied by IMI2 JU.

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THE JOINT UNDERTAKING’S REPLY

| 12 and 13. | IMI welcomes the positive conclusion of the Court on the reliability of its accounts as well as on the legality and regularity of all transactions underlying the annual accounts 2015.
  IMI remains committed to managing its funding under the principle of sound financial management and through a trust-based approach with the participants in the projects whilst ensuring sufficient control and accountability. |
| --- | --- |

12 and 13.

IMI welcomes the positive conclusion of the Court on the reliability of its accounts as well as on the legality and regularity of all transactions underlying the annual accounts 2015.

IMI remains committed to managing its funding under the principle of sound financial management and through a trust-based approach with the participants in the projects whilst ensuring sufficient control and accountability.

| 15. | The 2015 final Report on Budgetary and Financial Management was sent to all stakeholders on 30 March 2016. Meanwhile, the methodological corrections requested by the auditors can only be implemented in the 2016 report.
  Since September 2015, IMI Joint Undertaking (JU) has outsourced the function of Accounting Officer to the Accounting Officer of the European Commission. The different level of details is based on the Commission reporting practices. IMI JU strongly supports the Court’s recommendation on establishing guidelines for the budget reporting. |
| --- | --- |

15.

The 2015 final Report on Budgetary and Financial Management was sent to all stakeholders on 30 March 2016. Meanwhile, the methodological corrections requested by the auditors can only be implemented in the 2016 report.

Since September 2015, IMI Joint Undertaking (JU) has outsourced the function of Accounting Officer to the Accounting Officer of the European Commission. The different level of details is based on the Commission reporting practices. IMI JU strongly supports the Court’s recommendation on establishing guidelines for the budget reporting.

| 20. | Under IMI2 (H2020 programme) EUR 45,9 million were paid as pre-financings for the signed Grant Agreements. The first cost claims were due in Q1 2016. |
| --- | --- |

20.

Under IMI2 (H2020 programme) EUR 45,9 million were paid as pre-financings for the signed Grant Agreements. The first cost claims were due in Q1 2016.

| 21. | IMI2 JU Council Regulation stipulates that EUR 1 425 million is committed to the programme by EFPIA companies as in kind contribution. 11 grant agreements signed under IMI2 programme contain a commitment of EUR 123,5 million for in kind contribution. IMI2 has validated EUR 47,2 million following the ex-ante review of the audit certificate received. |
| --- | --- |

21.

IMI2 JU Council Regulation stipulates that EUR 1 425 million is committed to the programme by EFPIA companies as in kind contribution. 11 grant agreements signed under IMI2 programme contain a commitment of EUR 123,5 million for in kind contribution. IMI2 has validated EUR 47,2 million following the ex-ante review of the audit certificate received.

| 23. | The IMI2 JU Anti-Fraud Strategy was adopted by its Governing Board on 22 July 2015. The strategy is aligned with the Common Anti-Fraud Strategy for the Research family approved on 7 February 2015.
  The IMI2 JU Anti-Fraud Strategy (AFS) adopts principles and identifies actions to address common risks shared with the Common Research AFS as well as specific targets linked with its particular nature of Public Private Partnership and the specificities of its operational tasks. |
| --- | --- |

23.

The IMI2 JU Anti-Fraud Strategy was adopted by its Governing Board on 22 July 2015. The strategy is aligned with the Common Anti-Fraud Strategy for the Research family approved on 7 February 2015.

The IMI2 JU Anti-Fraud Strategy (AFS) adopts principles and identifies actions to address common risks shared with the Common Research AFS as well as specific targets linked with its particular nature of Public Private Partnership and the specificities of its operational tasks.

| 26. | IMI has progressed in the implementation of the actions agreed with the IAS as specified in the Action plan approved on 13 March 2015.
  IMI has implemented a recommendation on reinforcement of control procedures for Certificates on Financial Statements (CFS), leading IAS to acknowledge this. In this regard, IMI has established a standard operating procedure, internal guidance for CFS review and more detailed guidance for beneficiaries and CFS auditors. A separate guidance is established for EFPIA companies working on the basis of the certified methodology and preparing CFS at the end of the project.
  IAS confirmed that IMI management implemented a recommendation on risk-based approach to ex-ante controls by means of a risk assessment of the system in place and by streamlining internal procedures. |
| --- | --- |

26.

IMI has progressed in the implementation of the actions agreed with the IAS as specified in the Action plan approved on 13 March 2015.

IMI has implemented a recommendation on reinforcement of control procedures for Certificates on Financial Statements (CFS), leading IAS to acknowledge this. In this regard, IMI has established a standard operating procedure, internal guidance for CFS review and more detailed guidance for beneficiaries and CFS auditors. A separate guidance is established for EFPIA companies working on the basis of the certified methodology and preparing CFS at the end of the project.

IAS confirmed that IMI management implemented a recommendation on risk-based approach to ex-ante controls by means of a risk assessment of the system in place and by streamlining internal procedures.

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| 16.12.2016 | EN | Official Journal of the European Union | C 473/66 |
| --- | --- | --- | --- |

16.12.2016

EN

Official Journal of the European Union

C 473/66

---

REPORT

on the annual accounts of the Single European Sky Air Traffic Management Research Joint Undertaking for the financial year 2015, together with the Joint Undertaking’s reply

(2016/C 473/08)

CONTENTS

| | Paragraph | Page |
| --- | --- | --- |
| INTRODUCTION | 1–5 | 67 |
| INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE | 6 | 67 |
| STATEMENT OF ASSURANCE | 7–14 | 68 |
| Opinion on the reliability of the accounts | 12 | 69 |
| Opinion on the legality and regularity of the transactions underlying the accounts | 13–14 | 69 |
| COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT | 15–20 | 69 |
| Implementation of the 2015 budget | 15–16 | 69 |
| SESAR Joint Undertaking multiannual budget implementation under FP7 and TEN-T | 17–19 | 69 |
| SESAR Joint Undertaking multiannual budget implementation under Horizon 2020 | 20 | 70 |
| OTHER MATTERS | 21–25 | 70 |
| Key controls and supervisory systems | 21 | 70 |
| Anti-Fraud Strategy | 22–24 | 70 |
| The Commission’s Internal Audit Service (IAS) | 25 | 70 |
| FOLLOW-UP OF PREVIOUS OBSERVATIONS | 26–27 | 70 |
| Monitoring and reporting of project research results | 26 | 70 |
| Conflicts of interest | 27 | 70 |
| ANNEX | | 72 |

Paragraph

Page

INTRODUCTION

1–5

67

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

6

67

STATEMENT OF ASSURANCE

7–14

68

Opinion on the reliability of the accounts

12

69

Opinion on the legality and regularity of the transactions underlying the accounts

13–14

69

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

15–20

69

Implementation of the 2015 budget

15–16

69

SESAR Joint Undertaking multiannual budget implementation under FP7 and TEN-T

17–19

69

SESAR Joint Undertaking multiannual budget implementation under Horizon 2020

20

70

OTHER MATTERS

21–25

70

Key controls and supervisory systems

21

70

Anti-Fraud Strategy

22–24

70

The Commission’s Internal Audit Service (IAS)

25

70

FOLLOW-UP OF PREVIOUS OBSERVATIONS

26–27

70

Monitoring and reporting of project research results

26

70

Conflicts of interest

27

70

ANNEX

72

INTRODUCTION

| 1. | The Single European Sky Air Traffic Management Research (SESAR) Joint Undertaking, located in Brussels, was set up in February 2007 (1) in order to manage the technological component of the SESAR project and started to work autonomously on 10 August 2007. In June 2014 (2), the Council amended the original Regulation and extended the lifetime of the Joint Undertaking for the period up to 31 December 2024. |
| --- | --- |

1.

The Single European Sky Air Traffic Management Research (SESAR) Joint Undertaking, located in Brussels, was set up in February 2007 (1) in order to manage the technological component of the SESAR project and started to work autonomously on 10 August 2007. In June 2014 (2), the Council amended the original Regulation and extended the lifetime of the Joint Undertaking for the period up to 31 December 2024.

| 2. | The SESAR project aims to modernise air traffic management (ATM) in Europe and is divided into three phases:






  — | A ‘definition phase’ (2004-2007) led by the European Organisation for the Safety of Air Navigation (Eurocontrol), with co-financing from the European Union budget through the Trans-European Networks — Transport (TEN-T) programme. The outcome was the European ATM Master Plan, which defines the content and describes the development and deployment of the next generation of ATM systems. |
| --- | --- | --- |

2.

The SESAR project aims to modernise air traffic management (ATM) in Europe and is divided into three phases:

—

A ‘definition phase’ (2004-2007) led by the European Organisation for the Safety of Air Navigation (Eurocontrol), with co-financing from the European Union budget through the Trans-European Networks — Transport (TEN-T) programme. The outcome was the European ATM Master Plan, which defines the content and describes the development and deployment of the next generation of ATM systems.

| — | A two-term ‘development phase’ (2008–2013, extended to 2015) managed by the SJU and leading to the production of new technological systems, components and operational procedures as defined in the European ATM Master Plan. |
| --- | --- |

—

A two-term ‘development phase’ (2008–2013, extended to 2015) managed by the SJU and leading to the production of new technological systems, components and operational procedures as defined in the European ATM Master Plan.

| — | A ‘deployment phase’ (2014-2024) to be led by industry and stakeholders for the large-scale production and implementation of the new ATM infrastructure. |
| --- | --- |

—

A ‘deployment phase’ (2014-2024) to be led by industry and stakeholders for the large-scale production and implementation of the new ATM infrastructure.

| 3. | Under the Horizon 2020 Framework programme for Research and Innovation (3), the Council entrusted the SJU with continuing research and innovation relating to air traffic management and in particular to the coordinated approach, in the context of the Single European Sky, in order to achieve the performance targets defined. The SESAR II Programme under Horizon 2020 (‘SESAR 2020’) was launched in 2015 (4). |
| --- | --- |

3.

Under the Horizon 2020 Framework programme for Research and Innovation (3), the Council entrusted the SJU with continuing research and innovation relating to air traffic management and in particular to the coordinated approach, in the context of the Single European Sky, in order to achieve the performance targets defined. The SESAR II Programme under Horizon 2020 (‘SESAR 2020’) was launched in 2015 (4).

| 4. | The SESAR Joint Undertaking was designed as a public-private partnership. The founding members are the European Union (EU), represented by the Commission, and Eurocontrol, represented by its Agency. Following a call for expressions of interest, fifteen public and private enterprises from the air navigation industry became members of the Joint Undertaking. They comprise aircraft manufacturers, ground and airborne equipment manufacturers, air navigation service providers and airport authorities. |
| --- | --- |

4.

The SESAR Joint Undertaking was designed as a public-private partnership. The founding members are the European Union (EU), represented by the Commission, and Eurocontrol, represented by its Agency. Following a call for expressions of interest, fifteen public and private enterprises from the air navigation industry became members of the Joint Undertaking. They comprise aircraft manufacturers, ground and airborne equipment manufacturers, air navigation service providers and airport authorities.

| 5. | The budget for the development phase of the SESAR I Programme 2008–2015 is 2 100 million euro, to be provided in equal parts by the EU, Eurocontrol and the participating public and private partners from the aviation industry (5). The EU contribution is funded from the Seventh Research Framework Programme (FP7) and TEN-T. The EU budget for the deployment phase of the SESAR II Programme 2014–2024 funded from Horizon 2020 is 585 million euro. Under the new Horizon 2020 Membership Agreements, the contribution by Eurocontrol is expected to be around 500 million euro, and the contribution of the other partners from the aviation industry is expected to be around 720,7 million euro. Around 90 % of the funding from Eurocontrol and the other stakeholders is in the form of in-kind contributions. |
| --- | --- |

5.

The budget for the development phase of the SESAR I Programme 2008–2015 is 2 100 million euro, to be provided in equal parts by the EU, Eurocontrol and the participating public and private partners from the aviation industry (5). The EU contribution is funded from the Seventh Research Framework Programme (FP7) and TEN-T. The EU budget for the deployment phase of the SESAR II Programme 2014–2024 funded from Horizon 2020 is 585 million euro. Under the new Horizon 2020 Membership Agreements, the contribution by Eurocontrol is expected to be around 500 million euro, and the contribution of the other partners from the aviation industry is expected to be around 720,7 million euro. Around 90 % of the funding from Eurocontrol and the other stakeholders is in the form of in-kind contributions.

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 6. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex-post audits carried out by the Joint Undertaking (or by private audit firms on its behalf) at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations. |
| --- | --- |

6.

The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex-post audits carried out by the Joint Undertaking (or by private audit firms on its behalf) at beneficiaries. This is supplemented by evidence provided by relevant work of other auditors and an analysis of management representations.

| STATEMENT OF ASSURANCE









  7. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:






  (a) | the annual accounts of the SESAR Joint Undertaking, which comprise the financial statements (6) and the reports on the implementation of the budget (7) for the financial year ended 31 December 2015; and |
| --- | --- | --- |

STATEMENT OF ASSURANCE

7.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:

(a)

the annual accounts of the SESAR Joint Undertaking, which comprise the financial statements (6) and the reports on the implementation of the budget (7) for the financial year ended 31 December 2015; and

| (b) | the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

(b)

the legality and regularity of the transactions underlying those accounts.

The management’s responsibility

| 8. | In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (8), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.






  (a) | The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (9), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |
| --- | --- | --- |

8.

In accordance with Articles 16 and 22 of Commission Delegated Regulation (EU) No 110/2014 (8), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.

(a)

The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer (9), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.

| (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. |
| --- | --- |

(b)

The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.

The auditor’s responsibility

| 9. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (10) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |
| --- | --- |

9.

The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council (10) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular.

| 10. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. In preparing this report and statement of assurance, the Court considered the audit work performed by the independent external auditor on the Joint Undertaking’s accounts, as stipulated in Article 208(4) of the EU Financial Regulation (11). |
| --- | --- |

10.

The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. In preparing this report and statement of assurance, the Court considered the audit work performed by the independent external auditor on the Joint Undertaking’s accounts, as stipulated in Article 208(4) of the EU Financial Regulation (11).

| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
| --- | --- |

11.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Opinion on the reliability of the accounts

| 12. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |
| --- | --- |

12.

In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2015 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer.

Opinion on the legality and regularity of the transactions underlying the accounts

| 13. | In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular. |
| --- | --- |

13.

In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 are, in all material respects, legal and regular.

| 14. | The comments which follow do not call the Court’s opinion into question. |
| --- | --- |

14.

The comments which follow do not call the Court’s opinion into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the 2015 budget

| 15. | The final 2015 budget available for implementation included commitment appropriations of 81,7 million euro and payment appropriations of 136,9 million euro. The utilisation rates for commitment and payment appropriations were 100 % and 82,3 %, respectively. The lower-than-expected implementation rate for payment appropriations was due to the fact that the launch of the first Horizon 2020 calls was delayed and the related grant agreements could only be signed in early 2016. |
| --- | --- |

15.

The final 2015 budget available for implementation included commitment appropriations of 81,7 million euro and payment appropriations of 136,9 million euro. The utilisation rates for commitment and payment appropriations were 100 % and 82,3 %, respectively. The lower-than-expected implementation rate for payment appropriations was due to the fact that the launch of the first Horizon 2020 calls was delayed and the related grant agreements could only be signed in early 2016.

| 16. | Of the total operational commitments made in 2015 (74,5 million euro), 29 % were individual commitments based on completed award procedures for grants and contracts. The remaining 71 % were global commitments for which the award procedure was not completed. The high level of global commitments in 2015 is due to the fact that the first Horizon 2020 calls for proposals for 51,5 million euro in grants were launched in the second half of 2015, and the related agreements will be signed in 2016. |
| --- | --- |

16.

Of the total operational commitments made in 2015 (74,5 million euro), 29 % were individual commitments based on completed award procedures for grants and contracts. The remaining 71 % were global commitments for which the award procedure was not completed. The high level of global commitments in 2015 is due to the fact that the first Horizon 2020 calls for proposals for 51,5 million euro in grants were launched in the second half of 2015, and the related agreements will be signed in 2016.

SESAR Joint Undertaking multiannual budget implementation under FP7 and TEN-T

| 17. | Out of the total operational and administrative budget under the FP7 and TEN-T programmes of 892,8 million euro (12), the SESAR Joint Undertaking made commitments amounting to 827,4 million euro and payments amounting to 651,1 million euro (78,7 % of commitments). The outstanding commitments of 176,3 million euro (27,1 %) will be used to cover future payments for the ongoing FP7 and TEN-T grant agreements, which are expected to be closed by the end of 2016 (13). |
| --- | --- |

17.

Out of the total operational and administrative budget under the FP7 and TEN-T programmes of 892,8 million euro (12), the SESAR Joint Undertaking made commitments amounting to 827,4 million euro and payments amounting to 651,1 million euro (78,7 % of commitments). The outstanding commitments of 176,3 million euro (27,1 %) will be used to cover future payments for the ongoing FP7 and TEN-T grant agreements, which are expected to be closed by the end of 2016 (13).

| 18. | Out of a total envelope of 1 254,5 million euro for the other members’ in-kind and cash contributions to operational and administrative activities (670,2 million euro from Eurocontrol and 584,3 million euro from the aviation industry), 986 million euro had been reported to the Joint Undertaking by 31 December 2015 (500,9 million euro by Eurocontrol and 485,1 million euro by the aviation industry). Of the reported contributions, 742,7 million euro or 75,3 % have been validated by the Governing Board (348,5 million euro for Eurocontrol and 394,2 million euro for the aviation industry). The relatively high amount of accumulated in-kind contributions from Eurocontrol which have not been validated (152,4 million euro) reflects delays in presenting 2014 financial statements to the Joint Undertaking. |
| --- | --- |

18.

Out of a total envelope of 1 254,5 million euro for the other members’ in-kind and cash contributions to operational and administrative activities (670,2 million euro from Eurocontrol and 584,3 million euro from the aviation industry), 986 million euro had been reported to the Joint Undertaking by 31 December 2015 (500,9 million euro by Eurocontrol and 485,1 million euro by the aviation industry). Of the reported contributions, 742,7 million euro or 75,3 % have been validated by the Governing Board (348,5 million euro for Eurocontrol and 394,2 million euro for the aviation industry). The relatively high amount of accumulated in-kind contributions from Eurocontrol which have not been validated (152,4 million euro) reflects delays in presenting 2014 financial statements to the Joint Undertaking.

| 19. | At the end of 2015, the administrative costs of the Joint Undertaking amounting to 64,5 million euro were shared as follows: 21,9 million euro or 33,9 % were covered by the EU, 21,4 million euro or 33,9 % by Eurocontrol, and 21,2 million euro or 32,9 % by the aviation industry. |
| --- | --- |

19.

At the end of 2015, the administrative costs of the Joint Undertaking amounting to 64,5 million euro were shared as follows: 21,9 million euro or 33,9 % were covered by the EU, 21,4 million euro or 33,9 % by Eurocontrol, and 21,2 million euro or 32,9 % by the aviation industry.

SESAR Joint Undertaking multiannual budget implementation under Horizon 2020

| 20. | As indicated above (paragraphs 5 and 16), Horizon 2020 grant agreements and the bilateral agreements with Eurocontrol and the aviation industry were not concluded at the end of 2015. |
| --- | --- |

20.

As indicated above (paragraphs 5 and 16), Horizon 2020 grant agreements and the bilateral agreements with Eurocontrol and the aviation industry were not concluded at the end of 2015.

OTHER MATTERS

Key controls and supervisory systems

| 21. | The SJU has set up ex ante control procedures based on financial and operational desk reviews, and performs ex post audits of grant beneficiaries. These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions to the Joint Undertaking by its members other than the EU. The residual error rate for the ex-post audits reported in the SJU 2015 annual activity report was 0,7 % (14). |
| --- | --- |

21.

The SJU has set up ex ante control procedures based on financial and operational desk reviews, and performs ex post audits of grant beneficiaries. These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions to the Joint Undertaking by its members other than the EU. The residual error rate for the ex-post audits reported in the SJU 2015 annual activity report was 0,7 % (14).

Anti-Fraud Strategy

| 22. | According to the SJU Financial Rules, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities (15). |
| --- | --- |

22.

According to the SJU Financial Rules, the budget should be implemented in compliance with effective and efficient internal control, including prevention, detection, correction and follow-up of fraud and irregularities (15).

| 23. | Following the adoption of an Anti-Fraud Strategy by the European Commission in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012 and updated in March 2015 to take account of changes introduced by Horizon 2020 (16). In 2015 the SJU has set up its own anti-fraud strategy in line with the methodology provided by the European Commission as well as an action plan taking into account the results of the specific anti-fraud risk assessment performed by the SJU in 2015. |
| --- | --- |

23.

Following the adoption of an Anti-Fraud Strategy by the European Commission in June 2011, the first common Research Anti-Fraud Strategy was adopted in July 2012 and updated in March 2015 to take account of changes introduced by Horizon 2020 (16). In 2015 the SJU has set up its own anti-fraud strategy in line with the methodology provided by the European Commission as well as an action plan taking into account the results of the specific anti-fraud risk assessment performed by the SJU in 2015.

| 24. | Internal control procedures are already in place at the SJU to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex-ante checks on payments, conflict of interest policy and ex-post audits of grant beneficiaries). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (17), in accordance with the agreed timetable. |
| --- | --- |

24.

Internal control procedures are already in place at the SJU to provide reasonable assurance on the prevention and detection of fraud and irregularities, (ex-ante checks on payments, conflict of interest policy and ex-post audits of grant beneficiaries). The Joint Undertaking is implementing the measures in the action plan, such as making use of Commission databases to identify excluded organisations or potential double funding (17), in accordance with the agreed timetable.

The Commission’s Internal Audit Service (IAS)

| 25. | In 2015, the IAS performed an audit on operational governance and the Master Plan (MP) update at the SJU. The IAS recommended that the SJU reinforce the MP update and annual reporting, improve coordination with the SESAR deployment manager with regard to monitoring and reporting, and appoint the new SESAR working groups. The SJU has set up a detailed action plan to implement the recommendations. |
| --- | --- |

25.

In 2015, the IAS performed an audit on operational governance and the Master Plan (MP) update at the SJU. The IAS recommended that the SJU reinforce the MP update and annual reporting, improve coordination with the SESAR deployment manager with regard to monitoring and reporting, and appoint the new SESAR working groups. The SJU has set up a detailed action plan to implement the recommendations.

FOLLOW-UP OF PREVIOUS OBSERVATIONS

Monitoring and reporting of project research results

| 26. | As required by Horizon 2020 rules (18), the SJU disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (19). |
| --- | --- |

26.

As required by Horizon 2020 rules (18), the SJU disclosed specific indicators on research results in its Annual Activity Report (performance indicators and indicators for monitoring cross-cutting issues) (19).

Conflicts of interest

| 27. | In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures. |
| --- | --- |

27.

In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on conflicts of interest, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertaking into its procedures.

This Report was adopted by Chamber IV, headed by Mr Baudilio TOMÉ MUGURUZA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 October 2016.

For the Court of Auditors

Klaus-Heiner LEHNE

President

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(1)  Council Regulation (EC) No 219/2007 of 27 February 2007 on the establishment of a Joint Undertaking to develop the new generation European air traffic management system (SESAR) (OJ L 64, 2.3.2007, p. 1), amended by Regulation (EC) No 1361/2008 (OJ L 352, 31.12.2008, p. 12).

1

(2)  Council Regulation (EU) No 721/2014 of 16 June 2014 amending Regulation (EC) No 219/2007 on the establishment of a Joint Undertaking to develop the new generation European air traffic management system (SESAR) as regards the extension of the Joint Undertaking until 2024 (OJ L 192, 1.7.2014, p. 1).

2

(3)  The Horizon 2020 Framework programme for Research and Innovation, adopted by Regulation (EU) No 1291/2013 of the European Parliament and of the Council of 11 December 2013 establishing Horizon 2020 — the Framework Programme for Research and Innovation (2014-2020) and repealing Decision No 1982/2006/EC (OJ L 347, 20.12.2013, p. 104).

3

(4)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

4

Annex

(5)  As regards the financial contributions to the Joint Undertaking’s administrative costs, the Administrative Board shall decide on the amounts which must be released by each member in proportion to the contributions which it has agreed to pay and shall establish the deadline by which the members must pay their contributions.

5

(6)  These include the balance sheet and the statement of financial performance, the cash-flow table, the statement of changes in net assets, a summary of the significant accounting policies and other explanatory notes.

6

(7)  These comprise the reports on implementation of the budget, a summary of budgetary principles and other explanatory notes.

7

(8)  OJ L 38, 7.2.2014, p. 2.

8

(9)  The accounting rules adopted by the Commission’s accounting officer are derived from the International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, where relevant, the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

9

(10)  Article 47 of delegated Regulation (EU) No 110/2014.

10

(11)  Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (OJ L 298, 26.10.2012, p. 1).

11

(12)  The total SESAR Joint Undertaking budget for the FP7 and TEN-T programmes of 892,8 million euro is composed of a 700 million euro EU cash contribution funded by the FP7 and TEN-T programmes, a 165 million euro cash contribution from Eurocontrol and a 27,8 million euro cash contribution from aviation industry members.

12

(13)  See 2015 Annual Activity Report, p. 20.

13

(14)  See SJU 2015 Annual Activity Report, p. 68.

14

(15)  Article 25a.

15

a

(16)  For example, the setting-up of the Common Support Service, with a centralised audit service and harmonised business processes for EU research bodies.

16

(17)  This action also includes assessment of the use of non-EU funding sources to prevent double funding.

17

(18)  Article 31 of Regulation (EU) No 1291/2013.

18

(19)  See 21 April 2016, draft Annual Activity Report: Annexes 8 to 10, p. 112 to 116.

19

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ANNEX

SESAR Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 187 and 188 of the Treaty on the Functioning of the European Union) | Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme provides for a Community contribution to the establishment of long-term public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 187 of the Treaty.
  Council Regulation (EC) No 219/2007 setting up the SESAR Joint Undertaking, as last amended by Regulation (EC) No 1361/2008 (OJ L 352, 31.12.2008).
  Council Regulation (EU) No 721/2014 of 16 June 2014 amending Regulation (EC) No 219/2007 on the establishment of a Joint Undertaking to develop the new generation European air traffic management system (SESAR) as regards the extension of the Joint Undertaking until 2024. |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EC) No 219/2007, as last amended by Regulation (EU) No 721/2014) | Objectives

  The aim of the Joint Undertaking is to ensure the modernisation of the European air traffic management system by coordinating and concentrating all relevant research and development efforts in the Union. It shall be responsible for execution of the ATM Master Plan and, in particular, for carrying out the following tasks:






  — | organising and coordinating the activities of the SESAR development phase in accordance with the ATM Master Plan, which resulted from the definition phase of the project headed by Eurocontrol, by combining and managing public and private-sector funding under a single structure; |

Areas of Union competence deriving from the Treaty

(Articles 187 and 188 of the Treaty on the Functioning of the European Union)

Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme provides for a Community contribution to the establishment of long-term public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 187 of the Treaty.

Council Regulation (EC) No 219/2007 setting up the SESAR Joint Undertaking, as last amended by Regulation (EC) No 1361/2008 (OJ L 352, 31.12.2008).

Council Regulation (EU) No 721/2014 of 16 June 2014 amending Regulation (EC) No 219/2007 on the establishment of a Joint Undertaking to develop the new generation European air traffic management system (SESAR) as regards the extension of the Joint Undertaking until 2024.

Competences of the Joint Undertaking

(Council Regulation (EC) No 219/2007, as last amended by Regulation (EU) No 721/2014)

Objectives

The aim of the Joint Undertaking is to ensure the modernisation of the European air traffic management system by coordinating and concentrating all relevant research and development efforts in the Union. It shall be responsible for execution of the ATM Master Plan and, in particular, for carrying out the following tasks:

—

organising and coordinating the activities of the SESAR development phase in accordance with the ATM Master Plan, which resulted from the definition phase of the project headed by Eurocontrol, by combining and managing public and private-sector funding under a single structure;

| — | ensuring the necessary funding for the activities of the SESAR development phase in accordance with the ATM Master Plan; |
| --- | --- |

—

ensuring the necessary funding for the activities of the SESAR development phase in accordance with the ATM Master Plan;

| — | ensuring the involvement of stakeholders in the air traffic management sector in Europe, in particular air navigation service providers, airspace users, professional staff associations, airports and manufacturers; as well as the relevant scientific institutions or the relevant scientific community; |
| --- | --- |

—

ensuring the involvement of stakeholders in the air traffic management sector in Europe, in particular air navigation service providers, airspace users, professional staff associations, airports and manufacturers; as well as the relevant scientific institutions or the relevant scientific community;

| — | organising the technical work of research and development, validation and study, to be carried out under its authority, while avoiding fragmentation of such activities; |
| --- | --- |

—

organising the technical work of research and development, validation and study, to be carried out under its authority, while avoiding fragmentation of such activities;

| — | ensuring the supervision of activities related to the development of common products duly identified in the ATM Master Plan and, if necessary, organising specific invitations to tender. |
| --- | --- |

—

ensuring the supervision of activities related to the development of common products duly identified in the ATM Master Plan and, if necessary, organising specific invitations to tender.

Governance

(Council Regulation (EC) No 219/2007, as last amended by Regulation (EU) No 721/2014)

Administrative Board

The Administrative Board is responsible for:

| (a) | adopting the ATM Master Plan endorsed by the Council as referred to in Article 1(2) of the Regulation and approving any proposal to modify it; |
| --- | --- |

(a)

adopting the ATM Master Plan endorsed by the Council as referred to in Article 1(2) of the Regulation and approving any proposal to modify it;

| (b) | giving guidelines and taking the decisions necessary for the implementation of the development phase of the SESAR project, and exercising overall control over its implementation; |
| --- | --- |

(b)

giving guidelines and taking the decisions necessary for the implementation of the development phase of the SESAR project, and exercising overall control over its implementation;

| (c) | approving the Joint Undertaking’s work programme and annual work programmes referred to in Article 16(1), as well as the annual budget, including the staff establishment plan; |
| --- | --- |

(c)

approving the Joint Undertaking’s work programme and annual work programmes referred to in Article 16(1), as well as the annual budget, including the staff establishment plan;

| (d) | authorising negotiations and deciding on the accession of new members and on the related agreements as referred to in Article 1(3); |
| --- | --- |

(d)

authorising negotiations and deciding on the accession of new members and on the related agreements as referred to in Article 1(3);

| (e) | supervising the execution of agreements between members and the Joint Undertaking; |
| --- | --- |

(e)

supervising the execution of agreements between members and the Joint Undertaking;

| (f) | appointing and dismissing the Executive Director and approving the organisation chart and monitoring the Executive Director’s performance; |
| --- | --- |

(f)

appointing and dismissing the Executive Director and approving the organisation chart and monitoring the Executive Director’s performance;

| (g) | deciding on the amounts and procedures for the payment of members’ financial contributions and the assessment of contributions in kind; |
| --- | --- |

(g)

deciding on the amounts and procedures for the payment of members’ financial contributions and the assessment of contributions in kind;

| (h) | adopting the financial rules of the Joint Undertaking; |
| --- | --- |

(h)

adopting the financial rules of the Joint Undertaking;

| (i) | approving the annual accounts and balance sheet; |
| --- | --- |

(i)

approving the annual accounts and balance sheet;

| (j) | adopting the annual report on the progress of the development phase of the SESAR project and its financial situation referred to in Article 16(2); |
| --- | --- |

(j)

adopting the annual report on the progress of the development phase of the SESAR project and its financial situation referred to in Article 16(2);

| (k) | deciding on proposals to the Commission on the extension or dissolution of the Joint Undertaking; |
| --- | --- |

(k)

deciding on proposals to the Commission on the extension or dissolution of the Joint Undertaking;

| (l) | establishing procedures for granting rights of access to tangible and intangible assets which are the property of the Joint Undertaking, and the transfer of such assets; |
| --- | --- |

(l)

establishing procedures for granting rights of access to tangible and intangible assets which are the property of the Joint Undertaking, and the transfer of such assets;

| (m) | laying down rules and procedures for awarding the contracts necessary to implement the ATM Master Plan, including specific procedures in the event of conflicts of interest; |
| --- | --- |

(m)

laying down rules and procedures for awarding the contracts necessary to implement the ATM Master Plan, including specific procedures in the event of conflicts of interest;

| (n) | deciding on proposals to the Commission to amend the Statutes in accordance with Article 24; |
| --- | --- |

(n)

deciding on proposals to the Commission to amend the Statutes in accordance with Article 24;

| (o) | exercising such other powers and performing such other functions, including the establishment of subsidiary bodies, as may be necessary for the purposes of the SESAR development phase; |
| --- | --- |

(o)

exercising such other powers and performing such other functions, including the establishment of subsidiary bodies, as may be necessary for the purposes of the SESAR development phase;

| (p) | adopting the arrangements for implementing Article 8. |
| --- | --- |

(p)

adopting the arrangements for implementing Article 8.

Executive Director

The Executive Director shall perform his duties with complete independence within the powers assigned to him.

Internal audit

Internal Auditor of the European Commission

External audit

European Court of Auditors and Independent External Auditor for the audit of the Annual Accounts (in accordance with Article 106 of the SJU Financial Rules)

Discharge authority

European Parliament and European Council

Resources available to the Joint Undertaking in 2015

SESAR Joint Undertaking 2015 provisional accounts

Budget

30 229 774 euro for commitments (‘SESAR 1’ FP7/TEN-T)

126 733 842 euro for payments (‘SESAR 1’ FP7/TEN-T)

and

51 470 000 euro for commitments (‘SESAR2020’ Horizon 2020)

10 300 000 euro for payments (‘SESAR2020’ Horizon 2020)

Staff at 31 December 2015

The 2015 operating budget provides for an establishment plan of 39 temporary staff and three seconded national experts (SNEs). This gives a total of 42 posts, of which 41 were occupied at year-end 2015:

| — | 35 temporary staff, recruited externally; |
| --- | --- |

—

35 temporary staff, recruited externally;

| — | 1 staff member seconded by the SJU Members in accordance with Article 8 of Regulation (EC) No 219/2007; |
| --- | --- |

—

1 staff member seconded by the SJU Members in accordance with Article 8 of Regulation (EC) No 219/2007;

| — | 2 contract staff; |
| --- | --- |

—

2 contract staff;

| — | 3 SNEs. |
| --- | --- |

—

3 SNEs.

Assigned to

Operational tasks: 22

Support for operations: 6

Administration tasks: 12

ED: 1

Activities and services provided in 2015

See the Joint Undertaking’s Annual Activity Report for 2015 at

http://www.sesarju.eu/ (publication of the final Annual Activity Report 2015 expected early July; draft available if required)

Source: Information supplied by the SESAR Joint Undertaking.

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THE JOINT UNDERTAKING'S REPLY

| 15. | The SJU would like to highlight that the delay of two months for the first Horizon 2020 calls was out of the SJU control. The main reason was significant changes to the IT tool for grant preparation and evaluation. Therefore, when strictly following the Horizon 2020 grant procedures, the first grant agreements could only be signed in January 2016. The related unused 2015 payment appropriations were fully reintroduced into the 2016 budget. |
| --- | --- |

15.

The SJU would like to highlight that the delay of two months for the first Horizon 2020 calls was out of the SJU control. The main reason was significant changes to the IT tool for grant preparation and evaluation. Therefore, when strictly following the Horizon 2020 grant procedures, the first grant agreements could only be signed in January 2016. The related unused 2015 payment appropriations were fully reintroduced into the 2016 budget.

| 16. | The SJU would like to highlight that the rate of individual commitments is 92 % as regards the SJU budget for the Seventh Framework Programme and TENT-T. |
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16.

The SJU would like to highlight that the rate of individual commitments is 92 % as regards the SJU budget for the Seventh Framework Programme and TENT-T.

| 18. | The SJU would like to emphasise that Eurocontrol did present the financial statements regarding the financial year 2014 in 2015. However, as some key elements were missing, the SJU was not able to validate the Eurocontrol Financial Statements as a whole. The missing parts have been received in the meanwhile and the assessment is in its final stage. |
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18.

The SJU would like to emphasise that Eurocontrol did present the financial statements regarding the financial year 2014 in 2015. However, as some key elements were missing, the SJU was not able to validate the Eurocontrol Financial Statements as a whole. The missing parts have been received in the meanwhile and the assessment is in its final stage.

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