# C_2012388EN.01022601.xml

| 15.12.2012 | EN | Official Journal of the European Union | C 388/226 |
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15.12.2012

EN

Official Journal of the European Union

C 388/226

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REPORT

on the annual accounts of the Research Executive Agency for the financial year 2011, together with the Agency’s replies

2012/C 388/38

INTRODUCTION

INTRODUCTION

| 1. | The Research Executive Agency (hereinafter "the Agency"), which is located in Brussels was set up by Commission Decision 2008/46/EC (1). The Agency was established for a limited period beginning on 1 January 2008 and ending on 31 December 2017 with the aim of managing specific Union activities in the field of research (2). On 15 June 2009 the Agency was officially granted its administrative and operational autonomy by the European Commission. |
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1.

The Research Executive Agency (hereinafter "the Agency"), which is located in Brussels was set up by Commission Decision 2008/46/EC (1). The Agency was established for a limited period beginning on 1 January 2008 and ending on 31 December 2017 with the aim of managing specific Union activities in the field of research (2). On 15 June 2009 the Agency was officially granted its administrative and operational autonomy by the European Commission.

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INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

| 2. | The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Agency’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. |
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2.

The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Agency’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

STATEMENT OF ASSURANCE

| 3. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (3) of the Agency, which comprise the “financial statements” (4) and the “reports on the implementation of the budget” (5) for the financial year ended 31 December 2011, and the legality and regularity of the transactions underlying those accounts. |
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3.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (3) of the Agency, which comprise the “financial statements” (4) and the “reports on the implementation of the budget” (5) for the financial year ended 31 December 2011, and the legality and regularity of the transactions underlying those accounts.

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The Management’s responsibility

The Management’s responsibility

| 4. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules of the Agency, under his own responsibility and within the limits of the authorised appropriations (6). The Director is responsible for putting in place (7) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (8) that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular. |
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4.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules of the Agency, under his own responsibility and within the limits of the authorised appropriations (6). The Director is responsible for putting in place (7) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (8) that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular.

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The Auditor’s responsibility

The Auditor’s responsibility

| 5. | The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council (9) with a statement of assurance as to the reliability of the annual accounts of the Agency and the legality and regularity of the transactions underlying them. |
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5.

The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council (9) with a statement of assurance as to the reliability of the annual accounts of the Agency and the legality and regularity of the transactions underlying them.

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| 6. | The Court conducted 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 that the Court plans and performs the audit to obtain reasonable assurance as to whether the annual accounts of the Agency are free of material misstatement and the transactions underlying them are legal and regular. |
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6.

The Court conducted 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 that the Court plans and performs the audit to obtain reasonable assurance as to whether the annual accounts of the Agency are free of material misstatement and the transactions underlying them are legal and regular.

| 7. | An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the transactions underlying them. The procedures are selected based on the auditor’s judgment, including an assessment of the risks of material misstatement of the accounts and of material non-compliance of the underlying transactions with the requirement of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal controls relevant to the preparation and fair presentation of the accounts and supervisory and control systems implemented to ensure legality and regularity of underlying transactions, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made, as well as evaluating the overall presentation of the accounts. |
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7.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the transactions underlying them. The procedures are selected based on the auditor’s judgment, including an assessment of the risks of material misstatement of the accounts and of material non-compliance of the underlying transactions with the requirement of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal controls relevant to the preparation and fair presentation of the accounts and supervisory and control systems implemented to ensure legality and regularity of underlying transactions, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made, as well as evaluating the overall presentation of the accounts.

| 8. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
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8.

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

Opinion on the reliability of the accounts

| 9. | In the Court’s opinion, the Agency’s Annual Accounts (10) present fairly, in all material respects, its financial position as of 31 December 2011 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation and the accounting rules adopted by the Commission’s accounting officer (11). |
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9.

In the Court’s opinion, the Agency’s Annual Accounts (10) present fairly, in all material respects, its financial position as of 31 December 2011 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation and the accounting rules adopted by the Commission’s accounting officer (11).

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

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

| 10. | In the Court’s opinion, the transactions underlying the annual accounts of the Agency for the financial year ended 31 December 2011 are legal and regular in all material respects. |
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10.

In the Court’s opinion, the transactions underlying the annual accounts of the Agency for the financial year ended 31 December 2011 are legal and regular in all material respects.

| 11. | The comments which follow do not call the Court’s opinions into question. |
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11.

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

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

| 12. | Carryovers amounting to 1,2 million euro (representing 35 % of all appropriations carried over to 2011) were cancelled in 2011. This concerned in particular Title I (Staff expenditure) where 0,3 million euro (52 % of appropriations) and Title II (Infrastructure and operating expenditure), where 0,7 million euro (41 % of appropriations) were cancelled. This situation is at odds with the budgetary principle of annuality. |
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12.

Carryovers amounting to 1,2 million euro (representing 35 % of all appropriations carried over to 2011) were cancelled in 2011. This concerned in particular Title I (Staff expenditure) where 0,3 million euro (52 % of appropriations) and Title II (Infrastructure and operating expenditure), where 0,7 million euro (41 % of appropriations) were cancelled. This situation is at odds with the budgetary principle of annuality.

| 13. | Many budget transfers were made towards the year end. Appropriations concerning IT and operational expenditure increased significantly (12). This situation indicates weaknesses in budget planning and programming and is at odds with the principle of specification. |
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13.

Many budget transfers were made towards the year end. Appropriations concerning IT and operational expenditure increased significantly (12). This situation indicates weaknesses in budget planning and programming and is at odds with the principle of specification.

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OTHER COMMENTS

OTHER COMMENTS

| 14. | There is room for improving the transparency of recruitment procedures. Questions for written tests and interviews were set after the applications had been examined by the selection board; threshold scores for being included in the reserve list were not set in advance; the selection board did not fully document all its meetings and decisions. |
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14.

There is room for improving the transparency of recruitment procedures. Questions for written tests and interviews were set after the applications had been examined by the selection board; threshold scores for being included in the reserve list were not set in advance; the selection board did not fully document all its meetings and decisions.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 18 September 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(1)  OJ L 11, 15.1.2008, p. 9.

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(2)  The Annex summarises the Agency’s competences and activities. It is presented for information purposes.

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Annex

(3)  These accounts are accompanied by a report on the budgetary and financial management during the year which gives further information on budget implementation and management.

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(4)  The financial statements include the balance sheet and the economic outturn account, the cash-flow table, the statement of changes in net assets and a summary of the significant accounting policies and other explanatory notes.

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(5)  The budget implementation reports comprise the budget outturn account and its annex.

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(6)  Article 25 of Commission Regulation (EC) No 1653/2004 (OJ L 297, 22.9.2004, p. 10).

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(7)  Article 29 of Regulation (EC) No 1653/2004.

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(8)  The rules concerning the presentation of the accounts and accounting by the Agencies are laid down in Chapters 1 and 2 of Title VI of Regulation (EC) No 1653/2004 as last amended by Regulation (EC) No 651/2008 (OJ L 181, 10.7.2008, p. 15).

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(9)  Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (OJ L 248, 16.9.2002, p. 1).

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(10)  The Final Annual Accounts were drawn up on 20 June 2012 and received by the Court on 4 July 2012. The Final Annual Accounts, consolidated with those of the Commission, are published in the Official Journal of the European Union by 15 November of the following year. These can be found on the following website http://eca.europa.eu or http://ec.europa.eu/rea.

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Official Journal of the European Union

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

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(12)  Appropriations concerning IT expenses (budget line 2103) increased by 80 % from 1,9 million euro to 3,4 million euro. Appropriations for the common FP7 evaluation platform (budget line 3303) increased by 194 % from 0,7 million euro to 2,1 million euro.

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2103

3303

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ANNEX

Research Executive Agency (Bruxelles)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Articles 179 and 180 of the TFEU) | Collection of information

  The Union shall have the objective of strengthening its scientific and technological bases by achieving a European research area in which researchers, scientific knowledge and technology circulate freely, and encouraging it to become more competitive, including in its industry.
  For this purpose the Union shall encourage undertakings, including SMEs, research centers and universities in their research and technological development activities of high quality; it shall support their efforts to cooperate with one another, aiming, notably, at permitting researchers to cooperate freely across borders and at enabling undertakings to exploit the internal market potential to the full, in particular through [...] the definition of common standards and the removal of legal and fiscal obstacles to that cooperation. [...]
  In pursuing these objectives, the Union shall carry out the following activities, complementing the activities carried out in the Member States:






  (a) | implementation of research, technological development and demonstration programmes, by promoting cooperation with and between undertakings, research centers and universities; |
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Areas of Union competence deriving from the Treaty

(Articles 179 and 180 of the TFEU)

Collection of information

The Union shall have the objective of strengthening its scientific and technological bases by achieving a European research area in which researchers, scientific knowledge and technology circulate freely, and encouraging it to become more competitive, including in its industry.

For this purpose the Union shall encourage undertakings, including SMEs, research centers and universities in their research and technological development activities of high quality; it shall support their efforts to cooperate with one another, aiming, notably, at permitting researchers to cooperate freely across borders and at enabling undertakings to exploit the internal market potential to the full, in particular through [...] the definition of common standards and the removal of legal and fiscal obstacles to that cooperation. [...]

In pursuing these objectives, the Union shall carry out the following activities, complementing the activities carried out in the Member States:

(a)

implementation of research, technological development and demonstration programmes, by promoting cooperation with and between undertakings, research centers and universities;

| (b) | promotion of cooperation in the field of Union research, technological development and demonstration with third countries and international organizations; |
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(b)

promotion of cooperation in the field of Union research, technological development and demonstration with third countries and international organizations;

| (c) | dissemination and optimization of the results of activities in Union research, technological development and demonstration; |
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(c)

dissemination and optimization of the results of activities in Union research, technological development and demonstration;

| (d) | stimulation of the training and mobility of researchers in the Union. |
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(d)

stimulation of the training and mobility of researchers in the Union.

Competences of the Agency

(Commission Decision 2008/46/EC)

Objectives

The objective of the Agency is to manage the Programmes entrusted to it under the Seventh Framework Programme of the Union for Research, Techncological Development and Demonstration Activities (2007-2013) (hereafter FP7) (the People Programme, the SME actions of the Capacities Programme, and the Space and Security themes of the Cooperation Programme) efficiently and effectively, to deliver efficient and effective services to the research community and to provide centralised FP7 support services to the respective Commission services for all areas of the Cooperation, Capacities and People Specific Programmes.

With regard to the efficient and effective Programme implementation, the Agency – as promoter of the European Research Area – aims at improving project management, establishing close contact with final beneficiaries and providing a high visibility of the European Union.

Tasks

With regard to the management of projects, the Agency concludes and manages grant agreements, involving the following operations:

| — | preparation and publication of calls for proposals; |
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preparation and publication of calls for proposals;

| — | evaluation of proposals; |
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evaluation of proposals;

| — | preparation and signature of grant agreements; |
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preparation and signature of grant agreements;

| — | monitoring the implementation of projects including acceptance of reports and other deliverables; |
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monitoring the implementation of projects including acceptance of reports and other deliverables;

| — | payments, recoveries, and application of sanctions within the meaning of Article 114(4) of the general Financial Regulation, notably when errors in declared costs have been identified following ex-post audits at the level of the final beneficiaries; |
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payments, recoveries, and application of sanctions within the meaning of Article 114(4) of the general Financial Regulation, notably when errors in declared costs have been identified following ex-post audits at the level of the final beneficiaries;

| — | ex-post publicity and dissemination of results. |
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ex-post publicity and dissemination of results.

With regard to FP7 Support Services, the Agency performs the following tasks:

| — | administrative support for call publication; |
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administrative support for call publication;

| — | management of the electronic reception of proposals; |
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management of the electronic reception of proposals;

| — | support for remote and on-site evaluations; |
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support for remote and on-site evaluations;

| — | support to the preparation of appointment letters and payments for experts; |
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support to the preparation of appointment letters and payments for experts;

| — | management of the Central FP7 participants database (Unique Registration Facility – URF), including support for financial capacity checks of selected beneficiaries; |
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management of the Central FP7 participants database (Unique Registration Facility – URF), including support for financial capacity checks of selected beneficiaries;

| — | management of the Research Enquiry Service. |
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management of the Research Enquiry Service.

Governance

Steering Committee

Comprises five members appointed by the European Commission. It adopts the Agency’s organization chart and it’s Annual Work Programme after approval by the Commission. In addition, it adopts the administrative budget of the Agency and its Annual Activity Report.

Director

Appointed by the Commission, manages the Agency together with the Steering Committee, implements the administrative budget, sets up management and internal control systems adapted to the tasks entrusted to the Agency and prepares the reports to be presented to the Commission.

External audit

The European Court of Auditors.

Discharge authority

The European Parliament, acting on a recommendation from the European Council. With respect to the Agency’s implementation of its administrative budget, the discharge decision is addressed to the Director. For the implementation of the operational budget delegated by the Commission to the Agency, the Commission remains accountable.

Resources made available to the Agency in 2011 (2010)

Operational Budget 2011 (2010)

1 340,6 (962,6) million euro of commitment appropriations and 1 059 (1 709) million euro of payment appropriations. The Agency implements the Commission’s operational budget under a delegation decision of the Commission.

Administrative Budget 2011 (2010)

39,2 (33,6) million euro. The Agency implements the administrative budget autonomously.

Staff at 31 December 2011 (2010)

TA posts: 117 (106) listed in the establishment plan of which 103 (99) occupied.

Contract staff: 349 (318) staff planned of which 351 (309) were in place as of 31 December 2011.

Total staff in place: 454 (408) undertaking the following tasks:

| — | Programme implementation: 287 (254) |
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Programme implementation: 287 (254)

| — | FP7 Support Services: 88 (81) |
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FP7 Support Services: 88 (81)

| — | Management and Administrative functions: 79 (73) |
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Management and Administrative functions: 79 (73)

Products and services 2011 (2010)

For the People Programme, 10 calls were closed in 2011 and 10 evaluations completed. 1 615 new grant agreements were signed and 2,676 payments made (excluding payments for expert evaluators). The Agency now manages a total of 5 159 (4 125) projects under this programme.

For the SME actions of the Capacities Programme, 3 calls were closed and 3 evaluations completed. 162 new grant agreements were signed and 385 payments made (excluding payments for expert evaluators). The Agency now manages a total of 522 (408) projects under this scheme.

For the Space and Security themes of the Cooperation Programme, 2 calls were closed in 2011 and 2 evaluations completed. 118 new grant agreements were signed and 183 payments made (excluding payments to expert evaluators). The Agency now manages a total of 271 (153) projects under these themes.

As regards the FP7 support services, the results obtained for 2011 are as follows:

| — | 64 (88) call publications supported; |
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64 (88) call publications supported;

| — | 26 838 (21 766) proposals received through the electronic proposal submission tool; |
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26 838 (21 766) proposals received through the electronic proposal submission tool;

| — | 3 897 (3 847) expert evaluators contracted and 3 620 (2 615) expert payments made (for programmes managed by the Agency only); |
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3 897 (3 847) expert evaluators contracted and 3 620 (2 615) expert payments made (for programmes managed by the Agency only);

| — | 6 252 (5 896) validations of participants completed; |
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6 252 (5 896) validations of participants completed;

| — | 7 123 (7 171) replies sent following questions to the Research Enquiry Service. |
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7 123 (7 171) replies sent following questions to the Research Enquiry Service.

Source: Information supplied by the Agency.

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THE AGENCY’S REPLIES

| 12. | Cancellations of carryovers – expressed in percentage of previous year budget – reduced from 7 % for the carry over from 2009 to 2010 to only 3 % for the carry over from 2010 to 2011 and it is expected that the amount of appropriations carried over to 2012 and subsequently cancelled will further reduce as the Agency paid additional attention to ensure that the balance of provisional commitments at year-end reflects a reliable estimate of the real outstanding obligations for payment. |
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12.

Cancellations of carryovers – expressed in percentage of previous year budget – reduced from 7 % for the carry over from 2009 to 2010 to only 3 % for the carry over from 2010 to 2011 and it is expected that the amount of appropriations carried over to 2012 and subsequently cancelled will further reduce as the Agency paid additional attention to ensure that the balance of provisional commitments at year-end reflects a reliable estimate of the real outstanding obligations for payment.

| 13. | The more significant budget transfers are linked to the unexpectedly high contributions due to the Commission for the use of IT tools and the proposal evaluation facilities shared amongst all services managing FP7. The Agency agreed with the Commission on a new procedure which will provide more reliable budget estimates for the next financial year. |
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13.

The more significant budget transfers are linked to the unexpectedly high contributions due to the Commission for the use of IT tools and the proposal evaluation facilities shared amongst all services managing FP7. The Agency agreed with the Commission on a new procedure which will provide more reliable budget estimates for the next financial year.

| 14. | The Agency points out that its recruitment procedures were in full conformity with its staff implemeting rules, adopted in line with the model developed by the Commission and shared amongst all Executive Agencies, and that the impartiality of the recruitments was not jeopardized. An update of these staff implementing rules was, however, agreed with the Commission in summer 2012 and the Court’s arguments will be considered for the forthcoming review of the Agency’s recruitment procedures. |
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14.

The Agency points out that its recruitment procedures were in full conformity with its staff implemeting rules, adopted in line with the model developed by the Commission and shared amongst all Executive Agencies, and that the impartiality of the recruitments was not jeopardized. An update of these staff implementing rules was, however, agreed with the Commission in summer 2012 and the Court’s arguments will be considered for the forthcoming review of the Agency’s recruitment procedures.

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