# C_2012388EN.01015101.xml

| 15.12.2012 | EN | Official Journal of the European Union | C 388/151 |
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15.12.2012

EN

Official Journal of the European Union

C 388/151

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REPORT

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

2012/C 388/26

INTRODUCTION

INTRODUCTION

| 1. | The European Research Council Executive Agency (hereinafter "the Agency"), which is located in Brussels, was created by Commission Decision 2008/37/EC of 14 December 2007 (1). The Agency was established for a period beginning on 1 January 2008 and ending on 31 December 2017 with the aim of managing the "Ideas" specific programme in the field of frontier research (2). |
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1.

The European Research Council Executive Agency (hereinafter "the Agency"), which is located in Brussels, was created by Commission Decision 2008/37/EC of 14 December 2007 (1). The Agency was established for a period beginning on 1 January 2008 and ending on 31 December 2017 with the aim of managing the "Ideas" specific programme in the field of frontier research (2).

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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 KEY CONTROLS OF THE AGENCY’S SUPERVISORY AND CONTROL SYSTEMS

COMMENTS ON KEY CONTROLS OF THE AGENCY’S SUPERVISORY AND CONTROL SYSTEMS

| 12. | The Agency did not exercise sufficient control during the development of an internal IT asset called e-Stream, whose purpose was to automate the workflow approval processes of the Scientific Management department. The business case for this project was not adequately defined, risks were not adequately identified and addressed and management failed to monitor the project's progress. These weaknesses contributed to the failure of the IT project, resulting in an impairment charge of 258 967 euro. |
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12.

The Agency did not exercise sufficient control during the development of an internal IT asset called e-Stream, whose purpose was to automate the workflow approval processes of the Scientific Management department. The business case for this project was not adequately defined, risks were not adequately identified and addressed and management failed to monitor the project's progress. These weaknesses contributed to the failure of the IT project, resulting in an impairment charge of 258 967 euro.

| 13. | The Director ad interim of the Agency was appointed on 1 January 2011 by a Commission decision. In February 2012, at the time of the audit, the duration of this posting exceeded the one year maximum foreseen in the Staff Regulation by one month. Since the Director’s original function as Head of Department was taken over temporarily by a Head of Unit, the same non-compliance with Staff Regulations also applies here. Another Head of Unit was acting Head of Department between June 2009 and February 2011 and the duration of the posting was irregular also in this case. |
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13.

The Director ad interim of the Agency was appointed on 1 January 2011 by a Commission decision. In February 2012, at the time of the audit, the duration of this posting exceeded the one year maximum foreseen in the Staff Regulation by one month. Since the Director’s original function as Head of Department was taken over temporarily by a Head of Unit, the same non-compliance with Staff Regulations also applies here. Another Head of Unit was acting Head of Department between June 2009 and February 2011 and the duration of the posting was irregular also in this case.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 11 September 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(1)  OJ L 9, 12.1.2008, p. 15.

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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 Chapter 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 27 June 2012 and received by the Court on 28 June 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://erc.europa.eu/.

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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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ANNEX

European Research Council Executive Agency (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty

  (Article 182 of the Treaty on the Functioning of the European Union) | 1. | A multiannual framework programme, setting out all the activities of the Union, shall be adopted by the European Parliament and the Council, after consulting the Economic and Social Committee. The framework programme shall:






  — | establish the scientific and technological objectives to be achieved by the activities provided for in Article 180 and fix the relevant priorities, |
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Areas of Union competence deriving from the Treaty

(Article 182 of the Treaty on the Functioning of the European Union)

1.

A multiannual framework programme, setting out all the activities of the Union, shall be adopted by the European Parliament and the Council, after consulting the Economic and Social Committee. The framework programme shall:

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establish the scientific and technological objectives to be achieved by the activities provided for in Article 180 and fix the relevant priorities,

| — | indicate the broad lines of such activities, |
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indicate the broad lines of such activities,

| — | fix the maximum overall amount and the detailed rules for Union financial participation in the framework programme and the respective shares in each of the activities provided for. |
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fix the maximum overall amount and the detailed rules for Union financial participation in the framework programme and the respective shares in each of the activities provided for.

| 2. | The framework programme shall be adapted or supplemented as the situation changes. |
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2.

The framework programme shall be adapted or supplemented as the situation changes.

| 3. | The framework programme shall be implemented through specific programmes developed within each activity. Each specific programme shall define the detailed rules for implementing it, fix its duration and provide for the means deemed necessary. The sum of the amounts deemed necessary, fixed in the specific programmes, may not exceed the overall maximum amount fixed for the framework programme and each activity. |
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3.

The framework programme shall be implemented through specific programmes developed within each activity. Each specific programme shall define the detailed rules for implementing it, fix its duration and provide for the means deemed necessary. The sum of the amounts deemed necessary, fixed in the specific programmes, may not exceed the overall maximum amount fixed for the framework programme and each activity.

| 4. | The Council, acting in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, shall adopt the specific programmes. |
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4.

The Council, acting in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, shall adopt the specific programmes.

Competences of the Agency

(Commission Decision 2008/37/EC)

Objectives

The Agency was set up in December 2007 by Commission Decision 2008/37/EC, for the management of the specific Community Programme "Ideas" in the field of frontier research in the application of Council Regulation (EC) No 58/2003."Ideas" is implemented by the European Research Council (ERC), comprising an independent Scientific Council which establishes the ERC’s scientific strategy and monitors its implementation by the Agency that handles the operational management. The Agency became autonomous from the Directorate General for Research and Innovation on 15 July 2009.

Tasks

The tasks of the Agency are described in the Delegation Act (See Commission Decision C(2008) 5694), namely in Articles 5-7 thereof. Among these tasks, the Agency has been entrusted with tasks covering:

| — | All aspects of administrative implementation and programme execution and in particular, the evaluation procedures, peer review and selection process according to the principles established by the Scientific Council; |
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All aspects of administrative implementation and programme execution and in particular, the evaluation procedures, peer review and selection process according to the principles established by the Scientific Council;

| — | The financial and scientific management of the grants. |
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The financial and scientific management of the grants.

Governance

(Commission decisions C(2008) 5132 and C(2011) 4877)

(Commission decisions 2007/134/EC and 2011/12/EU)

(Council decision 2006/972/EC)

(Council Regulation (EC) No 58/2003)

Steering Committee

The Steering Committee is the body that supervises the operations of the Agency and is appointed by the Commission (See Commission Decision C(2008) 5132). It adopts the Agency's annual work programme (after approval by the Commission), administrative budget and annual reports. It is composed of five members and one observer.

Scientific Council of the ERC

The Scientific Council of the ERC is entrusted by virtue of Commission Decision 2007/134/EC with establishing a scientific strategy for the Ideas Specific Programme, deciding on the type of research to be funded in accordance with Article 5(3) of Council Decision 2006/972/EC and acting as a guarantor of the quality of the activity from a scientific perspective. Its tasks cover, in particular, the establishment of the annual work programme for the Ideas Specific Programme, and of the peer review process, as well as the monitoring and quality control of the implementation of the Specific Programme "Ideas", without prejudice to the responsibility of the Commission. It is composed of twenty-two members appointed by the Commission.

Director of the Agency

Appointed by the European Commission for four years.

External audit

Court of Auditors.

Discharge authority

Parliament, following a recommendation from the Council.

Resources made available to the Agency in 2011 (2010)

Budget

35,6 (29,3) million euro

Staff at 31 December 2011

The 2011 operating budget provides for an establishment plan of 100 (100) Temporary staff (TS) and a budget for 253 (215) Contract staff (CS) and 7 (15) Seconded National Experts (SNE), at a total of 360 (330) staff, out of which 350 (316) were occupied at year end 2011:

| — | 97 (94) temporary staff, out of which 13 (13) TS seconded and 84 (81) TS external; |
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97 (94) temporary staff, out of which 13 (13) TS seconded and 84 (81) TS external;

| — | 245 (218) contract staff; |
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245 (218) contract staff;

| — | 8 (4) SNEs. |
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8 (4) SNEs.

Allocated to:

| — | Operational activities (Scientific and Grant Management departments): 68 %; |
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Operational activities (Scientific and Grant Management departments): 68 %;

| — | Administrative activities (other departments): 32 %. |
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Administrative activities (other departments): 32 %.

Products and services in 2011 (2010)

| 1. | Monitor the grant agreements awarded under the 2010 and 2011 Ideas Work Programme, calls for Starting Grants, Advanced Grants and Proof-of-Concept Grants. The Ideas work programme is implemented via the publication of the annual calls for proposals, which is followed by an evaluation (by external experts), the preparation and signing of grant agreements and finally the monitoring of project implementation. Each call for proposals results in a series of Grant Agreements, with an expected project cycle of about five years. |
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1.

Monitor the grant agreements awarded under the 2010 and 2011 Ideas Work Programme, calls for Starting Grants, Advanced Grants and Proof-of-Concept Grants. The Ideas work programme is implemented via the publication of the annual calls for proposals, which is followed by an evaluation (by external experts), the preparation and signing of grant agreements and finally the monitoring of project implementation. Each call for proposals results in a series of Grant Agreements, with an expected project cycle of about five years.

| 2. | Execution of the 2011 Calls for proposals for the Ideas work programme. (Starting Grants, Advanced Grants and Proof-of-Concept Grants): 6 515 proposal applications were submitted in 2011, out of which 4 080 were for Starting Grants, 2 284 for Advanced Grants and 151 for Proof-of-Concept Grants. Of these a total of 6 400 were eligible and thus evaluated by the review panels. A total of 822 proposals were selected for the granting process (794 on the main lists, 28 on the reserve lists). |
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2.

Execution of the 2011 Calls for proposals for the Ideas work programme. (Starting Grants, Advanced Grants and Proof-of-Concept Grants): 6 515 proposal applications were submitted in 2011, out of which 4 080 were for Starting Grants, 2 284 for Advanced Grants and 151 for Proof-of-Concept Grants. Of these a total of 6 400 were eligible and thus evaluated by the review panels. A total of 822 proposals were selected for the granting process (794 on the main lists, 28 on the reserve lists).

| 3. | Generation and dissemination of information on the Ideas Specific Programme and the Agency’s activities in 2011. |
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3.

Generation and dissemination of information on the Ideas Specific Programme and the Agency’s activities in 2011.

| 4. | Support to the Scientific Council of the ERC: Five Scientific Council plenary sessions were organised during the reporting period. In order to facilitate the Scientific Council's strategy discussion, the Agency, in conjunction with the Secretary General of the ERC, carried out analysis on the operation, portfolio of funded projects and early signs of the impact that the ERC has on the scientific community as well as the research landscape in Europe. Meetings (typically two per year) relating to the four existing ERC Working Groups on "Relations with Industry", "Open Access", "Third Country Participation" and "Gender Balance", as well as the two standing committees of the Scientific Council (Committee on panels and Committee on Conflict of Interest and Scientific Misconduct) were organised by the Agency. A series of documents containing analyses and key messages on the specific issues dealt with by the Working Groups and the Committees were prepared by the Agency in conjunction with the members of the said groups and were submitted for discussion/adoption to the plenary meetings of the Scientific Council. As every previous year, the Agency supported the Scientific Council in the establishment of the Annual Work Programme of the Ideas Specific Programme. |
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4.

Support to the Scientific Council of the ERC: Five Scientific Council plenary sessions were organised during the reporting period. In order to facilitate the Scientific Council's strategy discussion, the Agency, in conjunction with the Secretary General of the ERC, carried out analysis on the operation, portfolio of funded projects and early signs of the impact that the ERC has on the scientific community as well as the research landscape in Europe. Meetings (typically two per year) relating to the four existing ERC Working Groups on "Relations with Industry", "Open Access", "Third Country Participation" and "Gender Balance", as well as the two standing committees of the Scientific Council (Committee on panels and Committee on Conflict of Interest and Scientific Misconduct) were organised by the Agency. A series of documents containing analyses and key messages on the specific issues dealt with by the Working Groups and the Committees were prepared by the Agency in conjunction with the members of the said groups and were submitted for discussion/adoption to the plenary meetings of the Scientific Council. As every previous year, the Agency supported the Scientific Council in the establishment of the Annual Work Programme of the Ideas Specific Programme.

Source: Information supplied by the Agency.

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THE AGENCY’S REPLIES

| 12. | The failure of the eStream project is due to a combination of technical and environmental factors. The ERCEA has recognized weaknesses in its management of IT projects and has made significant progress in its Action Plan to address these weaknesses. It should also be stressed that the impairment of 258 967 euro represents about 2,5 % of the Agency IT budget over the period of development of eStream. |
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12.

The failure of the eStream project is due to a combination of technical and environmental factors. The ERCEA has recognized weaknesses in its management of IT projects and has made significant progress in its Action Plan to address these weaknesses. It should also be stressed that the impairment of 258 967 euro represents about 2,5 % of the Agency IT budget over the period of development of eStream.

| 13. | In the case of the ERCEA Director ad interim the extension of the temporary posting beyond one year is in the interest of the service, given that the post was published in March 2012 and the selection procedure is currently ongoing. In the case of the Head of Unit to the post of Head of Department previously occupied by the current Director ad interim, the temporary posting was foreseen to be effective until the post of the Director would be filled. The extension of the temporary posting beyond one year is in the interest of the service as foreseen in Article 7 of the Staff Regulation.
  In the second case of a Head of Unit acting as Head of Department, this temporary posting ended on 15 February 2011 and the new Head of Department took up duties on 16 February 2011 following a successful recruitment procedure open to external candidates. |
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13.

In the case of the ERCEA Director ad interim the extension of the temporary posting beyond one year is in the interest of the service, given that the post was published in March 2012 and the selection procedure is currently ongoing. In the case of the Head of Unit to the post of Head of Department previously occupied by the current Director ad interim, the temporary posting was foreseen to be effective until the post of the Director would be filled. The extension of the temporary posting beyond one year is in the interest of the service as foreseen in Article 7 of the Staff Regulation.

In the second case of a Head of Unit acting as Head of Department, this temporary posting ended on 15 February 2011 and the new Head of Department took up duties on 16 February 2011 following a successful recruitment procedure open to external candidates.

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