# EUR-Lex - 52007SC0311 - EN

Important legal notice

*|*

# 52007SC0311

**Commission staff working document - Accompanying the Report from the Commission to the Council, the European Parliament and the European Court of Auditors on the progress of the Commission Action Plan towards An Integrated Internal Control Framework {COM(2007) 86 final} /* SEC/2007/0311 final */ **

*

*

[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 7.3.2007

SEC(2007) 311

COMMISSION STAFF WORKING DOCUMENT Accompanying the

REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE EUROPEAN COURT OF AUDITORS

on the progress of the Commission Action Plan towards an Integrated Internal Control Framework

{ COM(2007) 86 final}

Sub action | Title | Completion Indicator | Status | Deadline set in Action Plan |

1 | Keep under consideration simplification of the rules for the 2007-2013 period concerning in particular the eligibility of expenditure in the structural funds and in the research programmes. | ′′′′≤ | FP7 now in final stages including simplification in a number of areas. Further simplification and clarification of the operation of rules is an ongoing process in all policy areas. | 31/12/2006 |

2 | Propose internal control as budgetary principle in the revised Financial Regulation on the basis of the results of the inter-institutional consultation. | ≤≤≤≤≤ | Rejected by the legislator in negotiations for FR but mostly integrated in Art. 28 bis. | 01/06/2006 |

3a | Establish Internal Control Templates which outline the range of control components (management declarations, balance of ex ante and ex post checking, certification, etc.) which would be expected in a given control environment. | ′′′′′ | Templates developed with basic structure for two management modes. | 31/05/2006 |

3b | Demonstrate how DGs will gain assurance on the internal control structures for shared management and internal policies, taking the developed templates and control strategies at Commission-level into account. | ′′′′′ | Templates now included in AAR standing instructions. | 30/09/2006 |

3c | Organise peer review to enhance coherence and consistency of control strategies per family. | ≤≤≤≤≤ | To be combined with peer review on AARs in early 2007 | New deadline: 31/03/2007 (was 31/12/2006) |

3d | Demonstrate how DGs will gain assurance on the internal control structures for external policy, administrative expenditure, pre-accession aid, EDF and own resources, taking the developed templates and control strategies at Commission-level into account. | ′′≤≤≤ | Templates are already in use by external policy, administrative and pre-accession DGs from the AAR 2006. This will be further developed in 2007 for EDF and own resources. | New deadline: 31/12/2007 (was 30/06/2007) |

3e | Organise peer review to enhance coherence and consistency of control strategies per family. | ≤≤≤≤≤ | Not yet started. | 31/12/2007 |

New Action: 3N | As from the Synthesis Report 2006, the Commission will clearly set out and communicate to the budgetary authority reservations to the global assurance, including where relevant by sector or Member state, together with the corresponding financial corrections or suspensions of payments. | ≤≤≤≤≤ |

4 | Launch inter-institutional initiative on the basic principles to be considered regarding the risks to be tolerated in the underlying transactions and the definition of common benchmarks for the management of this risk. | ≤≤≤≤≤ | Commission's proposal for the revised Financial Regulation rejected by Council. Council will follow the issue in the future. Commission internal action to be integrated with Action 11. | 31/03/2006 |

5 | Promote the use of management declarations at operational level in the negotiations on the 2007-2013 legislation for indirect centralised management (through national agencies, mostly in the area of education and culture) and the establishment of national coordinating bodies able to provide an overview of the assurance available for example by a synthesis of operational declarations per policy area. | ′′′′′ | Declarations of assurance on respect of regulatory requirements foreseen in Education and Culture 2007-2013. Summary of declarations now foreseen in legislation, MS support required for implementation. Some MS (NL, UK) are pursuing declaration initiatives independently. NL to be implemented for agriculture as of 2007 (for 2006). UK have not set a date. | 30/06/2006 |

6a | Develop guidelines on making management declarations more effective in research and other internal policies (at beneficiary level). | ≤≤≤≤≤ | Combined with Action 7 on audit certification and the use of certification of methodology. | Action removed |

6b | Extend guidelines on making management declarations more effective for external policies. | ≤≤≤≤≤ | Not yet started. | New deadline: 31/12/2007 (was 30/06/2007) |

7a | Establish criteria for certification audits in research and internal policies, focusing on the use of ‘agreed upon procedures’. | ′′′′′ | Final draft has been revised after consultation with auditing profession. Will combine clearer cost reporting with methodology certification for certain beneficiaries in the FP7 model grant agreement. | 31/12/2006 |

7b | Examine criteria, where these are not already in place, for certification audits in shared management 2007-2013, considering also the use of ‘agreed upon procedures’. | ≤≤≤≤≤ | Recommendations included in the guidance note on good practices in first-level management checks. Agreed upon procedures have not been developed, in keeping with the principle of subsidiarity applicable in the Structural Funds | 31/03/2007 |

7c | Extend criteria for certification audits, focusing on the use of ‘agreed upon procedures’, to other management modes, where appropriate. | ≤≤≤≤≤ | Will be examined with DG EAC in the latter half of 2007. | New deadline: 31/12/2007 (was 30/06/2007) |

8 | Analysis of potential additional assurance from SAIs on existing practice related to EU-funds. | ′′′′′ | Data exchange with SAIs has been launched and feedback obtained from some SAIs. Commission, Court and SAIs discussed further initiatives at Contact Committee in December 2006. Data exchange to continue in 2007. | 31/12/2006 |

New Action: 8N | To build on the momentum created by this action, the Commission will pursue contact with the SAIs with a view to determining how their work can be used to provide assurance on the execution of its programmes in the Member States. It will also launch a case study on the key issues faced by SAIs in examining Community expenditure. | ≤≤≤≤≤ | 31/12/2007 |

9a.1 | Assess potential actions necessary for enhancing the sharing of audit and control results and recording of their follow-up in the area of Internal policies, including Research. | ′′′′′ | Developed in the framework of the Research family audit strategy, to be finalised by end 2006. For Education and Culture 2007-13, the MS will report the results of the national controls to the Commission through the declaration of assurance process. | New deadline: 31/12/2006 (was 30/10/2006) |

New Action: 9a.1N | To oversee the initial stages of data-sharing in ABAC, the Commission will, for the Sixth Framework Programme, monitor the use of data sharing and management reporting with a view to identifying key factors for success in better integrating the sharing of data in the overall control process. | ≤≤≤≤≤ | 31/12/2007 |

9a.2 | Assess potential actions necessary for enhancing the sharing of audit and control results and recording of their follow-up in the area of Structural Funds 2007-2013. | ′′′′≤ | Reporting of audit results by Member States and the use made of this information by the Commission has been steadily improved and an audit tracking tool SYSAUDIT is now used by DG REGIO and will be extended to DG EMPL.. | 31/05/2007 |

9a.3 | Assess potential actions necessary for enhancing the sharing of audit and control results and recording of their follow-up in the area of other policies. | ≤≤≤≤≤ | As ABAC tool applies to all legal entities, this will be carried out within 9b | 31/12/2007 |

9b | For expenditure under direct management, implement a tool linked to ABAC for a Commission-wide exchange of information on control and audit missions on all legal entities. | ′′′≤≤ | Module now functioning within ABAC (and covers all legal entities, not just international bodies). Further enhancements planned for 2007. | 31/12/2007 |

9c | Award tender for a Commission-wide contractual framework to assist DGs on methodological issues, implementation of control work and tracking control performance. | ′′′′≤ | Tender launched. Evaluation in progress, award expected in April 2007. | 30/04/2007 |

10a.1 | Assess costs of controls in shared management: define a common methodology. | ′′′′′ | Methodology developed in collaboration with shared management DGs. | 31/05/2006 |

10a.2 | Assess costs of controls in shared management: launch initiative for data to be provided by Member States. | ′′′′′ | Launched for agriculture. Launched for Structural Funds starting with three Member States; to be rolled out to the other Member States in 2007. | 30/09/2006 |

10a.3 | Assess costs of controls in shared management: provision of data by Member States. | ′′≤≤≤ | Data collection in progress. | 28/02/2007 |

10a.4 | Assess costs of controls in shared management: analysis of received information. | ≤≤≤≤≤ | Not yet started. | 30/09/2007 |

10b | Make a first estimation on the costs of control incurred in direct management expenditure. | ′′′≤≤ | Pilot program in progress. | New deadline: 30/06/2007 (was 31/12/2006) |

10N | To further explore the cost-benefit ratio of control, the Commission will examine the effect of programme design and eligibility requirements on costs of control to develop a detailed analysis of tolerable risk on a practical basis. | ≤≤≤≤≤ | 31/12/2007 |

11 | Run a pilot-experience for evaluating benefits in the context of control of internal policies. | ′′≤≤≤ | Draft methodology developed, validation by pilot DGs in progress. | New deadline: 30/06/2007 (was 31/03/2007) |

New Action: 11N | To determine whether recovery and offsetting systems are working effectively, by identifying amounts recovered in 2005 and 2006 and their coherence with errors identified during controls the Commission will, in direct management, develop a typology of error and the relationship with recoveries, financial corrections and adjustments to payments and for shared management it will examine the reliability of national monitoring and reporting systems. | ≤≤≤≤≤ | 31/12/2007 |

12 | Put in place steps to close these gaps via the Annual Management Plans, with follow up reporting on progress in the Annual Activity Reports. | ′′′′≤ | Follow up to be included in 2006 AARs, and analysed in synthesis report. | New deadline: 15/06/2007 (was 31/03/2006) |

New Action: 12N | To ensure effective delivery of added assurance, the Commission will perform 300 audits for FP6 in 2007, compared with the 45 carried out in 2006. In addition, having developed a systematic approach to analysing and sampling the FP6 beneficiary population as part of Action 16b, the Commission will proceed with the identification and correction of errors in beneficiaries receiving the most significant proportion of the budget. This will also provide, by the end of 2007, a representative picture of the level and nature of irregularities in the research budget as a whole. | ′≤≤≤≤ |

13.1 | Finalise, as requested by Ecofin, the analysis for Structural Funds on the present controls at sector and regional level and the value of existing statements and declarations, taking the Article 13 annual reports due by June 2006 and the results of Commission audits into account. | ′′′′≤ | The SF DGs will report on their assessment of the functioning of the management and control systems in the Member States for 2000-06 in the 2006 AARs. | New deadline: 31/03/2007 (was 31/12/2006) |

13.2 | Update, in the context of the Annual Activity Reports, how DGs gain assurance from the internal control structures for Structural Funds and Agriculture for the 2007-2013 period. | ′′′′′ | DG REGIO has for the 2005 AAR formalised its procedures in providing assurance to the Director General, which will be set out in the AAR 2006. | 31/12/2007 |

14a | Disseminate good practices for primary level checks to manage the risk of error in underlying transactions and recommend Member States to step up their information activities directed at beneficiaries, including information on controls and risk of cancellation of funds. | ′′′′′ | Completed. SF DGs have issued guidance recommending good practices for management checks, checks by paying authorities, reporting of recoveries and financial corrections and closure of 2000-06 programmes (also foreseen in Implementing Regulations of the Financial Regulation by draft EP amendment) | 30/06/2006 |

14b | Provide in the context of the Structural Funds and indirect centralised management 2007-2013 guidelines for beneficiaries and/or intermediate levels on controls and responsibilities in the control chain. | ′′′′′ ′′≤≤≤ | For SF 2007-13, the SF DGs are preparing new guidance on a number of subjects including "financial engineering" Guidelines in some areas have also been issued for executive and traditional agencies. DG EAC has developed models for the ex-ante declaration of assurance and will develop the models for the yearly declaration and guidelines for national authorities in 2007. | 31/01/2007 31/12/2007 |

15 | Conclude for Structural Funds ‘Contracts of Confidence’ with 8 Member States, if sufficient volunteers, as a sound basis to prepare for implementation of the new legislation and to improve assurance on expenditure under the existing legislation. | ′′≤≤≤ | Signed with Wales and Austria. Negotiations are continuing with four other Member States. | New deadline: 31/12/2007 (was 30/09/2006) |

16a | Establish guidelines, based on existing experience, on accreditation, training and monitoring of external auditors in the domain of research and other internal policies. | ′′≤≤≤ | RTD have established an audit manual for FP6. More general best practices will be spread via an evolving intranet format in order to share DGs experience more interactively. | New deadline: 30/06/2007 (was 31/12/2006) |

16b | Develop common approaches to using risk and representative sampling in research and other internal policies, and external policies. | ′′′′′ ′≤≤≤≤ | Done for Research family. Being developed with other internal policies DGs on a needs basis. For external policies, preliminary analysis has begun. | 31/12/2006 31/12/2007 |

16c | Coordinate audit standards, error rate reporting, etc. for Structural Funds. | ′′≤≤≤ | In progress. Audit manual for the Structural Funds being revised to incorporate new requirements in the legislation and guidance on the application of internationally accepted auditing standards. | 31/12/2007 |