# Official Journal C 6/2013

| | ISSN 1977-091X
  doi:10.3000/1977091X.C_2013.006.eng |
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| Official Journal
  of the European Union | C 6 |
| | |
| English edition | Information and Notices | Volume 5610 January 2013 |

ISSN 1977-091X

doi:10.3000/1977091X.C_2013.006.eng

Official Journal

of the European Union

C 6

English edition

Information and Notices

Volume 5610 January 2013

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| Notice No | Contents | page |
| --- | --- | --- |
| | IV   Notices |
| | NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES |
| | Court of Auditors |
| 2013/C 006/01 | Report on the annual accounts of the Artemis Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking | 1 |
| 2013/C 006/02 | Report on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking | 9 |
| 2013/C 006/03 | Report on the annual accounts of the ENIAC Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking | 18 |
| 2013/C 006/04 | Report on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking | 27 |
| 2013/C 006/05 | Report on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2011, together with the replies of the Joint Undertaking | 36 |
| 2013/C 006/06 | Report on the annual accounts of the SESAR Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking | 46 |
| 2013/C 006/07 | Report on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking | 56 |

Notice No

Contents

page

IV   Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

Court of Auditors

2013/C 006/01

Report on the annual accounts of the Artemis Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

1

2013/C 006/02

Report on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

9

2013/C 006/03

Report on the annual accounts of the ENIAC Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

18

2013/C 006/04

Report on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

27

2013/C 006/05

Report on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2011, together with the replies of the Joint Undertaking

36

2013/C 006/06

Report on the annual accounts of the SESAR Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

46

2013/C 006/07

Report on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

56

| EN | |
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EN

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IV Notices

NOTICES FROM EUROPEAN UNION INSTITUTIONS, BODIES, OFFICES AND AGENCIES

Court of Auditors

| 10.1.2013 | EN | Official Journal of the European Union | C 6/1 |
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10.1.2013

EN

Official Journal of the European Union

C 6/1

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REPORT

on the annual accounts of the Artemis Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/01

INTRODUCTION

| 1. | The Artemis Joint Undertaking, located in Brussels, was set up in December 2007 (1) for a period of 10 years. |
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1.

The Artemis Joint Undertaking, located in Brussels, was set up in December 2007 (1) for a period of 10 years.

| 2. | The main objective of the Joint Undertaking is to define and implement a ‘Research Agenda’ for the development of key technologies for Embedded Computing Systems across different application areas in order to strengthen European competitiveness and sustainability, and allow the emergence of new markets and societal applications (2). |
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2.

The main objective of the Joint Undertaking is to define and implement a ‘Research Agenda’ for the development of key technologies for Embedded Computing Systems across different application areas in order to strengthen European competitiveness and sustainability, and allow the emergence of new markets and societal applications (2).

| 3. | The Founding Members of the Artemis Joint Undertaking are the European Union represented by the Commission, the Member States Austria, Belgium, Denmark, Estonia, France, Finland, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Portugal, Romania, Slovenia, Spain, Sweden, the United Kingdom, and Artemisia, an association representing companies and other research organisations active in the field of Embedded Computing Systems in Europe. In 2009, Cyprus, the Czech Republic, Latvia and Norway also became members of the Joint Undertaking. |
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3.

The Founding Members of the Artemis Joint Undertaking are the European Union represented by the Commission, the Member States Austria, Belgium, Denmark, Estonia, France, Finland, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Portugal, Romania, Slovenia, Spain, Sweden, the United Kingdom, and Artemisia, an association representing companies and other research organisations active in the field of Embedded Computing Systems in Europe. In 2009, Cyprus, the Czech Republic, Latvia and Norway also became members of the Joint Undertaking.

| 4. | The maximum EU contribution to the Artemis Joint Undertaking to cover running costs and research activities is 420 million euro to be paid from the budget of the Seventh Framework Programme (3). The Artemisia association is to make a maximum contribution of 30 million euro to the running costs. Artemis Member States are to make in-kind contributions to the running costs (by facilitating the implementation of projects), and to provide financial contributions of at least 1,8 times the EU contribution. In-kind contributions are also to be provided by research organisations participating in projects. |
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4.

The maximum EU contribution to the Artemis Joint Undertaking to cover running costs and research activities is 420 million euro to be paid from the budget of the Seventh Framework Programme (3). The Artemisia association is to make a maximum contribution of 30 million euro to the running costs. Artemis Member States are to make in-kind contributions to the running costs (by facilitating the implementation of projects), and to provide financial contributions of at least 1,8 times the EU contribution. In-kind contributions are also to be provided by research organisations participating in projects.

| 5. | The Joint Undertaking started to work autonomously on 26 October 2009. |
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5.

The Joint Undertaking started to work autonomously on 26 October 2009.

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. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. |
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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. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

| 7. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (4) of the Artemis 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 2011 and the legality and regularity of the transactions underlying those accounts. |
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7.

Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (4) of the Artemis 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 2011 and the legality and regularity of the transactions underlying those accounts.

| 8. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7). |
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8.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7).

The Management's responsibility

| 9. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) 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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9.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) 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.

The Auditor's responsibility

| 10. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |
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10.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them.

| 11. | The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |
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11.

The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

| 12. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |
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12.

The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.

| 13. | 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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13.

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

| 14. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules. |
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14.

In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules.

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

| 15. | The ex post audit strategy (12) of the Joint Undertaking was adopted by a Governing Board decision on 25 November 2010 and is a key control (13) for assessing the legality and regularity of the underlying transactions. The payments made in 2011 relating to certificates of acceptance of costs issued by the National Funding Authorities of the Member States (NFAs) amounted to 4,8 million euro, which represents 32 % of total operational payments. The implementation of the ex post audit strategy started in 2011. |
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15.

The ex post audit strategy (12) of the Joint Undertaking was adopted by a Governing Board decision on 25 November 2010 and is a key control (13) for assessing the legality and regularity of the underlying transactions. The payments made in 2011 relating to certificates of acceptance of costs issued by the National Funding Authorities of the Member States (NFAs) amounted to 4,8 million euro, which represents 32 % of total operational payments. The implementation of the ex post audit strategy started in 2011.

| 16. | The audit of project cost claims has been delegated to the NFAs of the Member States. The administrative agreements signed with the NFAs do not include the practical arrangements for the ex post audits. By the end of the audit (September 2012), Artemis had not received sufficient information relating to the audit strategies of eight of the NFAs (14) and was not in a position to assess whether the ex-post audit strategy provides sufficient assurance with respect to the legality and regularity of the underlying transactions (15). |
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16.

The audit of project cost claims has been delegated to the NFAs of the Member States. The administrative agreements signed with the NFAs do not include the practical arrangements for the ex post audits. By the end of the audit (September 2012), Artemis had not received sufficient information relating to the audit strategies of eight of the NFAs (14) and was not in a position to assess whether the ex-post audit strategy provides sufficient assurance with respect to the legality and regularity of the underlying transactions (15).

| 17. | The information available on the implementation of the Joint Undertaking’s ex post audit strategy is not sufficient to conclude whether this key control is functioning effectively. |
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17.

The information available on the implementation of the Joint Undertaking’s ex post audit strategy is not sufficient to conclude whether this key control is functioning effectively.

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

| 18. | In the Court’s opinion, except for the possible effects of the matter described in the basis for a qualified opinion in paragraphs 15 to 17, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2011 are, in all material respects, legal and regular. |
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18.

In the Court’s opinion, except for the possible effects of the matter described in the basis for a qualified opinion in paragraphs 15 to 17, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2011 are, in all material respects, legal and regular.

| 19. | The comments which follow in paragraphs 20 to 35 do not call the Court’s opinions into question. |
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19.

The comments which follow in paragraphs 20 to 35 do not call the Court’s opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

| 20. | Contrary to Artemis's financial rules (16), the 2011 budget of the Joint Undertaking does not reflect differentiated payment appropriations for operational expenditure. |
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20.

Contrary to Artemis's financial rules (16), the 2011 budget of the Joint Undertaking does not reflect differentiated payment appropriations for operational expenditure.

| 21. | The 2011 budget was adopted on 25 November 2010 and included operational appropriations amounting to 46,6 million euro. On 17 December 2011 an amending budget was adopted reducing operational appropriations to 18,6 million euro. While the utilisation rate for operational commitment appropriations was 100 % (as a result of the reduction of the operational appropriations to 18,6 million euro), the rate for payment appropriations was only 51 %. |
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21.

The 2011 budget was adopted on 25 November 2010 and included operational appropriations amounting to 46,6 million euro. On 17 December 2011 an amending budget was adopted reducing operational appropriations to 18,6 million euro. While the utilisation rate for operational commitment appropriations was 100 % (as a result of the reduction of the operational appropriations to 18,6 million euro), the rate for payment appropriations was only 51 %.

| 22. | According to the programme manager, the estimates for budget implementation for the 2008, 2009 and 2010 call for proposals at the end of the year amounted to 86 %, 53 % and 18 % respectively. However, the actual payments made under the 2008 call were only 50 %, 31 % for the 2009 call and no payments had been made under the 2010 call. According to the Joint Undertaking, the relatively low implementation rate for operational payment appropriations, is the consequence of the delays at the level of the Member States in signing the national grant agreements. |
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22.

According to the programme manager, the estimates for budget implementation for the 2008, 2009 and 2010 call for proposals at the end of the year amounted to 86 %, 53 % and 18 % respectively. However, the actual payments made under the 2008 call were only 50 %, 31 % for the 2009 call and no payments had been made under the 2010 call. According to the Joint Undertaking, the relatively low implementation rate for operational payment appropriations, is the consequence of the delays at the level of the Member States in signing the national grant agreements.

| 23. | Contrary to the Statutes of the Artemis Joint Undertaking (17), Greece is using EU structural funds to cover its national contributions to the Greek beneficiaries of the Artemis projects (18) instead of providing national funding. The Joint Undertaking accepted the continuation of Greek participation in Artemis projects but no funding is being provided by the Joint Undertaking to the Greek beneficiaries as co-financing with another source of EU funding is not allowed (19). |
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23.

Contrary to the Statutes of the Artemis Joint Undertaking (17), Greece is using EU structural funds to cover its national contributions to the Greek beneficiaries of the Artemis projects (18) instead of providing national funding. The Joint Undertaking accepted the continuation of Greek participation in Artemis projects but no funding is being provided by the Joint Undertaking to the Greek beneficiaries as co-financing with another source of EU funding is not allowed (19).

| 24. | The Joint Undertaking is using non-automatic carryover of payment appropriations to the next financial year, but without a decision of the Governing Board as required by Article 10(1) of the financial rules (20). Moreover, no distinction is made between payment appropriations carried over from previous years and payment appropriations of the current year. |
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24.

The Joint Undertaking is using non-automatic carryover of payment appropriations to the next financial year, but without a decision of the Governing Board as required by Article 10(1) of the financial rules (20). Moreover, no distinction is made between payment appropriations carried over from previous years and payment appropriations of the current year.

Calls for proposals

| 25. | The Council Regulation setting up the Artemis Joint Undertaking envisaged a maximum total budget of 420 million euro to cover operational expenditure. The actual implementation and the foreseen value of the calls for proposals represent 244 million euro or 58 % of the total budget. |
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25.

The Council Regulation setting up the Artemis Joint Undertaking envisaged a maximum total budget of 420 million euro to cover operational expenditure. The actual implementation and the foreseen value of the calls for proposals represent 244 million euro or 58 % of the total budget.

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

| 26. | During 2011 the Joint Undertaking intensified its efforts to establish and implement effective financial, accounting and management control procedures. However further work is needed, in particular regarding the internal control standards (21) and the financial verification of cost claims (22). |
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26.

During 2011 the Joint Undertaking intensified its efforts to establish and implement effective financial, accounting and management control procedures. However further work is needed, in particular regarding the internal control standards (21) and the financial verification of cost claims (22).

| 27. | The Accounting Officer validated the financial and accounting systems used, but has not yet validated the underlying business processes which provide financial information, in particular, the one providing financial information about the validation and payment of the cost claims received from the national authorities. |
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27.

The Accounting Officer validated the financial and accounting systems used, but has not yet validated the underlying business processes which provide financial information, in particular, the one providing financial information about the validation and payment of the cost claims received from the national authorities.

OTHER MATTERS

Internal Audit Capability and the Commission’s Internal Audit Service

| 28. | Article 6(2) of the Regulation setting up Artemis stipulates that the Joint Undertaking shall have an internal audit capability. However, at the end of 2011, this important element of the internal control system had not yet been set up. |
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28.

Article 6(2) of the Regulation setting up Artemis stipulates that the Joint Undertaking shall have an internal audit capability. However, at the end of 2011, this important element of the internal control system had not yet been set up.

| 29. | In 2011 the Commission’s Internal Audit Service carried out a risk assessment exercise and the strategic audit plan for 2012-2014 was presented to the Governing Board for adoption on 25 January 2012. |
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29.

In 2011 the Commission’s Internal Audit Service carried out a risk assessment exercise and the strategic audit plan for 2012-2014 was presented to the Governing Board for adoption on 25 January 2012.

| 30. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 25 November 2010. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (23) referring to the powers of the Commission’s Internal Auditor. |
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30.

The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 25 November 2010. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (23) referring to the powers of the Commission’s Internal Auditor.

Annual activity report

| 31. | According to Articles 19(4) of the Statutes of the Joint Undertaking and Article 40 of its Financial Rules, the Executive Director is required to draw up an annual activity report. The annual activity report shall indicate the results of the operations by reference to the objectives set, the risks associated with these operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. It shall also confirm that the information contained in the report presents a true and fair view except as otherwise specified in any reservations related to defined areas of revenue and expenditure. |
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31.

According to Articles 19(4) of the Statutes of the Joint Undertaking and Article 40 of its Financial Rules, the Executive Director is required to draw up an annual activity report. The annual activity report shall indicate the results of the operations by reference to the objectives set, the risks associated with these operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. It shall also confirm that the information contained in the report presents a true and fair view except as otherwise specified in any reservations related to defined areas of revenue and expenditure.

| 32. | Although the annual activity report provides information on the results of the operations of the Joint Undertaking, it does not include an assessment of the efficiency and effectiveness of the internal control system. The annual activity report contains the following weaknesses:






  — | Lack of information on the implementation of the ex-post audit strategy, which is not sufficient to conclude whether this key control is functioning effectively, and should have led to a reservation. |
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32.

Although the annual activity report provides information on the results of the operations of the Joint Undertaking, it does not include an assessment of the efficiency and effectiveness of the internal control system. The annual activity report contains the following weaknesses:

—

Lack of information on the implementation of the ex-post audit strategy, which is not sufficient to conclude whether this key control is functioning effectively, and should have led to a reservation.

| — | No information on the partial validation of the financial and accounting systems by the accounting officer is provided. The accounting officer has validated only the part that is under the direct Joint Undertaking control but not the systems providing information from the National Funding Authorities. |
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—

No information on the partial validation of the financial and accounting systems by the accounting officer is provided. The accounting officer has validated only the part that is under the direct Joint Undertaking control but not the systems providing information from the National Funding Authorities.

| — | There are unexplained differences between the budgetary implementation figures included in the Outturn on payments appropriations of the annual activity report and the budgetary implementation figures included in the Final Accounts. |
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—

There are unexplained differences between the budgetary implementation figures included in the Outturn on payments appropriations of the annual activity report and the budgetary implementation figures included in the Final Accounts.

Follow up of previous observations

| 33. | During 2011 the Joint Undertaking set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. Further work is required to finalise the Disaster Recovery Plan. |
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33.

During 2011 the Joint Undertaking set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. Further work is required to finalise the Disaster Recovery Plan.

| 34. | Contrary to the Artemis Joint Undertaking's financial rules (24), the National Funding Authorities have not yet declared any bank interest generated on pre-financing payments. |
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34.

Contrary to the Artemis Joint Undertaking's financial rules (24), the National Funding Authorities have not yet declared any bank interest generated on pre-financing payments.

| 35. | The Host State Agreement (25) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support to be provided was signed on 2 February 2012. |
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35.

The Host State Agreement (25) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support to be provided was signed on 2 February 2012.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(1)  Council Regulation (EC) No 74/2008 of 20 December 2007 on the establishment of the ‘ARTEMIS Joint Undertaking’ to implement a Joint Technology Initiative in Embedded Computing Systems (OJ L 30, 4.2.2008, p. 52).

1

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

2

Annex

(3)  The Seventh Framework Programme, adopted by Decision No 1982/2006/EC of the European Parliament and the Council (OJ L 412, 30.12.2006, p. 1), brings all the research-related EU initiatives together under one roof and plays a crucial role in achieving the goals of growth, competitiveness and employment. It is also a key pillar for the European Research Area.

3

(4)  The Court received the provisional annual accounts on 1 March 2012. These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations.

4

inter alia

(5)  The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information.

5

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

6

(7)  OJ L 248, 16.9.2002, p. 1.

7

(8)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

8

(9)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

9

(10)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are integrated as such in the financial rules of the Joint Undertaking.

10

(11)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

11

(12)  The general financing agreement between the European Commission and the Joint Undertaking states that ‘the Joint Undertaking in its competent board, adopts its ex-post audit strategy with the aim of providing reasonable assurance on the legality and regularity of the underlying transactions’ and ‘the ex-post audit strategy shall be based on examination of procedures and of a sample of transactions for all or a sample of beneficiaries and shall, in particular, adequately reflect the risks involved.’

12

(13)  Article 12 of Regulation (EC) No 74/2008 states that ‘The Artemis Joint Undertaking shall ensure that the financial interests of its members are adequately protected by carrying out or commissioning appropriate internal and external controls’ and ‘The Artemis Joint Undertaking shall carry out on-the-spot checks and financial audits among the recipients of the Artemis Joint Undertaking's public funding. These checks and audits shall be performed either directly by the Artemis Joint Undertaking or by Artemis Member States on its behalf. Artemis Member States may carry out any other checks and audits among the recipients of their national funding as they deem necessary and shall communicate the results to the Artemis Joint Undertaking.’

13

(14)  The documentation received so far is in most cases insufficient to allow the Joint Undertaking to assess these strategies and their implementation as no details on the audit arrangements are provided (i.e. audit approach and methodology, size of the sample, the type of financial checks to be performed by the NFAs etc.).

14

(15)  According to the ex-post audit strategy adopted by the Artemis Governing Board the Joint Undertaking shall assess at least once a year whether the information received from the Artemis Member States provides sufficient assurance with respect to the regularity and legality of the executed transactions. By the end of the audit only four Artemis Member States had sent information on the ex post audits performed.

15

(16)  Article 8(1) of the Artemis Joint Undertaking's financial rules states that ‘the budget shall contain non-differentiated appropriations and differentiated appropriations. The latter shall consist of commitment appropriations and payment appropriations.’

16

(17)  Article 13(1) of the Statutes of Artemis Joint Undertaking states ‘Public funding for projects selected following calls for proposals published by the Artemis Joint Undertaking shall consist of the national financial contributions from the Artemis Member States and/or the financial contribution from the Artemis Joint Undertaking. Any public support under this initiative is without prejudice to the procedural and material State aid rules when applicable.’

17

(18)  The total budget of the Greek participation in Artemis projects of the 2008, 2009 and 2010 calls amounts to 12,2 million euro (estimated as 5,7 million euro of national funds, 2,03 million euro of Joint Undertaking contribution and the rest from the project participants).

18

(19)  Article 54(5) of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund (OJ L 210, 31.7.2006, p. 25) states ‘an expenditure co-financed by the Funds shall not receive assistance from another Union financial instrument’.

19

(20)  Article 10(1) of the Joint Undertaking's financial rules states that ‘Appropriations which have not been used at the end of the financial year for which they were entered shall be cancelled. Given the needs of the Joint Undertaking, the cancelled appropriations may be entered in the estimate of revenue and expenditure of up to the following three financial years, in accordance with Article 27. However, they may, by decision of the Governing Board taken not later than 15 February, be carried over to the next financial year only.’

20

(21)  On 22 September 2010 the Governing Board approved the Joint Undertaking's internal control framework which is composed of 16 internal control standards. Although significant progress has been made, some of these standards are still not fully implemented.

21

(22)  Regarding financial verification of costs, full reliance is placed on the certificates provided by the national authorities. Apart from the checks carried out by the Joint Undertaking on the staff assigned to the projects (only as an indicator of the personnel costs used to implement the activities), no other financial checks are performed by the Joint Undertaking.

22

(23)  Regulation (EC, Euratom) No 2343/2002.

23

(24)  Article 103(2) of the Artemis Joint Undertaking's financial rules states that ‘Interest generated by pre-financing payments shall be assigned to the programme implemented by the Joint Undertaking and deducted from the payment of the balance of the amounts due to the beneficiary. Interest shall not be due to the Joint Undertaking if the pre-financing does not exceed the amount of 50 000 euro.’

24

(25)  Paragraph 26 of the Court of Auditors’ report on the annual accounts of the Artemis Joint Undertaking for the financial year 2010, together with the replies of the Joint Undertaking (OJ C 368, 16.12.2011, p. 1).

25

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ANNEX

Artemis Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Extracts from Article 187 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. |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EC) No 74/2008) | Objectives

  The Artemis Joint Undertaking shall contribute to the implementation of the 7th Framework Programme and the theme ‘information and communication technologies’ of the specific programme ‘cooperation’.

  Tasks







  — | define and implement a ‘Research Agenda’ for the development of key technologies for Embedded Computing Systems; |

Areas of Union competence deriving from the Treaty

(Extracts from Article 187 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.

Competences of the Joint Undertaking

(Council Regulation (EC) No 74/2008)

Objectives

The Artemis Joint Undertaking shall contribute to the implementation of the 7th Framework Programme and the theme ‘information and communication technologies’ of the specific programme ‘cooperation’.

Tasks

—

define and implement a ‘Research Agenda’ for the development of key technologies for Embedded Computing Systems;

| — | support the implementation of the R & D Activities by awarding funding to participants in selected projects following competitive calls for proposals; |
| --- | --- |

—

support the implementation of the R & D Activities by awarding funding to participants in selected projects following competitive calls for proposals;

| — | promote a public-private partnership aimed at mobilising and pooling Union, national and private efforts and increasing overall R & D investments in the field of Embedded Computing Systems; |
| --- | --- |

—

promote a public-private partnership aimed at mobilising and pooling Union, national and private efforts and increasing overall R & D investments in the field of Embedded Computing Systems;

| — | achieve synergy and coordination of European R & D efforts in the field of Embedded Computing Systems; |
| --- | --- |

—

achieve synergy and coordination of European R & D efforts in the field of Embedded Computing Systems;

| — | promote the involvement of SMEs. |
| --- | --- |

—

promote the involvement of SMEs.

Governance

The Governing Board (GB): has overall responsibility for the operations of the Joint Undertaking and oversees the implementation of its activities.

The Director: is the chief executive responsible for the day-to-day management of the Joint Undertaking in accordance with the decisions of the Governing Board.

The Public Authorities Board: is responsible for the decisions on the scope and budget of the calls for proposals, selection of proposals and allocation of public funds for selected proposals.

The Industry and Research Committee: elaborates the multiannual strategic plan as well as the research agenda and the annual work programme.

External audit

Court of Auditors.

Discharge authority

European Parliament, acting on a recommendation from the Council.

Resources available to the Joint Undertaking in 2011

Budget: the budget contains commitment appropriations for 28,5 million euro and payment appropriations for 32 million euro

Staff at 31 December 2011

8 posts provided for in the establishment plan were fully occupied

Other staff:

| — | Seconded National Experts: 0 |
| --- | --- |

—

Seconded National Experts: 0

| — | Contract staff: 5 |
| --- | --- |

—

Contract staff: 5

| — | Local staff: 0 |
| --- | --- |

—

Local staff: 0

| — | Total staff employed: 13 |
| --- | --- |

—

Total staff employed: 13

Allocated to:

| — | Operational activities: 6 |
| --- | --- |

—

Operational activities: 6

| — | Administrative tasks: 4 |
| --- | --- |

—

Administrative tasks: 4

| — | Mixed tasks: 3 |
| --- | --- |

—

Mixed tasks: 3

Activities and services provided in 2011

A Call for Proposals was organised in 2011 with an overall budget of 72 million euro.

Source: Information supplied by the Joint Undertaking.

---

REPLIES OF THE ARTEMIS JOINT UNDERTAKING

Paragraphs 15-16-17

We acknowledge the importance of the ex-post audit strategy and the pertinence of the Court’s observations. However, we would like to bring additional information:

| 1. | The various financing schemes and national rules in place in the different Member States imply that ex-post audit is only feasible on completed projects. In that perspective, a proposal for an ad-hoc modification of Artemis ex-post audit strategy will be submitted to the Governing Board for adoption in December 2012 |
| --- | --- |

1.

The various financing schemes and national rules in place in the different Member States imply that ex-post audit is only feasible on completed projects. In that perspective, a proposal for an ad-hoc modification of Artemis ex-post audit strategy will be submitted to the Governing Board for adoption in December 2012

| 2. | In that perspective, knowing that the first group of projects or part of it (Call 2008) will terminate in the course of 2011, we have anticipated the ex-post audit issue by starting to collect from the Member States, early 2011 (just after the approval by the Artemis Governing Board, of the ex-post audit strategy), documentation about their ex-post audit strategy. |
| --- | --- |

2.

In that perspective, knowing that the first group of projects or part of it (Call 2008) will terminate in the course of 2011, we have anticipated the ex-post audit issue by starting to collect from the Member States, early 2011 (just after the approval by the Artemis Governing Board, of the ex-post audit strategy), documentation about their ex-post audit strategy.

| 3. | In the course of 2011, we received only one ‘end-of-project certificate and ex-post audit information’ and 15 more were received in the first three months of 2012. At the time of the audit, April 2012, it is true that the documentation received from the Member States was far from being complete, it’s also true that significant progress has already been demonstrated during 2012. |
| --- | --- |

3.

In the course of 2011, we received only one ‘end-of-project certificate and ex-post audit information’ and 15 more were received in the first three months of 2012. At the time of the audit, April 2012, it is true that the documentation received from the Member States was far from being complete, it’s also true that significant progress has already been demonstrated during 2012.

| 4. | For these reasons, the declaration of assurance of the Executive Director didn’t make reference to the implementation of the ex-post audit strategy, taking into account the absence of materiality for the year 2011. It will be obviously included in the Annual Activity Report 2012. |
| --- | --- |

4.

For these reasons, the declaration of assurance of the Executive Director didn’t make reference to the implementation of the ex-post audit strategy, taking into account the absence of materiality for the year 2011. It will be obviously included in the Annual Activity Report 2012.

Paragraph 24

Article 10(1) of the financial rules was transposed from the Framework Financial Regulation for Agencies and is fully respected in Artemis JU for commitment appropriations. This request (concerning payment appropriations) to the Governing Board has sense in Agencies that send the excess of revenues back to the European Commission. Article 15 of the Artemis Statutes forbids this possibility, with the exception of a winding-up scenario.

Paragraph 28

The Commission’s Internal Audit Service is the Internal Auditor of ARTEMIS since 25 November 2010 and, taking into account the size of the Artemis Joint Undertaking staff, has kindly offered to be also the Internal Audit Capability of Artemis. Lengthy discussions between the IAS and the Commission are still ongoing and have delayed the implementation of this plan. This was confirmed by the IAS in the Governing Board meeting held on January 25, 2012. The Artemis JU hopes that the IAS will fulfill that role as soon as possible. In the meantime, the Executive Director has replaced that role of the IAS by collective (the whole team) off-site meetings addressing the main topics related to process improvements.

Paragraph 30

We agree with the observation, but, for reasons of simplification and efficiency, we have decided to amend our Financial Rules for this point, at the time we’ll have to amend them for the on-going revision of the General Financial Regulation.

Paragraph 32

The differences between the two reports (Annual Accounts and Annual Activity Report) are due to different criteria used. As stated in the Annual Activity Report all types of credits/fund sources are reported (footnote table 1) while in the Annual Accounts only the implementation of the budget of the current year is reported.

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| 10.1.2013 | EN | Official Journal of the European Union | C 6/9 |
| --- | --- | --- | --- |

10.1.2013

EN

Official Journal of the European Union

C 6/9

---

REPORT

on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/02

INTRODUCTION

| 1. | The Clean Sky Joint Undertaking, located in Brussels, was set up in December 2007 (1) for a period of ten years. |
| --- | --- |

1.

The Clean Sky Joint Undertaking, located in Brussels, was set up in December 2007 (1) for a period of ten years.

| 2. | The objective of the Clean Sky Joint Undertaking is to accelerate the development, validation and demonstration of clean air-transport technologies in the EU for earliest possible deployment (2). The research activities coordinated by the Joint Undertaking are divided into six technological areas or ‘Integrated Technology Demonstrators’ (ITDs). |
| --- | --- |

2.

The objective of the Clean Sky Joint Undertaking is to accelerate the development, validation and demonstration of clean air-transport technologies in the EU for earliest possible deployment (2). The research activities coordinated by the Joint Undertaking are divided into six technological areas or ‘Integrated Technology Demonstrators’ (ITDs).

| 3. | The Founding Members of the Joint Undertaking are the European Union, represented by the Commission, and industrial partners as the leaders of the ITDs, together with the associate members of the ITDs. |
| --- | --- |

3.

The Founding Members of the Joint Undertaking are the European Union, represented by the Commission, and industrial partners as the leaders of the ITDs, together with the associate members of the ITDs.

| 4. | The maximum EU contribution to the Clean Sky Joint Undertaking to cover running costs and research activities is 800 million euro to be paid from the budget of the Seventh Framework Programme (3). Other Members of the Joint Undertaking are to contribute resources at least equal to the EU contribution, including in-kind contributions. |
| --- | --- |

4.

The maximum EU contribution to the Clean Sky Joint Undertaking to cover running costs and research activities is 800 million euro to be paid from the budget of the Seventh Framework Programme (3). Other Members of the Joint Undertaking are to contribute resources at least equal to the EU contribution, including in-kind contributions.

| 5. | The Joint Undertaking started working autonomously on 16 November 2009. |
| --- | --- |

5.

The Joint Undertaking started working autonomously on 16 November 2009.

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. This is supplemented by evidence provided by the work of other auditors (where relevant) 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. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

| 7. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (4) of the Clean Sky 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 2011, and the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

7.

Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (4) of the Clean Sky 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 2011, and the legality and regularity of the transactions underlying those accounts.

| 8. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7). |
| --- | --- |

8.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7).

The Management's responsibility

| 9. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) 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. |
| --- | --- |

9.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) 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.

The Auditor's responsibility

| 10. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |
| --- | --- |

10.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them.

| 11. | The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |
| --- | --- |

11.

The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

| 12. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |
| --- | --- |

12.

The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.

| 13. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

13.

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

| 14. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 provision of its financial rules. |
| --- | --- |

14.

In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 provision of its financial rules.

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

| 15. | The ex-post audit strategy of the Joint Undertaking was adopted by a Governing Board decision on 17 December 2010 and is a key control for assessing the legality and regularity of the underlying transactions (12). The ex-post audits completed as of September 2012 covered 44,3 million euro (18,8 % of all cost claims received by the Joint Undertaking in 2008, 2009 and 2010 (13). The error rate resulting from these ex-post audits was 6,16 % (14). |
| --- | --- |

15.

The ex-post audit strategy of the Joint Undertaking was adopted by a Governing Board decision on 17 December 2010 and is a key control for assessing the legality and regularity of the underlying transactions (12). The ex-post audits completed as of September 2012 covered 44,3 million euro (18,8 % of all cost claims received by the Joint Undertaking in 2008, 2009 and 2010 (13). The error rate resulting from these ex-post audits was 6,16 % (14).

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

| 16. | In the Court’s opinion, except for the effects of the matters described in paragraph 15, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2011 are, in all material respects, legal and regular. |
| --- | --- |

16.

In the Court’s opinion, except for the effects of the matters described in paragraph 15, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2011 are, in all material respects, legal and regular.

| 17. | The comments which follow in paragraphs 18 to 32 do not call the Court’s opinions into question. |
| --- | --- |

17.

The comments which follow in paragraphs 18 to 32 do not call the Court’s opinions into question.

COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

| 18. | The 2011 final amending budget (15) included commitment appropriations of 175 million euro and payment appropriations of 159,8 million euro. The utilisation rate for commitment appropriations was 94 %, while the rate of payment appropriations was 64 %. The payment appropriation rate reflects delays in the implementation of the Joint Undertaking’s activities. There are significant delays between the publication of the calls for proposals and the signature of the grant agreements (16). The low implementation of the budget is also reflected in the cash balance, which stood at 51 million euro at the end of the year (32 % of the available payment appropriations in 2011) (17). |
| --- | --- |

18.

The 2011 final amending budget (15) included commitment appropriations of 175 million euro and payment appropriations of 159,8 million euro. The utilisation rate for commitment appropriations was 94 %, while the rate of payment appropriations was 64 %. The payment appropriation rate reflects delays in the implementation of the Joint Undertaking’s activities. There are significant delays between the publication of the calls for proposals and the signature of the grant agreements (16). The low implementation of the budget is also reflected in the cash balance, which stood at 51 million euro at the end of the year (32 % of the available payment appropriations in 2011) (17).

| 19. | The Joint Undertaking, contrary to its financial rules, carried over 68 million euro of payment appropriations to 2012 without a decision by the Governing Board (18). |
| --- | --- |

19.

The Joint Undertaking, contrary to its financial rules, carried over 68 million euro of payment appropriations to 2012 without a decision by the Governing Board (18).

Presentation of the accounts

| 20. | The Joint Undertaking experienced a significant delay in receiving the cost claims from Grant Agreements with Members for 2011. Due to the delay, the validation of a large number of claims could not be completed for the 2011 Final Accounts. The related in-kind contributions (52 million euro) were not approved by the Governing Board in due time and, as a consequence, could not be registered under net assets and had to be reflected under liabilities (‘contributions to be validated’).The Joint Undertaking therefore reported negative net assets of 18,5 million euro. The Final Accounts duly reflect this transitional situation that does not indicate any risk of solvency for the Joint Undertaking. |
| --- | --- |

20.

The Joint Undertaking experienced a significant delay in receiving the cost claims from Grant Agreements with Members for 2011. Due to the delay, the validation of a large number of claims could not be completed for the 2011 Final Accounts. The related in-kind contributions (52 million euro) were not approved by the Governing Board in due time and, as a consequence, could not be registered under net assets and had to be reflected under liabilities (‘contributions to be validated’).The Joint Undertaking therefore reported negative net assets of 18,5 million euro. The Final Accounts duly reflect this transitional situation that does not indicate any risk of solvency for the Joint Undertaking.

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

| 21. | Despite the progress made during 2011, the Joint Undertaking has not yet fully established reliable internal control and financial information systems. In particular, further work is needed on the ex-ante control procedures applied for the validation of cost claims. |
| --- | --- |

21.

Despite the progress made during 2011, the Joint Undertaking has not yet fully established reliable internal control and financial information systems. In particular, further work is needed on the ex-ante control procedures applied for the validation of cost claims.

| 22. | In 2011 the Joint Undertaking had not yet implemented the new tool (19) to manage the data relating to the cost claims submitted by the members and beneficiaries. |
| --- | --- |

22.

In 2011 the Joint Undertaking had not yet implemented the new tool (19) to manage the data relating to the cost claims submitted by the members and beneficiaries.

| 23. | The Court examined the ex-ante control procedures applied to cost claims submitted under three grant agreements with Clean Sky Members (20). The following weaknesses were noted:






  — | the checklists used for the ex-ante control on cost claims were not always complete (21). |
| --- | --- | --- |

23.

The Court examined the ex-ante control procedures applied to cost claims submitted under three grant agreements with Clean Sky Members (20). The following weaknesses were noted:

—

the checklists used for the ex-ante control on cost claims were not always complete (21).

| — | in one case, the audit certificate accompanying the cost claim of an associate included exceptions affecting personnel costs and subcontracting. No adjustment to the cost claim was made as a result of these exceptions. |
| --- | --- |

—

in one case, the audit certificate accompanying the cost claim of an associate included exceptions affecting personnel costs and subcontracting. No adjustment to the cost claim was made as a result of these exceptions.

| — | contrary to the manual of financial procedures (22), there is no evidence that the operational agents are also verifying the financial aspects of the implementation of the contracts. |
| --- | --- |

—

contrary to the manual of financial procedures (22), there is no evidence that the operational agents are also verifying the financial aspects of the implementation of the contracts.

| — | in at least three transactions, the financial verifying and the authorising officer functions were the responsibility of the head of administration, contrary to the provisions of the manual of financial procedures and the principle of segregation of duties. |
| --- | --- |

—

in at least three transactions, the financial verifying and the authorising officer functions were the responsibility of the head of administration, contrary to the provisions of the manual of financial procedures and the principle of segregation of duties.

| 24. | The Accounting Officer completed in March 2012 the validation exercise of the underlying business processes as required by the Joint Undertaking's financial rules (23). A number of recommendations were made in the Accounting Officer’s validation report, in particular the need to improve the system for the validation of cost claims and the implementation of a tool to properly report to management, on budgetary and accounting matters. |
| --- | --- |

24.

The Accounting Officer completed in March 2012 the validation exercise of the underlying business processes as required by the Joint Undertaking's financial rules (23). A number of recommendations were made in the Accounting Officer’s validation report, in particular the need to improve the system for the validation of cost claims and the implementation of a tool to properly report to management, on budgetary and accounting matters.

OTHER MATTERS

Internal audit function and the Commission’s Internal Audit Service

| 25. | During 2011, and as a result of resource constraints within the organisation, the internal auditor had to work on the core processes of the Joint Undertaking, including the establishment of the 2010 and 2011 accounts and the validation of cost claims received from members. |
| --- | --- |

25.

During 2011, and as a result of resource constraints within the organisation, the internal auditor had to work on the core processes of the Joint Undertaking, including the establishment of the 2010 and 2011 accounts and the validation of cost claims received from members.

| 26. | In 2011 the Commission’s Internal Audit Service carried out a risk assessment exercise. Based on the results of the risk assessment, the strategic audit plan for 2012-2014 was presented to the Governing Board for adoption on 14 December 2011. |
| --- | --- |

26.

In 2011 the Commission’s Internal Audit Service carried out a risk assessment exercise. Based on the results of the risk assessment, the strategic audit plan for 2012-2014 was presented to the Governing Board for adoption on 14 December 2011.

| 27. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 31 March 2011. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (24) referring to the powers of the Commission’s internal auditor. |
| --- | --- |

27.

The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 31 March 2011. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (24) referring to the powers of the Commission’s internal auditor.

Payments of members’ contributions

| 28. | The procedure for issuing recovery orders relating to the Joint Undertaking's running costs was not properly applied. The request to the members to pay their 2011 contributions was not accompanied by the cash-flow forecast as required under the funding agreement. |
| --- | --- |

28.

The procedure for issuing recovery orders relating to the Joint Undertaking's running costs was not properly applied. The request to the members to pay their 2011 contributions was not accompanied by the cash-flow forecast as required under the funding agreement.

Follow-up of previous observations

| 29. | As at the end of 2011, the Joint Undertaking had not yet completed the internal procedures to be used for the supervision of the application of the provisions regarding the protection, use and dissemination of research results (25). |
| --- | --- |

29.

As at the end of 2011, the Joint Undertaking had not yet completed the internal procedures to be used for the supervision of the application of the provisions regarding the protection, use and dissemination of research results (25).

| 30. | The Court in its 2011 Opinion on the Joint Undertaking’s financial rules identified a number of areas which needed to be amended (26). The financial rules have not been amended to reflect the matters raised in the Court’s Opinion. |
| --- | --- |

30.

The Court in its 2011 Opinion on the Joint Undertaking’s financial rules identified a number of areas which needed to be amended (26). The financial rules have not been amended to reflect the matters raised in the Court’s Opinion.

| 31. | During 2011 the JU set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. Essential elements (27) of a Disaster Recovery Plan have been defined during 2011, but work is needed to finalise and approve it. |
| --- | --- |

31.

During 2011 the JU set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. Essential elements (27) of a Disaster Recovery Plan have been defined during 2011, but work is needed to finalise and approve it.

| 32. | The Host State Agreement (28) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support was signed on 2 February 2012. |
| --- | --- |

32.

The Host State Agreement (28) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support was signed on 2 February 2012.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 13 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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

2

Annex

(3)  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), brings all the research-related EU initiatives together under one roof and plays a crucial role in achieving the goals of growth, competitiveness and employment. It is also a key pillar for the European Research Area.

3

(4)  The Court received the provisional annual accounts on 1 March 2012. These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations.

4

inter alia

(5)  The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information.

5

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

6

(7)  OJ L 248, 16.9.2002, p. 1.

7

(8)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

8

(9)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

9

(10)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are integrated as such in the financial rules of the Joint Undertaking.

10

(11)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

11

(12)  Article 12(4) of the Regulation setting up the Joint Undertaking states that ‘The Clean Sky Joint Undertaking shall carry out on-the-spot checks and financial audits among the recipients of the Clean Sky Joint Undertaking’s public funding’. Ex-post audits may identify ineligible expenditures claimed by the beneficiaries which are then subject to recovery procedures.

12

(13)  The 2010 claims were paid during 2011

13

(14)  The error rate is calculated using an average of the overdeclarations found in the different cost claims weighted by their amount.

14

(15)  Adopted by the Governing Board on 14 December 2011.

15

(16)  The average time between the publication of the call for proposals and the signature of the JU grant agreements was 418 days for the calls launched in 2010 and 291 days for first call launched in 2011.

16

(17)  The cash balance at the end of 2010 amounted to 53 million euro (41 % of the available payment appropriations in 2010).

17

(18)  Article 10(1) of the financial rules states that ‘Appropriations which have not been used at the end of the financial year for which they were entered shall be cancelled. Given the needs of the Joint Undertaking, the cancelled appropriations may be entered in the estimate of revenue and expenditure up to the following three financial years, in accordance with Article 27. However, they may, by decision of the Governing Board taken not later than 15 February, be carried over to the next financial year only, ...’.

18

(19)  The Joint Undertaking is developing a new tool to manage the data related to Members.

19

(20)  Each Clean Sky Member claim included on average 30 cost claims of associates.

20

(21)  Critical elements such as the signature of the operational verifying officer and the review of the completeness of the operational checklist by the financial verifying officer were not always documented.

21

(22)  The manual of financial procedures of the Joint Undertaking states that the roles of operational and financial verification and authorising officer shall be separated across the management of operational expenditure and that:

22

| — | ‘the operational verifying agent shall verify that the operational aspects (technical and financial) of the file are in compliance with the agreed parameters, |
| --- | --- |

—

‘the operational verifying agent shall verify that the operational aspects (technical and financial) of the file are in compliance with the agreed parameters,

| — | the verifying agent (head of administration) shall verify the compliance of the operational aspects with the existing rules and the overall regularity of the operation, |
| --- | --- |

—

the verifying agent (head of administration) shall verify the compliance of the operational aspects with the existing rules and the overall regularity of the operation,

| — | the executive director shall perform the overall financial and operational check of the entire file.’ |
| --- | --- |

—

the executive director shall perform the overall financial and operational check of the entire file.’

(23)  Article 43 of the JU’s financial rules stipulates that the accounting officer shall be responsible for ‘laying down and validating the accounting systems, and, where appropriate, validating systems laid down by the authorising officer to supply or justify accounting information’.

23

(24)  Regulation (EC, Euratom) No 2343/2002.

24

(25)  Paragraph 23 of the Court of Auditors’ report on the 2010 annual accounts of the Clean Sky Joint Undertaking (OJ C 368, 16.12.2011, p. 8).

25

(26)  Court of Auditors’ Opinion No 2/2011 on the Clean Sky Joint Undertaking’s Financial Rules (http://eca.europa.eu).

26

(27)  (a) financial circuits in case of disaster; (b) back-up procedure for securing the databases by regular and frequent backup and off-site storage; (c) initial agreement to use the EC installations to access the financial systems (ABAC, SAP) and the internet.

27

(28)  Paragraph 25 of the Court of Auditors’ report on the 2010 annual accounts of the Clean Sky Joint Undertaking.

28

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ANNEX

Clean Sky 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) | 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 71/2008 of 20 December 2007 setting up the Clean Sky Joint Undertaking (OJ L 30, 4.2.2008, p. 1) |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EC) No 71/2008) | Objectives







  — | The Clean Sky Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular Theme 7, Transport (including Aeronautics) of the Specific Programme Cooperation. |

Areas of Union competence deriving from the Treaty

(Extracts from 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 71/2008 of 20 December 2007 setting up the Clean Sky Joint Undertaking (OJ L 30, 4.2.2008, p. 1)

Competences of the Joint Undertaking

(Council Regulation (EC) No 71/2008)

Objectives

—

The Clean Sky Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular Theme 7, Transport (including Aeronautics) of the Specific Programme Cooperation.

| — | accelerating in the EU the development, validation and demonstration of clean Air Transport technologies for earliest possible deployment; |
| --- | --- |

—

accelerating in the EU the development, validation and demonstration of clean Air Transport technologies for earliest possible deployment;

| — | ensuring coherent implementation of European research efforts aiming at environmental improvements in the field of Air Transport; |
| --- | --- |

—

ensuring coherent implementation of European research efforts aiming at environmental improvements in the field of Air Transport;

| — | creating a radically innovative Air Transport System based on the integration of advanced technologies and full scale demonstrators (ITDs), with the target of reducing the environmental impact of air transport through significant reduction of noise and gaseous emissions, and improvement of the fuel economy of aircrafts; |
| --- | --- |

—

creating a radically innovative Air Transport System based on the integration of advanced technologies and full scale demonstrators (ITDs), with the target of reducing the environmental impact of air transport through significant reduction of noise and gaseous emissions, and improvement of the fuel economy of aircrafts;

| — | accelerating the generation of new knowledge, innovation and the uptake of research proving the relevant technologies and fully integrated system of systems, in the appropriate operational environment, leading to strengthened industrial competitiveness. |
| --- | --- |

—

accelerating the generation of new knowledge, innovation and the uptake of research proving the relevant technologies and fully integrated system of systems, in the appropriate operational environment, leading to strengthened industrial competitiveness.

Governance

| — | The governing body of the JU is the Governing Board. The Executive team is led by an Executive Director. Industry is represented through various means such as ITD steering committees and National States representative group. |
| --- | --- |

—

The governing body of the JU is the Governing Board. The Executive team is led by an Executive Director. Industry is represented through various means such as ITD steering committees and National States representative group.

Resources available to the Joint Undertaking in 2011

Budget

192 350 991 euro

Staff at 31 December 2011

24 posts provided for in the establishment plan (18 temporary staff and 6 contract staff) of which 23 posts were occupied; these were allocated to: Operational activities: 9; Administrative tasks: 14; Mixed tasks: 5

Activities and services provided in 2011

See Annual Activity Report 2011 of the Clean Sky Joint Undertaking at www.cleansky.eu

Source: Information supplied by the Clean Sky Joint Undertaking.

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REPLIES OF THE CLEAN SKY JOINT UNDERTAKING

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

Paragraph 15

The Clean Sky Joint Undertaking (CSJU) welcomes the positive conclusion of the Court on the legality and regularity of all transactions underlying the annual accounts 2011 with the only exception of transactions relating to the validation of cost claims.

The validation of costs claimed by the JU’s beneficiaries leads to interim/final payments and clearing of pre-financing. The ex-post audits performed by the CSJU in 2011 covered costs validated by the management of the Joint Undertaking (JU) concerning the project execution 2008, 2009 and 2010. In the accumulated operational payments incurred by the JU from the beginning of the CS program until December 2011, only 49,5 % (1) were related to project execution 2008, 2009 and 2010.

The error detected by the JU’s ex-post audits carried out in 2011 amounts to 6,16 %. However, taking into account the corrective actions implemented by the JU as described further down in this comment, besides the detected error rate another indicator needs to be considered for the assessment of the legality and regularity of the validated cost claims: the residual error rate. According to the methodology described in the approved CSJU ex-post audit strategy, the residual error rate indicates the remaining error in the validated cost claims, after recovery mechanism have taken place. For the ex-post audits carried out in 2011 for previous years’ cost claims, the residual error rate amounts to 4,09 %, which leads to a comparatively limited amount at risk in respect of total accumulated operational payments incurred for the CS program until the end of 2011 (2,02 % (2)).

The JU acknowledges the relevance of the detected and residual error rates related to the audited cost claims and aims to enhance further the quality of its ex-ante validation process.

The JU has implemented its ex-post audit process in the year 2011, approximately one year after having achieved its autonomy in November 2009. The scope of the first audits covered the validation process of the year 2010, which was the first one carried out by the JU. In the year 2010 the JU was still in a start-up phase and the ex-ante controls related to the grant management were not yet fully mature to manage the high volume of grants.

With a view to the results of the first ex-post audit exercise carried out, the JU wishes to highlight the effectiveness of this element of its internal control system, through which the management has detected and corrected errors incurred during the JU’s ex-ante validation of cost claims. Final corrective actions are still on-going.

Since 2010, the JU has significantly developed its processes governing the validation of cost claims by setting up dedicated procedures including a database for grant management providing for a standard approval mechanism of cost claims by Financial and Project officers.

After the first ex-post audit exercise, the JU has established the appropriate recovery measures to correct the overpayments incurred in the past, including extrapolation of systematic errors detected in the audits on non-audited cost claims. It needs to be noted, that 75 % of the JU’s funds are granted to named beneficiaries (members of the CSJU), who participate in the CS projects until the end of the program. This situation facilitates the corrective measures to be taken by the JU through recoveries on the occasion of subsequent payments to the beneficiaries.

As a preventive measure, the procedures applied today for the ex-ante validation of cost claims take into account the results of the ex-post audits of previous years, in particular in cases of systematic errors. For the period 2008 to 2010, more than 80 % of the detected errors were of a systematic nature. This enables the JU also to provide guidance to the named beneficiaries, thus averting errors in future cost claims.

A significant part of the error detected in the ex-post audits of 2011 (approximately 50 %) was due to the usage of previous years’ accounting data, as actual data were not available at the time, when the financial statements were due. The JU is monitoring the process of subsequent adjustments within its ex-ante controls and will make sure in the coming reporting periods, that adjustments of previous years’ cost claims are submitted without delay.

The JU’s management considers it important to ensure a multi-annual control architecture for the grant management of the Clean Sky JU, which takes into account the opportunities for standard recovery procedures as well as for preventive measures. This is why the JU’s management has established control mechanisms and objectives for the multi-annual duration of the project, which are measured by indicators covering the entire program duration.

Comments on the budgetary and financial management

Paragraph 18

The JU relies on the efficient and successful outcome of negotiations relating to the calls for proposals and has taken steps internally to improve and accelerate the process around this important aspect of the payments to new partners. The JU is seeing an overall improvement in the time to grant and is monitoring this closely at management level (3).

Paragraph 19

The JU acknowledges the delay of the Governing Board decision approving the carry-over of payment appropriations to the budget plan of the year 2012 (4). The time schedule for the JU’s budgetary planning and reporting cycle has been revised in order to take care of the appropriate timely approval of the Governing Board for the carry-overs to the year 2013.

Paragraph 20

The JU faced an exceptional situation in the first half of 2012 regarding the receipt of cost claims from its members for project execution in 2011. The financial statements for GAMs 2011, which were due 1st March 2012, were submitted by the beneficiaries with an unusual delay of up to 3-4 months. The JU has analysed the underlying reason for this delay together with the ITD coordinators (consortia leaders) and takes action to prevent a similar development in 2013. The following actions have been decided:

| — | With agreement of the Governing Board (June 2012), a clear timetable for the 2013 process (January - June 2013) will be set out indicating deadlines and response times expected from the industry and the JU. |
| --- | --- |

—

With agreement of the Governing Board (June 2012), a clear timetable for the 2013 process (January - June 2013) will be set out indicating deadlines and response times expected from the industry and the JU.

| — | Through guidance and training the JU will contribute to improve the completeness and quality of the cost claims and related Certificates of Financial Statements (CFS). |
| --- | --- |

—

Through guidance and training the JU will contribute to improve the completeness and quality of the cost claims and related Certificates of Financial Statements (CFS).

| — | Close monitoring will be further enhanced by the JU, providing pro-active assistance to the members for individual questions on eligibility of costs. This was not possible due to lack of resources in the first half of 2012. |
| --- | --- |

—

Close monitoring will be further enhanced by the JU, providing pro-active assistance to the members for individual questions on eligibility of costs. This was not possible due to lack of resources in the first half of 2012.

| — | A new IT tool for grant management will facilitate the process of submitting and validating cost claims. |
| --- | --- |

—

A new IT tool for grant management will facilitate the process of submitting and validating cost claims.

Following the validation of finally received cost claims by management and approval by the Governing Board later in 2012, the related in-kind contributions will be transferred to the Net Assets of the JU in the 2012 Final accounts. Therefore, the status of the Net Assets as presented in the Final accounts 2011 has to be considered as transitional.

Comments on key controls of the Joint Undertaking’s supervisory and control systems

Paragraph 21

During the first quarter of the year 2012 and following previous year’s ECA recommendations, the JU has developed a dedicated procedure for the processes related to the validation of cost claims, integrating the POs in the validation process of the financial statements (5). Besides the validation of the technical reports, the POs check the information available on the usage of resources and notify the result of their validation to the Financial Officers. Clear rules have been developed ensuring the evidence of the financial and operational verification respectively authorisation for the validation of cost claims. The format of the previously used checklist has been improved, in order to provide evidence of the validation steps actually performed and to show the interaction between the financial and operational units.

Paragraph 22

The JU, following its experiences and previous observations of the Court regarding the processing of data relating to beneficiaries, developed a dedicated tool for the management of beneficiary data for the Grant agreements for members (GMT) in the last quarter of 2011. This tool was used for processing the cost claims of 2011 in the second quarter of 2012 and - after testing the reliability of the data encoded and of the resulting reports by the JU’s Accounting officer together with an external audit firm - results were applied for the Final Accounts 2011.

Paragraph 23

The JU takes note of the remarks of the Court and has taken steps to improve the internal approval processes for both financial and operational actors; indeed, there is now, through the above mentioned grant management tool, a more integrated approach to the validation of the cost claims and annual technical reports by the respective financial and operational actors and this is more visible in the process.

Regarding the segregation of duties, the JU is currently working out a modification of the financial circuits to ensure the segregation between the financial verification and authorisation in cases of absences of the normally foreseen financial actors.

Paragraph 24

The JU has taken note of the recommendations of the Accounting officer and as already stated, has made significant steps to implement GMT that will allow improving the validation of the cost claims and to be able to comprehensively and regularly report to the JU management.

Other matters

Paragraph 25

In August 2011, Governing Board and management of the JU had been made aware by the Internal Audit Officer (IAO) on the involvement of the IAO in some core processes in the financial management of the JU and the potential consequences on the independence of the IAO. The risk of a potential lack of assurance regarding the concerned processes will be mitigated through the involvement of the IAS if required.

Paragraph 27

The JU will amend its financial rules following the next update to the framework financial regulation which is currently underway (see also item 30).

Paragraph 28

The request for payment of contributions 2011 to the Commission (as one of the Members of the JU) was duly accompanied by an appropriate cash-flow forecast. While a cash flow was not attached, the request to Members other than the EC was accompanied by an explanation of the requested amount and the repartition key, showing the share of each member or associate. Moreover, through the information on the annual accounts of the previous year and the approved annual budget of the year 2011, provided in the minutes of the Governing Board, all members were delivered with relevant financial details. The JU will make sure, that in future cash flow forecasts will be attached to payment requests also to members other than the Commission.

Paragraph 29

The adequate implementation of the detailed provisions in the Annex II, General conditions, of the Clean Sky JU Grant agreements for Members on the protection, use and dissemination of research results is still on-going.

A dedicated procedure, summarising the elements of the JU’s supervisory role and controls in place, will be established in due course.

Paragraph 30

The JU will amend its financial rules following the next update to the framework financial regulation which is currently underway. This will allow the JU to align itself with the commonly accepted rules and take advantage to clarify, where possible, the issues raised by the Court.

Paragraph 31

Together with the neighbouring JUs in their common building, Clean Sky JU has further worked on finalising the Disaster Recovery Plan. It is envisaged, that this will be completed by the end of 2012.

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(1)  Accumulated operational payments from 2008 to 2011 amount to 261 358 871 euro, final payments plus clearing of pre-financing for the years 2008 to 2010 add up to 129 295 956 euro.

(2)  = 4,09 % of (129 295 956 euro/261 385 871 euro)*100.

(3)  Since the start-up of the JU, the time to grant has improved from 418 days to 268 days as of the most recent call (Call 10). This shows a further improvement to that assessed by the Court.

(4)  The Governing Board did adopt the annual budget plan 2011 in December 2010 wherein an estimate of the carry over amount was included.

(5)  CS procedure No. 2.9.1, Interim Procedure for validating financial statements received from Members for the execution of GAMs 2011 and for adjustments received for previous years’ GAMs.

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| 10.1.2013 | EN | Official Journal of the European Union | C 6/18 |
| --- | --- | --- | --- |

10.1.2013

EN

Official Journal of the European Union

C 6/18

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REPORT

on the annual accounts of the ENIAC Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/03

INTRODUCTION

| 1. | The European Joint Undertaking for the implementation of the Joint Technology Initiative on Nanoelectronics (ENIAC Joint Undertaking), located in Brussels, was set up in December 2007 (1) for a period of 10 years. |
| --- | --- |

1.

The European Joint Undertaking for the implementation of the Joint Technology Initiative on Nanoelectronics (ENIAC Joint Undertaking), located in Brussels, was set up in December 2007 (1) for a period of 10 years.

| 2. | The main objective of the Joint Undertaking is to define and implement a ‘Research Agenda’ for the development of key competences for nanoelectronics across different application areas in order to strengthen European competitiveness and sustainability, and allow the emergence of new markets and societal applications (2). |
| --- | --- |

2.

The main objective of the Joint Undertaking is to define and implement a ‘Research Agenda’ for the development of key competences for nanoelectronics across different application areas in order to strengthen European competitiveness and sustainability, and allow the emergence of new markets and societal applications (2).

| 3. | The Founding Members of the Joint Undertaking are the European Union represented by the Commission, the Member States Belgium, Estonia, France, Germany, Greece, Ireland, Italy, the Netherlands, Poland, Portugal, Spain, Sweden and the United Kingdom, and the Association for European Nanoelectronics Activities (AENEAS). Other Member States and associated countries, as well as any other country or legal entity capable of making a substantial financial contribution to the achievement of the Joint Undertaking’s objectives, may become members of the ENIAC Joint Undertaking. |
| --- | --- |

3.

The Founding Members of the Joint Undertaking are the European Union represented by the Commission, the Member States Belgium, Estonia, France, Germany, Greece, Ireland, Italy, the Netherlands, Poland, Portugal, Spain, Sweden and the United Kingdom, and the Association for European Nanoelectronics Activities (AENEAS). Other Member States and associated countries, as well as any other country or legal entity capable of making a substantial financial contribution to the achievement of the Joint Undertaking’s objectives, may become members of the ENIAC Joint Undertaking.

| 4. | The maximum EU contribution to the ENIAC Joint Undertaking to cover running costs and research activities is 450 million euro to be paid from the budget of the Seventh Framework Programme (3). AENEAS is to make a maximum contribution of 30 million euro to the running costs of the Joint Undertaking. ENIAC Member States are to make in-kind contributions to the running costs (by facilitating the implementation of projects), and to provide financial contributions of at least 1,8 times the EU contribution. In-kind contributions are also to be provided by research organisations participating in projects. The organisations participating in the research projects must make in-kind contributions at least equal to the contribution of the Commission and the Member States. |
| --- | --- |

4.

The maximum EU contribution to the ENIAC Joint Undertaking to cover running costs and research activities is 450 million euro to be paid from the budget of the Seventh Framework Programme (3). AENEAS is to make a maximum contribution of 30 million euro to the running costs of the Joint Undertaking. ENIAC Member States are to make in-kind contributions to the running costs (by facilitating the implementation of projects), and to provide financial contributions of at least 1,8 times the EU contribution. In-kind contributions are also to be provided by research organisations participating in projects. The organisations participating in the research projects must make in-kind contributions at least equal to the contribution of the Commission and the Member States.

| 5. | The Joint Undertaking was granted its financial autonomy on 26 July 2010. |
| --- | --- |

5.

The Joint Undertaking was granted its financial autonomy on 26 July 2010.

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. This is supplemented by evidence provided by the work of other auditors (where relevant) 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. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

| 7. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union the Court has audited the annual accounts (4) of the ENIAC 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 2011 and the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

7.

Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union the Court has audited the annual accounts (4) of the ENIAC 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 2011 and the legality and regularity of the transactions underlying those accounts.

| 8. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7). |
| --- | --- |

8.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7).

The Management's responsibility

| 9. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) 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. |
| --- | --- |

9.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) 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.

The Auditor’s responsibility

| 10. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |
| --- | --- |

10.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them.

| 11. | The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |
| --- | --- |

11.

The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

| 12. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |
| --- | --- |

12.

The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.

| 13. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

13.

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

| 14. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules. |
| --- | --- |

14.

In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules.

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

| 15. | The ex post audit strategy (12) of the Joint Undertaking was adopted by a Governing Board decision on 18 November 2010 and is a key control (13) for assessing the legality and regularity of the underlying transactions. The payments made in 2011 relating to certificates of acceptance of costs issued by the National Funding Authorities (NFAs) of the Member States amounted to 6,8 million euro, which represents 45 % of the total operational payments. The implementation of the ex post audit strategy started in 2011. |
| --- | --- |

15.

The ex post audit strategy (12) of the Joint Undertaking was adopted by a Governing Board decision on 18 November 2010 and is a key control (13) for assessing the legality and regularity of the underlying transactions. The payments made in 2011 relating to certificates of acceptance of costs issued by the National Funding Authorities (NFAs) of the Member States amounted to 6,8 million euro, which represents 45 % of the total operational payments. The implementation of the ex post audit strategy started in 2011.

| 16. | The audit of project cost claims has been delegated to the NFAs of the Member States. The administrative agreements signed with the NFAs do not include the practical arrangements for the ex post audits. By the end of the audit (September 2012), the Joint Undertaking had not received sufficient information relating to the audit strategies of the NFAs (14) and was not in a position to assess whether the ex post audit strategy provides sufficient assurance with respect to the legality and regularity of the underlying transactions (15). Furthermore, no ex post audits had been carried out by the NFAs on the grants paid up to the end of 2011. |
| --- | --- |

16.

The audit of project cost claims has been delegated to the NFAs of the Member States. The administrative agreements signed with the NFAs do not include the practical arrangements for the ex post audits. By the end of the audit (September 2012), the Joint Undertaking had not received sufficient information relating to the audit strategies of the NFAs (14) and was not in a position to assess whether the ex post audit strategy provides sufficient assurance with respect to the legality and regularity of the underlying transactions (15). Furthermore, no ex post audits had been carried out by the NFAs on the grants paid up to the end of 2011.

| 17. | The information available on the implementation of the Joint Undertaking’s ex post audit strategy is not sufficient to conclude whether this key control is functioning effectively. |
| --- | --- |

17.

The information available on the implementation of the Joint Undertaking’s ex post audit strategy is not sufficient to conclude whether this key control is functioning effectively.

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

| 18. | In the Court’s opinion, except for the possible effects of the matter described in the basis for a qualified opinion in paragraphs 15 to 17, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2011 are, in all material respects, legal and regular. |
| --- | --- |

18.

In the Court’s opinion, except for the possible effects of the matter described in the basis for a qualified opinion in paragraphs 15 to 17, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2011 are, in all material respects, legal and regular.

| 19. | The comments which follow in paragraphs 20 to 33 do not call the Court’s opinions into question. |
| --- | --- |

19.

The comments which follow in paragraphs 20 to 33 do not call the Court’s opinions into question.

COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

| 20. | The 2011 final budget included commitment and payment appropriations amounting to 66 million euro and 35 million euro respectively. The utilisation rates for the available commitment and payment appropriations were 97 % and 48 % (16) respectively. Out of the 63,6 million euro commitment appropriations available for operational activities, 20,1 million euro were implemented as a global commitment for the first 2011 call for proposals and 42,2 million euro were implemented as a global commitment for the second 2011 call for proposals. |
| --- | --- |

20.

The 2011 final budget included commitment and payment appropriations amounting to 66 million euro and 35 million euro respectively. The utilisation rates for the available commitment and payment appropriations were 97 % and 48 % (16) respectively. Out of the 63,6 million euro commitment appropriations available for operational activities, 20,1 million euro were implemented as a global commitment for the first 2011 call for proposals and 42,2 million euro were implemented as a global commitment for the second 2011 call for proposals.

| 21. | A lack of adequate procedures and control weaknesses were detected in the decommitment of unused appropriations. Appropriations which should have been implemented by the end of 2010 and appropriations which should have been implemented by the end of 2011 were decommitted in January 2012. The unused global commitment of 2,8 million euro on the operational activities budget line for 2010 with a final date of implementation of 31 December 2011 was not decommitted. |
| --- | --- |

21.

A lack of adequate procedures and control weaknesses were detected in the decommitment of unused appropriations. Appropriations which should have been implemented by the end of 2010 and appropriations which should have been implemented by the end of 2011 were decommitted in January 2012. The unused global commitment of 2,8 million euro on the operational activities budget line for 2010 with a final date of implementation of 31 December 2011 was not decommitted.

Calls for proposals

| 22. | The calls for proposals organised in 2008, 2009 and 2010 resulted in signed grant agreements totalling 107,9 million euro, which represent 25 % of the maximum EU contribution to the Joint Undertaking for research activities (17). In 2011, two calls for proposals were launched amounting to 62,3 million euro, but the signature of the grant agreements was ongoing. In 2012, two more calls for proposals were launched amounting to 84,5 million euro. During 2013, calls for proposals with a budget of 185,3 million euro (42 %) would have to be launched in order to fully use the available EU contribution of 440 million euro. |
| --- | --- |

22.

The calls for proposals organised in 2008, 2009 and 2010 resulted in signed grant agreements totalling 107,9 million euro, which represent 25 % of the maximum EU contribution to the Joint Undertaking for research activities (17). In 2011, two calls for proposals were launched amounting to 62,3 million euro, but the signature of the grant agreements was ongoing. In 2012, two more calls for proposals were launched amounting to 84,5 million euro. During 2013, calls for proposals with a budget of 185,3 million euro (42 %) would have to be launched in order to fully use the available EU contribution of 440 million euro.

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

| 23. | The Joint Undertaking has not yet fully implemented effective and efficient internal controls and financial information systems. This resulted in significant errors and delays in the financial reporting that were corrected before the adoption of the final accounts. |
| --- | --- |

23.

The Joint Undertaking has not yet fully implemented effective and efficient internal controls and financial information systems. This resulted in significant errors and delays in the financial reporting that were corrected before the adoption of the final accounts.

| 24. | The Accounting Officer of the Joint Undertaking validated the financial and accounting systems (ABAC and SAP) on 20 December 2010. However, the underlying business processes which provide financial information, in particular the one providing financial information on the validation and payment of the cost claims received from the NFAs, were not validated during 2011. |
| --- | --- |

24.

The Accounting Officer of the Joint Undertaking validated the financial and accounting systems (ABAC and SAP) on 20 December 2010. However, the underlying business processes which provide financial information, in particular the one providing financial information on the validation and payment of the cost claims received from the NFAs, were not validated during 2011.

OTHER MATTERS

Internal Audit Capability and the Commission’s Internal Audit Service

| 25. | Article 6(2) of the Council Regulation setting up ENIAC stipulates that the Joint Undertaking shall have an internal audit capability. However, at the end of 2011, this important element of the internal control system had not yet been set up. |
| --- | --- |

25.

Article 6(2) of the Council Regulation setting up ENIAC stipulates that the Joint Undertaking shall have an internal audit capability. However, at the end of 2011, this important element of the internal control system had not yet been set up.

| 26. | In 2011, the Commission’s Internal Audit Service carried out a risk assessment exercise. Based on the results of the risk assessment, the strategic audit plan for 2012-2014 was presented to the Governing Board for adoption on 22 November 2011. |
| --- | --- |

26.

In 2011, the Commission’s Internal Audit Service carried out a risk assessment exercise. Based on the results of the risk assessment, the strategic audit plan for 2012-2014 was presented to the Governing Board for adoption on 22 November 2011.

| 27. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 18 November 2010. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (18) referring to the powers of the Commission’s internal auditor. |
| --- | --- |

27.

The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 18 November 2010. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (18) referring to the powers of the Commission’s internal auditor.

ENIAC Member States’ contribution

| 28. | The statutes of the ENIAC Joint Undertaking stipulate that the financial contributions from ENIAC Member States are to amount in total to at least 1,8 times (19) the EU’s financial contribution, while the Joint Undertaking’s grants can reach a maximum of 16,7 % of the total eligible costs of the projects. For the first five calls for proposals, the financial contribution from ENIAC Member States amounted to 1,55 times the EU’s financial contribution. |
| --- | --- |

28.

The statutes of the ENIAC Joint Undertaking stipulate that the financial contributions from ENIAC Member States are to amount in total to at least 1,8 times (19) the EU’s financial contribution, while the Joint Undertaking’s grants can reach a maximum of 16,7 % of the total eligible costs of the projects. For the first five calls for proposals, the financial contribution from ENIAC Member States amounted to 1,55 times the EU’s financial contribution.

| 29. | Contrary to the Statutes of ENIAC Joint Undertaking (20), Greece is using EU structural funds to cover its national contributions to the Greek beneficiaries of the ENIAC projects (21) instead of providing national funding. The Joint Undertaking accepted the continuation of the Greek participation in ENIAC projects but no funding is being provided by the Joint Undertaking to the Greek beneficiaries, as co-financing with another source of EU funding is not allowed (22). |
| --- | --- |

29.

Contrary to the Statutes of ENIAC Joint Undertaking (20), Greece is using EU structural funds to cover its national contributions to the Greek beneficiaries of the ENIAC projects (21) instead of providing national funding. The Joint Undertaking accepted the continuation of the Greek participation in ENIAC projects but no funding is being provided by the Joint Undertaking to the Greek beneficiaries, as co-financing with another source of EU funding is not allowed (22).

Annual activity report

| 30. | According to Articles 19(4) of the Statutes of the Joint Undertaking and Article 40 of its Financial Rules, the Executive Director is required to draw up an annual activity report. The annual activity report shall indicate the results of the operations by reference to the objectives set, the risks associated with these operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. It shall also confirm that the information contained in the report presents a true and fair view except as otherwise specified in any reservations related to defined areas of revenue and expenditure. |
| --- | --- |

30.

According to Articles 19(4) of the Statutes of the Joint Undertaking and Article 40 of its Financial Rules, the Executive Director is required to draw up an annual activity report. The annual activity report shall indicate the results of the operations by reference to the objectives set, the risks associated with these operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. It shall also confirm that the information contained in the report presents a true and fair view except as otherwise specified in any reservations related to defined areas of revenue and expenditure.

| 31. | The annual activity report does not include an assessment of the efficiency and effectiveness of the internal control system. The annual activity report includes the following weaknesses:






  — | Lack of information on the implementation of the ex-post audit strategy, which is not sufficient to conclude whether this key control is functioning effectively and should have led to a reservation. |
| --- | --- | --- |

31.

The annual activity report does not include an assessment of the efficiency and effectiveness of the internal control system. The annual activity report includes the following weaknesses:

—

Lack of information on the implementation of the ex-post audit strategy, which is not sufficient to conclude whether this key control is functioning effectively and should have led to a reservation.

| — | No information on the partial validation of the financial and accounting systems by the accounting officer is provided. The accounting officer has validated only the part that is under the Joint Undertaking’s direct control but not the systems providing information from the National Funding Authorities (see paragraph 24). |
| --- | --- |

—

No information on the partial validation of the financial and accounting systems by the accounting officer is provided. The accounting officer has validated only the part that is under the Joint Undertaking’s direct control but not the systems providing information from the National Funding Authorities (see paragraph 24).

| — | The control weaknesses identified as regards the accounting and financial reporting did not lead to a reservation (see paragraph 23). |
| --- | --- |

—

The control weaknesses identified as regards the accounting and financial reporting did not lead to a reservation (see paragraph 23).

Follow-up of previous observations

| 32. | During 2011 the Joint Undertaking set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. Further work is required to finalise the Disaster Recovery Plan. |
| --- | --- |

32.

During 2011 the Joint Undertaking set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. Further work is required to finalise the Disaster Recovery Plan.

| 33. | The Host State Agreement (23) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support to be provided was signed on 2 February 2012. |
| --- | --- |

33.

The Host State Agreement (23) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support to be provided was signed on 2 February 2012.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(1)  Council Regulation (EC) No 72/2008 of 20 December 2007 setting up the ENIAC Joint Undertaking (OJ L 30, 4.2.2008, p. 21).

1

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

2

Annex

(3)  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) brings all the research-related EU initiatives together under one roof and plays a crucial role in achieving the goals of growth, competitiveness and employment. It is also a key pillar for the European Research Area.

3

(4)  The Court received the provisional annual accounts on 30 March 2012. These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations.

4

inter alia

(5)  The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information.

5

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

6

(7)  OJ L 248, 16.9.2002, p. 1.

7

(8)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

8

(9)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

9

(10)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are integrated as such in the financial rules of the Joint Undertaking.

10

(11)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

11

(12)  The ENIAC Joint Undertaking’s ex-post audit strategy states that the Joint Undertaking ‘shall seek sufficient information with respect to the ex-post audit procedure applied in the ENIAC Member States to perform an assessment of the national procedures with respect to their suitability to provide sufficient assurance with respect to the regularity and the legality of the transactions related to the ENIAC Joint Undertaking projects.’

12

(13)  Article 12 of Regulation (EC) No 72/2008 states that the Joint Undertaking ‘shall ensure that the financial interests of its members are adequately protected by carrying out or commissioning appropriate internal and external controls’ and that it ‘shall carry out on-the-spot checks and financial audits among the recipients of the ENIAC Joint Undertaking's public funding. These checks and audits shall be performed either directly by the ENIAC Joint Undertaking or by ENIAC Member States on its behalf.’

13

(14)  The Joint Undertaking had received information on audit strategies from seven out of twenty two NFAs. The documentation received for the seven NFAs is in most cases insufficient to allow the Joint Undertaking to assess the national procedures as no practical details on the audit arrangements are provided (i.e. audit approach and methodology, size of the sample, the type of financial checks to be performed by the NFAs, etc).

14

(15)  The Internal Audit Service of the European Commission has assessed the audit strategies of ENIAC’s Member States. In June 2012, it has concluded that the current ex post strategy does not provide the necessary information to reach reasonable assurance. Consequently, the ex post audit strategy has been revised and transactions will be tested based on a sampling basis requesting the NFAs to detail the audit and checks performed,

15

(16)  The relatively low implementation rate for operational payments is explained by the fact that payments from ENIAC are triggered by the late receipt of the certificate from national authorities and by delays at the level of the Member States in signing the national grant agreement.

16

(17)  According to Article 5 of Regulation (EC) No 72/2008 and Article 11(5) of its Annex, the maximum EU contribution covering running costs and research activities of the Joint Undertaking is to be 450 million euro, of which the contribution for running costs is not to exceed 10 million euro. If part of the contribution for the running costs is not used, it can be made available for the research activities.

17

(18)  Regulation (EC, Euratom) No 2343/2002.

18

(19)  Article 11(6)(b) of the Statutes annexed to Regulation (EC) No 72/2008.

19

(20)  Article 13(1) of the Statutes annexed to Regulation (EC) No 72/2008 states that ‘Public funding for projects selected following calls for proposals published by the ENIAC JU shall consist of the national financial contributions from the ENIAC Member States and/or the financial contribution from the ENIAC JU. Any public support under this initiative is without prejudice to the procedural and material State aid rules when applicable’.

20

(21)  The total budget of the Greek participation in ENIAC projects of the 2008, 2009 and 2010 calls amounts 9,7 million euro (being 4,4 million euro national funds, 1,6 million euro Joint Undertaking’s contribution and the rest from the project participants).

21

(22)  Article 54(5) of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund (OJ L 210, 31.7.2006, p. 25) states, ‘An expenditure co-financed by the Funds shall not receive assistance from another Union financial instrument’.

22

(23)  Paragraph 25 of Court of Auditors’ report on the annual accounts of the ENIAC Joint Undertaking for the financial year 2010, together with the replies of the Joint Undertaking (OJ C 368, 16.12.2011, p. 48).

23

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ANNEX

ENIAC Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Art. 187 of the Treaty on the Functioning of the European Union) | The Joint Undertaking is a Community body and the implementation of its budget is therefore subject to discharge by the European Parliament taking into account, however, the specificities resulting from the nature of JTIs as public-private partnerships and in particular from the private sector contribution.
  The ENIAC Joint Undertaking was established by Council Regulation (EC) No 72/2008 of 20 December 2007 (OJ L 30 of 4.2.2008, p. 21). |
| --- | --- |
| Competences of the Joint Undertaking


  (Council Regulation (EC) No 72/2008) | Objectives

  The ENIAC Joint Undertaking contributes to the implementation of the Seventh Framework Programme of the European Community for research, technological development and demonstration activities (2007-2013) and the theme ‘Information and Communication Technologies’ of the Specific Programme ‘Cooperation’. It shall, in particular:






  — | define and implement a Research Agenda for the development of key competences for nanoelectronics across different application areas in order to strengthen European competitiveness and sustainability and allow the emergence of new markets and societal applications; |

Areas of Union competence deriving from the Treaty

(Art. 187 of the Treaty on the Functioning of the European Union)

The Joint Undertaking is a Community body and the implementation of its budget is therefore subject to discharge by the European Parliament taking into account, however, the specificities resulting from the nature of JTIs as public-private partnerships and in particular from the private sector contribution.

The ENIAC Joint Undertaking was established by Council Regulation (EC) No 72/2008 of 20 December 2007 (OJ L 30 of 4.2.2008, p. 21).

Competences of the Joint Undertaking

(Council Regulation (EC) No 72/2008)

Objectives

The ENIAC Joint Undertaking contributes to the implementation of the Seventh Framework Programme of the European Community for research, technological development and demonstration activities (2007-2013) and the theme ‘Information and Communication Technologies’ of the Specific Programme ‘Cooperation’. It shall, in particular:

—

define and implement a Research Agenda for the development of key competences for nanoelectronics across different application areas in order to strengthen European competitiveness and sustainability and allow the emergence of new markets and societal applications;

| — | support the activities required for the implementation of the Research Agenda (hereinafter R&D activities), notably by awarding funding to participants in selected projects following competitive calls for proposals; |
| --- | --- |

—

support the activities required for the implementation of the Research Agenda (hereinafter R&D activities), notably by awarding funding to participants in selected projects following competitive calls for proposals;

| — | promote a public-private partnership aimed at mobilising and pooling Community, national and private efforts, increasing overall R&D investments in the field of nanoelectronics, and fostering collaboration between the public and private sectors; |
| --- | --- |

—

promote a public-private partnership aimed at mobilising and pooling Community, national and private efforts, increasing overall R&D investments in the field of nanoelectronics, and fostering collaboration between the public and private sectors;

| — | ensure the efficiency and durability of the JTI on nanoelectronics; |
| --- | --- |

—

ensure the efficiency and durability of the JTI on nanoelectronics;

| — | achieve synergy and coordination of European R&D efforts in the field of nanoelectronics including the progressive integration into the ENIAC Joint Undertaking of the related activities in this field currently implemented through intergovernmental R&D schemes (EUREKA). |
| --- | --- |

—

achieve synergy and coordination of European R&D efforts in the field of nanoelectronics including the progressive integration into the ENIAC Joint Undertaking of the related activities in this field currently implemented through intergovernmental R&D schemes (EUREKA).

Governance

Members

At the end of 2011, the members of the ENIAC Joint Undertaking were: AENEAS representing Industry, the European Union represented by the Commission and the ENIAC member States (Austria, Belgium, Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Netherlands, Norway, Poland, Portugal, Romania, Slovak Republic, Spain, Sweden and the United Kingdom).

The Governing Board

The Governing Board consists of representatives of the Members of the ENIAC Joint Undertaking and the Chairperson of the Industry and Research Committee.

The Governing Board shall have overall responsibility for the operations of the ENIAC Joint Undertaking and shall oversee the implementation of its activities.

The Public Authorities Board

The Public Authorities Board consists of the public authorities of the member States of the ENIAC Joint Undertaking.

The Industry and Research Committee

AENEAS appoints the members of the Industry and Research Committee.

The Executive Director

The Executive Director is the chief executive responsible for the day-to-day management of the ENIAC Joint Undertaking and be its legal representative.

External audit

Court of Auditors.

Discharge authority

European Parliament, acting on a recommendation from the Council.

Resources available to the Joint Undertaking in 2011

Budget

Voted 2011 budget in €:

| | Commitments | Payments |
| --- | --- | --- |
| TITLE I- Staff | 1 488 801,72 | 1 488 801,72 |
| TITLE II- Administrative | 1 142 898,28 | 1 142 898,28 |
| TOTAL TITLES I & II | 2 631 700,00 | 2 631 700,00 |
| TITLE III-Operational | 63 646 170,00 | 32 426 000,00 |
| TOTAL TITLES I, II & III | 66 277 870,00 | 35 057 700,00 |

Commitments

Payments

TITLE I- Staff

1 488 801,72

1 488 801,72

TITLE II- Administrative

1 142 898,28

1 142 898,28

TOTAL TITLES I & II

2 631 700,00

2 631 700,00

TITLE III-Operational

63 646 170,00

32 426 000,00

TOTAL TITLES I, II & III

66 277 870,00

35 057 700,00

Staff at 31 December 2011

| | Establishment plan 2011 | Occupied at 31.12.2011 |
| --- | --- | --- |
| Temporary staff | 6 | 6 |
| Contract staff | 7 | 7 |
| Total Staff | 13 | 13 |
| Allocated to: | | |
| — | Operational activities |

Establishment plan 2011

Occupied at 31.12.2011

Temporary staff

6

6

Contract staff

7

7

Total Staff

13

13

Allocated to:

—

Operational activities

6

| — | Administrative tasks |
| --- | --- |

—

Administrative tasks

4

| — | Mixed tasks |
| --- | --- |

—

Mixed tasks

3

Activities and services provided in 2011

A   OPERATIONAL PROGRESS TOWARDS OBJECTIVES

Establishing the research agenda

At the end of 2011, the total eligible costs of the projects selected for funding exceeded 1 billion euro. They cover all the R&D areas defined in the Multiannual Strategy Plan (MASP)

Awarding funding to participants

Since inception, the ENIAC JU has awarded 171,6 million euro to the participants, up from 109,3 million euro at the end of 2010, achieving in 2011 an 85 % increase year-on-year, demonstrating that the ENIAC JU made considerable progress.

Increasing the R&D investments in nanoelectronics

Approximately 47 % of the total of approximately 3 700 researchers involved in R&D on nanolectronics in 2012 will be engaged in the projects selected for funding by the ENIAC JU, achieving synergy and coordination of the European R&D effort.

The ENIAC JU coordinated its activities primarily with the EUREKA cluster CATERNE, co-organising the European Nanoelectronics Forum.

Promoting the participation of small and medium size enterprises

SMEs are leading in the ENIAC JU projects, representing 40,7 % of the participating organisations (30,5 % are universities and research institutes and 28,8 % large industrial companies).

B   FUNCTIONAL PERFORMANCE

The membership of theENIAC JU did not change in 2011.

The organisation progressed greatly:

| — | moved to the White Atrium building, installed its new offices and IT infrastructure |
| --- | --- |

—

moved to the White Atrium building, installed its new offices and IT infrastructure

| — | recruited and integrated new team members |
| --- | --- |

—

recruited and integrated new team members

| — | transferred smoothly to the CIRCABC repository |
| --- | --- |

—

transferred smoothly to the CIRCABC repository

| — | structured its document management |
| --- | --- |

—

structured its document management

| — | established procedures for its new tasks |
| --- | --- |

—

established procedures for its new tasks

| — | progressed in closing grant agreements |
| --- | --- |

—

progressed in closing grant agreements

| — | performed and accounted for more than 1 400 payments since autonomy |
| --- | --- |

—

performed and accounted for more than 1 400 payments since autonomy

| — | executed the first technical reviews for the on-going projects |
| --- | --- |

—

executed the first technical reviews for the on-going projects

| — | issued and brought to conclusion 2 calls for proposals in one year |
| --- | --- |

—

issued and brought to conclusion 2 calls for proposals in one year

| — | refined and reported Key Performance Indicators |
| --- | --- |

—

refined and reported Key Performance Indicators

| — | performed large scale public events, produced smaller scale publications and well-received press releases |
| --- | --- |

—

performed large scale public events, produced smaller scale publications and well-received press releases

IMPLEMENTATION OF THE 2011 BUDGET

At the end of the year, the ENIAC JU had committed all appropriations for the projects arising from Calls 2011_1 (Call 4) and 2011_2 (Call 5) and had implemented 48,09 % of the operational payments.

Source: Information supplied by the Joint Undertaking.

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REPLIES OF THE ENIAC JOINT UNDERTAKING

| 15 - 17. | Already from 2010, the ENIAC JU engaged, together with the Artemis JU, in a process of collecting the relevant information regarding the audit procedures in the ENIAC member States. In 2011, in line with the strategic audit plan, the Internal Audit Service of the Commission (IAS), acting as internal auditor of the Joint Undertaking, has started a consultancy engagement on assessing whether the execution of audit strategies already in existence in the ENIAC member States can provide reasonable assurance.
  IAS has only finished the assessment in 2012, concluding that this approach will not provide the necessary information to reach reasonable assurance, Consequently, the ENIAC JU defined and started executing its own ex post audit plan that shall be completed before the end of the year. |
| --- | --- |

15 - 17.

Already from 2010, the ENIAC JU engaged, together with the Artemis JU, in a process of collecting the relevant information regarding the audit procedures in the ENIAC member States. In 2011, in line with the strategic audit plan, the Internal Audit Service of the Commission (IAS), acting as internal auditor of the Joint Undertaking, has started a consultancy engagement on assessing whether the execution of audit strategies already in existence in the ENIAC member States can provide reasonable assurance.

IAS has only finished the assessment in 2012, concluding that this approach will not provide the necessary information to reach reasonable assurance, Consequently, the ENIAC JU defined and started executing its own ex post audit plan that shall be completed before the end of the year.

| 21. | The ENIAC JU suffered from a lack of resources at the end of 2012 and executed the decommittment too late. Actions have been taken to avoid any future recurrence, in particular executing the hiring plan, defining a detailed procedure for managing the year end closure, and setting hard deadlines. |
| --- | --- |

21.

The ENIAC JU suffered from a lack of resources at the end of 2012 and executed the decommittment too late. Actions have been taken to avoid any future recurrence, in particular executing the hiring plan, defining a detailed procedure for managing the year end closure, and setting hard deadlines.

| 23. | The ENIAC JU has strong reasons to consider that all its financial operations are regular and reliable. Detailed plans for monitoring accounting have been put in place, but serious difficulties have been encountered in running appropriately the financial and accounting systems. This situation has been aggravated by the lack of adequate training programmes, inexistent procedures applicable to our case and insufficient user support available. None the less, all errors mentioned in connection with this finding have been solved, as shown in the previous replies. The ENIAC JU will continue dedicating serious efforts to overcome the difficulties and accelerate the progress. |
| --- | --- |

23.

The ENIAC JU has strong reasons to consider that all its financial operations are regular and reliable. Detailed plans for monitoring accounting have been put in place, but serious difficulties have been encountered in running appropriately the financial and accounting systems. This situation has been aggravated by the lack of adequate training programmes, inexistent procedures applicable to our case and insufficient user support available. None the less, all errors mentioned in connection with this finding have been solved, as shown in the previous replies. The ENIAC JU will continue dedicating serious efforts to overcome the difficulties and accelerate the progress.

| 24. | On 20 December 2010 (1), after only three month of implementing the own budget, the accounting officer had validated the financial and accounting systems put in place at the ENIAC JU, and included a number of recommendations in his validation decision.
  In 2011, the ENIAC JU went through a period of frequent changes, caused by moving to new premises, using a completely new IT infrastructure for its financial transactions, executing the recruiting process that considerable increased the census and experiencing a strong increase in the overall level of activity. Consequently, the financial circuits underwent a strong and continuous evolution. Although the internal control systems continue being strengthened and optimised, a complementary validation became possible in 2012, once the circuits and systems stabilised after the first full budgetary exercise managed autonomously, this has been done on 25 June 2012, also including an analysis of the main activities and administrative processes carried out by the ENIAC JU to support the financial management systems. |
| --- | --- |

24.

On 20 December 2010 (1), after only three month of implementing the own budget, the accounting officer had validated the financial and accounting systems put in place at the ENIAC JU, and included a number of recommendations in his validation decision.

In 2011, the ENIAC JU went through a period of frequent changes, caused by moving to new premises, using a completely new IT infrastructure for its financial transactions, executing the recruiting process that considerable increased the census and experiencing a strong increase in the overall level of activity. Consequently, the financial circuits underwent a strong and continuous evolution. Although the internal control systems continue being strengthened and optimised, a complementary validation became possible in 2012, once the circuits and systems stabilised after the first full budgetary exercise managed autonomously, this has been done on 25 June 2012, also including an analysis of the main activities and administrative processes carried out by the ENIAC JU to support the financial management systems.

| 25. | The IAC function has been set up on 7 February 2011 in the 13th Governing Board meeting, being fulfilled by the Internal Audit Service of the Commission (IAS). The IAS has informed the ENIAC JU on 6 October 2011 that the provision of IAC services ‘would unfortunately need to be suspended for the time being’, due to pending discussions within the services of the Commission. As no progress has been achieved in unblocking this function, the ENIAC JU decided in 2012 to assign a member of its own staff to the IAC function as per decision ENIAC-ED-88-12 of 25 April 2012. |
| --- | --- |

25.

The IAC function has been set up on 7 February 2011 in the 13th Governing Board meeting, being fulfilled by the Internal Audit Service of the Commission (IAS). The IAS has informed the ENIAC JU on 6 October 2011 that the provision of IAC services ‘would unfortunately need to be suspended for the time being’, due to pending discussions within the services of the Commission. As no progress has been achieved in unblocking this function, the ENIAC JU decided in 2012 to assign a member of its own staff to the IAC function as per decision ENIAC-ED-88-12 of 25 April 2012.

| 27. | The amendment of the Framework Financial Regulation falls under the competence of the Commission which is currently in the process of preparing the alignment of the existing Framework Financial Regulation with the new EU General Financial Regulation. The ENIAC JU shall adopt the revised version as soon as available. |
| --- | --- |

27.

The amendment of the Framework Financial Regulation falls under the competence of the Commission which is currently in the process of preparing the alignment of the existing Framework Financial Regulation with the new EU General Financial Regulation. The ENIAC JU shall adopt the revised version as soon as available.

| 28. | The ENIAC JU contributions to any participant in the projects arising from a given call for proposals must be exactly the same percentage of the total eligible costs that participant incurs. The percentage contribution of the ENIAC member States is limited to the difference between the maximum State aid intensity specified in the Commission Regulation (EC) No 800/2008 and the ENIAC JU contribution. For example, if the ENIAC JU percentage is 16,7 %, then the ENIAC member State will vary from 8,3 % (in the case of a State aid of max. 25 %, for a large enterprise in an experimental development) to 83,3 % (for a University). The average aid intensity that the ENIAC member State can contribute is unpredictable, depending on the type or R&D performed, the status of the participants, and the amounts each of them engages. Noticing that the average departed from the specified ratio of 1,8, the EC proposed in 2012 to reduce the ENIAC JU contribution to 15 %, although this also resulted in a reduction of the total R&D volume, in contradiction with the overall objective to increase the R&D investments. |
| --- | --- |

28.

The ENIAC JU contributions to any participant in the projects arising from a given call for proposals must be exactly the same percentage of the total eligible costs that participant incurs. The percentage contribution of the ENIAC member States is limited to the difference between the maximum State aid intensity specified in the Commission Regulation (EC) No 800/2008 and the ENIAC JU contribution. For example, if the ENIAC JU percentage is 16,7 %, then the ENIAC member State will vary from 8,3 % (in the case of a State aid of max. 25 %, for a large enterprise in an experimental development) to 83,3 % (for a University). The average aid intensity that the ENIAC member State can contribute is unpredictable, depending on the type or R&D performed, the status of the participants, and the amounts each of them engages. Noticing that the average departed from the specified ratio of 1,8, the EC proposed in 2012 to reduce the ENIAC JU contribution to 15 %, although this also resulted in a reduction of the total R&D volume, in contradiction with the overall objective to increase the R&D investments.

| 29. | The condition under which Greece has been participating in the programme is not contradicting the ENIAC JU statutes. The aim and general objectives of the programme consist in achieving synergies and coordination for ensuring a wide participation in the projects.
  In that context, and entirely in line with the Statutes, there are in the programme a number of legal entities which are legitimate members of a consortium after signing the accession form defined in the JU Grant Agreement template, although they do not receive any JU funding or did not sign any national grant agreement. This is the case for legal entities receiving regional financial support, or located in countries that are not ENIAC member States.
  Prohibiting the participation of legal entities from ENIAC member States on such grounds would constitute discrimination with respect to the participants from non-ENIAC member States, who have no obligation to disclose their sources of national funding, if any. This would contradict the overall objectives of the programme. |
| --- | --- |

29.

The condition under which Greece has been participating in the programme is not contradicting the ENIAC JU statutes. The aim and general objectives of the programme consist in achieving synergies and coordination for ensuring a wide participation in the projects.

In that context, and entirely in line with the Statutes, there are in the programme a number of legal entities which are legitimate members of a consortium after signing the accession form defined in the JU Grant Agreement template, although they do not receive any JU funding or did not sign any national grant agreement. This is the case for legal entities receiving regional financial support, or located in countries that are not ENIAC member States.

Prohibiting the participation of legal entities from ENIAC member States on such grounds would constitute discrimination with respect to the participants from non-ENIAC member States, who have no obligation to disclose their sources of national funding, if any. This would contradict the overall objectives of the programme.

| 31. | The Annual Activity Report 2011 contains a detailed analysis of the efficiency and effectiveness of the ICS in chapter 3.1. The status of the ex post audit activities is included in paragraph 3.1.14. The status of the validation of the financial and accounting systems was unchanged with respect to the previous year, for the reasons listed under paragraph 24.
  Since the ENIAC JU Statutes (2) stipulate in the Article 19(4) that ‘The Annual Activity Report shall be presented by the executive director together with the annual accounts and the balance sheets.’, the ENIAC JU considers that the reservations formulated and included in the latter documents also apply to the former, and will not duplicate them. |
| --- | --- |

31.

The Annual Activity Report 2011 contains a detailed analysis of the efficiency and effectiveness of the ICS in chapter 3.1. The status of the ex post audit activities is included in paragraph 3.1.14. The status of the validation of the financial and accounting systems was unchanged with respect to the previous year, for the reasons listed under paragraph 24.

Since the ENIAC JU Statutes (2) stipulate in the Article 19(4) that ‘The Annual Activity Report shall be presented by the executive director together with the annual accounts and the balance sheets.’, the ENIAC JU considers that the reservations formulated and included in the latter documents also apply to the former, and will not duplicate them.

| 32. | On 28 January 2011, the ENIAC JU has finalised and validated its business continuity plan and set up a specific financial circuit for ensuring continuity in case of crisis. The latter provisions constitute the Disaster Recovery Plan that is not elaborated as a separate document.
  This plan is submitted to periodic reviews and improvements, the last review taking into account the important evolutions throughout 2011 has been finalised on 20 April 2012, including further detailed provisions addressing disaster recovery. |
| --- | --- |

32.

On 28 January 2011, the ENIAC JU has finalised and validated its business continuity plan and set up a specific financial circuit for ensuring continuity in case of crisis. The latter provisions constitute the Disaster Recovery Plan that is not elaborated as a separate document.

This plan is submitted to periodic reviews and improvements, the last review taking into account the important evolutions throughout 2011 has been finalised on 20 April 2012, including further detailed provisions addressing disaster recovery.

---

(1)  The ENIAC JU acquired the capacity to implement its own budget In September 2010.

(2)  Council Regulation (EC) No 72/2008 (OJ L 30, 4.2.2008, p. 21).

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| 10.1.2013 | EN | Official Journal of the European Union | C 6/27 |
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10.1.2013

EN

Official Journal of the European Union

C 6/27

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REPORT

on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/04

INTRODUCTION

| 1. | The European 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. |
| --- | --- |

1.

The European 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.

| 2. | The objective of the IMI Joint Undertaking 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 (2). |
| --- | --- |

2.

The objective of the IMI Joint Undertaking 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 (2).

| 3. | The Founding Members of the Joint Undertaking are the European Union represented by the Commission, and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Any legal entity directly or indirectly supporting research and development in a Member State or in a country associated with the Seventh Framework Programme (3) may apply to become a Member of the IMI Joint Undertaking. |
| --- | --- |

3.

The Founding Members of the Joint Undertaking are the European Union represented by the Commission, and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Any legal entity directly or indirectly supporting research and development in a Member State or in a country associated with the Seventh Framework Programme (3) may apply to become a Member of the IMI Joint Undertaking.

| 4. | The maximum EU contribution to the IMI Joint Undertaking to cover running costs and research activities is one billion euro, to be paid from the budget of the Seventh Framework Programme. The EU and EFPIA, as Founding Members, are to contribute equally to the running costs, each with an amount not exceeding 4 % of the total EU contribution. Other Members are to contribute to running costs in proportion to their contribution to research activities. The research companies which are members of EFPIA are to contribute to the funding of research activities through in-kind (4) contributions at least equal to the EU financial contribution (5). |
| --- | --- |

4.

The maximum EU contribution to the IMI Joint Undertaking to cover running costs and research activities is one billion euro, to be paid from the budget of the Seventh Framework Programme. The EU and EFPIA, as Founding Members, are to contribute equally to the running costs, each with an amount not exceeding 4 % of the total EU contribution. Other Members are to contribute to running costs in proportion to their contribution to research activities. The research companies which are members of EFPIA are to contribute to the funding of research activities through in-kind (4) contributions at least equal to the EU financial contribution (5).

| 5. | The Joint Undertaking started to work autonomously on 16 November 2009. |
| --- | --- |

5.

The Joint Undertaking started to work autonomously on 16 November 2009.

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 Undertakingand an assessment of key controls of the supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) 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 Undertakingand an assessment of key controls of the 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

| 7. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union the Court has audited the annual accounts (6) of the Innovative Medicines Initiative Joint Undertaking, which comprise the ‘financial statements’ (7) and the ‘reports on the implementation of the budget’ (8) for the financial year ended 31 December 2011 and the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

7.

Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union the Court has audited the annual accounts (6) of the Innovative Medicines Initiative Joint Undertaking, which comprise the ‘financial statements’ (7) and the ‘reports on the implementation of the budget’ (8) for the financial year ended 31 December 2011 and the legality and regularity of the transactions underlying those accounts.

| 8. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (9). |
| --- | --- |

8.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (9).

The Management's responsibility

| 9. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (10). The Director is responsible for putting in place (11) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (12) that are free from material misstatement, whether due to fraud or errors and for ensuring that the transactions underlying those accounts are legal and regular. |
| --- | --- |

9.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (10). The Director is responsible for putting in place (11) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (12) that are free from material misstatement, whether due to fraud or errors and for ensuring that the transactions underlying those accounts are legal and regular.

The Auditor's responsibility

| 10. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |
| --- | --- |

10.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them.

| 11. | The Court conducted its audit in accordance with the IFAC and ISSAI (13) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |
| --- | --- |

11.

The Court conducted its audit in accordance with the IFAC and ISSAI (13) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

| 12. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and the regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |
| --- | --- |

12.

The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and the regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.

| 13. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

13.

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 accounts

| 14. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules. |
| --- | --- |

14.

In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules.

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

| 15. | The ex-post audit strategy of the Joint Undertaking was adopted by a Governing Board decision on 14 December 2010 and is a key control for assessing the legality and regularity of the underlying transactions (14). The ex-post audits that were completed as of September 2012 covered 2,2 million euro (18,8 % of accepted IMI JU contribution for the first call validated by the IMI Joint Undertaking by June 2011). The error rate resulting from these ex-post audits was 6,84 % (15). |
| --- | --- |

15.

The ex-post audit strategy of the Joint Undertaking was adopted by a Governing Board decision on 14 December 2010 and is a key control for assessing the legality and regularity of the underlying transactions (14). The ex-post audits that were completed as of September 2012 covered 2,2 million euro (18,8 % of accepted IMI JU contribution for the first call validated by the IMI Joint Undertaking by June 2011). The error rate resulting from these ex-post audits was 6,84 % (15).

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

| 16. | In the Court’s opinion, except for the effects of the matters described in paragraph 15, the transactions underlying the annual accounts of the Joint Undertaking for the year end 31 December 2011, are in all material respects, legal and regular. |
| --- | --- |

16.

In the Court’s opinion, except for the effects of the matters described in paragraph 15, the transactions underlying the annual accounts of the Joint Undertaking for the year end 31 December 2011, are in all material respects, legal and regular.

| 17. | The comments which follow in paragraphs 18-32 do not call the Court’s opinions into question. |
| --- | --- |

17.

The comments which follow in paragraphs 18-32 do not call the Court’s opinions into question.

COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

| 18. | The 2011 annual budget and implementation plan were adopted by the Governing Board on 4 April 2011 (16) due to the time taken to establish and agree on the scientific priorities to be included in the annual implementation plan. This delayed the launch of the call for proposals. During the year, the Joint Undertaking launched the fourth call for proposals, signed five grant agreements for the third call for proposals and eight grant agreements for the second call for proposals. |
| --- | --- |

18.

The 2011 annual budget and implementation plan were adopted by the Governing Board on 4 April 2011 (16) due to the time taken to establish and agree on the scientific priorities to be included in the annual implementation plan. This delayed the launch of the call for proposals. During the year, the Joint Undertaking launched the fourth call for proposals, signed five grant agreements for the third call for proposals and eight grant agreements for the second call for proposals.

| 19. | The implementation rate for the 159 million euro commitment appropriations available for research activities was 66 % and it was implemented through a global commitment covering the fourth call for proposals. The high level of unused appropriations of the administrative budget (44 %) indicates that it was not based on realistic estimates. |
| --- | --- |

19.

The implementation rate for the 159 million euro commitment appropriations available for research activities was 66 % and it was implemented through a global commitment covering the fourth call for proposals. The high level of unused appropriations of the administrative budget (44 %) indicates that it was not based on realistic estimates.

| 20. | Commitment appropriations amounting to 117 million euro and payment appropriations amounting to 65 million euro not used in the financial year 2010 were carried over to 2011 and commitment appropriations amounting to 62 million euro and payment appropriations amounting to 11 million euro not used during the financial year 2011 were carried over to 2012. |
| --- | --- |

20.

Commitment appropriations amounting to 117 million euro and payment appropriations amounting to 65 million euro not used in the financial year 2010 were carried over to 2011 and commitment appropriations amounting to 62 million euro and payment appropriations amounting to 11 million euro not used during the financial year 2011 were carried over to 2012.

Calls for proposals

| 21. | The calls for proposals organised in 2008, 2009 and 2010 resulted in signed grant agreements amounting to 269 million euro at the end of 2011. In 2011 the fourth call for proposals was launched with an indicative budgeted EU contribution of 105 million euro. In 2012 the fifth call for proposals was launched with an indicative budgeted EU contribution of 80 million euro. Consequently, if calls for proposals remain at the current level, it is highly likely that the total available EU contribution will not be used. |
| --- | --- |

21.

The calls for proposals organised in 2008, 2009 and 2010 resulted in signed grant agreements amounting to 269 million euro at the end of 2011. In 2011 the fourth call for proposals was launched with an indicative budgeted EU contribution of 105 million euro. In 2012 the fifth call for proposals was launched with an indicative budgeted EU contribution of 80 million euro. Consequently, if calls for proposals remain at the current level, it is highly likely that the total available EU contribution will not be used.

Inconsistencies between the Governing Board Decisions and the report on budgetary and financial management

| 22. | In the report on budgetary and financial management, the total amount of chapter 30-C2 ‘Research agenda’ (117 million euro) is lower than the budget line B03000-C2 (141 million euro) which is part of the aforementioned chapter. In addition, the Governing Board Decision of 28 January 2011 only authorises the carry-over of 115 million euro of commitment appropriations, while the report on budgetary and financial management discloses a carry-over of 117 million euro. |
| --- | --- |

22.

In the report on budgetary and financial management, the total amount of chapter 30-C2 ‘Research agenda’ (117 million euro) is lower than the budget line B03000-C2 (141 million euro) which is part of the aforementioned chapter. In addition, the Governing Board Decision of 28 January 2011 only authorises the carry-over of 115 million euro of commitment appropriations, while the report on budgetary and financial management discloses a carry-over of 117 million euro.

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

| 23. | During 2011 significant progress regarding internal control systems was noted. However, further work is needed to establish and document the budget and accounting procedures and related controls. In addition, no formal assessment of the internal control system was carried out during 2011. |
| --- | --- |

23.

During 2011 significant progress regarding internal control systems was noted. However, further work is needed to establish and document the budget and accounting procedures and related controls. In addition, no formal assessment of the internal control system was carried out during 2011.

| 24. | The Accounting Officer reported on the validation of the accounting system on 27 September 2012 and underlined significant weaknesses which need to be addressed (17). |
| --- | --- |

24.

The Accounting Officer reported on the validation of the accounting system on 27 September 2012 and underlined significant weaknesses which need to be addressed (17).

Methodology for evaluating in kind contributions

| 25. | The methodology for evaluating in-kind contributions (18) was approved by the Governing Board on 11 November 2011. The in-kind contributions are validated by way of an ex-ante certification and ex-post audits. In 2011 no ex-ante certification and no ex-post audit were carried out. |
| --- | --- |

25.

The methodology for evaluating in-kind contributions (18) was approved by the Governing Board on 11 November 2011. The in-kind contributions are validated by way of an ex-ante certification and ex-post audits. In 2011 no ex-ante certification and no ex-post audit were carried out.

OTHER MATTERS

Internal audit function and the Commission’s Internal Audit Service

| 26. | In 2011 the Commission’s Internal Audit Service and ther Internal Audit Capabilty of the Joint Undertaking carried out a risk assessment exercise and the strategic audit plan for 2012-2014 was approved by the Governing Board on 3 November 2011. |
| --- | --- |

26.

In 2011 the Commission’s Internal Audit Service and ther Internal Audit Capabilty of the Joint Undertaking carried out a risk assessment exercise and the strategic audit plan for 2012-2014 was approved by the Governing Board on 3 November 2011.

| 27. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 8 March 2011. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (19). |
| --- | --- |

27.

The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 8 March 2011. However, the financial rules of the Joint Undertaking have not yet been amended to include the provision of the Framework Regulation (19).

| 28. | The Joint Undertaking obtained its autonomy in November 2009, but no internal assurance audit work was performed until March 2012 either by the Internal Audit Service of the Commission or the internal audit manager. The internal audit manager has been directly involved in operational activities (implementation of ex-post strategy, KPI framework, review of ex-ante certificate on in-kind contributions) and other consultancy engagements. |
| --- | --- |

28.

The Joint Undertaking obtained its autonomy in November 2009, but no internal assurance audit work was performed until March 2012 either by the Internal Audit Service of the Commission or the internal audit manager. The internal audit manager has been directly involved in operational activities (implementation of ex-post strategy, KPI framework, review of ex-ante certificate on in-kind contributions) and other consultancy engagements.

Audit rights of the European Court of Auditors

| 29. | The provisions of the grant agreement do not recognise the right of the Court of Auditors to audit the in-kind contributions of EFPIA companies although they are recorded in IMI’s financial statements. It is estimated that these contributions will represent approximately one billion euro over IMI’s lifetime. |
| --- | --- |

29.

The provisions of the grant agreement do not recognise the right of the Court of Auditors to audit the in-kind contributions of EFPIA companies although they are recorded in IMI’s financial statements. It is estimated that these contributions will represent approximately one billion euro over IMI’s lifetime.

Follow up of previous observations

| 30. | A host agreement was concluded on 2 February 2012 between the Joint Undertaking and Belgium concerning the office accommodation, privileges and immunities and other support to be provided by Belgium. |
| --- | --- |

30.

A host agreement was concluded on 2 February 2012 between the Joint Undertaking and Belgium concerning the office accommodation, privileges and immunities and other support to be provided by Belgium.

| 31. | During 2011 the Joint Undertaking made progress on the formalisation of IT security policies. However, the business continuity plan and disaster recovery plan were not finalised. |
| --- | --- |

31.

During 2011 the Joint Undertaking made progress on the formalisation of IT security policies. However, the business continuity plan and disaster recovery plan were not finalised.

Annual activity report

| 32. | According to Article 6.4 of the Statutes of the Joint Undertaking and Article 41 of the IMI Joint Undertaking’s financial rules, the Executive Director is required to draw up an annual activity report including a declaration of assurance stating that the information contained in the report presents a true and fair view except as otherwise specified in any reservation. The declaration of assurance was issued in February 2012 without reservation despite the lack of information on the effectiveness of the ex-post audit strategy, which is the key control for operational expenditure. |
| --- | --- |

32.

According to Article 6.4 of the Statutes of the Joint Undertaking and Article 41 of the IMI Joint Undertaking’s financial rules, the Executive Director is required to draw up an annual activity report including a declaration of assurance stating that the information contained in the report presents a true and fair view except as otherwise specified in any reservation. The declaration of assurance was issued in February 2012 without reservation despite the lack of information on the effectiveness of the ex-post audit strategy, which is the key control for operational expenditure.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 13 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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

2

Annex

(3)  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), brings all the research-related EU initiatives together under one roof and plays a crucial role in achieving the goals of growth, competitiveness and employment. It is also a key pillar for the European Research Area.

3

(4)  According to article 11(4) of the Annex to Regulation (EC) No 73/2008 setting up the Joint Undertaking, the in-kind contributions are ‘non-monetary contributions by the research based pharmaceutical companies that are members of EFPIA with resources (such as personnel, equipment, consumables, etc).’. The contribution from the research companies shall at least match the financial contribution of the Union.

4

(5)  According to article 11(5) of the Annex to Regulation (EC) No 73/2008 setting up the Joint Undertaking, ‘the participating research based pharmaceutical companies that are members of EFPIA shall not be eligible to receive any financial support from the IMI Joint Undertaking for any activity’.

5

(6)  The Court received the annual accounts on 1 July 2012 and a corrigendum to these accounts on 12 October 2012. These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations with summary information on the transfers of appropriations among the various budget items.

6

inter alia

(7)  The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information.

7

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

8

(9)  OJ L 248, 16.9.2002, p. 1.

9

(10)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

10

(11)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

11

(12)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapter 1 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are integrated as such in the financial rules of the Joint Undertaking.

12

(13)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

13

(14)  Article 12(4) of Regulation (EC) No 73/2008 setting up the Joint Undertaking states that ‘The IMI Joint Undertaking shall carry out on-the-spot checks and financial audits among the participants of the Research activities funded by the IMI Joint Undertaking’. Ex_post audits may identify ineligible expenditures claimed by the beneficiaries which are then subject to recovery procedures.

14

(15)  The error rate is calculated using an average of the overdeclarations found in the different cost claims weighted by their amount.

15

(16)  On the basis of Article 14 of the IMI’s financial rules, budget rule 1/12 was used to make payments until the budget was adopted.

16

(17)  Major observations reported by the accounting officer: (a) no use of an accurate and established methodology for the calculation of accruals at the end of the financial year (b) improve treasury management and archiving practices (c) formalize the approval of the updated draft manual of financial procedures (d) ensure a complete supporting documentation in payment files (e) introduce an IT-tool in order to better register and manage contracts and agreements.

17

(18)  In-kind contributions are the eligible costs incurred by the legal entities participating in the activities which are not reimbursed by the Joint Undertaking.

18

(19)  Regulation (EC, Euratom) No 2343/2002.

19

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ANNEX

Innovative Medicines Initiative 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) | Article 187: The Union may set up joint undertakings or any other structure necessary for the efficient execution of Union research, technological development and demonstration programmes.

  Article 188: 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 | Objectives (Article 2 of Regulation (EC) No 73/2008 setting up the Joint Undertaking)
  The IMI Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular the Theme ‘Health’ of the Specific Programme Cooperation implementing the Seventh Framework Programme. It shall have the objective of significantly improving the efficiency and effectiveness of the drug development process with the long-term aim that the pharmaceutical sector produce more effective and safer innovative medicines. In particular it shall:






  (a) | support ‘pre-competitive pharmaceutical research and development’ in the Member States and countries associated with the Seventh Framework Programme via a coordinated approach to overcome the identified research bottlenecks in the drug development process; |

Areas of Union competence deriving from the Treaty

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

Article 187: The Union may set up joint undertakings or any other structure necessary for the efficient execution of Union research, technological development and demonstration programmes.

Article 188: 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

Objectives (Article 2 of Regulation (EC) No 73/2008 setting up the Joint Undertaking)

The IMI Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular the Theme ‘Health’ of the Specific Programme Cooperation implementing the Seventh Framework Programme. It shall have the objective of significantly improving the efficiency and effectiveness of the drug development process with the long-term aim that the pharmaceutical sector produce more effective and safer innovative medicines. In particular it shall:

(a)

support ‘pre-competitive pharmaceutical research and development’ in the Member States and countries associated with the Seventh Framework Programme via a coordinated approach to overcome the identified research bottlenecks in the drug development process;

| (b) | support the implementation of the research priorities as set out by the Research Agenda of the Joint Technology Initiative on Innovative Medicines (hereinafter referred to as ‘Research Activities’), notably by awarding grants following competitive calls for proposals; |
| --- | --- |

(b)

support the implementation of the research priorities as set out by the Research Agenda of the Joint Technology Initiative on Innovative Medicines (hereinafter referred to as ‘Research Activities’), notably by awarding grants following competitive calls for proposals;

| (c) | ensure complementarity with other activities of the Seventh Framework Programme; |
| --- | --- |

(c)

ensure complementarity with other activities of the Seventh Framework Programme;

| (d) | be a public-private partnership aiming at increasing the research investment in the biopharmaceutical sector in the Members States and countries associated with the Seventh Framework Programme by pooling resources and fostering collaboration between the public and private sectors; |
| --- | --- |

(d)

be a public-private partnership aiming at increasing the research investment in the biopharmaceutical sector in the Members States and countries associated with the Seventh Framework Programme by pooling resources and fostering collaboration between the public and private sectors;

| (e) | promote the involvement of small and medium-sized enterprises (SME) in its activities, in line with the objectives of the Seventh Framework Programme. |
| --- | --- |

(e)

promote the involvement of small and medium-sized enterprises (SME) in its activities, in line with the objectives of the Seventh Framework Programme.

Tasks (Article 1 of the Annex – Statutes of the Joint Undertaking for the Implementation of the Joint Technology Initiative on Innovative Medicines)

The main tasks and activities of the Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (hereinafter referred to as IMI Joint Undertaking) shall be the following:

| (a) | to ensure the establishment and sustainable management of the Joint Technology Initiative on ‘Innovative Medicines’; |
| --- | --- |

(a)

to ensure the establishment and sustainable management of the Joint Technology Initiative on ‘Innovative Medicines’;

| (b) | to define and carry out the annual implementation plan referred to in Article 18 via calls for projects; |
| --- | --- |

(b)

to define and carry out the annual implementation plan referred to in Article 18 via calls for projects;

| (c) | to regularly review and make any necessary adjustments to the Research Agenda of the Joint Technology Initiative on Innovative Medicines in the light of scientific developments occurring during its implementation; |
| --- | --- |

(c)

to regularly review and make any necessary adjustments to the Research Agenda of the Joint Technology Initiative on Innovative Medicines in the light of scientific developments occurring during its implementation;

| (d) | to mobilise the public and private sector resources needed; |
| --- | --- |

(d)

to mobilise the public and private sector resources needed;

| (e) | to establish and develop close and long-term cooperation between the Community, industry and the other stakeholders such as regulatory bodies, patients’ organisations, academia and clinical centres, as well as cooperation between industry and academia; |
| --- | --- |

(e)

to establish and develop close and long-term cooperation between the Community, industry and the other stakeholders such as regulatory bodies, patients’ organisations, academia and clinical centres, as well as cooperation between industry and academia;

| (f) | to facilitate coordination with national and international activities in this area; |
| --- | --- |

(f)

to facilitate coordination with national and international activities in this area;

| (g) | to undertake communication and dissemination activities; |
| --- | --- |

(g)

to undertake communication and dissemination activities;

| (h) | to communicate and interact with the Member States and the countries associated with the Seventh Framework Programme via a group specifically established for this purpose (hereinafter referred to as the IMI States Representatives Group); |
| --- | --- |

(h)

to communicate and interact with the Member States and the countries associated with the Seventh Framework Programme via a group specifically established for this purpose (hereinafter referred to as the IMI States Representatives Group);

| (i) | to organise at least an annual meeting (hereinafter referred to as a Stakeholder Forum) with interest groups to ensure openness and transparency of the Research Activities of the IMI Joint Undertaking with its stakeholders; |
| --- | --- |

(i)

to organise at least an annual meeting (hereinafter referred to as a Stakeholder Forum) with interest groups to ensure openness and transparency of the Research Activities of the IMI Joint Undertaking with its stakeholders;

| (j) | to notify legal entities that have concluded a grant agreement (hereinafter referred to as Grant Agreement) with the IMI Joint Undertaking of the potential borrowing opportunities from the European Investment Bank, in particular the Risk Sharing Finance Facility set up under the Seventh Framework Programme; |
| --- | --- |

(j)

to notify legal entities that have concluded a grant agreement (hereinafter referred to as Grant Agreement) with the IMI Joint Undertaking of the potential borrowing opportunities from the European Investment Bank, in particular the Risk Sharing Finance Facility set up under the Seventh Framework Programme;

| (k) | to publish information on the projects, including the name of the participants and the amount of the financial contribution of the IMI Joint Undertaking per participant; |
| --- | --- |

(k)

to publish information on the projects, including the name of the participants and the amount of the financial contribution of the IMI Joint Undertaking per participant;

| (l) | to ensure the efficiency of the Joint Technology Initiative on ‘Innovative Medicines’; |
| --- | --- |

(l)

to ensure the efficiency of the Joint Technology Initiative on ‘Innovative Medicines’;

| (m) | to carry out any other activity needed to achieve the objectives referred to in Article 2 of the Regulation. |
| --- | --- |

(m)

to carry out any other activity needed to achieve the objectives referred to in Article 2 of the Regulation.

Governance

(Article 4 of the Annex to Regulation (EC) No 73/2008 – Statutes of the Joint Undertaking for the Implementation of the Joint Technology Initiative on Innovative Medicines)

1 —   The Governing Board

2 —   The Executive Director

3 —   The Scientific Committee

4 —   Two Advisory Bodies:

the IMI States Representatives Group and the Stakeholder Forum

5 —   Internal audit

The Internal Auditor of the European Commission

(Article 10 of the Annex to Regulation (EC) No 73/2008 – Statutes of the Joint Undertaking for the Implementation of the Joint Technology Initiative on Innovative Medicines)

Internal audit capability within the IMI JU

(Article 6 of Regulation (EC) No 73/2008)

6 —   External audit

The European Court of Auditors

(Article 17(5) of the Statutes annexed to Regulation (EC) No 73/2008 and Article 126 of the IMI’s financial rules)

7 —   Discharge authority

The European Parliament, acting on a recommendation from the Council.

(Article 11(4) of Regulation (EC) No 73/2008 and Article 129 of the IMI’s financial rules)

Resources available to the Joint Undertaking in 2011

Budget The final budget consisted of commitment appropriations of 285 379 570 euro and payment appropriations of 88 898 250 euro. These amounts included appropriations carried over from 2010 of 116 862 090 euro in commitment appropriations and of 64 506 677 euro in payment appropriations.

Staff as at 31 December 2011

31 posts provided for in the establishment plan (26 Temporary Agents + 5 Contract Agents), of which, 31 posts were occupied.

Staff:

| — | Temporary Agents: 26 |
| --- | --- |

—

Temporary Agents: 26

| — | Contract staff: 6 (one CA was recruited in anticipation in order to cover the maternity leave of one TA) |
| --- | --- |

—

Contract staff: 6 (one CA was recruited in anticipation in order to cover the maternity leave of one TA)

| — | Seconded National Experts: 0 |
| --- | --- |

—

Seconded National Experts: 0

| — | Local staff: 0 |
| --- | --- |

—

Local staff: 0

Allocated to:

| — | Operational activities: 6 |
| --- | --- |

—

Operational activities: 6

| — | Administrative tasks: 8 (1) |
| --- | --- |

—

Administrative tasks: 8 (1)

| — | Horizontal tasks: 17 |
| --- | --- |

—

Horizontal tasks: 17

Activities and services provided in 2011

Launched or prepared for new calls for proposals, evaluation, negotiation, grant management, ongoing contact, support and guidance to beneficiaries and other participants, communication and organisation of meetings and events with key stakeholders, as well as consultations and support to the Founding Members on the innovative medicine research strategy and associated activities.

Source: Information supplied by the IMI JU.

---

(1)  the number refers to administrative assistants with administrative tasks.

Source: Information supplied by the IMI JU.

---

REPLIES OF THE INNOVATIVE MEDICINES INITIATIVE JOINT UNDERTAKING

Paragraph 15

IMI JU welcomes the positive conclusion of the Court on the legality and regularity of all transactions underlying the annual accounts of the Joint Undertaking with the only exception of material errors detected by IMI JU in relation to interim payments for first call claims. Interim payments in 2011 accounted for 20 % (15,2 million euro) of the total payments paid out by IMI JU in 2011 (74,3 million euro) and 22 % of the total payments made by IMI JU to beneficiaries (69,0 million euro).

In addition, without questioning the Court’s own calculation of the error rate based on IMI JU’s first audits, the detected and residual error rate resulting from these finalised ex-post audits, applying the methodology established in IMI JU’s ex-post audit strategy, were 4,58 % and 3,72 % respectively as at September 2012. This result is based on a relatively limited number of concluded audits, and concentrated on new or unaudited beneficiaries from the first IMI projects, where a higher rate of error can be expected.

2011 was the first complete year of ex-ante and ex-post control with audits being launched as soon as the first costs claims related to Call 1 projects were validated and paid. The errors reported by the Court as the basis for a qualified opinion were detected by IMI JU’s own internal control system and this in itself demonstrates the effectiveness of this process. Moreover, the multi-annual basis of IMI JU’s strategy and operations also means that additional time is needed before a full assessment can be made on the impact of such controls.

IMI JU, none the less, acknowledges the risks related to grant management and is taking the appropriate measures both at ex-ante and ex-post level to follow-up and correct the errors detected from the finalised ex-post audits. In addition, new initiatives are being introduced with the aim of preventing the occurrence of such errors among existing and new participants of IMI JU projects. These have included the further strengthening of ex-ante controls in order to allow higher detection and correction of errors before validation of cost claims, the organisation of financial workshops and the development of guidance aimed at increasing the awareness and the understanding of participants on key issues such as the eligibility of costs and the importance of keeping adequate supporting documentation linked to the submitted claims. This is all the more important as a large portion of participants are small and medium size enterprises and other entities are unfamiliar with EU research programmes.

Paragraph 19

The budget was based on the adopted Legislative Financial Statements and its execution followed the principles of sound financial management. Moreover, none of the funds budgeted for running costs were lost and unutilised funds from the European Commission were transferred to research activities. It is also important to keep in view that 50 % of the budget for running costs is financed through EFPIA.

Paragraph 21

Effective measures were put in place in 2012 to increase and accelerate the commitment of EU funding and the matching in-kind contributions from EFPIA members through the launch of several Calls for proposals. To date in 2012, three Calls for Proposals have been launched with another one foreseen by the end of 2012, thus marking significant progress in the execution of IMI programme.

Paragraph 22

The total amount of chapter 30-C2 ‘Research Agenda’ (117 million euro) is the correct amount with the difference being due to a technical problem in the ABAC system which is now being addressed. With regard to the authorised carry-over, this is duly clarified in the preamble of the Governing Board Decision whereby it is stated that IMI JU had operational commitments and payment appropriations which had not been used at the end of the financial year 2010 and that it was considered necessary to use the cancelled appropriation during 2011. None the less, IMI JU will clarify the text of the decision for the future carry-overs.

Paragraph 23

Work related to the formal assessment of the internal control system was carried out by the Internal Control Coordinator in the last quarter of 2011 and finalised through the approval of the report to the Executive Director on 13 February 2012. This is in line with what is foreseen in Internal Control Standard 15 and in preparation of the Annual Activity Report of 2011. During 2011, the implementation of the internal control systems was also periodically reviewed, in a formal manner, through the preparation and approval of the 2011 Action Plan in February 2011 and through its updating in May and October 2011.

Paragraph 24

An Action Plan is being drawn up to address the recommendations of the Accounting Officer of 27 September 2012.

Paragraph 25

EFPIA members participating in IMI JU projects submitted their first declarations on in-kind contributions in February 2012 following the approval of the methodology by the Governing Board on 11 November 2011. Apart from ex-ante checks of these declarations and the respective certified methodologies, the first ex-post audit of in-kind contributions will be carried out in 2012.

Paragraphs 26 to 28

The Coordinated IAS-IAC Strategic Audit Plan for 2012-2014 was approved by the Governing Board on 3 November 2011. This was based on a comprehensive risk assessment exercise carried out jointly by the IAS and IMI JU’s Internal Audit Capability and finalised in September 2011. Throughout 2011, the Internal Audit Capability within IMI JU also carried out a number of internal audit consultancy engagements in relation to the development and strengthening of IMI JU’s governance, internal control and risk management systems and processes.

The first internal audit by the Internal Audit Service of the European Commission was carried out during the second quarter of 2012 with the final report being issued and submitted to the Executive Director and the Governing Board in July. This comprehensive internal audit exercise focused on the negotiations, grant agreement preparations and pre-financing sub-processes of IMI JU.

The role of internal audit in IMI JU’s financial rules will also be duly amended to reflect the requirements of the model financial regulation for Public Private Partnerships expected to be introduced by the European Commission in 2013.

Paragraph 29

The provisions set out in the revised model Grant Agreement approved by the Governing Board on 11 November 2011 with regard to the audit of EFPIA companies’ in-kind contributions are in line with the parameters set out in Articles 12(4) and 12(5) of the Council Regulation (EC) No 73/2008 setting up IMI JU.

Nevertheless, as this is fundamentally a question of principle, the advice of the European Commission is now being sought on the rights of the European Court of Auditors to audit in-kind contributions of EFPIA companies who are not recipients of IMI JU funding.

Paragraph 31

Considerable progress was done in 2011 in preparation for IMI JU’s business continuity and disaster recovery plans. Both have since been finalised and were in place by the first quarter of 2012.

Paragraph 32

Ex-post audits were launched in November 2011 and as at February 2012 there was no indication from the on-going audits that would have reasonably justified a reservation.

---

| 10.1.2013 | EN | Official Journal of the European Union | C 6/36 |
| --- | --- | --- | --- |

10.1.2013

EN

Official Journal of the European Union

C 6/36

---

REPORT

on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/05

INTRODUCTION

| 1. | The European Joint Undertaking for ITER (1) and the Development of Fusion Energy was set up in March 2007 (2) for a period of 35 years. While the main fusion facilities are 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 was set up in March 2007 (2) for a period of 35 years. While the main fusion facilities are 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 the contribution of Euratom to the ITER International Fusion Energy Organisation (4); |
| --- | --- | --- |

2.

The tasks of the Joint Undertaking are (3):

(a)

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

| (b) | to provide the contribution of Euratom to the ‧Broader Approach Activities‧ (complementary joint fusion research) with Japan for the rapid development of fusion energy; and |
| --- | --- |

(b)

to provide the contribution of Euratom to the ‧Broader Approach Activities‧ (complementary joint fusion research) with Japan for the rapid development of fusion energy; and

| (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 Member States of Euratom and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion and have expressed their wish to become Members (at 31 December 2011: Switzerland). |
| --- | --- |

3.

The members of the Joint Undertaking are Euratom, represented by the European Commission, the Member States of Euratom and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion and have expressed their wish to become Members (at 31 December 2011: 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 of the supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) 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 of the 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

| 5. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (5) of the European Joint Undertaking for ITER and the Development of Fusion Energy, which comprise the ‘financial statements’ (6) and the ‘reports on the implementation of the budget’ (7) for the financial year ended 31 December 2011, and the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

5.

Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (5) of the European Joint Undertaking for ITER and the Development of Fusion Energy, which comprise the ‘financial statements’ (6) and the ‘reports on the implementation of the budget’ (7) for the financial year ended 31 December 2011, and the legality and regularity of the transactions underlying those accounts.

| 6. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (8). |
| --- | --- |

6.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (8).

The Management's responsibility

| 7. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s Financial Regulation, under his own responsibility and within the limits of the authorised appropriations (9). The Director is responsible for putting in place (10) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (11) 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. |
| --- | --- |

7.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s Financial Regulation, under his own responsibility and within the limits of the authorised appropriations (9). The Director is responsible for putting in place (10) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (11) 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.

The Auditor's responsibility

| 8. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |
| --- | --- |

8.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them.

| 9. | The Court conducted its audit in accordance with the IFAC and ISSAI (12) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |
| --- | --- |

9.

The Court conducted its audit in accordance with the IFAC and ISSAI (12) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

| 10. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |
| --- | --- |

10.

The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.

| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

11.

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

| 12. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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. |
| --- | --- |

12.

In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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.

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

| 13. | In the Court’s opinion, the transactions underlying the annual accounts of the Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2011 are, in all material respects, legal and regular. |
| --- | --- |

13.

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

| 14. | The comments which follow in paragraphs 15 to 32 do not call the Court’s opinions into question. |
| --- | --- |

14.

The comments which follow in paragraphs 15 to 32 do not call the Court’s opinions into question.

COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

| 15. | The utilisation rates for the available commitment and payment appropriations were 99,7 % and 85,7 % respectively. Out of the 611 million euro of commitment appropriations available for operational activities, 42 % were implemented through direct individual commitments while the remaining 58 % was implemented through global commitments. |
| --- | --- |

15.

The utilisation rates for the available commitment and payment appropriations were 99,7 % and 85,7 % respectively. Out of the 611 million euro of commitment appropriations available for operational activities, 42 % were implemented through direct individual commitments while the remaining 58 % was implemented through global commitments.

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

| 16. | The Court of Auditors has previously reported that the Joint Undertaking’s internal control systems had not been fully established and implemented as required by its Financial Regulation (13). On 31 May 2010 the Joint Undertaking’s Internal Auditor issued a report which raised concerns about the financial circuits and the separation of duties. |
| --- | --- |

16.

The Court of Auditors has previously reported that the Joint Undertaking’s internal control systems had not been fully established and implemented as required by its Financial Regulation (13). On 31 May 2010 the Joint Undertaking’s Internal Auditor issued a report which raised concerns about the financial circuits and the separation of duties.

| 17. | In response to this, the Governing Board adopted a management improvement plan in June 2010 together with a proposal to change the organisational structure and reinforce the financial circuits. Although significant progress has been made (14), a number of actions need to be implemented:






  — | an integrated tool to manage budget, financial and operational information is not yet in place; |
| --- | --- | --- |

17.

In response to this, the Governing Board adopted a management improvement plan in June 2010 together with a proposal to change the organisational structure and reinforce the financial circuits. Although significant progress has been made (14), a number of actions need to be implemented:

—

an integrated tool to manage budget, financial and operational information is not yet in place;

| — | a management system to monitor project and budget implementation is expected to be operational by the third quarter of 2012; |
| --- | --- |

—

a management system to monitor project and budget implementation is expected to be operational by the third quarter of 2012;

| — | the validation of the underlying systems by the accounting officer is not completely finished and should continue in 2012 (15); |
| --- | --- |

—

the validation of the underlying systems by the accounting officer is not completely finished and should continue in 2012 (15);

| — | a comprehensive ex post audit strategy for grants and operational contracts has not been adopted (see paragraphs 22 and 23); |
| --- | --- |

—

a comprehensive ex post audit strategy for grants and operational contracts has not been adopted (see paragraphs 22 and 23);

| — | the action plans adopted by the Joint Undertaking in response to the internal audits on the financial circuits, grant management and experts contracts have not been fully implemented (16); |
| --- | --- |

—

the action plans adopted by the Joint Undertaking in response to the internal audits on the financial circuits, grant management and experts contracts have not been fully implemented (16);

| — | a risk management exercise at corporate level has not been carried out. |
| --- | --- |

—

a risk management exercise at corporate level has not been carried out.

Procurement and grants

| 18. | As pointed out in its 2010 report (17), the Joint Undertaking needs to enhance its efforts to increase competition. The number of offers received for the operational procurement procedures signed in 2011 was still low (18) and amounted to two on average; for grants the average number of proposals received was only one per call. |
| --- | --- |

18.

As pointed out in its 2010 report (17), the Joint Undertaking needs to enhance its efforts to increase competition. The number of offers received for the operational procurement procedures signed in 2011 was still low (18) and amounted to two on average; for grants the average number of proposals received was only one per call.

| 19. | In one case the decision to cancel an open procedure and to use a negociated procedure was not duly justified. In another case, the Joint Undertaking decided to negotiate with two companies which submitted offers under the open procedure (although one of them was not technically compliant). In another case both the choice of the negotiated procedure and the quantities and price contracted were not duly justified. |
| --- | --- |

19.

In one case the decision to cancel an open procedure and to use a negociated procedure was not duly justified. In another case, the Joint Undertaking decided to negotiate with two companies which submitted offers under the open procedure (although one of them was not technically compliant). In another case both the choice of the negotiated procedure and the quantities and price contracted were not duly justified.

| 20. | The Court’s audit has confirmed the findings of an internal audit carried out in 2011 in the area of procurement, notably:






  — | the pre-information notice is not used as an instrument for increasing ex ante publicity of forthcoming tenders (19); |
| --- | --- | --- |

20.

The Court’s audit has confirmed the findings of an internal audit carried out in 2011 in the area of procurement, notably:

—

the pre-information notice is not used as an instrument for increasing ex ante publicity of forthcoming tenders (19);

| — | there is no system to track and manage changes in the contract requirements and thus identify and remedy cost deviations; |
| --- | --- |

—

there is no system to track and manage changes in the contract requirements and thus identify and remedy cost deviations;

| — | the duration of the procurement process is often excessive and there are inefficiencies in preparing tender documents; |
| --- | --- |

—

the duration of the procurement process is often excessive and there are inefficiencies in preparing tender documents;

| — | cost estimates are not well documented. |
| --- | --- |

—

cost estimates are not well documented.

| 21. | The audit also revealed that the ex ante control procedures applied to payments made under contracts and grant agreements are not sufficiently documented (20). |
| --- | --- |

21.

The audit also revealed that the ex ante control procedures applied to payments made under contracts and grant agreements are not sufficiently documented (20).

Quality assurance audits and ex post controls on procurement and grants

| 22. | The Joint Undergtaking has a system to perform audits (21) at the level of contractors with the aim of checking compliance with the quality assurance requirements (22). However, the scope of these audits does not cover the financial aspects of the implementation of the contracts. |
| --- | --- |

22.

The Joint Undergtaking has a system to perform audits (21) at the level of contractors with the aim of checking compliance with the quality assurance requirements (22). However, the scope of these audits does not cover the financial aspects of the implementation of the contracts.

| 23. | During 2011 the Joint Undertaking started ex post controls to asses the legality and regularity of the implementation of grants awarded. Despite the progress made (23), the Joint Undertaking lacks an overall ex post control strategy. Such a strategy should cover the implementation of grant contracts and procurement contracts. |
| --- | --- |

23.

During 2011 the Joint Undertaking started ex post controls to asses the legality and regularity of the implementation of grants awarded. Despite the progress made (23), the Joint Undertaking lacks an overall ex post control strategy. Such a strategy should cover the implementation of grant contracts and procurement contracts.

OTHER MATTERS

Intellectual property rights and Industrial Policy

| 24. | On 28 March 2012 the Governing Board adopted the Joint Undertaking’s policy on intellectual property rights and dissemination of information. However, detailed rules for its implementation had not been drawn-up at the time of the audit (April 2012) as required under the Statutes (24). |
| --- | --- |

24.

On 28 March 2012 the Governing Board adopted the Joint Undertaking’s policy on intellectual property rights and dissemination of information. However, detailed rules for its implementation had not been drawn-up at the time of the audit (April 2012) as required under the Statutes (24).

| 25. | The Governing Board has not yet adopted the industrial policy required under the Statutes (25). |
| --- | --- |

25.

The Governing Board has not yet adopted the industrial policy required under the Statutes (25).

Late payment of membership contributions

| 26. | Payments of the 2011 contributions by 12 members were subject to delays. |
| --- | --- |

26.

Payments of the 2011 contributions by 12 members were subject to delays.

Commission Internal Audit Service

| 27. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 25 November 2011 together with a coordinated strategic audit plan for 2012-2014. The Joint Undertaking's Financial Regulation has been amended accordingly to introduce the provisions of the Framework Regulation (26) referring to the powers of the Commission’s internal auditor. |
| --- | --- |

27.

The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 25 November 2011 together with a coordinated strategic audit plan for 2012-2014. The Joint Undertaking's Financial Regulation has been amended accordingly to introduce the provisions of the Framework Regulation (26) referring to the powers of the Commission’s internal auditor.

Financial Regulation and Implementing Rules

| 28. | On 9 October 2008 the Court issued Opinion No 4/2008 on Fusion for Energy's Financial Regulation. This opinion contained 50 recommendations. At its meeting of 1 June 2011 the Joint Undertaking’s Governing Board decided to broadly accept the Court of Auditors’ observations (37 recommendations were fully accepted, 11 accepted with comments and only two rejected), amending its Financial Regulation accordingly (27). |
| --- | --- |

28.

On 9 October 2008 the Court issued Opinion No 4/2008 on Fusion for Energy's Financial Regulation. This opinion contained 50 recommendations. At its meeting of 1 June 2011 the Joint Undertaking’s Governing Board decided to broadly accept the Court of Auditors’ observations (37 recommendations were fully accepted, 11 accepted with comments and only two rejected), amending its Financial Regulation accordingly (27).

| 29. | However, the Court considers that certain provisions in the Joint Undertaking's implementing rules (28) depart from the implementing rules of the EU General Financial Regulation without sufficient justification. |
| --- | --- |

29.

However, the Court considers that certain provisions in the Joint Undertaking's implementing rules (28) depart from the implementing rules of the EU General Financial Regulation without sufficient justification.

EU contribution to ITER construction phase

| 30. | In July 2010 (29). the Council agreed the revised budget estimate of the Joint Undertaking's contribution for the construction phase amounting to 6,6 billion euro (2008 value), thus doubling the initial estimate. As reported by the internal auditor (30), the Joint Undertaking does not yet have a tool to regularly monitor the validity of the estimates and report on potential deviations. |
| --- | --- |

30.

In July 2010 (29). the Council agreed the revised budget estimate of the Joint Undertaking's contribution for the construction phase amounting to 6,6 billion euro (2008 value), thus doubling the initial estimate. As reported by the internal auditor (30), the Joint Undertaking does not yet have a tool to regularly monitor the validity of the estimates and report on potential deviations.

Follow up of previous observations

Status of the financing of the ITER project for 2012-13

| 31. | On 1 December 2011 an agreement was reached by the Council, the European Parliament and the Commission on the financing of the 1 300 million euro of additional costs for the ITER project for 2012-2013 (31). |
| --- | --- |

31.

On 1 December 2011 an agreement was reached by the Council, the European Parliament and the Commission on the financing of the 1 300 million euro of additional costs for the ITER project for 2012-2013 (31).

Host State agreement

| 32. | According to the Host State Agreement signed with the Kingdom of Spain on 28 June 2007, the permanent premises should have been made available to the Joint Undertaking by June 2010. However, at the time of the audit (April 2012) this had not occurred. |
| --- | --- |

32.

According to the Host State Agreement signed with the Kingdom of Spain on 28 June 2007, the permanent premises should have been made available to the Joint Undertaking by June 2010. However, at the time of the audit (April 2012) this had not occurred.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

---

(1)  ITER: 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).

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. The 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)  The Court received the provisional annual accounts on 1 March 2012. These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations.

5

inter alia

(6)  The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information.

6

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

7

(8)  OJ L 248, 16.9.2002, p. 1.

8

(9)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

9

(10)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

10

(11)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are integrated as such in the Financial Regulation of the European Joint Undertaking for ITER and the Development of Fusion Energy.

11

(12)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

12

(13)  Paragraph 21 of the 2009 report made reference to the reorganisation of the departmental structure of the Joint Undertaking, which in the Court’s view raised issues concerning the separation of duties between financial and operational activities.

13

(14)  During 2011 the selection and appointment of the Head of the ITER Department, the Head of Administration and the Head of the Budget and Finance Unit were concluded. The appointment of the Heads of projects teams and the implementation of the ABAC Contracts tool were almost complete by April 2012, and the financial circuits together with the administrative and financial manual, had been completed.

14

(15)  The validation of the underlying systems by the Accounting Officer should include information on the direct testing carried out on a sample of transactions of the key controls of the Joint Undertaking.

15

(16)  The action plans in response to the internal audits on financial circuits, grant management and experts contracts were adopted by the Joint Undertaking on 30 June 2010, 14 February 2011 and 19 November 2011 respectively.

16

(17)  Paragraph 20 of the 2010 Court of Auditors’ report made reference to the low level of competition for procurements and grants.

17

(18)  The Joint Undertaking also used a high percentage of negotiated procedures (around two thirds of the operational contracts signed in 2011, excluding the framework contracts).

18

(19)  Article 107 of the Joint Undertaking’s implementing rules states that the pre-information notice is the means by which the Joint Undertaking may make known, by way of indication, the estimated total value of contracts and framework contracts, by category of service or groups of products, and the essential characteristics of works contracts which they intend to award using the restricted procedure or competitive dialogue during a budgetary year.

19

(20)  For instance, the review by the financial verifying officer of the technical acceptance reports is not documented.

20

(21)  Out of the 18 quality audits carried out during 2011, 15 audits were closed by May 2012. The audits only qualified one project performance as unsatisfactory and identified seven situations of non-conformity with the procedures and 139 areas for improvement.

21

(22)  The scope of the audits covers the quality plan, non-conformities, purchase control and subcontracting management, documentation and data management, changes and deviations management, quality control plan for the civil works, detailed project schedule, contract risk management and quality control plan for technical works.

22

(23)  In November 2011 a new member was appointed to the internal control cell with the specific task of putting in place a procedure to carry out ex post controls on procurement and grants. F4E will also adhere to a Commission framework contract for ex-post audits.

23

(24)  Article 8(4) of the Statutes annexed to Decision 2007/198/Euratom states that ‘The Director shall draw up the rules on intellectual property rights and industrial policy, and on the dissemination of information’.

24

(25)  Article 6(3) of the Statutes annexed to Decision 2007/198/Euratom states that ‘The Governing Board shall adopt rules on industrial policy, intellectual property rights and on the dissemination of information in agreement with the Commission’.

25

(26)  Regulation (EC, Euratom) No 2343/2002.

26

(27)  Second amendment to the Fusion for Energy Joint Undertaking’s Financial Regulation of 25 November 2011

27

(28)  Thresholds referred to in Articles 80 and 100, competitive dialogue under Article 96 and composition of the opening committees under Articles 119 and 120.

28

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

29

(30)  Internal auditor’s report on pre-procurement dated 13 January 2012.

30

(31)  OJ L 4, 7.1.2012, p. 12.

31

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ANNEX

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

Competences and activities

| Areas of Community competence deriving from the Treaty


  (Extracts from 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) | Objectives







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

Areas of Community competence deriving from the Treaty

(Extracts from 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

Competences of the Joint Undertaking

(Council Decision 2007/198/Euratom)

(Council Decision 2007/198/Euratom)

Objectives

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

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

Governance

Governing Board

Governing Board

The Governing Board shall be responsible for the supervision of the Joint Undertaking in the pursuit of its objectives and ensure close collaboration between the Joint Undertaking and its Members in the implementation of its activities.

Bureau

Bureau

The Bureau is a subsidiary body of the Fusion for Energy Governing Board and provides Support for communication and co-ordination between the Governing Board, F4E committees and F4E management.

Administration & Finance Committee

Administration & Finance Committee

The Administration and Finance Committee (AFC) assists the Governing Board in administrative and financial matters related to ITER, the Broader Approach and preparations for demonstration fusion reactors (DEMO).

Audit Committee

Audit Committee

The Audit Committee (AC) is an advisory committee to the Governing Board having an overview of Financial Reporting and Accounting, Governance, Internal Control and Risk Management as well as External Audit and Internal Audit.

Executive Committee

Executive Committee

The Executive Committee shall assist the Governing Board in the preparation of its decisions and shall carry out any other tasks which the Governing Board may delegate to it.

Technical Advisory Panel

Technical Advisory Panel

The Technical Advisory Panel shall advise the Governing Board and the Director, as necessary, on the adoption and implementation of the project plan and work programmes.

Director

Director

The Director shall be the chief executive officer responsible for the day-to-day management of the Joint Undertaking and shall be its legal representative.

External Audit

External Audit

Court of Auditors.

Internal Audit

Internal Audit

Established as of 1 July 2009.

Discharge Authority

Discharge Authority

Parliament, on a recommendation from the Council.

Resources available to the Joint Undertaking in 2011

Resources available to the Joint Undertaking in 2011

Budget

Budget

263,57 million euro, of which 93 % funded by Community contribution

Staff at 31 December 2011

Staff at 31 December 2011

239 permanent posts provided for in the establishment plan, of which 211 posts were occupied;

Other staff:

| — | Seconded National Experts: 5 |
| --- | --- |

—

Seconded National Experts: 5

| — | Contract staff: 99 |
| --- | --- |

—

Contract staff: 99

| — | Local staff: n/a |
| --- | --- |

—

Local staff: n/a

Total staff employed: 315

Allocated to (approximately):

| — | Operational activities: 160 |
| --- | --- |

—

Operational activities: 160

| — | Administrative tasks: 115 |
| --- | --- |

—

Administrative tasks: 115

| — | Mixed tasks: 40 |
| --- | --- |

—

Mixed tasks: 40

Activities and services provided in 2011

Activities and services provided in 2011

| — | Operational Contracts: 38 awarded for a total value of 163,556 million euro |
| --- | --- |

—

Operational Contracts: 38 awarded for a total value of 163,556 million euro

| — | Administrative Contracts: 17 awarded (including 7 Joint Procurements) for a total value of 5,162 million euro |
| --- | --- |

—

Administrative Contracts: 17 awarded (including 7 Joint Procurements) for a total value of 5,162 million euro

| — | Grants: 22 awarded for a total value of 13,061 million euro |
| --- | --- |

—

Grants: 22 awarded for a total value of 13,061 million euro

| — | Budget Implementation:






  — | 99,7 % in commitment appropriations (99,7 % operational & 98,7 % administrative) |
| --- | --- | --- |

—

Budget Implementation:

—

99,7 % in commitment appropriations (99,7 % operational & 98,7 % administrative)

| — | 85,7 % in payment appropriations (86,6 % operational and 79,6 % administrative) |
| --- | --- |

—

85,7 % in payment appropriations (86,6 % operational and 79,6 % administrative)

| — | Procurement Arrangements:






  — | 2 for the ITER project - 31,79 kIUA (equivalent to 50,135 million euro) out of a total of 1 135,9 kIUA foreseen for the European in kind contributions. |
| --- | --- | --- |

—

Procurement Arrangements:

—

2 for the ITER project - 31,79 kIUA (equivalent to 50,135 million euro) out of a total of 1 135,9 kIUA foreseen for the European in kind contributions.

| — | 10 for the Broader Approach - 62,67 kBAUA (equivalent to 42,490 million euro) out of a total of 236,4 kBAUA foreseen for all the European contributions. |
| --- | --- |

—

10 for the Broader Approach - 62,67 kBAUA (equivalent to 42,490 million euro) out of a total of 236,4 kBAUA foreseen for all the European contributions.

| — | ITER Credit Awarded: 35,551 kIUA (equivalent to 56,066 million euro) |
| --- | --- |

—

ITER Credit Awarded: 35,551 kIUA (equivalent to 56,066 million euro)

Source: Information supplied by the Joint Undertaking.

Source:

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REPLIES OF THE JOINT UNDERTAKING FOR ITER AND THE DEVELOPMENT OF FUSION ENERGY

| 16. | F4E operates within two distinct control environments; (a) the EU Internal Control Standards, and (b) the ITER-wide Quality Requirements, which are designed to ensure the success of the ITER project and compliance with the requirements of the French Nuclear Safety Authority. F4E aims to meet these standards and requirements through a single F4E-wide Management System comprising policies, processes, procedures, etc. In the second half of 2010, the Director of F4E put in place a Management Improvement Plan with a focus on project management and other key processes.
  Major actions have already been undertaken to improve the project management system with the assistance of external persons from an industrial/project background. These improvements will allow better budget forecasting, improved detection of deviations and exceptions, and identification of preventive as well as corrective actions in order to optimize the budget implementation and to contain the cost of the EU contribution to the ITER construction. Full implementation is targeted for the end of 2012.
  Furthermore, F4E Management has been responding to the recommendations of the F4E Internal Auditor and to the recommendations of the Court of Auditors. The financial activities have been regrouped and reinforced in a new Budget and Finance unit including the control environment functions (ex-post, financial audits & monitoring, etc.) while segregating the operational and financial activities. All middle and senior management posts have been filled in 2011 and the Budget and Finance Unit has been strengthened with other experienced staff in particular very qualified verifying agents with EU experience and knowledge.
  Regarding the financial circuit audit, it should be noted that in the first quarter of 2012, the budget and finance unit performed a self-assessment in relation to the level of implementation of the Financial Circuit's audit action plan. The assessment concluded an implementation level of nearly 86 %. |
| --- | --- |

16.

F4E operates within two distinct control environments; (a) the EU Internal Control Standards, and (b) the ITER-wide Quality Requirements, which are designed to ensure the success of the ITER project and compliance with the requirements of the French Nuclear Safety Authority. F4E aims to meet these standards and requirements through a single F4E-wide Management System comprising policies, processes, procedures, etc. In the second half of 2010, the Director of F4E put in place a Management Improvement Plan with a focus on project management and other key processes.

Major actions have already been undertaken to improve the project management system with the assistance of external persons from an industrial/project background. These improvements will allow better budget forecasting, improved detection of deviations and exceptions, and identification of preventive as well as corrective actions in order to optimize the budget implementation and to contain the cost of the EU contribution to the ITER construction. Full implementation is targeted for the end of 2012.

Furthermore, F4E Management has been responding to the recommendations of the F4E Internal Auditor and to the recommendations of the Court of Auditors. The financial activities have been regrouped and reinforced in a new Budget and Finance unit including the control environment functions (ex-post, financial audits & monitoring, etc.) while segregating the operational and financial activities. All middle and senior management posts have been filled in 2011 and the Budget and Finance Unit has been strengthened with other experienced staff in particular very qualified verifying agents with EU experience and knowledge.

Regarding the financial circuit audit, it should be noted that in the first quarter of 2012, the budget and finance unit performed a self-assessment in relation to the level of implementation of the Financial Circuit's audit action plan. The assessment concluded an implementation level of nearly 86 %.

| 17. | The new F4E organizational structure is now implemented. It is more project-oriented, gives more emphasis to the financial service, and strengthens the overall management of F4E following the introduction of the middle management level with appropriate delegations and the recruitment of new managers (Head of Administration Department, Head of ITER Department and Head of the Budget and Finance Unit). Furthermore:






  — | Several important reports are being produced on a routine basis, e.g. on the progress of the big procurements and on budget implementation. |
| --- | --- | --- |

17.

The new F4E organizational structure is now implemented. It is more project-oriented, gives more emphasis to the financial service, and strengthens the overall management of F4E following the introduction of the middle management level with appropriate delegations and the recruitment of new managers (Head of Administration Department, Head of ITER Department and Head of the Budget and Finance Unit). Furthermore:

—

Several important reports are being produced on a routine basis, e.g. on the progress of the big procurements and on budget implementation.

| — | A first validation of the underlying systems has been done by the accounting officer for the 2011 financial year. In view of the change in the organizational structure and the strengthening of the control environment (ongoing in 2012), it is foreseen to continue the exercise of validation of the accounting systems for the year 2012, including a full audit testing. |
| --- | --- |

—

A first validation of the underlying systems has been done by the accounting officer for the 2011 financial year. In view of the change in the organizational structure and the strengthening of the control environment (ongoing in 2012), it is foreseen to continue the exercise of validation of the accounting systems for the year 2012, including a full audit testing.

| — | As part of the Ex-Post audit strategy which F4E is currently establishing, the scope of the Quality Audits will be extended to perform checks on financial and contractual aspects of contracts. In this respect, a pilot exercise will be carried out before the end of 2012. |
| --- | --- |

—

As part of the Ex-Post audit strategy which F4E is currently establishing, the scope of the Quality Audits will be extended to perform checks on financial and contractual aspects of contracts. In this respect, a pilot exercise will be carried out before the end of 2012.

| — | The risk management of the Project exists in the Project Plan for ITER and Broader Approach activities and are managed regularly with the Partners Regarding the Coprorate Risk at the organizational level, this exercise has been launched at the beginning of 2012 and the first result was discussed at the GB in June, F4E is now finalized it and is being preparing the GB report on Corporate risks and mitigated action which will be discussed regularly at the GB Meetings. |
| --- | --- |

—

The risk management of the Project exists in the Project Plan for ITER and Broader Approach activities and are managed regularly with the Partners Regarding the Coprorate Risk at the organizational level, this exercise has been launched at the beginning of 2012 and the first result was discussed at the GB in June, F4E is now finalized it and is being preparing the GB report on Corporate risks and mitigated action which will be discussed regularly at the GB Meetings.

| 18. | F4E notes that the methodology used by the European Court of Auditors to calculate the average number of offers received, excludes framework contracts and thereby reduces the average number of offers from 6.8 to 2.4 offers.
  F4E reminds that the average number of proposals it receives per call is related to the extreme complex market in which it is active and refers to its reply to paragraph 29 for further explanations. |
| --- | --- |

18.

F4E notes that the methodology used by the European Court of Auditors to calculate the average number of offers received, excludes framework contracts and thereby reduces the average number of offers from 6.8 to 2.4 offers.

F4E reminds that the average number of proposals it receives per call is related to the extreme complex market in which it is active and refers to its reply to paragraph 29 for further explanations.

| 20. | It needs to be stressed that the audit in the area of procurement concluded by a satisfactory opinion and that the recommendations resulted in an action plan comprising of 40 action which are currently being implemented. |
| --- | --- |

20.

It needs to be stressed that the audit in the area of procurement concluded by a satisfactory opinion and that the recommendations resulted in an action plan comprising of 40 action which are currently being implemented.

| 21. | As part of the work on the Integrated Management System in 2012, improvements to the monitoring and controlling systems are being implemented which include stronger ex-ante control instruments. |
| --- | --- |

21.

As part of the work on the Integrated Management System in 2012, improvements to the monitoring and controlling systems are being implemented which include stronger ex-ante control instruments.

| 22. | As part of the Ex-Post audit strategy which F4E is currently establishing, the scope of the Quality Audits will be extended to perform checks on financial and contractual aspects of contracts. In this respect, a pilot exercise will be carried out before the end of 2012. |
| --- | --- |

22.

As part of the Ex-Post audit strategy which F4E is currently establishing, the scope of the Quality Audits will be extended to perform checks on financial and contractual aspects of contracts. In this respect, a pilot exercise will be carried out before the end of 2012.

| 23. | As a consequence of the experience gained during financial monitoring visits carried out in 2011, F4E is now in a position to define the strategy to cover the financial control for both procurements and grants. Given the reduced financial dimensions of grants versus standard and operational procurements, this strategy will focus the main effort of the financial control on the ex-post control of procurements.
  These two types of ex-post controls (quality and financial) will be included in a wide integrated management framework which combine the industrial control environment such as ISO requirements with the more administrative Internal Control Standards from the EU environment. Within this F4E wide integrated management framework, the quality audits will be integrated in the overall audit strategy in order to assure an additional control level in relation to procurements. |
| --- | --- |

23.

As a consequence of the experience gained during financial monitoring visits carried out in 2011, F4E is now in a position to define the strategy to cover the financial control for both procurements and grants. Given the reduced financial dimensions of grants versus standard and operational procurements, this strategy will focus the main effort of the financial control on the ex-post control of procurements.

These two types of ex-post controls (quality and financial) will be included in a wide integrated management framework which combine the industrial control environment such as ISO requirements with the more administrative Internal Control Standards from the EU environment. Within this F4E wide integrated management framework, the quality audits will be integrated in the overall audit strategy in order to assure an additional control level in relation to procurements.

| 24. | The detailed rules for the implementation of the policy are reflected in the ‘Intellectual Property Clauses’ of the model agreement. Such clauses were presented by F4E to the Executive Committee on 14th May 2012. The Executive Committee considered the Intellectual Property clauses proposed by F4E for the implementation of the F4E Intellectual Property rules and recommended their adoption to the Governing Board subject to the Committee’s comments being taken into account. The final version of such rules was adopted by the Governing Board during its meeting of 28th/29th June 2012. |
| --- | --- |

24.

The detailed rules for the implementation of the policy are reflected in the ‘Intellectual Property Clauses’ of the model agreement. Such clauses were presented by F4E to the Executive Committee on 14th May 2012. The Executive Committee considered the Intellectual Property clauses proposed by F4E for the implementation of the F4E Intellectual Property rules and recommended their adoption to the Governing Board subject to the Committee’s comments being taken into account. The final version of such rules was adopted by the Governing Board during its meeting of 28th/29th June 2012.

| 25. | A Working Group of the F4E Governing Board has prepared a draft Industrial Policy which was considered by the Governing Board during its meeting in June 2012. The Policy is now being finalised taking into account that prior approval of the Commission is required according to Article 6(3)(p) of the F4E Statutes with the aim of it being adopted by the Governing Board before the end of 2012. |
| --- | --- |

25.

A Working Group of the F4E Governing Board has prepared a draft Industrial Policy which was considered by the Governing Board during its meeting in June 2012. The Policy is now being finalised taking into account that prior approval of the Commission is required according to Article 6(3)(p) of the F4E Statutes with the aim of it being adopted by the Governing Board before the end of 2012.

| 26. | F4E has established a new framework in 2011 for the collection of the Membership contribution, taken so in consideration the recurrence of the finding of the court:






  — | on 25 November 2011, F4E Governing Board approved the proposal of F4E for the application mutatis mutandis of Article 56(3) of the F4E’s Financial Regulation in order to allow imposing interest on those Members who fail to pay their contributions within the delay of the debit note. As noticed by the Court in the references to the F4E Financial Regulation, the provision was applying to procurement and grant agreement only at that time. |
| --- | --- | --- |

26.

F4E has established a new framework in 2011 for the collection of the Membership contribution, taken so in consideration the recurrence of the finding of the court:

—

on 25 November 2011, F4E Governing Board approved the proposal of F4E for the application mutatis mutandis of Article 56(3) of the F4E’s Financial Regulation in order to allow imposing interest on those Members who fail to pay their contributions within the delay of the debit note. As noticed by the Court in the references to the F4E Financial Regulation, the provision was applying to procurement and grant agreement only at that time.

| — | The governing board also decided that late interest would be requested to the Member having not paid their contribution 2011 by the end of October. Three members were late in their payments but the interest to be requested were below the threshold of 200 EUR in one case. The late interests due for 2011 have been requested together with the membership contribution 2012 and the detail information has been provided to the Court during the Audit. |
| --- | --- |

—

The governing board also decided that late interest would be requested to the Member having not paid their contribution 2011 by the end of October. Three members were late in their payments but the interest to be requested were below the threshold of 200 EUR in one case. The late interests due for 2011 have been requested together with the membership contribution 2012 and the detail information has been provided to the Court during the Audit.

| — | The Governing Board decision has been formalised with the adoption of the following amendment to the F4E Implementing Rules in its meeting of 28 June 2012: ‧Any amount receivable in relation to the Annual Membership contributions shall bear interest in accordance with paragraph 2b and 3 if not paid on the deadline referred to in Article 45(3)(b).‧ |
| --- | --- |

—

The Governing Board decision has been formalised with the adoption of the following amendment to the F4E Implementing Rules in its meeting of 28 June 2012: ‧Any amount receivable in relation to the Annual Membership contributions shall bear interest in accordance with paragraph 2b and 3 if not paid on the deadline referred to in Article 45(3)(b).‧

| 28. | The distinct nature of work of the Joint Undertaking is characterised by the procurement of high technological components, never built before and without any commercial value, designed for the construction of an experimental fusion reactor. In addition, ‘Fusion for Energy’ operates in an extremely complex market in which monopoly or oligopoly situations are predominant. In order to be able to operate successfully in this context, and as foreseen by its Financial Regulation, the F4E Governing Board has adopted, in agreement with the European Commission, certain provisions in its Financial Regulations and Implementing Rules which derogate from the (framework) general financial regulation.
  In this context, the thresholds for low value contracts (Article 80 of the IRs), for the use of the negotiated procedure (Article 100 of the IRs), as well as for the competitive dialogue procedure (Articles 93-99 of the IRs) and for the composition of the opening committees (Art 119 and 120 of the IRs), have been adapted to the technological and market conditions of the ITER project, as opposed to the thresholds originally designed for the provision of goods and services for administrative purchases. |
| --- | --- |

28.

The distinct nature of work of the Joint Undertaking is characterised by the procurement of high technological components, never built before and without any commercial value, designed for the construction of an experimental fusion reactor. In addition, ‘Fusion for Energy’ operates in an extremely complex market in which monopoly or oligopoly situations are predominant. In order to be able to operate successfully in this context, and as foreseen by its Financial Regulation, the F4E Governing Board has adopted, in agreement with the European Commission, certain provisions in its Financial Regulations and Implementing Rules which derogate from the (framework) general financial regulation.

In this context, the thresholds for low value contracts (Article 80 of the IRs), for the use of the negotiated procedure (Article 100 of the IRs), as well as for the competitive dialogue procedure (Articles 93-99 of the IRs) and for the composition of the opening committees (Art 119 and 120 of the IRs), have been adapted to the technological and market conditions of the ITER project, as opposed to the thresholds originally designed for the provision of goods and services for administrative purchases.

| 29. | In relation to the implementing rules which have been revised to take into account the comments from the Court (e.g. conditions to raise and grant loans or the rules for valuing in-kind contributions), the Joint Undertaking considers that the amended implementing rules provide sufficient guidance for the implementation of these activities. Any additional specification in the rules may result in making them rigid and inflexible, and thus rendering them impossible to adapt to the different possible situations which may arise in reality. In any case, the Joint Undertaking will provide all the explanations required in the way it may implement the conditions to raise or grant a loan, or in the way it has (or will) set the value for any specific in-kind contribution it may receive. |
| --- | --- |

29.

In relation to the implementing rules which have been revised to take into account the comments from the Court (e.g. conditions to raise and grant loans or the rules for valuing in-kind contributions), the Joint Undertaking considers that the amended implementing rules provide sufficient guidance for the implementation of these activities. Any additional specification in the rules may result in making them rigid and inflexible, and thus rendering them impossible to adapt to the different possible situations which may arise in reality. In any case, the Joint Undertaking will provide all the explanations required in the way it may implement the conditions to raise or grant a loan, or in the way it has (or will) set the value for any specific in-kind contribution it may receive.

| 30. | The estimates for the total value of the project are based on the Toschi report. F4E is now undertaking an exercise to align all the incurred cost up to date to the 2008 values in order to be able to establish the potential deviations from the estimates.
  An integrated project monitoring tool which allows for the monitoring of potential cost deviations has been developed and is operational since September 2012 at F4E, migrating project management data, such as schedules, and financial management to the new Work Breakdown Structure. Additional development is ongoing for Earn Value Management and the Baseline Cost Estimate by contract. |
| --- | --- |

30.

The estimates for the total value of the project are based on the Toschi report. F4E is now undertaking an exercise to align all the incurred cost up to date to the 2008 values in order to be able to establish the potential deviations from the estimates.

An integrated project monitoring tool which allows for the monitoring of potential cost deviations has been developed and is operational since September 2012 at F4E, migrating project management data, such as schedules, and financial management to the new Work Breakdown Structure. Additional development is ongoing for Earn Value Management and the Baseline Cost Estimate by contract.

| 32. | The Host Agreement signed between ‘Fusion and for Energy’ and the Kingdom of Spain in 2007 does indeed foresee that Spain will provide F4E with permanent premises no later than 3 years after the signature of the agreement. The Agreement also foresees that in the meantime, and before the final premises are made available, Spain will provide temporary premises.
  While Spain has not yet provided permanent premises, the Joint Undertaking occupies temporary premises free of cost, as Spain pays for the full cost of the premises (rent and maintenance as foreseen by the Host Agreement, while F4E pays for the tenant’s part of the temporary premises) |
| --- | --- |

32.

The Host Agreement signed between ‘Fusion and for Energy’ and the Kingdom of Spain in 2007 does indeed foresee that Spain will provide F4E with permanent premises no later than 3 years after the signature of the agreement. The Agreement also foresees that in the meantime, and before the final premises are made available, Spain will provide temporary premises.

While Spain has not yet provided permanent premises, the Joint Undertaking occupies temporary premises free of cost, as Spain pays for the full cost of the premises (rent and maintenance as foreseen by the Host Agreement, while F4E pays for the tenant’s part of the temporary premises)

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| 10.1.2013 | EN | Official Journal of the European Union | C 6/46 |
| --- | --- | --- | --- |

10.1.2013

EN

Official Journal of the European Union

C 6/46

---

REPORT

on the annual accounts of the SESAR Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/06

INTRODUCTION

| 1. | The SESAR Joint Undertaking was set up in February 2007 (1), located in Brussels, in order to manage the activities of the SESAR (Single European Sky Air Traffic Management Research) programme. |
| --- | --- |

1.

The SESAR Joint Undertaking was set up in February 2007 (1), located in Brussels, in order to manage the activities of the SESAR (Single European Sky Air Traffic Management Research) programme.

| 2. | The SESAR programme aims to modernise Air Traffic Management (ATM) in Europe and is divided into three phases:






  (a) | ‘Definition phase’ started in 2005 and led by the European Organisation for Safety of Air Navigation (Eurocontrol), with co-financing from the European Union (EU) budget through the Trans European Network — Transport programme. The outcome is the European ATM Master Plan, which defines the content, the development and deployment plans of the next generation of ATM systems. |
| --- | --- | --- |

2.

The SESAR programme aims to modernise Air Traffic Management (ATM) in Europe and is divided into three phases:

(a)

‘Definition phase’ started in 2005 and led by the European Organisation for Safety of Air Navigation (Eurocontrol), with co-financing from the European Union (EU) budget through the Trans European Network — Transport programme. The outcome is the European ATM Master Plan, which defines the content, the development and deployment plans of the next generation of ATM systems.

| (b) | ‘Development phase’ (2008-2013) managed by the SESAR Joint Undertaking (see the Annex) and leading to the production of new technological systems, components and operational procedures as defined in the European ATM Master Plan. |
| --- | --- |

(b)

‘Development phase’ (2008-2013) managed by the SESAR Joint Undertaking (see the Annex) and leading to the production of new technological systems, components and operational procedures as defined in the European ATM Master Plan.

| (c) | ‘Deployment phase’ (2014-2020) to be led by industry and stakeholders, for the large-scale production and implementation of the new air traffic management infrastructure. |
| --- | --- |

(c)

‘Deployment phase’ (2014-2020) to be led by industry and stakeholders, for the large-scale production and implementation of the new air traffic management infrastructure.

| 3. | The Joint Undertaking is designed as a public-private partnership. The founding members are the European Union represented by the European Commission, and Eurocontrol represented by its Agency. Following a call for expressions of interest, fifteen public and private enterprises from the air navigation industry are members of the Joint Undertaking. These include air navigation service providers, ground and aerospace manufacturing industry, aircraft manufacturers, airport authorities and airborne equipment manufacturers. |
| --- | --- |

3.

The Joint Undertaking is designed as a public-private partnership. The founding members are the European Union represented by the European Commission, and Eurocontrol represented by its Agency. Following a call for expressions of interest, fifteen public and private enterprises from the air navigation industry are members of the Joint Undertaking. These include air navigation service providers, ground and aerospace manufacturing industry, aircraft manufacturers, airport authorities and airborne equipment manufacturers.

| 4. | The budget for the development phase of the SESAR programme is 2,1 billion euro, to be provided in equal parts by the EU, by Eurocontrol and by the participating public and private partners. The EU contribution is funded from the Seventh Research Framework Programme and the Trans-European Networks – Transport programme. Around 90 % of the funding from Eurocontrol and the other stakeholders is in the form of in-kind contributions. |
| --- | --- |

4.

The budget for the development phase of the SESAR programme is 2,1 billion euro, to be provided in equal parts by the EU, by Eurocontrol and by the participating public and private partners. The EU contribution is funded from the Seventh Research Framework Programme and the Trans-European Networks – Transport programme. Around 90 % of the funding from Eurocontrol and the other stakeholders is in the form of in-kind contributions.

| 5. | The SESAR JU started to work autonomously on 10 August 2007. |
| --- | --- |

5.

The SESAR JU started to work autonomously on 10 August 2007.

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. This is supplemented by evidence provided by the work of other auditors (where relevant) 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. This is supplemented by evidence provided by the work of other auditors (where relevant) 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, the Court has audited the annual accounts (2) of the SESAR Joint Undertaking, which comprise the ‘financial statements’ (3) and the ‘reports on implementation of the budget’ (4) for the financial year ended 31 December 2011 and the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

7.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (2) of the SESAR Joint Undertaking, which comprise the ‘financial statements’ (3) and the ‘reports on implementation of the budget’ (4) for the financial year ended 31 December 2011 and the legality and regularity of the transactions underlying those accounts.

The Management’s responsibility

| 8. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules (5) of the Joint Undertaking, under his own responsibility and within the limits of the authorised appropriations (6). The Director is responsible for putting in place the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (7) 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. |
| --- | --- |

8.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules (5) of the Joint Undertaking, under his own responsibility and within the limits of the authorised appropriations (6). The Director is responsible for putting in place the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (7) 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.

The Auditor’s responsibility

| 9. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the annual accounts of the Joint Undertaking and the legality and regularity of the transactions underlying them. |
| --- | --- |

9.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the annual accounts of the Joint Undertaking and the legality and regularity of the transactions underlying them.

| 10. | 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 accounts of the Joint Undertaking are free from material misstatement and whether the transactions underlying them are legal and regular. |
| --- | --- |

10.

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 accounts of the Joint Undertaking are free from material misstatement and whether the transactions underlying them are legal and regular.

| 11. | An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and about the legality and the regularity of the transactions underlying them. The procedures are selected based on the auditor’s judgement, including an assessment of the risks of material misstatement of the accounts and of material non-compliance of the underlying transactions with the requirements 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. |
| --- | --- |

11.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and about the legality and the regularity of the transactions underlying them. The procedures are selected based on the auditor’s judgement, including an assessment of the risks of material misstatement of the accounts and of material non-compliance of the underlying transactions with the requirements 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.

| 12. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

12.

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

| 13. | In the Court’s opinion, the SESAR Joint Undertaking’s annual accounts 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 (8). |
| --- | --- |

13.

In the Court’s opinion, the SESAR Joint Undertaking’s annual accounts 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 (8).

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 SESAR Joint Undertaking for the financial year ended 31 December 2011 are legal and regular in all material respects. |
| --- | --- |

14.

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

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

15.

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

BUDGETARY AND FINANCIAL MANAGEMENT

| 16. | The final 2011 budget adopted by the Administrative Board included commitment appropriations of 148 million euro and payment appropriations of 91,7 million euro. The utilisation rates for commitment and payment appropriations were 99,4 % and 82,4 % respectively. |
| --- | --- |

16.

The final 2011 budget adopted by the Administrative Board included commitment appropriations of 148 million euro and payment appropriations of 91,7 million euro. The utilisation rates for commitment and payment appropriations were 99,4 % and 82,4 % respectively.

| 17. | In 2011, the contributions from members (34 million euro) together with the outturn of the previous year (57 million euro) and other sources of revenue (0,2 million euro) amounted to 91,2 million euro, against payments of 75,6 million euro. This led to a positive budget outturn of 15,6 million euro and deposits in bank accounts at the end of the year totalling 15,3 million euro. This is at odds with the budgetary principle of equilibrium. |
| --- | --- |

17.

In 2011, the contributions from members (34 million euro) together with the outturn of the previous year (57 million euro) and other sources of revenue (0,2 million euro) amounted to 91,2 million euro, against payments of 75,6 million euro. This led to a positive budget outturn of 15,6 million euro and deposits in bank accounts at the end of the year totalling 15,3 million euro. This is at odds with the budgetary principle of equilibrium.

KEY CONTROLS OF THE JOINT UNDERTAKING’S SUPERVISORY AND CONTROL SYSTEMS

Internal control systems

| 18. | The Court notes that a review of the Joint Undertaking’s business processes carried out by an independent external auditor in 2011 found the internal control systems to be operating effectively. In April 2012, the Accounting Officer formally validated the underlying business processes, in line with the Financial Rules of the Joint Undertaking. |
| --- | --- |

18.

The Court notes that a review of the Joint Undertaking’s business processes carried out by an independent external auditor in 2011 found the internal control systems to be operating effectively. In April 2012, the Accounting Officer formally validated the underlying business processes, in line with the Financial Rules of the Joint Undertaking.

Internal auditing function and Commission Internal Audit Service

| 19. | The Court previously observed that the Commission and the SESAR Joint Undertaking have taken action to clarify the respective operational roles of the Commission’s Internal Aduit Service (IAS) and of the Joint Undertaking’s internal auditing function (9). |
| --- | --- |

19.

The Court previously observed that the Commission and the SESAR Joint Undertaking have taken action to clarify the respective operational roles of the Commission’s Internal Aduit Service (IAS) and of the Joint Undertaking’s internal auditing function (9).

| 20. | The Court notes that, in November 2011, the Administrative Board of the Joint Undertaking adopted a Coordinated IAS Strategic Audit Plan for the Joint Undertaking for the period 2012-2014. |
| --- | --- |

20.

The Court notes that, in November 2011, the Administrative Board of the Joint Undertaking adopted a Coordinated IAS Strategic Audit Plan for the Joint Undertaking for the period 2012-2014.

OTHER MATTERS

Late payment of membership contributions

| 21. | The deadline of 1 July 2011 for payment to the Joint Undertaking of the cash contributions for the year from its members was not respected. At the end of August 2011 there remained 17 outstanding recovery orders, totalling 3,7 million euro. One member had paid no annual contribution at all by the end of 2011. |
| --- | --- |

21.

The deadline of 1 July 2011 for payment to the Joint Undertaking of the cash contributions for the year from its members was not respected. At the end of August 2011 there remained 17 outstanding recovery orders, totalling 3,7 million euro. One member had paid no annual contribution at all by the end of 2011.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

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

2

(3)  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.

3

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

4

(5)  SESAR Financial Rules adopted by the Administrative Board on 28 July 2009.

5

(6)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

6

(7)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are incorporated in the Financial Rules of the SESAR Joint Undertaking.

7

(8)  The Accounting Rules adopted by the Commission’s Accounting Officer are derived from International Public Sector Accounting Standards (IPSAS) or, by default, International Financial Reporting Standards (IFRS).

8

(9)  Report on the annual accounts of the SESAR Joint Undertaking for the financial year 2010, together with the replies of the Joint Undertaking (OJ C 368, 16.12.2011, p. 32).

9

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ANNEX

SESAR Joint Undertaking (Brussels)

Competences and activities

| Areas of Union competence deriving from the Treaty


  (Article 187) | Research and technological development and space
  Efficient execution of EU research, technological development and demonstration programmes. |
| --- | --- |
| Competences of the JU / EA

  (Council Regulation (EC) No 219/2007, as last modified by Regulation (EC) No 1361/2008) | Main objectives

  The aim of the Joint Undertaking shall be 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 the execution of the ATM Master Plan and in particular for carrying out the following tasks:






  — | organising and coordinating the activities of the development phase of the SESAR project, in accordance with the ATM Master Plan, resulting from the definition phase of the project managed by Eurocontrol, by combining and managing under a single structure public and private sector funding, |

Areas of Union competence deriving from the Treaty

(Article 187)

Research and technological development and space

Efficient execution of EU research, technological development and demonstration programmes.

Competences of the JU / EA

(Council Regulation (EC) No 219/2007, as last modified by Regulation (EC) No 1361/2008)

Main objectives

The aim of the Joint Undertaking shall be 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 the execution of the ATM Master Plan and in particular for carrying out the following tasks:

—

organising and coordinating the activities of the development phase of the SESAR project, in accordance with the ATM Master Plan, resulting from the definition phase of the project managed by Eurocontrol, by combining and managing under a single structure public and private sector funding,

| — | ensuring the necessary funding for the activities of the development phase of the SESAR project in accordance with the ATM Master Plan, |
| --- | --- |

—

ensuring the necessary funding for the activities of the development phase of the SESAR project in accordance with the ATM Master Plan,

| — | ensuring the involvement of the stakeholders of the air traffic management sector in Europe, in particular: air navigation service providers, airspace users, professional staff associations, airports, and manufacturing industry; as well as the relevant scientific institutions or the relevant scientific community, |
| --- | --- |

—

ensuring the involvement of the stakeholders of the air traffic management sector in Europe, in particular: air navigation service providers, airspace users, professional staff associations, airports, and manufacturing industry; 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, to organise 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, to organise specific invitations to tender.

Governance

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 this 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 this 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 relating agreements as referred to in Article 1(3); |
| --- | --- |

(d)

authorising negotiations and deciding on the accession of new members and on the relating agreements as referred to in Article 1(3);

| (e) | supervising the execution of the agreements between members and the Joint Undertaking; |
| --- | --- |

(e)

supervising the execution of the 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 and the dissolution of the Joint Undertaking; |
| --- | --- |

(k)

deciding on proposals to the Commission on the extension and the 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 the rules and procedures for awarding the contracts necessary to implement the ATM Master Plan, including specific procedures for conflicts of interest; |
| --- | --- |

(m)

laying down the rules and procedures for awarding the contracts necessary to implement the ATM Master Plan, including specific procedures for 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 development phase of the Sesar project; |
| --- | --- |

(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 development phase of the Sesar project;

| (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.

The Executive Director shall direct the execution of the Sesar project within the guidelines established by the Administrative Board to which he shall be responsible. He shall provide the Administrative Board with all information necessary for the performance of its functions.

The Executive Director has to:

| ‘(a) | employ, manage and supervise the staff of the Joint Undertaking, including the staff referred to in Article 8;’; |
| --- | --- |

‘(a)

employ, manage and supervise the staff of the Joint Undertaking, including the staff referred to in Article 8;’;

| (b) | organise, manage and supervise the activities of the Joint Undertaking; |
| --- | --- |

(b)

organise, manage and supervise the activities of the Joint Undertaking;

| (c) | submit to the Administrative Board his proposals concerning the organisation chart; |
| --- | --- |

(c)

submit to the Administrative Board his proposals concerning the organisation chart;

| (d) | draw up and regularly update the global and the annual work programme of the Joint Undertaking, including an estimate on programme costs, and submit them to the Administrative Board; |
| --- | --- |

(d)

draw up and regularly update the global and the annual work programme of the Joint Undertaking, including an estimate on programme costs, and submit them to the Administrative Board;

| (e) | draw up, in accordance with the Financial Rules, the draft annual budget, including the staff establishment plan, and submit them to the Administrative Board; |
| --- | --- |

(e)

draw up, in accordance with the Financial Rules, the draft annual budget, including the staff establishment plan, and submit them to the Administrative Board;

| (f) | ensure that the obligations of the Joint Undertaking, with regard to the contracts and agreements it concludes are met; |
| --- | --- |

(f)

ensure that the obligations of the Joint Undertaking, with regard to the contracts and agreements it concludes are met;

| (g) | ensure that the activities of the Joint Undertaking are carried out with complete independence and without any conflicts of interest; |
| --- | --- |

(g)

ensure that the activities of the Joint Undertaking are carried out with complete independence and without any conflicts of interest;

| (h) | draw up the annual report on the progress of the Sesar project and its financial situation, and such other reports as may be requested by the Administrative Board, and submit them to the latter; |
| --- | --- |

(h)

draw up the annual report on the progress of the Sesar project and its financial situation, and such other reports as may be requested by the Administrative Board, and submit them to the latter;

| (i) | submit the annual accounts and balance-sheet to the Administrative Board; |
| --- | --- |

(i)

submit the annual accounts and balance-sheet to the Administrative Board;

| (j) | submit to the Administrative Board any proposal involving changes in the design of the Sesar project. |
| --- | --- |

(j)

submit to the Administrative Board any proposal involving changes in the design of the Sesar project.

Internal Audit

Internal Auditor of the European Commission.

External audit

European Court of Auditors.

Discharge authority

European Parliament, European Council and the Administrative Board of the SJU.

Resources made available to the Joint Undertaking in 2011 (2010)

Budget

147,7 million euro

(129,5 million euro)

Staff at 31 December 2011

The 2011 operating budget provides for an establishment plan of 39 Temporary Agents (TA) and 3 Seconded National Experts (SNE), leading to a total of 42 staff, out of which 35 were occupied at year end 2011, compared to 37 in 2010):

| — | 23 temporary staff, recruited externally, |
| --- | --- |

—

23 temporary staff, recruited externally,

| — | 8 staff seconded by the SJU Members in accordance with Article 8 of the Regulation (EC) No 219/2007, |
| --- | --- |

—

8 staff seconded by the SJU Members in accordance with Article 8 of the Regulation (EC) No 219/2007,

| — | 3 contractual staff, |
| --- | --- |

—

3 contractual staff,

| — | 1 SNEs. |
| --- | --- |

—

1 SNEs.

Allocated to

Operational tasks: 19

Administrative and support tasks: 15

Mixed tasks: 1

Products and services 2011

2011 constitutes a key year in the progress to achieve the Mid-Term Objectives and Vision 2012. In particular:

Objective No 1 —   Initial 4D trajectory is validated in an operational environment supported by satellite based technology

The ‘Initial 4D trajectory based operations’, is planned to be validated during a first validation exercise taking place as part of Release 1 in February 2012 in the traffic environment of MUAC, NUAC and Stockholm Approach. A number of preparatory activities were performed in 2011 including the development and integration of the two FMS prototypes as well as a number of simulation activities connecting ground and airborne simulation platforms. The second iteration, part of Release 2, is planned for late 2012 and the third for 2013. The aim will be to validate operational procedure for flying according to a CTA in the En-route and TMA airspace.

It is expected that as planned the objective will be mostly met in 2012, although the use of satellite based technologies is being introduced after the 2013 timeframe.

Objective No 2 —   10 000 flights, including 500 military, are SESAR labelled

In 2011, 9 366 commercial flights, demonstrated early SESAR benefits (including AIRE and OPTIMI flight demonstrations). It must be noted however that for the time being the number of Military flights remains limited. In addition to the ongoing Programme activities, the SJU Administrative Board decided the launch of a ‘Demonstration Activities’ call where integrated trials during 2012 will allow the SJU to reach the target and bring in the military dimension mostly during 2013 too.

Objective n. 3 —   80 % of SESAR projects have tested their outputs in a real life environment

In order to achieve the objective of 80 % of validation exercises in real life environment, a Validation Strategy has been established. In particular, the deliveries of Release 1 and those planned for Release 2 in 2012 will connect primary Projects to the different exercises performed within the Operational Focus Areas and to real systems or environment.

Objective No 4 —   First SWIM pilots are in place to exchange data across at least five domains

As already reported to the Administrative Board (hereinafter also ADB), in 2011 a SWIM Action Plan has been introduced to respond to the risks identified in the related Projects, inter alia, the lack of a legal framework for SWIM. Some progress was achieved and illustrated at the SWIM Demonstration Event, which took place in November 2011 with good participation from the overall programme. Still a number of yet unresolved issues and priorities have so far delayed the achievement of this mid-term objective. Despite the progress achieved by year-end 2011 and the implementation of the action plan with the contribution of the ongoing validation exercise, it is unlikely that the objective will be met in the set timeframe.

Objective No 5 —   The first remote tower is ready for operation

The first validation exercises for the Remote Tower, part of Release 1, have been performed as planned and will be completed during 2012 in order to achieve this mid-term objective. The Release 1 Exercise has confirmed:

| — | feasibility of providing Air Traffic Service to Ängelholm airport from the Malmö ATCC R&D Remote Tower Centre; |
| --- | --- |

—

feasibility of providing Air Traffic Service to Ängelholm airport from the Malmö ATCC R&D Remote Tower Centre;

| — | feasibility of conducting remotely nominal and non nominal operations; |
| --- | --- |

—

feasibility of conducting remotely nominal and non nominal operations;

| — | technical feasibility of capturing the ‘out of window’ traffic situation and operational environment from a single airport and to display this picture in the remote site. |
| --- | --- |

—

technical feasibility of capturing the ‘out of window’ traffic situation and operational environment from a single airport and to display this picture in the remote site.

Regulatory Authorities participated in these trials.

Objective No 6 —   SESAR benefits are demonstrated in city pairs connecting 8 European airports

Following the success of the first AIRE cycle in 2009, the SESAR Joint Undertaking further extended this green branch of the SESAR Programme. Through the connection of main European airports (Paris, Vienna, Madrid, Cologne, Dusseldorf, Prague, Brussels, Toulouse, ...) and the involvement of some 40 partners in Europe and beyond, AIRE has demonstrated significant benefits in terms of emission reduction. The quality of these results is high not only in terms of reduction of fuel burn and therefore CO2 emissions, but because the high conversion rate from projects into daily ATM practice.

The results of AIRE and the results expected in the ‘demonstration activities’ call launched and to be performed during 2012 will allow meeting the objective.

Objective No 7 —   Airspace users have signed up to the SESAR business case for time based operations

This objective has many dimensions and the business case development process is not mature yet to encompass all the different stakeholders’ perspectives. Nevertheless, substantial effort has been invested in developing business case methodologies for ANSPs, airspace users and airports. Step 1 of the 4D Time Based Operations deliverables has been validated in 2011 and will continue to be validated in 2012 and progress will be made on standardisation activities as well. To a certain extent and in some areas the business case will be endorsed to the level of industrialisation readiness, whereby additional work will be needed with stakeholders on its deployment. The objective will not be reached in the set timeframe although preliminary business case information will be made available to prepare the transition to deployment for first SESAR solutions from 2013.

Furthermore, the following provides a broader view on the 2011 progress and achievements:

| — | the first SESAR Release content, Release 1, was consolidated through a first System Engineering review and endorsed by the Administrative Board as part of the AWP 2011. It consisted of 29 Validation Exercises addressing concept elements in 16 Operational Focus Areas; |
| --- | --- |

—

the first SESAR Release content, Release 1, was consolidated through a first System Engineering review and endorsed by the Administrative Board as part of the AWP 2011. It consisted of 29 Validation Exercises addressing concept elements in 16 Operational Focus Areas;

| — | in June 2011, the second System Engineering review took place to assess the progress of Release 1 towards the step V3 validation and, in particular, the validation plans and the platforms readiness. The review resulted in a number of corrective actions to mitigate risks related to the Release execution. The review concluded that the overall progress was adequate, while in terms of resource consumption and delivery alignment some weaknesses were noted. In particular, the level of maturity of the projects in following the EOCVM methodology, though improving compared to 2010, was still not sufficient; |
| --- | --- |

—

in June 2011, the second System Engineering review took place to assess the progress of Release 1 towards the step V3 validation and, in particular, the validation plans and the platforms readiness. The review resulted in a number of corrective actions to mitigate risks related to the Release execution. The review concluded that the overall progress was adequate, while in terms of resource consumption and delivery alignment some weaknesses were noted. In particular, the level of maturity of the projects in following the EOCVM methodology, though improving compared to 2010, was still not sufficient;

| — | Release 1 has started to deliver tangible results and marks a turning point in the development of the new ATM system; |
| --- | --- |

—

Release 1 has started to deliver tangible results and marks a turning point in the development of the new ATM system;

| — | at the end of 2011, 26 validation activities were conducted meaning that 90 % of Release 1 is achieved and 3 exercises are postponed to 2012; |
| --- | --- |

—

at the end of 2011, 26 validation activities were conducted meaning that 90 % of Release 1 is achieved and 3 exercises are postponed to 2012;

| — | 282 Projects are in execution phase, representing more than 90 % of the total Programme but the progression of the Programme is not evenly distributed. As a matter of fact, deriving the top level concept into operational requirements is slower than expected and this impacts the critical path of several technical projects. A number of mitigation actions had to be put in place and are being monitored at the level of the Programme Control Group. SWIM is another area of concern where a dedicated action plan was elaborated to overcome the issues identified in the course of 2011. |
| --- | --- |

—

282 Projects are in execution phase, representing more than 90 % of the total Programme but the progression of the Programme is not evenly distributed. As a matter of fact, deriving the top level concept into operational requirements is slower than expected and this impacts the critical path of several technical projects. A number of mitigation actions had to be put in place and are being monitored at the level of the Programme Control Group. SWIM is another area of concern where a dedicated action plan was elaborated to overcome the issues identified in the course of 2011.

| — | In terms of resource consumptions (FTE), the first estimates at the end of 2011 provided by the Members indicate an overall under consumption in the order of 20 %. Nevertheless, it should be noted that for many Projects the planned distribution of resources during the execution phase is under revision and not yet reflected in the baseline used to measure the Programme progression. Following the IBAFO I and II reallocation adopted by the Administrative Board on 15 December 2011, it can be concluded that there is an under consumption of resources in the early stages of the Programme which appears to be compensated by a higher level of resources until the Programme end. |
| --- | --- |

—

In terms of resource consumptions (FTE), the first estimates at the end of 2011 provided by the Members indicate an overall under consumption in the order of 20 %. Nevertheless, it should be noted that for many Projects the planned distribution of resources during the execution phase is under revision and not yet reflected in the baseline used to measure the Programme progression. Following the IBAFO I and II reallocation adopted by the Administrative Board on 15 December 2011, it can be concluded that there is an under consumption of resources in the early stages of the Programme which appears to be compensated by a higher level of resources until the Programme end.

| — | A similar but less evident trend – maturity and resources – seems to appear in terms of deliverables, as in some areas the SJU noted a slower provisions of deliverables in line with the under consumption of the resources. In order to address the situation in the short term, different measures have been taken, inter alia, a request to the Programme Committee members to perform further verifications at partners level, an analysis of the major reasons behind the under consumption, the IBAFO I and II reallocation, the termination of some Projects, etc. All the measures are monitored at risk management level and consolidated at the SJU level. In addition, work is conducted with the Members to better identify key root causes. Some of them can already be mentioned, such as the organisation of the work in some Projects, some de-synchronized contributions across the Programme, the lack of clear identification of the deliverables and of more specific quality criteria. |
| --- | --- |

—

A similar but less evident trend – maturity and resources – seems to appear in terms of deliverables, as in some areas the SJU noted a slower provisions of deliverables in line with the under consumption of the resources. In order to address the situation in the short term, different measures have been taken, inter alia, a request to the Programme Committee members to perform further verifications at partners level, an analysis of the major reasons behind the under consumption, the IBAFO I and II reallocation, the termination of some Projects, etc. All the measures are monitored at risk management level and consolidated at the SJU level. In addition, work is conducted with the Members to better identify key root causes. Some of them can already be mentioned, such as the organisation of the work in some Projects, some de-synchronized contributions across the Programme, the lack of clear identification of the deliverables and of more specific quality criteria.

With regard to the 310 R&D and Management projects under the SJU responsibility (excluding WP E Long Term Research Projects) the table below provides a summary of the situation by project status at the end of 2011.

| | As of 31.12.2010 | Implemented in 2011 | As of 31.12.2011 | |
| --- | --- | --- | --- | --- |
| Total number of Projects in the SESAR Programme | 304 | 6 | 310 | |
| of which | | | | |
| — | Projects initiated |

As of 31.12.2010

Implemented in 2011

As of 31.12.2011

Total number of Projects in the SESAR Programme

304

6

310

of which

—

285

16

301

cancelled projects

2

1

3

0,9 %

suspended projects

11

–1

10

3,2 %

projects still under initiation

26

–20

6

2 %

projects in execution phase

246

36

282

91 %

| — | Projects to be initiated |
| --- | --- |

—

Projects to be initiated

19

–10

9

2,9 %

Source: Information supplied by the SESAR Joint Undertaking.

---

REPLIES OF THE SESAR JOINT UNDERTAKING

Statement of Assurance

| 13 – 14. | The SJU acknowledges with satisfaction the clean audit opinion of the Court on the reliability of the annual accounts for 2011 as well as on the legality and regularity of the transactions underlying the accounts.
  The audit opinions constitute an important achievement for the SJU, on which to build in order to further ensure that adequate internal management and control systems are in place and are effective in achieving the SESAR Programme objectives. |
| --- | --- |

13 – 14.

The SJU acknowledges with satisfaction the clean audit opinion of the Court on the reliability of the annual accounts for 2011 as well as on the legality and regularity of the transactions underlying the accounts.

The audit opinions constitute an important achievement for the SJU, on which to build in order to further ensure that adequate internal management and control systems are in place and are effective in achieving the SESAR Programme objectives.

Budgetary and Financial Management

| 17. | The SJU considers that it has further progressed in respect of the budgetary principle of equilibrium. The 2011 year end cash balance decreased from 57,2 million euro to 15,3 million euro, corresponding to a decrease of 73,2 %. The SJU will continue its efforts to ensure optimal cash management and the respect of budgetary principles. |
| --- | --- |

17.

The SJU considers that it has further progressed in respect of the budgetary principle of equilibrium. The 2011 year end cash balance decreased from 57,2 million euro to 15,3 million euro, corresponding to a decrease of 73,2 %. The SJU will continue its efforts to ensure optimal cash management and the respect of budgetary principles.

Other Matters – Late payment of membership contributions

| 21. | The late contribution still pending at year end was cashed in February 2012. The SJU will further discuss with its Members the most appropriate approach to ensure the respect of the contractual deadlines for the payment of membership cash contributions. |
| --- | --- |

21.

The late contribution still pending at year end was cashed in February 2012. The SJU will further discuss with its Members the most appropriate approach to ensure the respect of the contractual deadlines for the payment of membership cash contributions.

---

| 10.1.2013 | EN | Official Journal of the European Union | C 6/56 |
| --- | --- | --- | --- |

10.1.2013

EN

Official Journal of the European Union

C 6/56

---

REPORT

on the annual accounts of the Fuel Cells and Hydrogen Joint Undertaking for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/07

INTRODUCTION

| 1. | The Fuel Cells and Hydrogen Joint Undertaking (FCH Joint Undertaking) located in Brussels, was set up in May 2008 (1) for the period up to 31 December 2017. |
| --- | --- |

1.

The Fuel Cells and Hydrogen Joint Undertaking (FCH Joint Undertaking) located in Brussels, was set up in May 2008 (1) for the period up to 31 December 2017.

| 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 Framework Programme (2) in a coordinated manner, together with industry and research organisations, in order to focus on developing market applications and hence facilitating additional industrial efforts towards a rapid deployment of fuel cells and hydrogen technologies (3). |
| --- | --- |

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 Framework Programme (2) in a coordinated manner, together with industry and research organisations, in order to focus on developing market applications and hence facilitating additional industrial efforts towards a rapid deployment of fuel cells and hydrogen technologies (3).

| 3. | The Members of the Joint Undertaking are the European Union, represented by the Commission, the New Energy World Industry Grouping (NEW-IG) and the Research community (N.ERGHY). |
| --- | --- |

3.

The Members of the Joint Undertaking are the European Union, represented by the Commission, the New Energy World Industry Grouping (NEW-IG) and the Research community (N.ERGHY).

| 4. | The maximum EU contribution to the FCH Joint Undertaking to cover running costs and research activities is 470 million euro financed from the budget of the Seventh Framework Programme, of which the proportion earmarked for running costs must not exceed 20 million euro. New-IG should contribute 50 % of the running costs and N.ERGHY should contribute 1/12 of the running costs and should contribute to operational costs through in-kind (4) contributions at least equal to the financial contribution of the Union. |
| --- | --- |

4.

The maximum EU contribution to the FCH Joint Undertaking to cover running costs and research activities is 470 million euro financed from the budget of the Seventh Framework Programme, of which the proportion earmarked for running costs must not exceed 20 million euro. New-IG should contribute 50 % of the running costs and N.ERGHY should contribute 1/12 of the running costs and should contribute to operational costs through in-kind (4) contributions at least equal to the financial contribution of the Union.

| 5. | The Joint Undertaking was granted its financial autonomy on 15 November 2010. |
| --- | --- |

5.

The Joint Undertaking was granted its financial autonomy on 15 November 2010.

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. This is supplemented by evidence provided by the work of other auditors (where relevant) 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. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

| 7. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (5) of the Fuel Cells and Hydrogen 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 2011, and the legality and regularity of the transactions underlying those accounts. |
| --- | --- |

7.

Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (5) of the Fuel Cells and Hydrogen 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 2011, and the legality and regularity of the transactions underlying those accounts.

| 8. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (8). |
| --- | --- |

8.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (8).

The Management's responsibility

| 9. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (9). The Director is responsible for putting in place (10) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (11) 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. |
| --- | --- |

9.

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (9). The Director is responsible for putting in place (10) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (11) 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.

The Auditor’s responsibility

| 10. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |
| --- | --- |

10.

The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them.

| 11. | The Court conducted its audit in accordance with the IFAC and ISSAI (12) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |
| --- | --- |

11.

The Court conducted its audit in accordance with the IFAC and ISSAI (12) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

| 12. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |
| --- | --- |

12.

The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.

| 13. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |
| --- | --- |

13.

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

| 14. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules. |
| --- | --- |

14.

In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, 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 rules.

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

| 15. | An ex-post audit strategy was adopted by the Governing Board in January 2011 and is a key control for assessing the legality and regularity of the underlying transactions (13). Only eight of twelve ex-post audits were completed as of September 2012 covering 4,8 million euro (27 % of all cost claims received by the FCH Joint Undertaking in 2011). Six of the audits did not present material errors but the other two detected significant errors (14), the larger of which (764 000 euro) has been corrected in the following year. |
| --- | --- |

15.

An ex-post audit strategy was adopted by the Governing Board in January 2011 and is a key control for assessing the legality and regularity of the underlying transactions (13). Only eight of twelve ex-post audits were completed as of September 2012 covering 4,8 million euro (27 % of all cost claims received by the FCH Joint Undertaking in 2011). Six of the audits did not present material errors but the other two detected significant errors (14), the larger of which (764 000 euro) has been corrected in the following year.

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

| 16. | In the Court’s opinion, except for the effects of the matters described in paragraph 15, the transactions underlying the annual accounts of the Joint Undertaking for the year ended 31 December 2011 are, in all material respects, legal and regular. |
| --- | --- |

16.

In the Court’s opinion, except for the effects of the matters described in paragraph 15, the transactions underlying the annual accounts of the Joint Undertaking for the year ended 31 December 2011 are, in all material respects, legal and regular.

| 17. | The comments which follow in paragraphs 18 to 27 do not call the Court’s opinions into question. |
| --- | --- |

17.

The comments which follow in paragraphs 18 to 27 do not call the Court’s opinions into question.

COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the Budget

| 18. | The 2011 final budget included commitment and payment appropriations amounting to 117 million euro and 60 million euro respectively. The utilisation rates for the available commitment and payment appropriations were 99,8 % and 87,9 % respectively. An amount of 112 million euro representing commitment appropriations available for operational activities (Title III of the budget) was implemented through a global commitment relating to the 2011 call for proposals. |
| --- | --- |

18.

The 2011 final budget included commitment and payment appropriations amounting to 117 million euro and 60 million euro respectively. The utilisation rates for the available commitment and payment appropriations were 99,8 % and 87,9 % respectively. An amount of 112 million euro representing commitment appropriations available for operational activities (Title III of the budget) was implemented through a global commitment relating to the 2011 call for proposals.

| 19. | The budgetary procedure outlined in the FCH Joint Undertaking’s financial rules (15) was not followed; the derogation granted by the Commission to enter cancelled appropriations in the estimates of revenue and expenses for the following three years was misinterpreted. The Joint Undertaking chose to use payment appropriations amounting to 3,3 million euro (16) (representing payment appropriations carried over from 2010 to 2011) even though 6,3 million euro in payment appropriations authorised for the current financial year were still available (17). As a consequence of the FCH Joint Undertaking’s interpretation of the budgetary procedure, the budgetary outturn of the year is incorrect, as 6,3 million euro (18) in payment appropriations carried over from 2011 to 2012 were not included in the calculation. Furthermore, the budgetary outturn account for 2010 does not reflect the 3,3 million euro in payment appropriations carried over from 2010 to 2011. |
| --- | --- |

19.

The budgetary procedure outlined in the FCH Joint Undertaking’s financial rules (15) was not followed; the derogation granted by the Commission to enter cancelled appropriations in the estimates of revenue and expenses for the following three years was misinterpreted. The Joint Undertaking chose to use payment appropriations amounting to 3,3 million euro (16) (representing payment appropriations carried over from 2010 to 2011) even though 6,3 million euro in payment appropriations authorised for the current financial year were still available (17). As a consequence of the FCH Joint Undertaking’s interpretation of the budgetary procedure, the budgetary outturn of the year is incorrect, as 6,3 million euro (18) in payment appropriations carried over from 2011 to 2012 were not included in the calculation. Furthermore, the budgetary outturn account for 2010 does not reflect the 3,3 million euro in payment appropriations carried over from 2010 to 2011.

| 20. | Unused global commitments from 2010 amounting to 10,4 million euro and with a final date of implementation at 31 December 2011, were not decommitted by the end of 2011 but were decommited in January 2012. |
| --- | --- |

20.

Unused global commitments from 2010 amounting to 10,4 million euro and with a final date of implementation at 31 December 2011, were not decommitted by the end of 2011 but were decommited in January 2012.

Calls for proposals

| 21. | The calls for proposals organised in 2008, 2009 and 2010 resulted in signed grant agreements totalling 183,4 million euro (19), and in 2011 a fourth call for proposals was launched amounting to 111,6 million euro, which represents 41 % and 25 % respectively of the maximum EU contribution to the Joint Undertaking for research activities (20). The evaluation of the call was finalised in 2011 and the selected projects are currently in the negociation process. In January 2012 a fifth call for proposals was launched amounting to 79 million euro, a further 18 % of the maximum EU contribution. This shows satisfactory progress in budget implementation. |
| --- | --- |

21.

The calls for proposals organised in 2008, 2009 and 2010 resulted in signed grant agreements totalling 183,4 million euro (19), and in 2011 a fourth call for proposals was launched amounting to 111,6 million euro, which represents 41 % and 25 % respectively of the maximum EU contribution to the Joint Undertaking for research activities (20). The evaluation of the call was finalised in 2011 and the selected projects are currently in the negociation process. In January 2012 a fifth call for proposals was launched amounting to 79 million euro, a further 18 % of the maximum EU contribution. This shows satisfactory progress in budget implementation.

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

| 22. | At the end of 2011, the underlying business processes had been validated by the Accounting Officer (21) as required by the Joint Undertaking’s financial rules. In her report a number of weaknesses (22) were identified and will be followed up by the Accounting Officer in 2012. |
| --- | --- |

22.

At the end of 2011, the underlying business processes had been validated by the Accounting Officer (21) as required by the Joint Undertaking’s financial rules. In her report a number of weaknesses (22) were identified and will be followed up by the Accounting Officer in 2012.

Annual assessment of the level of the in-kind contribution

| 23. | The method for evaluating the level of the in-kind contribution (23) has been finalised (24) and was jointly assessed by the Internal Audit Service (IAS) and the Internal Audit Capability (IAC) in April 2012 (25). The aggregated level of in-kind contributions validated by the Authorising Officer as at 8 February 2012 (the cut-off date used for the preparation of the 2011 Provisional Accounts) was 347,6 million euro. The assessment report concluded that this amount should be reduced by 0,93 million euro (26) euro (or 0,3 %). |
| --- | --- |

23.

The method for evaluating the level of the in-kind contribution (23) has been finalised (24) and was jointly assessed by the Internal Audit Service (IAS) and the Internal Audit Capability (IAC) in April 2012 (25). The aggregated level of in-kind contributions validated by the Authorising Officer as at 8 February 2012 (the cut-off date used for the preparation of the 2011 Provisional Accounts) was 347,6 million euro. The assessment report concluded that this amount should be reduced by 0,93 million euro (26) euro (or 0,3 %).

Treasury management

| 24. | At the end of December 2011 the balance on the FCH Joint Undertaking’s bank account was 9,2 million euro (27). Between the months of August 2011 and December 2011 the FCH JU’s cash balance ranged between approximately 30 million euro and 60 million euro. The Joint Undertaking is expected to implement all the measures necessary to minimise the cash balances held on account to the levels that are required. |
| --- | --- |

24.

At the end of December 2011 the balance on the FCH Joint Undertaking’s bank account was 9,2 million euro (27). Between the months of August 2011 and December 2011 the FCH JU’s cash balance ranged between approximately 30 million euro and 60 million euro. The Joint Undertaking is expected to implement all the measures necessary to minimise the cash balances held on account to the levels that are required.

OTHER MATTERS

Follow-up of previous observations

| 25. | During 2011, the Joint Undertaking set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. The Business Continuity plan including a disaster recovery plan was adopted by the FCH JU on 12 June 2012. |
| --- | --- |

25.

During 2011, the Joint Undertaking set up a Business Continuity Plan and made progress on the formalisation of the IT security policies. The Business Continuity plan including a disaster recovery plan was adopted by the FCH JU on 12 June 2012.

| 26. | The financial rules of the Joint Undertaking have not yet been amended to include the provision referring to the powers of the Commission’s Internal Auditor (28). |
| --- | --- |

26.

The financial rules of the Joint Undertaking have not yet been amended to include the provision referring to the powers of the Commission’s Internal Auditor (28).

| 27. | The Host State Agreement (29) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support to be provided was signed on 3 February 2012. |
| --- | --- |

27.

The Host State Agreement (29) between the Joint Undertaking and the Belgian authorities concerning office accommodation, privileges and immunities and other support to be provided was signed on 3 February 2012.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 13 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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(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).

1

(2)  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), brings all the research-related EU initiatives together under one roof and plays a crucial role in achieving the goals of growth, competitiveness and employment. It is also a key pillar for the European Research Area.

2

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

3

Annex

(4)  According to Article 12(3) of the Annex to Regulation (EC) No 521/2008 setting up the Joint Undertaking, which stipulates that the ‘operational costs of the FCH Joint Undertaking shall be covered through the financial contribution of the Union, and through in-kind contributions from the legal entities participating in the activities, the contribution from the participating legal entities shall at least match the financial contribution of the Union’.

4

(5)  These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations with summary information on the transfers of appropriations among the various budget items.

5

inter alia

(6)  The ‘financial statements’ include the balance sheet and the economic outturn account, the cash-flow statement, the statement of changes in net assets and the notes to the financial statements which include a description of the accounting policies and other explanatory information.

6

(7)  The budget implementation reports comprise the budget outturn account, its reconciliation with the economic outturn account and a report on the budget execution in 2011.

7

(8)  OJ L 248, 16.9.2002, p. 1.

8

(9)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

9

(10)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

10

(11)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are incorporated in the financial rules of the FCH Joint Undertaking.

11

(12)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

12

(13)  Article 12(4) of Regulation (EC) No 521/2008 setting up the Joint Undertaking states that ‘The FCH Joint Undertaking shall carry out on-the-spot checks and financial audits among the recipientsof the FCH Joint Undertaking's public funding’. Ex-post audits may identify ineligible expenditures claimed by the beneficiaries which are then subject to recovery procedures.

13

(14)  Until the remaining audits have been completed, it is not appropriate to calculate an error rate.

14

(15)  Article 10 of the FCH Joint Undertaking’s financial rules states that ‘Appropriations which have not been used at the end of the financial year for which they were entered shall be cancelled. Given the needs of the Joint Undertaking, the cancelled appropriations may be entered in the estimate of revenue and expenditure up to the following three financial years, in accordance with Article 27.

15

However they may, by decision of the Governing Board taken not later than 15 February, be carried over to the next financial year only.’.

(16)  3,3 million euro of unused payment appropriations for operational activities from 2010 were introduced in the budget through the second budget amendment adopted by the Governing Board on 22 November 2011.

16

(17)  Article 10(4) of the FCH Joint Undertaking’s financial rules states that ‘The FCH Joint Undertaking shall first use the appropriations authorised for the current financial year and shall not use the appropriations carried forward until the former are exhausted.’.

17

(18)  In the provisional annual accounts for the financial year 2011 it is stated that ‘unused payment appropriations from 2011 operations (6 267 731 euro) [...] will be reactivated (carried over) in FCH Joint Undertaking 2012 budget through a budget amendment [...]’ (FCH Joint Undertaking provisional annual accounts for the financial year 2011, p. 42).

18

(19)  The committed appropriations also include the European Free Trade Area (EFTA) contributions of 2,4 % from countries associated to the 7th Framework Programme.

19

(20)  In accordance with Article 5 of Regulation (EC) No 521/2008 setting up the FCH Joint Undertaking and Article 12 of its Annex, the maximum EU contribution covering running costs and research activities of the Joint Undertaking shall be 470 million euro, of which the contribution for running costs shall not exceed 20 million euro. If part of the contribution for the running costs is not used, it can be made available for the research activities.

20

(21)  Article 43(e) of the FCH Joint Undertaking’s Financial Rules stipulate that the Accounting Officer shall be responsible for ‘laying down and validating the accounting systems’.

21

(22)  Examples of identified weaknesses include the need to establish and maintain an exhaustive register of legal commitments and the need to more effectively follow up and supervise the swift and correct implementation of amendments to legal commitments.

22

(23)  In-kind contributions are the eligible costs incurred by the legal entities participating in the activities which are not reimbursed by the FCH Joint Undertaking (FCH Joint Undertaking methodology for in-kind contributions).

23

(24)  Article 12(7) of the Annex to Regulation (EC) No 521/2008 setting up the FCH Joint Undertaking stipulates that ‘The methodology for evaluating contributions in kind shall be defined by the FCH Joint Undertaking in compliance with its financial rules and based on the Rules for Participation of the Seventh Framework programme’.

24

(25)  Article 12(7) of the Annex to Regulation (EC) No 521/2008 setting up the FCH Joint Undertaking stipulates the assessment is to be carried out on a yearly basis by an ‘independent auditor’ and the results presented to the Commission within 4 months of the end of each financial year.

25

(26)  The adjustment stems from eight projects of the 2008 call for proposals, where certain participants had presented their budgeted costs on the basis of a 60 % flat rate system for the calculation of indirect costs instead of the 20 % flat rate applicable to the FCH Joint Undertaking (Annual assessment of the level of in-kind contributions – Final report).

26

(27)  The cash balance at the end of 2010 amounted to 5 million euro.

27

(28)  Paragraph 20 of the Court of Auditors’ report on the 2010 annual accounts of FCH Joint Undertaking (OJ C 368, 16.12.2011, p. 40).

28

(29)  Paragraph 21 of the Court of Auditors’ report on the 2010 annual accounts of FCH Joint Undertaking.

29

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ANNEX

Fuel Cells and Hydrogen Joint Undertaking

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 concerning the Seventh Framework Programme – provides for a Union 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 TFEU. |
| --- | --- |
| Competences of the Joint Undertaking


  (Regulation (EC) No 521/2008, amended by Regulation (EU) No 1183/2011) | Objectives

  The Fuel Cells and Hydrogen Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular the Specific Programme ‘Cooperation’ themes for ‘Energy’, ‘Nanosciences, Nanotechnologies, Materials and New Production Technologies’, ‘Environment (including Climate Change)’, and ‘Transport (including Aeronautics)’.
  It shall in particular:






  (a) | aim at placing Europe at the forefront of fuel cell and hydrogen technologies worldwide and at enabling the market breakthrough of fuel cell and hydrogen technologies, thereby allowing commercial market forces to drive the substantial potential public benefits; |

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 concerning the Seventh Framework Programme – provides for a Union 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 TFEU.

Competences of the Joint Undertaking

(Regulation (EC) No 521/2008, amended by Regulation (EU) No 1183/2011)

Objectives

The Fuel Cells and Hydrogen Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular the Specific Programme ‘Cooperation’ themes for ‘Energy’, ‘Nanosciences, Nanotechnologies, Materials and New Production Technologies’, ‘Environment (including Climate Change)’, and ‘Transport (including Aeronautics)’.

It shall in particular:

(a)

aim at placing Europe at the forefront of fuel cell and hydrogen technologies worldwide and at enabling the market breakthrough of fuel cell and hydrogen technologies, thereby allowing commercial market forces to drive the substantial potential public benefits;

| (b) | support Research, Technological development and Demonstration (hereinafter referred to as RTD) in the Member States and countries associated with the Seventh Framework Programme (hereinafter referred as Associated countries) in a coordinated manner to overcome the market failure and focus on developing market applications and thereby facilitate additional industrial efforts towards a rapid deployment of fuel cells and hydrogen technologies; |
| --- | --- |

(b)

support Research, Technological development and Demonstration (hereinafter referred to as RTD) in the Member States and countries associated with the Seventh Framework Programme (hereinafter referred as Associated countries) in a coordinated manner to overcome the market failure and focus on developing market applications and thereby facilitate additional industrial efforts towards a rapid deployment of fuel cells and hydrogen technologies;

| (c) | support the implementation of the RTD priorities of the JTI on Fuel Cells and Hydrogen, notably by awarding grants following competitive calls for proposals; |
| --- | --- |

(c)

support the implementation of the RTD priorities of the JTI on Fuel Cells and Hydrogen, notably by awarding grants following competitive calls for proposals;

| (d) | Aim to encourage increased public and private research investment in fuel cells and hydrogen technologies in the Member States and Associated countries. |
| --- | --- |

(d)

Aim to encourage increased public and private research investment in fuel cells and hydrogen technologies in the Member States and Associated countries.

Tasks

| (a) | to ensure the establishment and the efficient management of the Joint Technology Initiative on Fuel Cells and Hydrogen; |
| --- | --- |

(a)

to ensure the establishment and the efficient management of the Joint Technology Initiative on Fuel Cells and Hydrogen;

| (b) | to reach the critical mass of research effort to give confidence to industry, public and private investors, decision makers and other stakeholders to embark on a long-term programme; |
| --- | --- |

(b)

to reach the critical mass of research effort to give confidence to industry, public and private investors, decision makers and other stakeholders to embark on a long-term programme;

| (c) | to leverage further industrial, national and regional RTD investment; |
| --- | --- |

(c)

to leverage further industrial, national and regional RTD investment;

| (d) | to integrate RTD, and focus on achieving long-term sustainability and industrial competitiveness targets for cost, performance and durability and overcome critical technology bottlenecks; |
| --- | --- |

(d)

to integrate RTD, and focus on achieving long-term sustainability and industrial competitiveness targets for cost, performance and durability and overcome critical technology bottlenecks;

| (e) | to stimulate innovation and the emergence of new value chains including SMEs; |
| --- | --- |

(e)

to stimulate innovation and the emergence of new value chains including SMEs;

| (f) | to facilitate the interaction between industry, universities and research centres including on basic research; |
| --- | --- |

(f)

to facilitate the interaction between industry, universities and research centres including on basic research;

| (g) | to promote the involvement of SMEs in its activities, in line with the objectives of the Seventh Framework Programme; |
| --- | --- |

(g)

to promote the involvement of SMEs in its activities, in line with the objectives of the Seventh Framework Programme;

| (h) | to encourage the participation of institutions from all Member States and associated countries; |
| --- | --- |

(h)

to encourage the participation of institutions from all Member States and associated countries;

| (i) | to perform broadly-conceived socio-techno-economic research to assess and monitor technological progress and nontechnical barriers to market entry; |
| --- | --- |

(i)

to perform broadly-conceived socio-techno-economic research to assess and monitor technological progress and nontechnical barriers to market entry;

| (j) | to perform research to support the development of new, and review existing regulations and standards to eliminate artificial barriers to market entry and support inter-changeability, inter-operability, cross-border hydrogen trading, and export markets whilst ensuring safe operation and not inhibiting innovation; |
| --- | --- |

(j)

to perform research to support the development of new, and review existing regulations and standards to eliminate artificial barriers to market entry and support inter-changeability, inter-operability, cross-border hydrogen trading, and export markets whilst ensuring safe operation and not inhibiting innovation;

| (k) | to undertake communication and dissemination activities, and to provide reliable information to improve public awareness and create public acceptance concerning hydrogen safety, and the benefits from the new technologies to the environment, security of supply, energy costs, and employment; |
| --- | --- |

(k)

to undertake communication and dissemination activities, and to provide reliable information to improve public awareness and create public acceptance concerning hydrogen safety, and the benefits from the new technologies to the environment, security of supply, energy costs, and employment;

| (l) | to establish and implement a Multiannual Implementation Plan; |
| --- | --- |

(l)

to establish and implement a Multiannual Implementation Plan;

| (m) | to commit the Union funding and mobilise the private-sector and other public-sector resources needed to implement its RTD activities; |
| --- | --- |

(m)

to commit the Union funding and mobilise the private-sector and other public-sector resources needed to implement its RTD activities;

| (n) | to ensure the sound operation of the RTD activities and sound financial management of the resources; |
| --- | --- |

(n)

to ensure the sound operation of the RTD activities and sound financial management of the resources;

| (o) | to communicate and disseminate information on the projects, including the names of the participants, the results from the RTD activities, and the amount of the financial contribution from the FCH Joint Undertaking; |
| --- | --- |

(o)

to communicate and disseminate information on the projects, including the names of the participants, the results from the RTD activities, and the amount of the financial contribution from the FCH Joint Undertaking;

| (p) | to notify the legal entities that have concluded a Grant Agreement with the FCH Joint Undertaking of the potential borrowing opportunities from the European Investment Bank, in particular the Risk Sharing Finance Facility set up under the Seventh Framework Programme |
| --- | --- |

(p)

to notify the legal entities that have concluded a Grant Agreement with the FCH Joint Undertaking of the potential borrowing opportunities from the European Investment Bank, in particular the Risk Sharing Finance Facility set up under the Seventh Framework Programme

| (q) | to ensure a high level of transparency and fair competition under equal access conditions for all applicants to the RTD activities of the FCH Joint Undertaking, whether or not they are members of the Research Grouping or the Industry Grouping, (in particular SMEs); |
| --- | --- |

(q)

to ensure a high level of transparency and fair competition under equal access conditions for all applicants to the RTD activities of the FCH Joint Undertaking, whether or not they are members of the Research Grouping or the Industry Grouping, (in particular SMEs);

| (r) | to follow the international developments in the area and engage in international cooperation when appropriate; |
| --- | --- |

(r)

to follow the international developments in the area and engage in international cooperation when appropriate;

| (s) | to develop close cooperation and ensure coordination with the Research Framework Programme and other European, national and trans-national activities, bodies and stakeholders; |
| --- | --- |

(s)

to develop close cooperation and ensure coordination with the Research Framework Programme and other European, national and trans-national activities, bodies and stakeholders;

| (t) | to monitor progress toward the objectives of the FCH Joint Undertaking; |
| --- | --- |

(t)

to monitor progress toward the objectives of the FCH Joint Undertaking;

| (u) | to carry out any other activity needed to achieve its objectives. |
| --- | --- |

(u)

to carry out any other activity needed to achieve its objectives.

Governance

The bodies of the FCH Joint Undertaking are:

| (a) | the Governing Board; |
| --- | --- |

(a)

the Governing Board;

| (b) | the Executive Director; |
| --- | --- |

(b)

the Executive Director;

| (c) | the Scientific Committee |
| --- | --- |

(c)

the Scientific Committee

The Governing Board

The Governing Board is the main decision-making body of the FCH Joint Undertaking.

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.

The Scientific Committee

Composed of up to 9 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 for the annual and Multiannual Implementation Plans proposal; |
| --- | --- |

(a)

advise on the scientific priorities for the annual and Multiannual Implementation Plans proposal;

| (b) | advise on the scientific achievements described in the annual activity report; |
| --- | --- |

(b)

advise on the scientific achievements described in the annual activity report;

| (c) | advise on the composition of the peer review committees |
| --- | --- |

(c)

advise on the composition of the peer review committees

The external advisory bodies to the FCH Joint Undertaking are:

| — | The FCH States Representatives Group and the Stakeholders General Assembly |
| --- | --- |

—

The FCH States Representatives Group and the Stakeholders General Assembly

The FCH States Representatives Group

It consists of one representative of each Member State and of each Associated country. Its most important tasks are to provide opinions on progress made with the FCH JU’s programme, monitoring compliance with targets and coordination with national programmes to avoid overlapping.

The Stakeholders General Assembly

The SGA is an important communication channel on FCH JU activities and as such is open to all public and private stakeholders, international interest groups from Member States, associated countries and from third countries. It is convened once a year. The SGA must be informed of the activities of the FCH Joint Undertaking and is invited to provide comments.

The internal and external auditors and the discharge authority of the FCH Joint Undertaking are:

Internal Audit

| — | FCH JU Internal Audit Manager (i.e. the Internal Audit Capability - IAC); |
| --- | --- |

—

FCH JU Internal Audit Manager (i.e. the Internal Audit Capability - IAC);

| — | the Commission's Internal Audit Service (i.e. IAS). |
| --- | --- |

—

the Commission's Internal Audit Service (i.e. IAS).

External Audit

Court of Auditors.

Discharge Authority

Parliament on a recommendation from the Council.

Resources available to the Joint Undertaking in 2011

Budget

117,2 million euro in Commitment Appropriations, of which 113,1 million euro are funded by the EU budget contribution (an equivalent in-kind contribution from private industry members is planned), for operations and 4 million euro for running costs.

Staff at 31 December 2011

18 temporary staff posts in the establishment plan (all filled)

2 contract staff posts (all filled)

Allocated to:

Operational activities: 6

Administrative activities: 7

| — | Mixed tasks: 7 |
| --- | --- |

—

Mixed tasks: 7

Main achievements for 2011

| — | Revision of the Multi Annual Implementation Plan (MAIP), adopted by the Governing Board on 22 November 2011 |
| --- | --- |

—

Revision of the Multi Annual Implementation Plan (MAIP), adopted by the Governing Board on 22 November 2011

| — | Drafting of the RTD priorities and 2011 call topics (36) with an indicative FCH JU funding of 109 million euro |
| --- | --- |

—

Drafting of the RTD priorities and 2011 call topics (36) with an indicative FCH JU funding of 109 million euro

| — | Drafting of the RTD priorities and 2012 call topics (31) with an indicative FCH JU funding of 77.5 million euro |
| --- | --- |

—

Drafting of the RTD priorities and 2012 call topics (31) with an indicative FCH JU funding of 77.5 million euro

| — | Publication of the 2011 call for proposals in May with a deadline for submission in August 2011 |
| --- | --- |

—

Publication of the 2011 call for proposals in May with a deadline for submission in August 2011

| — | Evaluation of the 2011 call for proposals in September 2011 with preparation of a list of projects for which negotiations are to be entered into; list submitted to the Board for approval in November 2011 (30); Negotiations started on 28 November 2011 |
| --- | --- |

—

Evaluation of the 2011 call for proposals in September 2011 with preparation of a list of projects for which negotiations are to be entered into; list submitted to the Board for approval in November 2011 (30); Negotiations started on 28 November 2011

| — | Negotiation of the 2010 call for selected proposals after approval of the correction factor by the Governing Board and conclusion of the related grant agreements (26) |
| --- | --- |

—

Negotiation of the 2010 call for selected proposals after approval of the correction factor by the Governing Board and conclusion of the related grant agreements (26)

| — | Development of the international cooperation with key partners (USA, Japan and Korea). One topic in the 2012 call with an additional eligibility criterion of connection with a project funded by DoE (USA) |
| --- | --- |

—

Development of the international cooperation with key partners (USA, Japan and Korea). One topic in the 2012 call with an additional eligibility criterion of connection with a project funded by DoE (USA)

| — | Exchange of information with the Member States and the associated countries (information sessions) |
| --- | --- |

—

Exchange of information with the Member States and the associated countries (information sessions)

| — | Cooperation with the European Regions (via HyER) |
| --- | --- |

—

Cooperation with the European Regions (via HyER)

| — | Cooperation with the Joint Research Centre (JRC) at project and programme level. Alignment of the activities by a Joint Work Plan focused on measuring, technology mapping and strategic advice. Stakeholders General Assembly held on 22-23 November 2011 together with the first Programme Review day with close to 400 participants and other communication activities with focus on commercialisation of FCH technologies in particular in the transport sector. |
| --- | --- |

—

Cooperation with the Joint Research Centre (JRC) at project and programme level. Alignment of the activities by a Joint Work Plan focused on measuring, technology mapping and strategic advice. Stakeholders General Assembly held on 22-23 November 2011 together with the first Programme Review day with close to 400 participants and other communication activities with focus on commercialisation of FCH technologies in particular in the transport sector.

Other main achievements:

| — | Move to new premises (together with the 4 other JUs mid- January 2011 |
| --- | --- |

—

Move to new premises (together with the 4 other JUs mid- January 2011

| — | First interim evaluation of the FCH JU |
| --- | --- |

—

First interim evaluation of the FCH JU

| — | Validation of the accounting system by the Accounting Officer on 21 November 2011 |
| --- | --- |

—

Validation of the accounting system by the Accounting Officer on 21 November 2011

| — | Adoption of Council Regulation (EU) No 1183/2011 amending the FCH JU founding regulation |
| --- | --- |

—

Adoption of Council Regulation (EU) No 1183/2011 amending the FCH JU founding regulation

| — | First cost claims received and treated |
| --- | --- |

—

First cost claims received and treated

| — | First ex posts audits launched |
| --- | --- |

—

First ex posts audits launched

Source: Information supplied by the Joint Undertaking.

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REPLIES OF THE FCH JOINT UNDERTAKING

Paragraphs 15 and 16

The FCH JU has established a control strategy of a multiannual nature which combines ex-ante and ex-post controls and takes into consideration cost-efficiency aspects. Ex-post audits are a key component of the overall internal control system and represent one of the main elements underpinning the Executive Director's statement of assurance. To address properly its control and assurance needs, the FCH JU launched the first ex-post audits immediately after the first cost claims were received and validated by the JU in 2011.

The FCH JU welcomes the positive conclusion of the Court on the legality and regularity of all transactions underlying the accounts with the only exception of transactions relating to the validation of cost claims. In the opinion of the FCH JU, the following aspects should be considered when drawing a conclusion on the legality and regularity of the underlying transactions as a whole and on the cost claims validated in 2011 in particular:

| — | Timing, type of payments and their weight: The first cost claims were received and validated by the JU only in 2011. 4,6 million euro of interim payments were paid in respect of validated cost claims. This represents 8 % (1) of total 2011 payments of 56,7 million euro. |
| --- | --- |

—

Timing, type of payments and their weight: The first cost claims were received and validated by the JU only in 2011. 4,6 million euro of interim payments were paid in respect of validated cost claims. This represents 8 % (1) of total 2011 payments of 56,7 million euro.

| — | Effectiveness of the FCH JU’s internal control system: The control system of the JU proved its effectiveness in 2011. The Court did not report to the JU any error on legality and regularity aspects as a result of its own testing of transactions. The errors stated by the Court were detected by the JU’s own internal control system (i.e. ex-post audits). |
| --- | --- |

—

Effectiveness of the FCH JU’s internal control system: The control system of the JU proved its effectiveness in 2011. The Court did not report to the JU any error on legality and regularity aspects as a result of its own testing of transactions. The errors stated by the Court were detected by the JU’s own internal control system (i.e. ex-post audits).

| — | Nature and financial impact of errors detected: 97 % (in value) of the errors detected by the JU are the result of only one audit of a new beneficiary, unfamiliar with FCH JU rules, and are due to misinterpretation of eligibility rules. Whereas the total cost over-declared by the beneficiary amount to 764 000 euro, the financial impact of the error detected, considering the JU in-cash contribution (i.e. overpayment), is much lower (177 971 euro). |
| --- | --- |

—

Nature and financial impact of errors detected: 97 % (in value) of the errors detected by the JU are the result of only one audit of a new beneficiary, unfamiliar with FCH JU rules, and are due to misinterpretation of eligibility rules. Whereas the total cost over-declared by the beneficiary amount to 764 000 euro, the financial impact of the error detected, considering the JU in-cash contribution (i.e. overpayment), is much lower (177 971 euro).

| — | Corrective actions: All errors detected by the JU have been accepted by the beneficiaries and 98 % (in value) of them corrected by the JU, as acknowledged by the Court. |
| --- | --- |

—

Corrective actions: All errors detected by the JU have been accepted by the beneficiaries and 98 % (in value) of them corrected by the JU, as acknowledged by the Court.

| — | Audit coverage: Ex-post audits launched by the JU in 2011 covered 43 % (in value) of the cost claims validated in the year. As of September 2012, audits completed represented 27 % of validated cost claims as stated by the Court. |
| --- | --- |

—

Audit coverage: Ex-post audits launched by the JU in 2011 covered 43 % (in value) of the cost claims validated in the year. As of September 2012, audits completed represented 27 % of validated cost claims as stated by the Court.

| — | Preventive and detective measures: the FCH JU has implemented measures to prevent financial errors in cost reporting by improving awareness within the beneficiaries of the regulatory framework. Three communication campaigns addressed to FCH JU beneficiaries have been organised so far and FCH JU guides on financial and control/audit matters have been published. FCH JU ex-ante controls have also been reinforced in order to allow for a higher detection and correction of errors before validation of cost claims. |
| --- | --- |

—

Preventive and detective measures: the FCH JU has implemented measures to prevent financial errors in cost reporting by improving awareness within the beneficiaries of the regulatory framework. Three communication campaigns addressed to FCH JU beneficiaries have been organised so far and FCH JU guides on financial and control/audit matters have been published. FCH JU ex-ante controls have also been reinforced in order to allow for a higher detection and correction of errors before validation of cost claims.

Without questioning the Court’s statements, FCH JU notes that considering the effectiveness of the JU’s internal controls to detect errors, the high ex-post audit coverage, the corrections implemented by the JU on 98 % of the errors detected and the low weight of interim payments in respect of total payments, the amount at risk (i.e. potential error undetected in the validated cost claims) is relatively limited in respect of total payments made and total operational expenditure incurred in 2011.

Paragraph 19

The FCH JU has established a procedure for the implementation of Article 10.1, paragraph 1 and Article 11 of its Financial Rules which allows the FCH JU to enter cancelled appropriations in its budget up to the following three financial years. The FCH JU has up to now not used the possibility provided for in Article 10.1, paragraph 2 to carry over to the next financial year (with the exception of C4 and C5) and consequently Article 10.1, paragraph 2 and 10.2 to 10.7 do not apply in the specific case.

The FCH JU has applied consistently its procedure for the implementation of its financial rules, in particular the derogation granted by the Commission to the effect of taking into account the needs of the FCH JU.

Paragraph 20

The FCH JU acknowledges that the de-commitments should have been done by 31.12.2011 and that the omission was corrected in January 2012. A tighter budget monitoring and application of year end procedure should avoid recurrence of a similar omission

Paragraph 22

The FCH JU management has defined an action plan to adress the weaknesses and as of October 2012 most actions are fully or partly implemented

Paragraph 23

The correction was made.

Paragraph 24

FCH JU cash balance ranged from 4 million euro on 1 August 2011 to 60 million euro on 11 October 2011 with a closing balance of 9 million on 31 December 2011. FCH JU is implementing all measures to optimise its cash flows within the limits of the financing agreements.

Paragraph 26

The FCH JU Financial rules will be duly amended to reflect all the necessary amendments required by the ‘Model Financial Regulation for public-private partnership bodies’ once adopted. In the meantime, as acknowledged by the Court in its report on 2010 accounts, the respective roles of the Commission’s Internal Auditor (IAS) and of the FCH JU Internal Audit Capability (IAC) were defined and approved by the Governing Board in March 2011. A ‘Coordinated IAS-IAC Strategic audit plan for 2011-2013’ was approved by the Board in May 2011 and is being implemented

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(1)  11 % considering interim payments (4,6 million euro) and pre-financing cleared in 2011 (1,6 million euro).

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