# EUR-Lex - 52011SC1350 - EN

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# 52011SC1350

**COMMISSION STAFF WORKING PAPER /* SEC/2011/1350 final */**

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TABLE OF CONTENTS

GENERAL INTRODUCTION.................................................................................................... 3

Council Recommendation on the 2009 discharge........................................................................... 4

Introduction......................................................................................................................... 5

Chapter 1 - The Statement of Assurance (DAS)
and supporting information......................... 7

Chapter 2 - Revenue........................................................................................................... 8

Chapter 3 - Agriculture and Natural Resources.................................................................. 10

Chapter 4 - Cohesion........................................................................................................ 15

Chapter 5 - Research, Energy and Transport..................................................................... 19

Chapter 6 - External aid, Development and
Enlargement.................................................... 22

Chapter 7 - Education and Citizenship............................................................................... 27

Chapter 8 - Economic and Financial Affairs....................................................................... 29

Chapter 9 - Administrative and other
expenditure............................................................... 31

Special Report No. 8/2009 "Networks of
excellence and Integrated projects in Community Research policy: did they
achieve their objectives?"..................................................................................... 33

Special Report No. 15/2009 "EU
assistance implemented through United Nations organisations: decision making and
monitoring".......................................................................................................... 36

Special Report No. 16/2009 "The European
Commission's management of pre-accession assistance to Turkey"   40

Special Report No. 17/2009 concerning
vocational training actions for women co-financed by the European Social Fund................................................................................................................... 42

Special Report No. 18/2009
"Effectiveness of EDF support for Regional Economic Integration in East
Africa and West Africa"....................................................................................................... 43

Special Report No. 1/2010 "Are
simplified customs procedures for imports effectively controlled?"          46

Special Report No. 2/2010 "The effectiveness
of the Design Studies and Construction of New Infrastructures support schemes
under the Sixth Framework Programme for Research"............................ 47

Special Report No. 4/2010 "Is the design
and management of the mobility scheme of the Leonardo da Vinci programme likely
to lead to effective results?"....................................................... 48

Special Report No. 7/2010 "Audit of the
clearance of accounts procedure"........................ 51

Requests concerning agencies/bodies................................................................................. 53

Requests concerning executive agencies............................................................................. 54

Requests concerning joint undertakings.............................................................................. 55

GENERAL
INTRODUCTION

This Commission
Staff Working Paper completes the Report from the Commission to the European
Parliament and the Council on the Follow-up to 2009 Discharge. It presents in
detail the answers to the 85 specific requests made by the Council in the
comments accompanying its Recommendations on the 2009 Discharges.[1]

Council
Recommendation on the 2009 discharge

Introduction

1.           (Council Doc. 5891/11 ADD 1,
§2 page 5, §4, page 6) The Council urges the Commission and Member States to continue to improve the financial management of EU funds.

The Council
draws attention to the necessity to continue monitoring closely the management
and control of funds, in particular concerning the policy group
"Agriculture and natural resources" for which the Court's audit
results show an increase in the estimate of most likely error, compared to
2008.

For shared
management, the Council recalls the principle of sound financial management and
the Commission's final responsibility, within the existing legal framework, for
EU budget implementation and for appropriate corrective action. Moreover, the
Council encourages the Commission to continue to contribute to a common
understanding of rules and regulations by supporting Member States through better
and more targeted guidelines and trainings, if necessary.

Commission's
response:

In the
area of Structural funds the Commission will continue providing additional
guidance and support to national audit authorities, especially on the coverage
and quality of the audits and on drawing up annual control reports and audit
opinions to maximise the added value of these. The Commission will concentrate
control efforts, but also guidance and administrative capacity building
activities, on the eligibility of costs and on the application of public
procurement rules, areas where the majority of the estimated errors have
occurred in 2008 and 2009. Furthermore, the Commission is taking initiatives to
further streamline the public procurement processes.

2.           (Council Doc. 5891/11 ADD 1,
§6, par 1, page 6) The Council invites the Commission to propose,
where appropriate, measures aiming at reducing the complexity of rules, in
particular of those governing the practical administration of programmes. The
Council suggests that elements for further simplification and more effective
delivery mechanisms for EU policies should also be included in the Commission's
upcoming proposals for new sectoral legislation relating to the next multiannual
programming period.

Commission's
response:

The
Commission will propose elements for simplification and for improving
effectiveness of EU policies' instruments in the new sectoral legislation
related to the next multiannual financial framework.

3.           (Council Doc. 5891/11 ADD 1,
§6, par 2, page 6) A thorough scrutiny of the inherently complex EU
legislation on public procurement would be of particular importance. The
Council considers that more coherence and clarity could be achieved in the
estimation of the impact of errors in public procurement on the basis of a
consistent and transparent method.

Commission's
response:

The
Commission has carried out a thorough ex-post evaluation of the existing
procurement rules (Directives 2004/17/EC and 2004/18/EC). Drawing from the
results of this evaluation and the public consultation on the modernisation of
EU public procurement policy the Commission is presently engaged in a major
revision of the legal framework with a view of simplifying the rules in order
to ensure a clear and unambiguous EU level playing field that can be
efficiently used by both buyers and suppliers in the changing economic
environment and policy context.

4.           (Council Doc. 5891/11 ADD 1,
§7, par 2, page 7) The Council encourages the Commission to
immediately interrupt and suspend payments when it is duly justified, and to
strictly follow up all corrective action.

Commission's
response:

The
Commission is taking the requested action. It intends to report on measures
taken to that effect in the last Annual Activity Reports of the Directors
General.

The
Commission exercised rigorously this supervisory role in 2010 by interrupting
63 (49 ERDF and 14 ESF) payment deadlines and adopting six suspension decisions
for 2000-2006 and 2007-2013 ESF operational programmes, where serious
deficiencies or irregularities have been detected in the management of
Structural Funds. The Commission is pursuing this strict policy in 2011, with
54 interruptions of payment deadlines decided (40 for ERDF and 14 for ESF) by
30 June 2011.

5.           (Council Doc. 5891/11 ADD 1,
§7, par 3, page 7) Clear evidence should also be provided by the
Commission and Member States on the impact resulting from the different
corrective mechanisms.

Commission's
response:

The
Commission has provided separate information in the 2010 EU annual accounts
(note 6) on interruptions and suspended payments to Member States. This is in
addition to the information on financial corrections and recoveries already
disclosed since a number of years.

Chapter 1 - The
Statement of Assurance (DAS) and supporting information

6.           (Council Doc. 5891/11 ADD 1,
§2, par 5, page 9) The Council encourages the Commission to increase
transparency and to take the information provided by Member States in their
annual summaries into account in its annual activity reports and management
declarations by its Directors-General, as well as in its synthesis report, in
order to draw the appropriate added value from the Member States' efforts to
provide these summaries, in addition to the set of annual certifications and
declarations foreseen in sectoral regulations of EU policies.

Commission's
response:

The
Commission services already provide in their Annual Activity Reports their
assessment of the Member States' management and control systems and take in
consideration the information provided by the Member States (through statements
of assurance and annual summaries) when issuing their management declarations.
The Commission sets up in the Synthesis Report the measures it considers
necessary to resolve substantial weaknesses identified.

Chapter 2 -
Revenue

7.           (Council Doc. 5891/11 ADD 1,
par 2, page 12) The Council reiterates its request to the Commission
for a qualitative assessment of the administration, management and control of
the traditional own resources and VAT own resources systems.

Commission's
response:

The
conclusions from the earlier examinations of the quantitative and qualitative
assessments made as a result of the Council's earlier requests were first fed
into the still ongoing budget review and those concerning VAT have since been
taken forward into the new proposals the Commission is currently preparing
concerning the future of the own resources system.

8.           (Council Doc. 5891/11 ADD 1,
§1, par 1, page 12) The Council notes that problems relating to the
management of B-accounts persisted. It calls on the Commission to continue its
surveillance and guidance activities in order to ensure correct accounting of
established customs duties.

Commission's
response:

In the
course of its regular inspections of Traditional Own Resources the Commission
examines the B-accounts in order to ensure the correct establishment and
recovery of duties. This examination is an ongoing feature of its inspections
and has been completed up to 2010. The Commission will continue to examine the
B-accounts in the course of its future inspections.

9.           (Council Doc. 5891/11 ADD 1,
§1, par 2, page 12) For transparency and equality reasons, the
Council invites the Commission and the Court to follow up closely possible
losses of traditional own resources also in such cases, including providing
information on the estimated overall amount of lost or endangered own
resources.

Commission's
response:

The
Commission is following up the losses of Traditional Own Resources arising from
the Court's report on Simplified Procedures and will supply a final report on
the estimated losses to the Parliament by the end of 2011. The final error rate
seems to be limited and over two thirds of the cases have already been closed
without financial consequences. An interim report on this follow up has already
been supplied to the Parliament.

10.         (Council Doc. 5891/11 ADD 1, §2,
page 13) The Council encourages the Commission to continue its
pro-active approach to improve the management of reservations and the meetings
that are organised in this context, in order to speed up the lifting of VAT
reservations.

Commission's
response:

Proactive
measures to lift long-outstanding reservations continue using the risk criteria
adopted in 2008. Twenty six long-outstanding reservations have been lifted.
Action is continuing to deal with other long-outstanding reservations (where
these are not dependent upon the outcome of ECJ proceedings) including the use
of management meetings where appropriate.

11.         (Council Doc. 5891/11 ADD 1, §3,
page 13) The Council encourages the Commission to pursue its
activities aimed at developing and sharing best practices between Member States on supervisory and control systems in the National Statistical Institutes.

It also
urges the Commission to complete its verification of Member States' GNI
inventories and produce assessment reports as early as possible during 2011.

Commission's
response:

The
Commission has already taken action. Out of the four existing specific
reservations on the GNP data for 1995-2001 that were in place at the end of
2010, two had been solved by early July 2011. Eurostat will continue its
cooperation with the two national statistical institutes (NSIs) concerned so
that the remaining two specific GNP reservations (one for each of these NSIs)
can be solved. Following the workshop it organised in December 2009 on
supervisory and control systems (SCS) in National Statistical Institutes, the
Commission has pursued its activities on developing and sharing best practices
on SCS  with a further discussion on the issue by the GNI Committee on 27
October 2010. These efforts will be continued in 2012. Further to the completion
of GNI inventories' verification, the assessment reports for 13 Member States
were presented by the Commission and discussed by the GNI Committee on 5-6 July
2011. The assessment reports for 12 other Member States will be presented at
the next GNI Committee meeting in October 2011. The assessment reports for Bulgaria and Romania will be presented in 2012.

Chapter 3 -
Agriculture and Natural Resources

12.         (Council Doc. 5891/11 ADD 1, par
3, page 14) Efforts should be stepped up in order to find adequate
solutions to the weaknesses of the supervisory and control systems, most of
which the Court assessed as partially effective.

Commission's
response:

The
requested action has been taken.

The
Commission works with the Member States to ensure a continuous improvement of
the supervisory and control systems. Recommendations are made in this respect
as part of the normal audits and action plans are developed and implemented by
Member States with serious problems.

Any
remaining weaknesses are followed up through conformity clearance procedures to
protect the EU's financial interests.

13.         (Council Doc. 5891/11 ADD 1, §1,
par 2, page 14-15) The Council urges the Commission and Member States to continue working together on the specific deficiencies identified in the
IACS.

Commission's
response:

The
requested action has been taken.

The
Commission works with the Member States to ensure the proper functioning of the
IACS. Recommendations are made in this respect as part of the normal audits and
action plans are developed and implemented by Member States with serious
problems. The Commission considers that these plans have been successful.

Moreover,
as of claim year 2010, Member States are obliged to assess the quality of their
LPIS. Whilst 2010 is the first year, this exercise has already been helpful for
Member States as regards identification of areas requiring attention.

Any
remaining weaknesses are followed up through conformity clearance procedures to
protect the EU's financial interests.

14.         (Council Doc. 5891/11 ADD 1, §1,
par 4, page 15) With respect to the observation reiterated by the
Court on the definition of farming activity, the Council invites the Commission
to effectively enforce current rules in order to prevent and correct any
abuses, without however introducing further conditions which would result into
even more complex and expensive controls, going in a direction opposite to
simplification, which remains a priority.

Commission's
response:

The
Commission is taking the requested action.

The issue
of the farming activity has been addressed in the framework of the Health Check
by giving Member States the possibility to exclude natural or legal persons
from the direct payment schemes whose principal business objects do not consist
of exercising an agricultural activity or whose agricultural activities are
insignificant (Article 28(2) of Regulation (EC) No 73/2009).

The
Commission has committed to further examine the rules on the definition of the
active farmer in the Communication from the Commission to the Council, the
European Parliament, the European Economic and Social Committee and the
Committee of the Regions "The CAP towards 2020: meeting the food, natural
resources and territorial challenges of the future".

15.         (Council Doc. 5891/11 ADD 1, §1,
par 5, page 15) Further efforts are required to continue simplifying
rules and conditions, focussing particularly on defining clearer eligibility
criteria and better guidance to beneficiaries. Therefore, the Council
encourages the Commission to work along the lines identified with respect to
rural development in its report on the follow-up to the 2008 discharge and to
aim at better controls, addressing the major causes of error, in order to
improve the efficiency of the systems and, consequently, the effectiveness of
the expenditure.

Commission's
response:

The
requested action has been taken.

In
response to the list of 39 simplification suggestions, put forward by Member
States during the Council meeting of April 2009, the Commission carried out the
following simplification related activities:

First, in
October 2010 the Commission adopted a proposal to amend Council Regulation (EC)
No 1698/2005 in order to:

• Reduce
the number of Rural Development Strategic Monitoring reports from 3 to 2;

•
Facilitate tailor made advice of farm advisory services;

• Allow
Member States to apply follow-up checks for minor infringements and the
"de-minimis" rule only on the basis of a risk sample instead of 100%
systematic checks.

The
proposal is currently pending before the EP and the Council.

Secondly,
also in response to the list of 39 simplification suggestions, the provisions
on control procedures and cross-compliance have been clarified and precise
obligations have been spelled out in the implementing rules, in the context of
a recast (Regulation (EC) No 65/2011).

Moreover,
significant simplification efforts in the area of rural development are being
made with regard to the next programming period. In that context, there are
ongoing reflections on how to clarify eligibility and selection criteria by for
instance capacity building, seminars and better guidance to Member States.

There are
also ongoing reflections on how to ensure coherence of the sectoral rules of
the EU funding schemes with the overall framework provided by the revised
Financial Regulation. This concerns for example rules on the eligibility of
expenditure.

A Thematic
Working Group, set up in the context of the European Network for Rural
Development, has studied the current policy delivery mechanisms with the
objective to provide advice on how to improve the design and implementation of
EU rural development policy and to achieve a more efficient and effective
delivery.

Finally, a
study on the administrative burden associated with the implementation of
certain rural development measures is about to be completed. The results of the
study could be taken into account by the Commission and Member States in order to further reduce the level of red tape for beneficiaries.

16.         (Council Doc. 5891/11 ADD 1, §2,
par 2, page 16) The Council highlights the role of the Commission's
conformity clearance mechanism and of the corrections imposed thereby in
covering the financial risk borne by the EU budget. However, with respect to
the method of calculating conformity adjustments, the Council strongly supports
the Court in asking the Commission to continue its effort to limit flat-rate
corrections to exceptional cases, and to base recoveries to the maximum
possible extent, and particularly when large sums are at stake, on the actual
amounts of irregular payments, subject to appropriate information being
provided by Member States on the actual losses.

Commission's
response:

The
requested action has been taken.

The
principles for the calculation of financial corrections recommended by the
Council are already included in the Commission guidelines from December 1997
(Doc. VI/5330/97).

The
Commission has indicated to Member States that if their certification bodies
fully re-perform a representative sample of transactions which the paying
agency has checked on-the-spot and, on this basis, confirm the reliability of a
Member State's control statistics, then the Commission will accept that the
resulting error rate represents the maximum risk possible and that any
financial corrections for the year in question will not exceed that level.

17.         (Council Doc. 5891/11 ADD 1, §2,
par 4, page 16) The Council shares the Commission's view on the
cost-effectiveness of accompanied inspections when assessing the quality of
on-the-spot checks. At the same time, it notes with interest that a number of
Member States asked certification bodies to re-perform a representative sample
of these checks and extended the scope of such work as to cover the entire
handling of the files, thus reinforcing the overall framework for gaining
reasonable assurance on the legality and regularity of payments at the level of
final beneficiaries. The Council encourages the Commission to report on the
results of the implementation of this initiative in those Member States already
applying it, with a view to extending it.

Commission's
response:

The
Commission is taking the requested action.

The
Commission will report on the results in its Annual Activity reports, starting
with next year's report on the Financial Year 2011.

18.         (Council Doc. 5891/11 ADD 1, §3,
par 1, page 17) As regards the internal control system relating to
the animal disease eradication and monitoring programmes the Council calls on
the Commission to take the necessary measures to correct the deficiencies identified
in the procedures, and to provide higher assurance that payments are free from
material error.

Commission's
response:

The
Commission started to take the requested action and will continue with the
measures to that effect in the coming years. DG SANCO clarified the segregation
of functions and started a project to simplify the legal base for the
programmes. To this end, clarifications and simplifications were already
introduced into Commission Decision 2010/712/EU on the financial contribution
for the eradication programmes. In 2012, the Commission will also propose
modifications to Council Decision 1990/424 which is the legal base for
reimbursing eligible costs under the eradication programmes.

19.         (Council Doc. 5891/11 ADD 1, §3,
par 2, page 17) With respect to the cases of fisheries projects
completed outside the eligibility period found by the Court, the Council
expects that all corrections be completed during the closure exercise.

Commission's
response:

The Commission
duly follows-up on all errors identified by the Court and will proceed, when
needed, to financial corrections.

The
Commission has put in place a control strategy and carries out ex-post audit
activity to verify that management and control systems of the Member States
function effectively to prevent such errors.

20.         (Council Doc. 5891/11 ADD 1, §3,
par 3, page 17) Further efforts towards the objective of a fully
functioning control strategy in these policy areas are expected. (Policy areas:
Environment, Fisheries, Health and Consumer protection.)

Commission's
response:

DG ENV
expects to reach its objectives of more than 40 ex-post audit reports issued in
2011. On 30 June 2011, 15 reports have been issued. The ex-post methodology and
audit plan have been revised in order to optimise control. Examples of the
foregoing are the introduction of desk reviews and the introduction of new
contradictory procedures with the operational unit and/or the beneficiaries before
issuing the final report.

Since
2010, DG SANCO increased its ex-ante on-site control visits while maintaining a
high average ex-post audit coverage. Desk controls will be intensified, e.g. by
enlarging the scope of the centralised ex-ante desk controls that are carried
out in addition to the desk controls of the operational units.

Chapter 4 -
Cohesion

21.         (Council Doc. 5891/11 ADD 1, par
2, page 18) The Council is concerned that interim and final payments
in 2009 were still affected by material error and that, although most systems
audited in the "Cohesion" area are qualified as compliant by the
Court, system weaknesses were still noted as regards the regularity of
transactions or recoveries and financial corrections. It calls on the
Commission and Member States to continue their efforts in close cooperation to
improve the situation.

Commission's
response:

The
Commission is continuously taking the requested action. It intends to report on
measures taken to that effect in the next Annual Activity Reports of the
Directors General.

The
Commission focuses its audits on high risk programmes and takes appropriate
actions, including interruptions and, if necessary, suspension of payments
and/or financial corrections. Furthermore, it puts in place national remedial
action plans aiming at improving the effectiveness of systems and remedying the
causes of low performance for those programmes and Member States which are
concerned.

22.         (Council Doc. 5891/11 ADD 1, §1,
par 4, page 19) The Council notes that a large part of quantifiable
errors were linked to the non-respect of public procurement rules. Even if
those rules are not strictly related to the implementation of Cohesion
projects, it urges the Commission to monitor their correct application and to
draw conclusions from its evaluation of their cost-effectiveness. The Council
is convinced that training and simplification measures in this area could
reduce the risk of misinterpretation and consequently the risk of error and
invites the Commission to refer to best practices in other policy areas.

Commission's
response:

The
Commission is taking the requested action. It intends to report measures taken
to that effect before 31/12//2012.

The Commission
has recently initiated a retrospective evaluation of the relevance,
effectiveness and efficiency of the basis EU public procurement legislative
framework. The evaluation will focus primarily on analyzing the
cost-effectiveness of public procurement procedures and rules. The evaluation
will also include a description of Member States’ implementation and
administrative structure to implement public procurement policy, including EU
legislation in this area. In addition, a Commission inter-service task force is
examining the most common public procurement issues arising in the context of
implementation of cohesion projects. The Commission will continue training
actions to Member States authorities on the correct application of public
procurement rules. The Commission will, where applicable continue to audit the
application of the EU directives on public procurement by carrying out its own
enquiries in some cases or by asking the Member States' audit authorities to
perform such enquiries on its behalf.

In addition,
in the Single Market Act the Commission has undertaken to put forward
proposals, by 2011.

Simplification
will be one of the main drivers of the forthcoming revision of the Directives.
The Commission is planning to issue its proposal by end-2011. Stakeholders and
interested parties have had opportunity to contribute to this process through
the consultation process launched with the Green Paper on the modernization of
EU public procurement policy.

Moreover,
the Commission has issued and discussed with the Member States in the Advisory
Committee on Public Procurement a report on more frequent errors on public
procurement, identified through EC audits and reasons for taking financial
correction decisions linked to public procurement procedures (May 2011). Member
States were alerted about these recurrent audit findings and asked to share
good practices and proposals to overcome such recurrent deficiencies. This
initiative intends also to feed the ongoing consultation on the
simplification/revision of the Directives.

23.         (Council Doc. 5891/11 ADD 1, §2,
par 1, page 19) The Council notes that in 2009 Member States'
management and control systems for the 2007-2013 programming period were only
partially in compliance with the regulatory requirements, notably regarding
managing authorities and intermediate bodies. It encourages Member States to
pursue their efforts to improve them, and the Commission to strictly supervise
them.

Commission's
response:

The
Commission is taking the requested action. It intends to report measures taken
to that effect in the next Annual Activity Reports by the Directors General.

The
Commission will pursue the efforts undertaken under its 2008 Action Plan to
improve the management and control systems in the Member States. It will follow
up the Court's findings and will continue to verify the functioning of the
Member States' management and control systems, building on the annual audit
opinions issued by the audit authorities and its own audit work. It will also
continue its strict policy of interruption and suspension when problems are
detected so that appropriate remedial action plans are implemented, and its
support and guidance to authorities that require it in order to improve systems
where necessary.

24.         (Council Doc. 5891/11 ADD 1, §2,
par 3, page 19) Even if it is convinced that no in-depth change
should be made to the systems before evaluation, the Council invites the
Commission and Member States to examine in due time further measures for
simplification.

Commission's
response:

The
Commission is taking the requested action. It intends to take measures to that
effect before 31/12/2012.

The
Commission intends to pursue its simplification efforts when preparing its
proposal for the next regulatory framework applying to Structural Funds. It
also recalls the simplification brought initially and in 2008-2009 to the
current delivery mechanism in the 2007-2013 regulations, including on
simplified costs.

25.         (Council Doc. 5891/11 ADD 1, §2,
par 4, page 20) The Council encourages the Commission and Member States to pursue their efforts to improve the systems for reporting recoveries and
withdrawals.

Commission's
response:

The
Commission is taking the requested action. It intends to report measures taken
to that effect in the 2011 and 2012 Annual Activity Reports of the Directors
General.

Information
on withdrawals and recoveries for the period 2000-2006 have improved over the
last years, a fact which is recognised by the Court of Auditors. The Commission
carried out audits in all Member States and provided recommendations to Member
States that allowed to improve the reported data for the 2000-2006 programmes.

For the
period 2007-2013 the reporting provisions have been enhanced and provide that
the certifying authority maintains a debtor's ledger with information on all
irregularities and recoveries, it reports annually according to a clear and
standardised template and the reporting is done via the common IT system
SFC2007. Member States are also requested by the Commission to separately
identify corrections resulting from Community audit work from the ones
resulting from their own audit and control work, in order to show the impact of
the Community and national audits separately and to avoid duplication of
figures. This is expected to improve the completeness and quality of reporting
and to simplify procedures, reducing thus errors in reporting. The process will
also be more easily auditable by the Commission and the Court.

Following
an analysis of data to be reported at 31 March each year, the Commission will
also carry out as from  the second semester of 2011 a specific audit enquiry on
the Member States' systems for recoveries, in order to gain assurance on the
quality of data submitted in the annual statements on recoveries and
withdrawals. This audit will be risk based and will continue in 2012 onwards.

26.         (Council Doc. 5891/11 ADD 1, §2,
par 4, page 20) The Council also calls for more transparency and
invites the Commission to make the data related to corrections and recoveries
easily accessible to the public.

Commission's
response:

The
Commission has taken the requested action.

Data on
recoveries and corrections are published in:

- the
Annual Activity Reports of the Structural Funds DGs (see detailed disclosure in
the 2010 Annual Activity Reports);

- note 6
to the Commission's annual accounts, the content of which has been much developed
and clarified to take into account the various requests by the Court of
Auditors, the European Parliament and the Council;

- the
annual report on the implementation of the structural funds.

Chapter 5 -
Research, Energy and Transport

27.         (Council Doc. 5891/11 ADD 1, par
2, page 21) The Council stresses that the diversity of research
projects does not justify a diversity of financial rules and control systems
and expects this issue to be resolved in the next multiannual framework
programmes.

Commission's
response:

The
Commission is currently working in the preparation of the next Framework
Programme for Research and Innovation. In this context, the Commission will
present to the European Parliament and to the Council a proposal where the
aspects highlighted by the Council will be addressed.

28.         (Council Doc. 5891/11 ADD 1, §2,
par 1, page 22) The Council regrets that the supervisory and control
systems were still only partially effective in ensuring the regularity of
payments, but welcomes the improvements noted by the Court. It encourages the
Commission to continue to reinforce its internal control systems.

Commission's
response:

The
Commission is committed to ensuring the legality and regularity of payments.

The
Commission's internal control system in place for the management of the
Framework Programmes covers all steps from the evaluation of proposals until
the closure of the project. The Commission is monitoring how it operates in
order to improve its effectiveness and reporting on the results of the
controls.

In this
context, DG RTD, as example, has designed and approved an anti-fraud strategy
for the prevention and detection of fraud in the research area (DG Research
Anti-Fraud control strategy -Ares(2010)485725-03/082010). DG INFSO has also
available a similar internal document (adopted on 10th March 2010), which is
about to be updated in order to take into account experiences. This strategy is
part of a broad initiative on fraud prevention at the Commission level and is
in line with analogous developments in other DGs managing Research funds.
Moreover, the strategy has been designed bearing in mind the current
simplification initiatives proposed by the Commission. Therefore, the
additional measures avoid creating an additional administrative burden on
beneficiaries and have to be balanced from a cost-benefit point of view.

29.         (Council Doc. 5891/11 ADD 1, §2,
par 2, page 22) The Council also notes that parts of this area are
managed in indirect centralised management by Executive Agencies and Joint
Undertakings, and asks the Commission to evaluate the functioning of this type
of management.

Commission's
response:

DG RTD has
evaluated the accountability and organisational structures of the community
bodies set up to implement the FP7 (including the article 185 initiatives)
shortly after their autonomy. This exercise has been carried out in December
2010. As a result of this exercise, the Commission has drawn several
conclusions as follows:

a) For the
Joint Undertakings (and article 185 initiatives) the existing monitoring and
reporting arrangements are considered to be adequate except for F4E. In this
case, the current monitoring arrangements are sufficient but it would be
desirable to align them with the other JUs. DG Research is seeking a revision
of the Administrative Agreement regulating the relationships between the
Commission and this JU. In addition DG RTD will follow up on the recommendations
given in the interim evaluations reports of the Joint Technology Initiatives
released during the period mid 2010 to mid 2011.

b) With
regard to the functioning of the two executive Agencies – REA and ERCEA - the
evaluation and monitoring is an ongoing and stable process defined in the
Memoranda of Understanding agreed between the parent DGs and the Agencies. In
the light of the accumulated experiences and in preparation of the CSF a
review, steered by DG RTD, of the MoU is expected finalized by end 2011.  In
addition, the conclusions of the first 3 year external evaluation of the two
executive agencies are expected by 2012.

30.         (Council Doc. 5891/11 ADD 1, §2,
par 4 and 5, page 22) The Council is concerned that the Court again
in 2009 found errors in cost statements which had received an unqualified
opinion from the certifying auditor under FP6. It expects the Commission to
pursue its measures to remedy this problem.

It also
regrets that the efforts of the Commission to simplify the audit certification
under FP7 by the ex-ante certification of beneficiaries' costing methodologies
did not lead to the expected results and suffered from consequent delays.

Commission's
response:

Although
FP6 audit certificates did not provide the assurance initially expected, this
ex-ante control made a substantial contribution in reducing FP6 error rates
compared with FP5 as it was recognised by the Court in previous reports. It is
recalled that the qualified auditor who certifies the financial statements is
selected by the beneficiary and that the auditor is deemed to have read
carefully the contract and the guidelines available (addressing financial and
audit certificates related issues). For FP7 the Commission has established that
the audit certificates are based on "agreed upon procedures", which
require the certifying auditor to perform pre-defined procedures and report on
that basis factual findings. This approach is expected to lead to a reduction
in errors of interpretation of the eligibility rules by the auditors compared
to the FP6 certification approach.

As regards
the certification of the average costing methodologies the Commission
recognises that the acceptability criteria were too stringent for most
beneficiaries.

However,
substantial simplification has been already introduced by the Commission to
facilitate the use of average personnel costs by beneficiaries within the
overall existing legal framework. In this respect, following the Communication
on simplifying the implementation of the Research Framework Programmes (COM
(2010) 187 final of 29.04.2010) the Commission adopted a Decision of 24 January
2011 (C(2011) 174 final) on three measures for simplifying the implementation
of the framework programme. This decision allows beneficiaries to apply their
usual accounting methods when requesting reimbursement for average personnel
costs. The ex-ante costing methodology certification becomes consequently more
attractive. This has a direct impact on the way ex-ante cost methodology
certification and the certificates accompanying the financial statements link
together. First of all, the obligation to submit a certificate on financial
statement for interim payment is waived for beneficiaries whose methodology is
certified (certification covering both average personnel costs and  calculation
of indirect costs). Further, even if this obligation is not waived (cases
whereby certification covers only average personnel costs methodology), the
audit work to be done is really simplified because the auditor will refer to
the approved methodology.

Furthermore,
the experience with ex-ante certification of cost methodologies will be taken
into account in the preparation of the rules for the next funding programme.

31.         (Council Doc. 5891/11 ADD 1, §2,
par 7, page 22) Regarding the systems related to recoveries and
financial corrections, the Council notes with concern the significant increase
of outstanding recoverable amounts. It urges the Commission to make additional
efforts to improve the timely implementation of audit results, notably by
simplification measures, even if it notes that the Commission has already taken
remedial action and imposed sanctions.

Commission's
response:

The
Commission is continuously monitoring the procedures for recovering undue
amounts paid. In this respect, the Commission has considerably improved this
aspect of the FP management. For example concerning FP6 in DG RTD - despite the
completion of audits which added €13 million to the amount to be recovered in
2010 - the percentage of total adjustments in favour of the EU effectively
recovered has grown from 30,40% in 2008 to 55,61% in 2009 and to 67,87% by the
end of 2010.

The
communication on the simplification of the recovery process in the framework of
the implementation of the audit strategy adopted on 15th December 2009 will
contribute to a better management of outstanding recoverable amounts.

The
Commission has continued to systematically apply liquidated damages on
beneficiaries which had over declared their costs. As an example, by the end of
2010, DG RTD had considered the application of liquidated damages in a total of
584 cases and had applied liquidated damages for a total of € 0,7 million.

Chapter 6 -
External aid, Development and Enlargement

32.         (Council Doc. 5891/11 ADD 1, par
2, page 23) Special attention should be given by the Commission on
how to remedy the problem of errors found by the Court at the level of Union
Delegations.

Commission's
response:

The
numerous training sessions organised for national and regional authorising
officers, specific training on contractual and financial procedures, training
in the handling of the CRIS data base and a specific seminar for finance,
contract and audit sectors in delegations in March 2011 should all contribute
to a better handling of procedures in delegations. The new electronic standard
reporting tool for the delegations' EAMR (external assistance management
reports) should also improve consistency in procedures. The so-called companion
to financial and contractual procedures which is regularly updated provides a
valuable instruction tool that helps staff in delegations avoiding errors. Many
of the errors usually found on interim and final payments could or would have
been corrected by subsequent controls. It has to be kept in mind that controls
can only reduce the risk of financial error, not eliminate it entirely.

33.         (Council Doc. 5891/11 ADD 1, §1,
par 2, page 24) Concerning DG ELARG, the Council asks the Commission
to take the necessary measures to correct the shortcomings identified by the
Court concerning tendering procedures, the setting up and operation of the
decentralised implementation system for Croatia and Turkey, the centralised
management at Commission level, and the closure and clearance of the PHARE and
CARDS programmes. Sufficient resources should be devoted to the analysis of the
outstanding final declarations submitted under PHARE and the Transition
Facility in the new Member States.

Commission's
response:

The
Commission has addressed the Court's main observations regarding ex-ante
controls, both at headquarters and in the EU Delegations. As acknowledged by
the Court, DG ELARG accepted its recommendations made in its 2009 annual report
and swiftly adopted a set of measures and instructions. Theses measures started
to become operational in 2010 and full impact is expected to be reached in
2011.

Closures
of the PHARE and CARDS programmes have been a priority for DG ELARG since 2007.
The effort is being pursued in spite of the fact that supplementary Human
Resources could not be allocated to this task. The Court has welcomed meanwhile
the efforts of DG ELARG and the backlog has been further considerably reduced
in 2010, more than compensating the slight slowdown observed in 2009.

DG ELARG
also continued to ensure compliance by the national authorities in Croatia and Turkey with the conditions of the (partial) conferral of management powers. It
maintained the ex- ante controls by the Delegation in order to mitigate the
risks. Moreover the substantive transaction testing of the Court did not reveal
any significant shortcomings beyond some lack of audit trail to explain fully
the decisions taken by delegations.

34.         (Council Doc. 5891/11 ADD 1, §1,
par 3, page 24) As regards DG ECHO, and while welcoming the Court's
assessment that the ex-ante controls were generally effective, the Council
invites the Commission to address the comments made by the Court, notably those
concerning partners' control systems.

Commission's
response:

The
Commission is taking the requested actions. It intends to take measures to that
effect before the 31 December 2011.

The
Commission has launched a working group on the assessment of humanitarian aid
proposals in early February 2011. It is harmonising and streamlining the
documentation of the assessment process by giving a better overview of the
entire process throughout a dashboard and establishing common assessment
criterion. Its conclusions will be validated by the management and implemented
as from 1 January 2012.

DG ECHO
ensures a systematic follow up of the audit recommendations at each next audit
visit of a partner be it at field or HQ level (every 2 to 4 years). A further
reinforcement of this follow-up procedure will be a burdensome for our partners
and of limited value.

35.         (Council Doc. 5891/11 ADD 1, §2,
par 1, page 24) The Council requests the Commission to correct the
continued weaknesses identified by the Court in the internal control system of
DG RELEX. It should devote sufficient resources to the analysis and closure of
the old Rapid Reaction Mechanism and the Common Foreign and Security Policy (CFSP)
contracts for which the implementation deadlines have already expired.

Commission's
response:

As
recommended by the Court, the Commission has already taken action to improve
the ex-post control methodology in DG RELEX. Part of the foreseen mitigating
measures is implemented in 2011 under the management of the new Service for
Foreign Policy Instruments (FPI).

The
request to correct the weaknesses in the internal control system is based on a
recommendation of the Court linked to the lack of Art. 56 FR ex-ante
assessments of CFSP missions. The new proposal for the revision of the FR
includes the acknowledgment that Art. 56 assessments can only be undertaken
progressively due to the specific nature of these missions which are created ad
hoc and ex nihilo.

Regarding
the closure of old contracts, the situation of all old and ended contracts is
reviewed on a regular basis and appropriate action is taken in order to close
projects which have ended.

Significant
progress was achieved both in 2009 and 2010 for the closure of old files. For
old Rapid Reaction Mechanism (the predecessor of IFS) files, the number of
files to be closed decreased from 97 at the beginning of 2008 to 6 at the end
of 2010. It is estimated these remaining files will also be closed by the end
of 2011.

For CFSP,
25 old projects were closed in 2010. The number of CFSP projects has been
increasing steadily together with the substantial increase of the CFSP budget
over the last years (e.g. there were 51 new contracts in 2010) and this might
give the false impression that the situation is not improving.

36.         (Council Doc. 5891/11 ADD 1, §2,
par 2, page 24) Concerning DG ELARG and DG ECHO, the Council, while
acknowledging that the Court considered their monitoring and supervision
systems as generally effective, underlines for the former the need to continue
to remedy the weaknesses already identified in previous years, including the
sufficient verification of the data entered in the management information systems.

Commission's
response:

There are
regular checks on the quality of data in CRIS, in particular ahead of
extracting relevant information for the Annual Activity Report. The IT
management tool where data is entered also contains embedded controls of data quality.
Moreover, the Commission is putting great emphasis on training of CRIS users.
DG ELARG verifies data encoded in CRIS by a) the financial circuits (8 eyes
review), based on the manuals of procedures, checklists and regular trainings
provided to staff, b) automatic data controls embedded in CRIS and c)
accounting data quality checks performed by the Accounting Correspondent of DG
ELARG.

Staff
within HQ and Delegations has hence been motivated to ensure proper encoding of
the data, but some of the problems noted go beyond the scope of the ELARG- or
ECHO-owned information systems, so that further solutions need to be sought at
a Commission-wide level.

37.         (Council Doc. 5891/11 ADD 1, §2,
par 2, page 24) The Council invites the Commission to monitor better
the use of the "Humanitarian Procurement Centres" as recommended by
the Court.

Commission's
response:

The
Commission is taking the requested action in respect of:

On the use
of the Humanitarian Procurement Centres (HPC): The HPC is just a tool offered
to DG ECHO partners to ease their procurement. For the 2010 reporting exercise,
launched in November 2010, the letter to HPC requesting the annual
documentation also requested statistical information on the orders invoiced to
DG ECHO Partners in the course of 2009. In addition, the HPCs have been
informed of the Commission's commitment to increase monitoring of the use of
HPCs by DG ECHO's Partners. Finally, DG ECHO has initiated measures to better
inform partners of the need to ensure that the reference number of the DG
ECHO-funded Action appears on the invoice issued by the HPC and will continue
enhancing the information provided to partners on their working relations with
HPC, with an emphasis on early procurement planning. These actions will permit
end of 2011 to have first indications, quantitative and qualitative, for
further follow-up.

38.         (Council Doc. 5891/11 ADD 1, §3,
par 1, page 25) While taking note of the significant reservations
contained in the Director General's declaration regarding the effectiveness of
ex-post controls over the operational budgets for CFSP and the Stability
Instrument, the Council welcomes the general improvements made in the operation
of the ex-post control system of DG RELEX identified by the Court. It invites
DG RELEX to consolidate its ex-post control methodology and promptly address
the recommendations made by the internal auditor in that respect.

Commission's
response:

The
methodology for ex-post controls has been completed and will be further
improved throughout 2011 based on experience gained from carrying out the
controls. All related recommendations made by the internal auditor are 
implemented.

39.         (Council Doc. 5891/11 ADD 1, §3,
par 2, page 25) As regards DG ECHO, the Council invites the
Commission to further improve the follow up of audit findings, and in
particular of those giving rise to the recovery of ineligible expenditure.

Commission's
response:

The
requested action has been taken. The Commission ensures a systematic follow up
of the audit recommendations at each next DG ECHO audit visit of a partner be
it at field or HQ level (every 2 to 4 years) and critical observations are used
for the partner's annual evaluation.

40.         (Council Doc. 5891/11 ADD 1, §4,
page 25) The Council invites the Commission to finalise the
improvements to the monitoring system as suggested by the Court.

Commission's
response:

The Commission
is taking the requested actions.

1. As far
as the mid-term review is concerned, this action has been taken. The mid-term
review of the Consensus Action Plan consists of a Communication (COM(2010) 722)
and accompanying Staff Working Document (SEC(2010) 1505). The Communication was
adopted on 8 December 2010. The mid-term review outlines progress in the EU's
implementation of the Consensus Action Plan over the past three years. The
review also highlights those areas of the Action Plan that require enhanced
efforts by the Union to ensure its comprehensive implementation. Suggestions
are proposed for enhancing coordination, effectiveness and leadership of EU
humanitarian aid.

2. The
integration of the Monitoring and Information Centre (MIC) has already given
rise to synergies such as the availability of real-time information at the
onset of natural and other disasters and closer cooperation between DG ECHO’s
technical experts on the ground and Member State experts despatched for Civil
Protection activities. This action has therefore been taken.

3. To
reinforce its efforts regarding the Linking Relief, Rehabilitation and
Development (LRRD) challenge, the Commission has established an interservice
group on transition in order to foster a common view, coordinated approaches
and common positions on policies for ‘transition situations’ where
humanitarian, development and stabilisation instruments are present. The aim is
to improve both policy and implementation of programmes on the ground and to
contribute to the international policy debate on transition situations.

4. The
Commission goes on developing the Cost Observed for Results' system (COR) and
will establish a prototype database before launching a restricted pilot phase
and perform finally a cost benefit analysis. This action should be implemented
by 31 December 2012.

41.         (Council Doc. 5891/11 ADD 1, §4,
page 25) The Council invites the Commission to pursue its work in
order to take into account the remaining remarks presented by the Court,
notably concerning the implementation of some of the new environmental
mainstreaming procedures, the introduction of new environmental performance
indicators, an evaluation of the effectiveness of environmental mainstreaming
and programmes, and a new comprehensive environment strategy.

Commission's
response:

The
Commission agrees that the issue of environmental integration should be given
high priority. Work in this area will continue in close coordination and
harmonisation with EU Member States, in support of the aid effectiveness
agenda. It shall include in particular the following steps as mentioned in
EuropeAid's 2010 Annual Report:

- further
work on indicators to monitor the effectiveness of a new environment strategy
and to assess environmental integration in the Commission's operations;

- overall
evaluation of environmental mainstreaming in development cooperation;

- new
Budget Support guidelines including new guidance on cross-cutting issues;

- adoption
of an environment strategy integrating all the above elements.

Chapter 7 -
Education and Citizenship

42.         (Council Doc. 5891/11 ADD 1, par
2 and 3, page 26) The Council regrets that a significant number of
errors in the closures made during the year were left undetected and
uncorrected. It takes note of the fact that those closures concerned actions
undertaken in a previous programming period and calls on the Commission to
reinforce the checks with regard to closure payments to prevent the reoccurrence
of errors.

The Council
calls on the Commission to continue its efforts in ensuring the regularity of
payments and in improving supervisory and control systems. It notes with
satisfaction the measures taken by the Commission to improve the systems such
as updated guidance and support for national authorities, regular meetings and
trainings and reinforced on the spot audit visits. The Council encourages the
Commission to continue its efforts in this direction.

Commission's
response:

The
Commission's reply in the 2009 Annual Report: The Commission considers that the
supervisory and control systems put in place for the 2007-2013 period provide
for a sound framework.

The
improvements of the systems in the area of Education and Culture made in 2009
(updated guidance for the National Authorities and reinforced on the spot audit
visits) are not reflected as the Court focussed on closure payments related to
actions from the previous programme generation that were not covered by the
current system (notably the audited actions related to the 2004/5 and 2005/6
academic years).

The
Commission emphasises that its closure in 2009 of projects from 2004/05 is
normal procedure. The longest of these projects ended in 2008 and were
submitted for closure by the National Agencies in the annual report 2008, which
the Commission received in 2009.

43.         (Council Doc. 5891/11 ADD 1, par
4, page 26) Simplified rules and extensive use of lump-sum
financing, used in the current generation of programmes, should lead to
reducing the risks linked to final payments in the future. The Council strongly
invites the Commission to pursue all possible actions of simplification.

Commission's
response:

The
Commission accepts the recommendation which is being implemented (see COM(2011)500, part II, of 29.06.2011).

Implementation
of the new programmes will be greatly simplified.

The new
Education Europe programme will bring about a significant simplification of
actions and rules through the elimination of sub-programmes, a reduction in the
overall number of activities and an increased use of lump sums.

The
Creative Europe programme will be managed centrally through the Education
Audiovisual and Communication Executive Agency (EACEA), as is currently the case
for both Culture and MEDIA. A small number of actions will be managed directly
by the Commission (e.g. European Capitals of Culture, EU cultural prizes, joint
actions with international institutions).

Chapter 8 -
Economic and Financial Affairs

44.         (Council Doc. 5891/11 ADD 1, par
2, page 27) As regards research framework programmes in this policy
group, the Council notes with satisfaction that the Commission has taken
significant measures to simplify the cost reimbursement system. The Council
encourages the Commission to continue this approach, to further simplify the
application of eligibility rules and to increase the awareness of
beneficiaries.

Commission's
response:

Compared
to its predecessors FP7 brought about a number of widely acknowledged
simplifications. This had already led to a reduction of time-to-grant and of
the administrative effort for managing projects. The feedback received in
stakeholder consultations convinced the Commission to analyse further progress
as it was reflected in the Communication on simplifying the implementation of
the Research Framework Programmes (COM (2010) 187 final of 29.04.2010). In this
context the Commission adopted a Decision of 24 January 2011 (C(2011) 174
final)  on three measures for simplifying the implementation of the framework
programme. These are as follows: a) use of average personnel costs, allowing
beneficiaries to use their usual accounting practices under the sole condition
that it is based on the payroll costs registered in the statutory accounts.
Personnel cost is one of the most recurrent source of errors as has been
pointed out by the Court of Auditors; b) flat-rate financing of SME owners and
other natural persons not receiving a salary (with significant impact on SMEs)
clarifying how they should be remunerated for their work where SME owners and
other natural persons have worked in a project as beneficiaries and have
performed tasks in accordance with the grant agreement; and finally, c) the
research clearing committee, in order to enhance legal certainty and equal
treatment of beneficiaries and their reliance on legitimate expectations when
they relate with the Commission services.

The
Commission is now preparing the proposal for the next Framework Programme where
further measures for the simplification are being analysed.

Furthermore,
the Commission is constantly working on the improvement of the clarity and
accessibility of guidance documents by streamlining the guides, removing
unnecessary jargon and using consistent terminology for the awareness of
beneficiaries and for reducing the entrance barriers for newcomers, in
particular SMEs (see, http://cordis.europa.eu/fp7/home_en.html).

45.         (Council Doc. 5891/11 ADD 1, par
3, page 27) The introduction, within FP7, of the system of ex-ante
certification of beneficiaries' costing methodologies should be further
exploited.

Commission's
response:

FP7
initially provided two types of cost methodology certification: the mandatory certificate
on the methodology on average personnel costs (CoMAv) and the certificate on
the methodology for personnel and indirect costs (CoM), optional for any
beneficiary of multiple grants fulfilling the eligibility criteria set by the
Commission. The Commission Decision C(2009)4705 adopted on 23 June 2009 settled ex-ante acceptability criteria specific to average personnel costs.

In the
Communication Simplifying the implementation of the Research Framework
Programmes (COM (2010) 187 of 24 April 2010) the Commission recognised that
'the current acceptability criteria can be met only by very few beneficiaries
thereby limiting the intended simplification impact of certifying average
costs'. Duly recognising the needed simplification, the Commission adopted a
Decision on 24 January 2011 (C(2011) 174 final)  on three measures for
simplifying the implementation of the framework programme. One of them on the
'use of average personnel costs', allowing beneficiaries to use any average
personnel cost methodologies applied as usual accounting practice by the
beneficiary could be accepted, as long as they are based on actual personnel
costs registered in the accounts and any double funding of costs under other
cost categories is excluded. This hence allows a broader acceptance of the
beneficiaries' accounting methods. In this regard, the Commission will also
take further measures in this sense for the preparation of the next framework
programme.

Chapter 9 -
Administrative and other expenditure

46.         (Council Doc. 5891/11 ADD 1, §2,
page 28) The Council supports the Court's recommendation that
administrative systems should be improved to timely monitor and control the
documents proving the staff's personal situation. It notes that the
institutions and bodies addressed by the Court have already taken action and
encourages them to pursue it.

Commission's
response:

The Office
for Administration and Payment of Individual Entitlements (PMO) pursues to
improve its administrative system SYSPER2/Rights to timely monitor and control
the documents proving the staff's personal situation. All the actions in
question (for example: automatic indexation of allowances paid elsewhere
(ongoing), the possibility to integrate proving documents for school
allowances, child declaration (ongoing) are followed up by the IT Steering
Committee of the Office.

47.         (Council Doc. 5891/11 ADD 1, §3,
par 2, page 29) While recognising the complex financing structure
and the multiannual character of the tasks of many agencies and Joint
Undertakings, the Council insists on improvements in their financial
programming, as it has already requested in its recommendations for previous
years, and on a timely implementation of the annual budget in line with the
annuality principle. In this context the Council also asks the Commission
to continue to take the agencies' unused appropriations into account when
establishing the draft budget and to carefully check - and if appropriate continue
to revise - the agencies' requests for funds and posts, in order to present a
realistic budget proposal corresponding to the agencies' real needs.

Commission's
response:

The
Commission has taken the recommended action.

Improved
planning and follow-up of budgetary requirements in agencies should lead to a
reduction of carry-over and cancellation rates in agency budgets, in accordance
with the principle of annuality. In addition, accurate cash forecasting and
rigorous cash management are required to avoid large agency surpluses at
year-end.

As
recognised by the Council, the Commission already takes agencies' unused
appropriations into account when establishing the draft budget: agency
surpluses 2010 will be recovered as assigned revenue in 2011 and have been taken
into account when calculating the EU contribution for 2012.

The draft
budget 2012 has been established after a careful examination of agencies'
requests for funds and human resources based on the analysis of the
implementation in 2010 and the evolution of establishment plans. As deemed
necessary the Commission has proposed modifications to agencies' requests for
financial and/or human resources. The Commission will continue to propose,
where necessary, adjustments to agency requests in future exercises, in line
with the Council Recommendation.

The
analysis referred to above is presented in detail in the working document of
the Draft Budget 2012 "Bodies set up by the Union and having legal
personality" [COM (2011) 300 – May 2011].

48.         (Council Doc. 5891/11 ADD 1, §3,
7 par, page 30) The Council looks forward to receiving detailed
information about the progress and results of the inter-institutional working
group on agencies.

Commission's
response:

The
Commission will provide the other Institutions with the results of the
inter-institutional working group on agencies, which work is expected to be
finalised by the end of 2011.

Special Report
No. 8/2009 "Networks of excellence and Integrated projects in Community
Research policy: did they achieve their objectives?"

49.         (Council Doc. 5891/11 ADD 2,
Annex 1, §4, par 1, page 4) Future spending programs should be based
upon an explicit intervention logic as well as "SMART" objectives and
performance indicators linking the instruments to realistic objectives as far
as possible. In this context, the possibility of setting a limited set of clear
objectives for each instrument should be considered in order to ensure clarity
of the instruments specific role. For each programme there should be
appropriate performance indicators to monitor the expected outputs, outcomes
and impacts.

Commission's
response:

The
Commission is currently working in the preparation of the next Framework
Programme for Research and Innovation. In this context, the Commission will
present to the European Parliament and to the Council a proposal where the
aspects highlighted by the Council will be addressed.

The
Commission considers that the FPs have always been based on a sound
intervention logic which has allowed effective evaluation and monitoring. In
FP7 this is made more explicit, together with the objectives and performance
measures that will help further strengthen the evaluation and monitoring
system. Under FP7, instead of being encapsulated in the “instruments”, research
goals and research policy objectives, including those aiming at structuring
research efforts, are clearly and explicitly set in the work programmes. For
each topic on which proposals are invited, the scientific goals, the scope of
activities and indications on the results expected are defined.

50.         (Council Doc. 5891/11 ADD 2,
Annex 1, §4, par 2, page 4) The Commission should consider whether
NoEs and IP-like collaborative projects have realistic objectives and provide
significant advantages as compared with other instruments for research
collaboration. Concerning NoEs financed under FP6, the Commission should assess
on a case-by-case basis whether past achievements, potential EU added value and
prospects of self-sustainability justify further funding under FP7.

Commission's
response:

a) The
Commission is currently working in the preparation of the next Framework
Programme for Research and Innovation. In this context, the Commission will
present to the European Parliament and to the Council a proposal where the
aspects highlighted by the Council will be addressed.

b) The
possibility of continuing the financing of certain promising NoEs under FP7 is
addressed on a case-by-case basis. In fact, an FP6 NoE's duration may be
prolonged under FP7 to achieve its objectives but without new funding (cases of
these currently exist).

51.         (Council Doc. 5891/11 ADD 2,
Annex 1, §4, par 3, page 4) On the basis of the Court's
recommendations, the Commission should examine the strengths and weaknesses of
IP type instruments and take specific measures. Appropriate data should be made
available to monitor the catalytic effect of EU RTD funding. The realism of
expected targets, in particular for SMEs and the private sector, should be
re-assessed.

Commission's
response:

The
Commission is currently working on the preparation of the next Framework
Programme for Research and Innovation. In this context, the Commission will
present to the European Parliament and to the Council a proposal where the
aspects highlighted by the Council will be addressed.

Nevertheless,
regarding the SMEs participation, several measures where introduced in FP7 to
simplify SME participation. The reimbursement rates and the flat rates for
indirect costs for SMEs were considerably increased in FP7 in comparison to
FP6. The introduction of thresholds for ex-ante verification of financial
capacity and the introduction of the guarantee fund echoed by the revised set
of protective measures for financially weak participants (no more bank
guarantees, blocked accounts or reduced pre-financing) took some financial and
administrative burden from SMEs and are particularly helpful for young start-ups.
The introduction of thresholds for providing certificates on financial
statements reduces the administrative burden for financial reporting. In some
thematic areas under the specific programme "Cooperation" calls with
specific topics for projects with obligatory SME participation were
implemented. As foreseen in the Small Business Act (COM(2008) 394), SMEs
participating in an FP7 project keep their SME status (and the 75 % funding
rate) during the lifetime of the project, even if they grow during the project
above the thresholds in the SME definition. Finally, the simplification
measures adopted in January 2011 also target the participation of SMEs in FP7
since the possibility to charge costs of a basis of flat-rate financing is
offered to SME-owners not receiving a salary. The possibility to get a fair
retribution of the work performed on the FP7 projects for SME-owners should
contribute to the attractiveness of FP7.

52.         (Council Doc. 5891/11 ADD 2,
Annex 1, §4, par 4, page 4) In view of improving in particular the
manageability of projects, their adequate implementation and appropriate
evaluation, the Commission should ensure clear and timely guidance, speedier
contracting process and better project monitoring.

Commission's
response:

The
Commission agrees that clear and timely guidance, speedier contracting process
and better project monitoring are very important elements for the
implementation of a European Framework programme for research.

In this
context, the Commission is constantly updating guidance available for
beneficiaries and potential beneficiaries as well as for auditors providing
certificates in the Cordis website (http://cordis.europa.eu/fp7/home_en.html).

The
Commission is also paying attention to the aspects pointed out by the Council
(contracting process and project monitoring). In the Annual Activity Reports, a
set of indicators have been established in order to report on the progress
achieved in the management of the Framework Programmes. This information is
provided by each Director General dealing with the Framework Programmes.
Furthermore, Monitoring Reports for FP7 are being issued on annual basis
addressing the most relevant aspects of its implementation.

53.         (Council Doc. 5891/11 ADD 2,
Annex 1, §6 and §7, page 5) The Council stresses that further
efforts need to be undertaken to improve the functioning of the instruments
concerned and therefore invites the Commission to pay utmost attention to the
Court's recommendations, also with a view to the instruments it will propose
for the next RTD Framework Programme and which should be based on a sound
intervention logic and, as far as possible, on SMART objectives, linking the
instruments to realistic objectives, and that any "new" instruments
provide significant advantages as compared with existing ones for research
collaboration.

The Council
looks forward to the Commission communication on simplification expected in
spring 2010 and intends to examine the matters concerned in detail in that
context, taking also into consideration the Court's findings and these
conclusions.

Commission's
response:

a) The
Commission is currently working in the preparation of the next Framework
Programme for Research and Innovation. In this context, the Commission presents
to the European Parliament and to the Council a proposal where the aspects
highlighted by the Council will be addressed.

b) In the
Communication on simplifying the implementation of the Research Framework Programmes
(COM (2010) 187 final of 29.04.2010) referred to by the Council, the Commission
explored several options to further simplify the rules and procedures for
research funding. A set of proposals were made in particular in view of FP8.
However, the Commission proposed a set of measures too to be implemented under
the current legal framework. In this respect, the Commission adopted a Decision
of 24 January 2011 (C(2011) 174 final) on three measures for simplifying the
implementation of the FP7 framework programme. This decision allows
beneficiaries to apply their usual accounting methods when requesting
reimbursement for average personnel costs – one of the most recurrent errors
reported by the Court of Auditors – and the possibility to reimburse owner-managers
of SMEs and other natural persons not receiving a salary through flat-rate
payments.

Special Report
No. 15/2009 "EU assistance implemented through United Nations
organisations: decision making and monitoring"

54.         (Council Doc. 5891/11 ADD 2,
Annex 2, §5, par 1, page 7) The Commission is invited to issue and
ensure the implementation of practical guidelines in order to improve the
decision-making process for selecting the implementing channel for the proposed
task. The guidelines should lead to a transparent, objective and systematic
demonstration in the financing proposals of the economic/technical and/or
political reasons why the chosen implementing channel was chosen over other aid
delivery mechanisms.

Commission's
response:

DEVCO is
currently updating and consolidating its three core operational guidance (PCM,
SPSP and BS) into one overall guidance for Project and Programme Cycle
Management which will include more structured guidance for context analysis at
the country and sector level that will feed into a risk management framework
allowing authorising officers to take more informed decisions on the most
appropriate aid implementation modalities to achieve objectives.

55.         (Council Doc. 5891/11 ADD 2,
Annex 2, §5, par 2, page 7) The Commission is invited to continue to
co-operate with the UN bodies as far as possible, taking into consideration the
UN rules and regulations, to ensure access to UN implemented audits; and continue
to ensure that the Financial and Administrative Framework Agreement (FAFA) is
applied so that any issues of access to information are rapidly resolved.

Commission's
response:

The EC
succeeded in obtaining further assurance through audit work performed by the
UN. At the last FAFA Working Group (8 April 2011) it was concluded that, in
future the UN would inform the EC of internal and external audits undertaken or
planned by the UN for the projects listed. During the meeting, UN entities were
encouraged by their own members to share summaries of the internal audit
reports with the donors. The actual policy of the UN organisations as to
whether such summaries could be shared with the donors differs widely and is
ultimately a decision for their respective Governing Boards. UNDP's Excecutive
Board recently took a decision in this direction, opening up internal audits to
donors and not only to UNDP Member States. The Commission believes that the
example of the largest EC partner may be followed by other UN entities in the
future. Some audit reports have already been received.

56.         (Council Doc. 5891/11 ADD 2,
Annex 2, §5, par 3, page 7) The Commission is invited to ensure that
the UN reports provide adequate information on project performance and the
achievement of results including the achievement of longer-term impact not
measurable within the existing reporting timeframe, in order to respond to the
aid effectiveness agenda.

Commission's
response:

The 2011
Working Group endorsed joint Reporting Guidelines for a trial period of a year.
The use of these guidelines will improve the quality of reporting, ensuring
that reports are submitted on time and focus more on the results achieved. The
reporting guidelines are also expected to result in improved project design and
that the Commission has sufficient information to assess the necessity and
eligibility of all costs proposed and claimed.

57.         (Council Doc. 5891/11 ADD 2,
Annex 2, §5, par 4, page 8) The Commission is invited to ensure,
through EuropeAid, that its field monitoring provides adequate coverage of
projects implemented through UN organisations to supplement and confirm the
information on results obtained from UN reports.

Commission's
response:

Discussions
on joint monitoring have taken place with a number of UN agencies and this work
will continue in the future.

58.         (Council Doc. 5891/11 ADD 2,
Annex 2, §5, par 5, page 8) The Commission is invited to consider
whether it can build on its experience with one UN agency by contributing in a
less fragmented way, for example at country level, to other UN organisations
with a view to engaging in a similar high-level dialogue enhancing the focus on
their performance in achieving objectives.

Commission's
response:

The
Commission will explore ways of enhancing the focus on UN performance to better
achieve objectives, using existing possibilities under the FR.

59.         (Council Doc. 5891/11 ADD 2,
Annex 2, §6, page 8 - 9) The Council calls on the Commission to
report to the Council in the framework of the Commission's annual report on its
experience with implementation through UN organisations with special regard to
the issue of added value, comparative advantage, effectiveness and efficiency
and on the improvement made to the Commission's own decision mechanisms.

The Council
agrees with the Court that monitoring of EU-funded activities undertaken by the
UN should take place in a coherent and transparent manner. It is noted that the
Commission has initiated the development of joint monitoring methods which
could be carried out with the UN agencies, should the UN decide to participate
in this endeavour. It urges the Commission to encourage the UN to take part in
these activities.

The Council
notes that there is considerable goodwill on the part of the UN to ensure that
the Court receives access to UN systems and documents in the course of the
performance of its duties and encourages the Commission to continue to support
the Court's requests in case of any difficulties encountered.

Commission's
response:

The
Commission reports on its experience with the UN through, inter alia,
EuropeAid's annual activity report. In addition, in accordance with Article
30.3 of the FR, contracts concluded by the UN with EU funds are published, thus
ensuring transparency of the activities undertaken. For the UN, external audit
reports issued by the UN Board of Auditors, which certify a given UN organisation's
accounts for a given biennium, are public documents. In April 2010, the UN
committed itself to making available extracts from external audit reports and
summaries of available internal audit reports related to Actions financed by
Commission in advance of a verification mission. In April 2011, commitments
were taken by the UN to further streamline this process.

60.         (Council Doc. 5891/11 ADD 2,
Annex 2, §7, par 2 and 3, page 9-10) The Council encourages ECHO and Member States to continue to fully support all efforts that bolster the central role of the
UN in humanitarian coordination. The Council identifies areas of
coordinated/joint action by the Commission and Member States in support of the
UN system and OCHA, that could include: (i) support to the strengthening of
UN/NGO partnerships and mutual accountability, (ii) establishment of time based
targets for smooth disbursement of funds from the UN agencies to their
implementing partners, (iii) dialogue on humanitarian issues in the governing
bodies of the relevant UN funds, programmes and agencies, (iv) aiming at
regular and more standardised result-based reporting by the UN agencies to the
donors (including Inter Agency Standing Committee's role in this respect).

Commission's
response:

The
requested action has been taken.

The
Commission provides strong support to the leading role of the UN in
humanitarian coordination. On a political level, DG ECHO promotes the role of
UN OCHA at every possible occasion and in various locations, and requests its
partner organisations to take part in coordination work. DG ECHO's funding for
UN OCHA's coordination activities reached a total of € 14.8 M in 2010 - an
increase in comparison to the total contributions of €12.7 for 2009 and € 7.1 M
for 2008.

In 2010,
DG ECHO implemented its operations through UN agencies for about 39% of its
total funding. Of the top 25 partners working with DG ECHO, 8 are UN agencies,
representing a total of €403 million, or 38% of the total amount contracted
during the year.

The
Commission provides political and financial support to the ongoing efforts to
strengthen the humanitarian system that were initiated in the 2005 UN-led
humanitarian system reform. As an example, DG ECHO has contributed over €27 M
towards the cluster system which has been established to ensure a designated
lead humanitarian organisation in each sector and country, with the objective
of ensuring a more predictable response to emergencies. DG ECHO also promotes
stronger partnership between UN and non-UN humanitarian actors (NGOs and
others), notably in the context of the Good Humanitarian Donorship Initiative.

UN
Emergency Relief Coordinator is currently leading efforts of the Inter Agency
Standing Committee to further improve the international humanitarian response
system in the areas of advocacy; leadership and coordination; accountability
and emergency preparedness. DG ECHO strongly supports these efforts and uses
its dialogues with the relevant UN funds, programmes and agencies to push for
an effective humanitarian response system and the importance of the collective
performance of the system as a whole.

Special Report
No. 16/2009 "The European Commission's management of pre-accession
assistance to Turkey"

61.         (Council Doc. 5891/11 ADD 2,
Annex 3, §5, page 13) An effective management of this assistance is
of utmost importance. In this context, the Council - while noting that the
Commission considers that it had established a satisfactory project appraisal
system already during the period from 2002 to 2006 and that compliance with the
AP priorities was one of the selection criteria during this period - encourages
the Commission to continue and further develop this system under the IPA
instrument. In this regard, effective implementation of the new project
assessment procedure, which includes from an early stage a systematic
verification of the relevance of a project for AP priorities, is of particular
importance. In this context, the Commission should give consideration to the
Court's recommendation to encourage the Turkish authorities to develop project
proposals such that the strategic objectives for EU funding can be achieved
within realistic timescales. The role of the recipient country is essential for
the successful implementation of projects.

Commission's
response:

The
Commission addressed this weakness identified by the Court and highlighted by
the Council by complementing the current programming practice with a more
sectoral approach where appropriate, with sector strategies aiming at both
improved ownership and impact.

62.         (Council Doc. 5891/11 ADD 2,
Annex 3, §6, page 13) The Council stresses the need for close
coordination between donors, including bilateral assistance provided by Member States and twinning projects. It welcomes the recent Conferences to improve donor
coordination and the effectiveness of financial assistance. The Council
encourages the follow-up of their conclusions as well as the preparation of
joint projects. It also calls upon the Turkish authorities to enhance their
capacity to contribute to donor coordination activities.

Commission's
response:

The
Commission addressed the weaknesses identified by the Court and highlighted by
the Council by taking steps to follow up the recommendations of last year’s IPA
conference and the December 2010 Council conclusions on IPA to better link
financial assistance to political priorities. Turkey has been encouraged to
take a stronger role in donor coordination and has taken first steps in this
direction.

63.         (Council Doc. 5891/11 ADD 2,
Annex 3, §7, page 13) In conclusion, the Council strongly encourages
the Commission to carefully consider the recommendations made by the Court and
to build upon the measures it has already taken to further improve the management
of the programmes. On its part, the Council will continue its efforts in
defining the priorities on the basis of realistic expectations, while noting
the need to cover all priority areas for Turkey's preparations.

Commission's
response:

The Commission
set up the following action plan in 2010 to address the weaknesses identified
by the Court and highlighted by the Council:

1. The
Commission complements the current programming practice with a more sectoral
approach where appropriate, with sector strategies aiming at both improved
ownership and impact.

2. The
Commission is taking steps to follow up the recommendations of last year’s IPA
conference and the December 2010 Council conclusions on IPA to better link
financial assistance to political priorities.

3. The
Commission ensures that future projects have clearer objectives that result in
an improved intervention logic through more relevant and measurable indicators
and benchmarks.

4. Where
necessary, clearly defined conditionalities are used to ensure the Turkish
beneficiaries implement commitments necessary for financial assistance to
achieve results and impacts.

5.
Together with the Turkish authorities, monitoring systems are further improved
to increase the focus on results and impact of projects under implementation.

6. Further
actions are taken to address outstanding recommendations from audits and
evaluations to strengthen the management and control systems for DIS
(Decentralised Implementation System).

7. Audits,
evaluations and close monitoring ensure that improvements are effective and
further adjustments are brought under way to the system if necessary.

Special Report
No. 17/2009 concerning vocational training actions for women co-financed by the
European Social Fund

64.         (Council Doc. 5891/11 ADD 2,
Annex 4, §5, page 15) Future programmes need to take account of all
individual needs of job seekers rather than focus solely on gender, and the
Council also recalls the relevance of an integrated approach and of actions
aiming at conciliation of work and life.

Commission's
response:

For the
next programming period the Commission intends to propose a scope for the
European Social fund closely linked to the Employment Guidelines. In this
framework, individualised job seeker support will be part of ESF activities.
The Commission will also propose the introduction of ex-ante conditionality
provisions. This could for instance include that Member States will be required
to deliver their ESF programmes in accordance with the employment guidelines.
This would imply that job seekers can benefit from personalised assistance
tailored to their needs, including as regards training.

Ex-ante
conditionality related to reconciliation could stimulate an integrated approach
by requiring that EU support is conditional upon the existence of an enabling
environment for flexible working arrangements and that the Member State has put in place measures for achieving the Barcelona targets on childcare.

65.         (Council Doc. 5891/11 ADD 2,
Annex 4, §10, page 16 ) The Council encourages the Commission to
continue its efforts to obtain further improvements of the management of the
current programme and its implementation, with a view of the next programming
period, starting in 2014.

Commission's
response:

The
Commission monitors and advises on programme implementation on a permanent
basis (via its participation in the Monitoring Committee meetings, the Annual
Review meeting, where, inter alia, the Annual Implementation Reports are
discussed) and stimulates the exchange of good practices amongst Member States
in different fora (e.g. ESF Technical Working Group, seminars and conferences).
The Commission has also promoted the use of simplified costs options which
should facilitate management.

Special Report
No. 18/2009 "Effectiveness of EDF support for Regional Economic
Integration in East Africa and West Africa"

66.         (Council Doc. 5891/11 ADD 2,
Annex 5, §5, page 18) The Council recognises that multiple Regional
Organisations with overlapping membership and mandates complicates the
effectiveness of EDF support. Therefore, the Council calls upon the Commission
to, where appropriate, promote through policy dialogue the conditions for a
smooth convergence of Regional Organisations.

Commission's
response:

The
Commission recognises the challenges of the institutional complexity for
effective regional integration and is supporting convergence of Regional
Organisations through political and policy dialogue and assistance for the
convergence of regionally-led policies, in line with the Cotonou Agreement and
the Paris Declaration on aid effectiveness regarding ownership, harmonisation
and alignment.

67.         (Council Doc. 5891/11 ADD 2,
Annex 5, §6, page 18) The Council welcomes the Court's appeal for
clearer guidelines for regional programming and, in particular, for improved
coherence between the programming and implementation of the Commission's respective
regional and national strategies. In this context, the Council encourages the
Commission to seek more systematic complementarity between support activities
at the regional and national level.

Commission's
response:

The
Commission has already taken a number of steps to further improve coherence and
consistency between regional and national strategies, in particular through
regional seminars. Complementarity will be a key element in the mid-term
reviews of the 10th EDF national strategies that are taking place in 2011, in
which special attention will be given to ensuring that the regional integration
objectives supported by the Regional Indicative Programmes (RIP) will be
integrated in the analysis of the National Indicative Programmes (NIP).

68.         (Council Doc. 5891/11 ADD 2,
Annex 5, §7, page 18) The Council calls upon the Commission to
define more clearly the responsibilities of the different Delegations in the
region concerned and to review the resources allocated to Delegations for the
programming and implementation of its regional programmes. Furthermore, the
Council welcomes the Court's call to establish, where appropriate, a
coordination mechanism between Delegations.

Commission's
response:

The
Commission is aware of the need for more effective management and coordination
instruments: redeployment and reinforcement of staff are being implemented but
also specific operational guidelines have been developed and issued for a more
effective management and coordination of regional programmes by the regional
delegations. In addition, a more formal cooperation mechanism between the
regional delegations has been introduced since the beginning of 2009. Improved
coordination modalities have been agreed which include two meetings per year at
Heads of Delegations level.

69.         (Council Doc. 5891/11 ADD 2,
Annex 5, §8, page 18) The Council invites the Commission to
facilitate wherever possible improved coordination between Regional Organisations
and among them and their Members States, including for monitoring the overall
progress and challenges of the regional integration process in individual
countries.

Commission's
response:

The
quality of the coordination among regional organisations and between the
regional organisations and their Member States is primarily of their own
responsibility and largely depends on the degree of ownership. However, the
Commission facilitates this coordination wherever possible, emphasising its
importance in the political dialogue with the regions and its States and
stimulating the set up of coordination mechanisms in the framework of the
regional financial assistance.

70.         (Council Doc. 5891/11 ADD 2,
Annex 5, §9, page 18) Furthermore, recalling the foremost role of
individual projects and the critical importance of assessing them effectively,
the Council recommends the establishment of an adequate system for effective
and timely reporting, monitoring and evaluation of EDF regional projects.

Commission's
response:

Actions
that have been taken so far include a reviewed format of the External Action
Management Report (EAMR) with sections dedicated to regional programmes, a
specific methodology for the Results Oriented Monitoring (ROM) of regional
programmes, Quality Support Group (QSG) checklists incorporating specific
sections for assessing the quality of proposed regional programmes. Also
specific annual regional meetings are being held where the progress of regional
programmes is being discussed. The reform of the Project Cycle Management
System (PPCM) is taking into account the specificities of the regional
programmes.

71.         (Council Doc. 5891/11 ADD 2,
Annex 5, §11-13, page 19) The Council invites the Commission to
dedicate special attention to ensure that, in the framework of the Mid-Term and
End of Term Reviews, regional integration objectives supported by both the
Regional and National Indicative Programmes will be taken into account.

The Council
strongly encourages the Commission to assess the reciprocal impact of national
and regional programmes on each other and to ensure overall complementarity
between national and regional programmes.

Finally, the
Council underlines the importance of close collaboration between the EU, the
African Development Bank, the World Bank and other bilateral donors in order to
effectively encourage regional integration.

Commission's
response:

Complementarity
between the regional and national strategies will be a key element in the
mid-term reviews of the 10th EDF national strategies that are taking place in
2011, in which special attention will be given to ensuring that the regional
integration objectives supported by the Regional Indicative Programmes (RIP)
will be integrated in the analysis of the National Indicative Programmes (NIP).

Special Report
No. 1/2010 "Are simplified customs procedures for imports effectively
controlled?"

72.         (Council Doc. 5891/11 ADD 2, Annex
6, §3, page 21) The Council takes the view that in further improving
the regulatory framework for simplified customs procedures, a solid environment
for companies to apply these procedures should be ensured both by Member States and the Commission, taking into account the practice which has emerged.

Commission's
response:

The
improved regulatory framework and solid environment for companies should be
achieved via the implementation of the Modernised Customs Code (MCC).
Implementation of the MCC was envisaged for 24 June 2013. However, in order to
ensure the development and deployment of electronic systems and the alignment
of the MCC with the provisions of the Lisbon Treaty, the Commission intends to
table a proposal suggesting postponement of the date of application and
implementation.

Special Report
No. 2/2010 "The effectiveness of the Design Studies and Construction of
New Infrastructures support schemes under the Sixth Framework Programme for
Research"

73.         (Council Doc. 5891/11 ADD 2,
Annex 7, §5, page 25) The Council encourages the Commission,
together with Member States and ESFRI, to continue its efforts to improve the
approaches to supporting European research infrastructures in line with the
Court's recommendations and the Council conclusions relating to research
infrastructures, also with a view to future EU funding instruments related to
R&D.

Commission's
response:

Drawing on
the lessons learnt from the CNI projects as a pilot experience, support for the
construction of new infrastructures has been further developed in FP7 and put
on a different footing. The support under FP7 is provided through a strategic
top-down approach based on the list of projects identified in the ESFRI
European roadmap for new research infrastructures. This support is intended
mainly for the preparatory phase.

The added
value and catalytic impact of the support thereby provided for the construction
of new infrastructures is acknowledged by Member States, in Council Conclusions
relating to research infrastructures and the ERA.

Future
support will build on the FP7 achievements and also consider Council
Conclusions on research infrastructures. The Innovation Union Flagship
Initiative highlights the increasing relevance of world-class research
infrastructures to enable ground-breaking research and innovation. It stresses
the need of pooling resources across Europe and in some cases globally. It
commits Member States together with the Commission to sustained coherence and
consistency in the EU and national strategies, to open Member State operated
research infrastructures to the full European user community, to complete or
launch by 2015 the construction of 60% of the priority European research
infrastructures currently identified by ESFRI, and to increase their innovation
potential.

Special Report
No. 4/2010 "Is the design and management of the mobility scheme of the
Leonardo da Vinci programme likely to lead to effective results?"

74.         (Council Doc. 5891/11 ADD 2,
Annex 9, §4, page 29) The Council invites the Commission to improve
the system for reporting on the results of the Leonardo da Vinci programme, and
establish a comprehensive system for measuring its impact whilst minimising the
overall administrative burden, notably by finalising the relevant applications
and tools without further delay - Inform the Council no later than June 2012 of
the progress made in implementing these recommendations.

Commission's
response:

The
Commission accepts the recommendation and is taking action on these issues.

The
Commission informs the Council about the progress in implementing this request
no later than end of June 2012.

75.         (Council Doc. 5891/11 ADD 2,
Annex 9, §4, page 29) The Council invites the Commission to provide
the national authorities with more qualitative feedback aimed at providing a
concise view of national implementation and highlighting strengths and
weaknesses - Inform the Council no later than June 2012 of the progress made in
implementing these recommendations.

Commission's
response:

The
Commission accepts the request which is already being implemented. The
Commission has provided National Agencies with qualitative feedback since the
2008 annual reporting. Furthermore, as the Court recognised, it has also
provided feedback on annual work programmes for those cases where revision was
needed in order to reach the expected quality standards.

The
Commission will inform the Council about the progress in implementing the
recommendation no later than end of June 2012.

76.         (Council Doc. 5891/11 ADD 2,
Annex 9, §4, page 29) The Council invites the Commission to improve
the application assessment procedure, for instance by further developing the
assessment handbook for evaluators, and by evaluating the cost effectiveness of
assessment checks on applications when conducting its quality and impact
monitoring visits to participating countries - Inform the Council no later than
June 2012 of the progress made in implementing these recommendations.

Commission's
response:

The
Commission accepts the request. The Commission is working on further developing
the assessment handbook for evaluators in connection with the new on-line
application and revised assessment form.

The
Commission will inform the Council about the progress in implementing this
recommendation no later than end of June 2012.

77.         (Council Doc. 5891/11 ADD 2,
Annex 9, §4, page 29) The Council invites the Commission to improve
its quality and impact monitoring system, and coordinate this with the annual
activity reporting currently carried out by the national agencies, whilst
endeavouring to avoid any increase in their workload - Inform the Council no
later than June 2012 of the progress made in implementing these
recommendations.

Commission's
response:

The
Commission accepts the request. The principles for quality and impact
monitoring visits, including visit checklists and model feedback letters, are
currently being reviewed. One element of this review is the need to integrate
follow-up of Yearly NA reporting into the visits and, when necessary, the
feedback letters.

The
Commission will inform the Council about the progress in implementing this
recommendation no later than end of June 2012.

78.         (Council Doc. 5891/11 ADD 2,
Annex 9, §4, page 29) The Council invites the Commission to align
the structure of the work programme and the annual report, so as to enable a
comparison of results against planned performance - Inform the Council no later
than June 2012 of the progress made in implementing these recommendations.

Commission's
response:

The
Commission accepts the request. An internal working group of DG Education and
Culture revised the requirements and form of the Yearly National Agency Report
in the second quarter of 2011. The revised report is now in line with the
structure and content of the National Agency work programme revised for 2011.
As a consequence the Yearly NA Report on the year 2011 (to be received by the
Commission in 2012) will allow meaningful comparison of results against planned
performance.

The
Commission will inform the Council of the progress no later than end of June
2012.

79.         (Council Doc. 5891/11 ADD 2,
Annex 9, §4, page 29) The Council invites the Commission to explore
options for ensuring a user-friendly and effective partner-search tool designed
to facilitate the placement of foreign participants - Inform the Council no
later than June 2012 of the progress made in implementing these
recommendations.

Commission's
response:

The
Commission partly accepts the request. The Commission discontinued its previous
partner finding database due to quality assurance problems. While alternative
solutions to partner search mechanisms are currently being analysed, the
Commission emphasises that the lack of a partner search database, for instance,
does not interfere with the successful implementation of the programme, as the
demand by far exceeds the budget available to support Leonardo mobility
projects.

No tool
will be developed for the current programme generation but the possibility will
be considered as part of the preparation of the new programme generation.

The
Commission will inform the Council about the progress in implementing this
recommendation no later than end of June 2012.

Special Report
No. 7/2010 "Audit of the clearance of accounts procedure"

80.         (Council Doc. 5891/11 ADD 2,
Annex 11, §4, page 32) The Council underlines that the respective
roles and responsibilities of the different parties involved should, where
needed, be more clearly defined in the relevant regulations, rather than in
guidelines.

Commission's
response:

The
Commission is taking the requested action.

The
respective roles and responsibilities of the different parties involved will,
where needed, be more clearly defined in the post 2013 COM Regulation.

81.         (Council Doc. 5891/11 ADD 2,
Annex 11, §5, page 32) The Council stresses that flat-rate
corrections, based on an estimation of the real financial risk to the European
Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development,
based on categories of weakness in the controls, should only be applied as the
third and last option, where calculating the amount of the financial correction
on the basis of individual irregular payments or on the basis of an
extrapolation of the results of examination of a representative sample of
transactions is impossible or not cost-effective.

Commission's
response:

The
requested action has been taken.

The
principles for the calculation of financial corrections recommended by the
Council are already included in the Commission guidelines from December 1997
(Doc. VI/5330/97).

The
Commission has indicated to Member States that if their certification bodies
fully re-perform a representative sample of transactions which the paying
agency has checked on-the-spot and, on this basis, confirm the reliability of a
Member State's control statistics, then the Commission will accept that the
resulting error rate represents the maximum risk possible and that any
financial corrections for the year in question will not exceed that level.

82.         (Council Doc. 5891/11 ADD 2,
Annex 11, §6, page 32) The Council encourages the Member States as
well as the Commission to continue to work together in order to obtain a
reduction in the time needed to complete conformity clearance procedures and
with a view to establishing the real financial risk to the Funds.

Commission's
response:

As to the
first part of the recommendation, the Commission is taking the requested
action.

DG AGRI's
Annual Management Plan 2011 includes targets for the reduction in the time
needed to complete conformity clearance procedures. In particular, all audits
carried out in 2008 and before should be closed by 31 December 2011.

As to the
second part of the recommendation, the Commission has taken the requested
action.

The
Commission has indicated to Member States that if their certification bodies
fully re-perform a representative sample of transactions which the paying
agency has checked on-the-spot and, on this basis, confirm the reliability of a
Member State's control statistics, then the Commission will accept that the
resulting error rate represents the maximum risk possible and that any
financial corrections for the year in question will not exceed that level.

Requests
concerning agencies/bodies

83.         (Council Doc. 5892/11 ADD 1,
Annex 1, par 2, page 5) The Council notes the Court's observation
that the Agency has not received a budget since 2008, whereas, according to the
Treaty establishing the European Atomic Energy Community, it should have
financial autonomy, and the Court's opinion that the Commission and the Agency
should take measures to regularise this situation.

Commission's
response:

In April
2011 the Commission adopted its proposal for the 2012 draft budget. This
included a contribution of €98000 for the Euratom Supply Agency.

Requests
concerning executive agencies

84.         (Council Doc. 5893/11 ADD 1,
Annex 2, par 2, page 7) The Council notes with concern that,
similarly to previous years, the Executive Agency's initial budget for 2009 was
reduced by almost 11 % in the fourth quarter mainly due to overestimated staff
needs. It invites both the Executive Agency and the Commission to adopt a more
realistic and effective approach when planning activities and related
resources.

Commission's
response:

The
initial 2009 budget was based on estimated staff numbers for the full year
indicated in the financial statement of the Commission decision to extend the
Agency's tasks. Staff was recruited according to the successively expanding
needs to cover the tasks handed over from the parent Directorates-General.

The Agency
informed the Commission that it has improved their forecasts. The Commission
will closely monitor the progress made.

Requests
concerning joint undertakings

85.         (Council Doc. 5894/11 ADD 1,
Annex 3, par 4 and 5, page 10) "The Council takes note of the
Joint Undertaking's intention to put in place an internal auditing function and
encourages it to clarify roles and tasks within its internal control system.
Finally, in line with the Court's comment in this respect, the Council calls on
the Commission to provide clear guidance to the Joint Undertaking on
harmonising the presentation of members' contributions in the accounts".

Commission's
response:

According
to art. 185 (3) of the Financial Regulation, in 2010 the Internal Audit Service
(IAS) of the Commission has declared itself as the internal auditor of the
ARTEMIS JU (ref. Ares 2010/826290).

The
Governing Board of ARTEMIS has adopted in 2010 the internal audit service
charter of the IAS (Artemis GB-2010-D.24). The IAS has started a risk analysis
process together with ARTEMIS.

ARTEMIS
has changed the presentation of the members' contributions in the 2010 accounts
(accounting rule number 1), taking into account all the recommendations of the
Court of Auditors.

[1]               For each specific recommendation a reference is given
to the relevant Council document: document references 5891/11 ADD 1 and 2,
5892/11 ADD 1, 5893/11 ADD 1, 5469/11 and 5894/11 ADD 1, published on http://www.europarl.europa.eu/activities/committees/editoDisplay.do?language=EN&id=2&body=CONT