EUROPEAN COMMISSION Brussels, 30.9.2016 SWD(2016) 322 final COMMISSION STAFF WORKING DOCUMENT Annual Internal Audit Report for 2015

Summary of the engagements finalised by the IAS within the 2015 audit plan Accompanying the document Report from the Commission to the European Parliament and Council Annual Report on internal audits carried out in 2015 (Article 99(5) of the Financial Regulation) {COM(2016) 628 final}



Contents Content of this annex: PART 1: Final reports 1. Horizontal audits 1.1. Audit on the effectiveness of the management of absenteeism in the Offices (OIB, OIL, PMO) 1.2. Audit on the objective setting process in the context of the preparation of the annual management plans 1.3. Audit on the adequacy and effective implementation of DG's Anti-Fraud Strategies 2. Agriculture, natural resources and health 2.1. Audit on the design of DG AGRI's management and control systems for greening 2.2. Audit on DG AGRI's management of the approval process of the 2014-2020 Rural Development Programmes (RDPs) 2.3. Audit on payment suspensions and interruptions in the 2014-2020 Common Agricultural Policy framework 2.4. Gap analysis on new legislation/design of 2014-2020 programming period of European structural and investment funds Phase 2 in DG MARE 2.5. Audit on the management of grants under 2014-2020 Consumer and health programmes in CHAFEA 2.6. Audit on DG's CLIMA and ENV's externalisation to EASME of the life programme 2014-2020 3. Cohesion 3.1. Audit on the monitoring of the action plans for unfulfilled Ex-ante Conditionalities in DG REGIO and DG EMPL 3.2. Limited Review of the calculation and the underlying methodology of the residual error rates for the 2014 reporting year in DG EMPL 4. Research, energy and transport 4.1. Audit on H2020 grant management in DG CONNECT: from the preparation of the work programme to the signature of the grant agreements

4.2. Audit on the participant guarantee fund for FP7 and H2020 in DG RTD, DG ECFIN and ERCEA 4.3. Audit on the governance and supervision of the nuclear decommissioning assistance programmes in DG ENER 4.4. Audit on the supervision on the implementation of CEF in DG ENER 4.5. Audit on strategic planning and programming / activity based management in JRC 4.6. Audit on the supervision on the implementation of CEF in DG MOVE 4.7. Audit on the set-up of the Common Support Centre for H2020 in DG RTD 4.8. Audit on H2020 grant management in DG RTD: from the preparation of the work programme to the signature of the grant agreements 4.9. Audit on the management and control systems for the implementation of LIFE 2014-2020 in EASME 4.10. Audit on the preparedness of the management and control systems for the SME instrument in EASME 4.11. Audit on H2020 grant management in ERCEA: from the preparation of the work programme to the signature of the grant agreements 4.12. Audit on the preparedness of the management and control system for CEF and H2020 in INEA 4.13. Audit on the implementation of the Anti-Fraud strategy in REA 5. External actions 5.1. Audit on the design and implementation of EU trust funds 5.2. Audit on preparedness for the Instrument for Pre-Accession Assistance (IPA II) in DG NEAR 5.3. Audit on DG NEAR's control strategy 5.4. Audit on the management of the African Peace Facility 5.5. Audit on the adequacy and effective implementation of DG ECHO's Anti-Fraud strategy 6. Education and citizenship 6.1. Audit on DG HOME's preparedness for 2014-2020 legislation under shared management

6.2. Audit on the effectiveness and efficiency of the Erasmus+ control strategy in the Education, Audio-visual and Culture Executive Agency and in National Agencies (DG EAC) 6.3. Audit on the effectiveness and efficiency of the Erasmus+ control strategy in the Education, Audio-visual and Culture Executive Agency and in National Agencies (DG EACEA) 6.4. Limited review of the calculation and the underlying methodology of the residual error rates for the 2014 reporting year in DG EAC 7. Economic and financial affairs 7.1. Audit on the performance of DG GROWTH's supervision of ESA's implementation of GALILEO 7.2. Audit on financial and procurement management in DG TRADE 7.3. Audit on European trade defence instruments in DG TRADE 7.4. Audit on knowledge management in DG COMP 7.5. Consulting engagement on objective and indicator setting in the context of DG FISMA's management plan 8. General services 8.1. Audit on the support by EUROSTAT to the Europe 2020 strategy and the new Commission priorities 8.2. Risk assessment of the Joint Sickness and Insurance Scheme 9. IT audits 9.1. Audit on the management of local IT in DG COMP 9.2. Audit on IT security governance in the Commission (DG HR, DG DIGIT, SG) 10. Management letter 10.1. Common issues arising from IAS audits related to IT security matters PART 2: Follow-up engagements (summarised) 1. Follow-up audit on management of the security of EU ETS IT system in DG CLIMA and DG DIGIT – Multi DG 2. Follow-up audit on the charge-back process in the Commission – Multi-DG

3. Follow-up audit on the performance audit on the efficiency and effectiveness of the planning stage of the selection process - Multi-DG 4. Follow-up audit on control strategy implementation in DG AGRI 5. Follow-up audit on the Limited Review of DG AGRI's Residual Error Rate 6. Follow-up audit on IAC audits in DG ENV (Anti-Fraud Strategy) 7. Follow-up audit on the ENV-CLIMA SIAC audits on Anti-Fraud Strategy in DG CLIMA 8. Follow-up audit on IAC audits in DG SANTE 9. Follow-up of the Limited Review of the calculation and the underlying methodology of DG REGIO's residual error rates for the 2013 reporting year 10. Follow-up audit 1st Phase of DG EMPL performance measurement systems (EaSI) 11. Follow-up audit of IAC audits in DG REGIO 12. Follow-Up audit on DG REGIO Implementation of the 2007-2013 Programming Period 13. 1st Follow-up audit of IAC audits in DG EMPL (Business Continuity Procedures) 14. Follow-up audit on the implementation of FP7 control systems (including supervision of external Bodies) in DG RTD 15. Follow-up audit on the implementation of FP7 control systems (including supervision of external Bodies) in DG CONNECT 16. Follow-up audit on implementation of FP7 control systems in ERCEA 17. Follow-up audit on IAC audit of assets management in DG JRC 18. Follow-up audit on IAC audits in INEA 19. Follow-up audit on IAC audits in DG CONNECT 20. Follow-up audit on FPI control strategy 21. Follow-up audit on DG DEVCO: assurance building Process in EU Delegations 22. Follow-up audit on DG ECHO: financial management of Humanitarian Aid

23. Follow-up audit on DG ECHO: contribution agreements with UN Bodies and other International organisations 24. Follow-up audit on DG DEVCO: contribution agreements with UN Bodies and other International organisations 25. Follow-up audit on the IAC Audits in DG JUST (Audit on Procurement) 26. Follow-up audit on IAC Audits in DG EAC 27. Follow-up audit on Lifelong Learning Programme in EAC and EACEA 28. Follow-up audit on National Agencies – DG EAC 29. Follow-up audit on IAC audits in EACEA 30. Follow-up audit on HR management in response to the financial crisis in DG ECFIN 32. Follow-up audit on DG GROW IAC audits (1st batch: ex-MARKT audits) 33. Follow-up audit on DG MARKT's (FISMA's) cooperation with the three Supervisory Bodies on Financial Services 34. Follow-up audit on HR management in response to the financial crisis in DG FISMA 35. Follow-up audit on IAC audits – DG FISMA 36. Follow-up audit on IAC audit on document management in DG TRADE 37. Follow-up audit on enforcement in the context of multilateral and bilateral trade commitments 38. Follow-up audit of the IAC Audit on management of the income process for the childcare activities in the OIB 39. Follow-up audit on management of local IT in DG ESTAT 40. Follow-up audit on the administrative processes supporting the European Semester 41. Follow-up audit of PMO IAC Audits 42. Follow-up audit on SCIC IAC Audits 43. Follow-up audit of the IAC audit on "Risk Management in the Secretariat General"

44. Follow-up audit on handling of sensitive information in the Legal Service 45. Follow-up audit on monitoring of security as managed by ADMIN-DS (HR Security) – new security rules 46. Follow-up audit on management of local IT in PMO 47. Follow-up audit on the management and supervision of contracts for the outsourced IT Services (IT contract management) 48. Follow-up audit on Official Journal managed by Publications Office 49. Follow-up audit on DG DEVCO: procurement under decentralised management mode 50. Follow-up audit on IAC IT recommendations 51. Follow-up audit on DG MARE local IT List of follow-up audits performed in 2015 for which all recommendations have been closed after the follow-up PART 3: Summary of long outstanding recommendations as at 31 January 2016



Content of this STAFF WORKING DOCUMENT: Part 1 of this SWD contains the objective and scope, key findings and the critical and very important recommendations of the IAS engagements which were part of the 2015 IAS audit plan (cut-off date for the exercise: 31 January 2016). Important and desirable recommendations are not reproduced in this SWD. The information contained in this SWD reflects the state of play when the audit engagements were finalised as stated in the executive summary of the audit report. Each executive summary underwent the applicable standard professional validation and contradictory procedures between auditor and auditee at the time of the finalisation and aims to provide a quick understanding of the audits and their main results. Part 2 of this SWD contains a summary of the IAS follow-up engagements in the period from 1 February 2015 to 31 January 2016. Part 3 provides a summarised overview of the 32 long overdue very important recommendations as at 31 January 2016. The cut-off date for this SWD is 31 January 2016. Services continued to improving their organisation and have implemented several IAS-recommentations since this cut-off date. Several recommendations had been implemented since this cut-off date but are not considered as such in this report. PART 1: Final reports 1.Horizontal audits

1.1.Audit on the effectiveness of the management of absenteeism in the Offices (OIB, OIL, PMO) Audit objectives and scope The overall objective of the audit was to assess the effectiveness of the processes in place for the management of absenteeism (i.e. sickness absences) in the Offices. The scope of the audit covered: The overall framework created by DG HR (in its central role) to facilitate the various aspects of managing sickness absences by the DGs/Services/Offices (e.g. providing guidelines, training for managers and local HR staff, HR information systems for recording, monitoring and reporting on sickness absences); The measures implemented in the three Offices (OIB, OIL and PMO) to prevent, detect and cope with the consequence of the sickness absences. There are no observations/reservations in the 2014 Annual Activity Reports (AAR) of the DG and Offices covered by the engagement that relate to the area/process audited. The fieldwork was finalised on 10/07/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues: Measurement, analysis and reporting on sickness absence level (Report finding N° 1, Report finding N° OIB 1, Report finding N° OIL 1, Report finding N° PMO 1) At the Commission level, the sickness absence rate is not supported by the necessary indicators or information that would allow for a more comprehensive overview of the issue and of the different factors which give rise to sickness absences. The existing reports only provide brief and high level information on the factors which contribute to the current sickness absence level, with no additional explanations on the possible correlation among different factors (such as staff structure by age, gender, status), analysis of the trends observed or a description of the impact of the sickness absence rate and the actions implemented to reduce it. The corporate IT reporting tools do not provide detailed statistics on sickness absences (by stratifying the population according to pre-defined criteria), nor do they provide information enabling the local HR units to identify unusual absence patterns. This is despite the availability of a significant amount of raw data. At the operational level, despite the fact that management are aware of the most significant factors influencing the sickness absence, there is no formal assessment linking these factors and their impact on the absence level and the extent to which they can be managed locally. Identification of the reference sickness absence rate (Report finding N° 2, Report finding N° OIB 1, Report finding N° OIL 1, Report finding N° PMO 1) Currently the main indicator to measure sickness absence both at corporate and at operational level, is the average sickness absence rate at the Commission. It represents an ex-post measurement of the existing situation. It is not a reference rate based on an in-depth analysis of the main factors influencing the sickness absence level , the direct and indirect cost of the absences and the benefits of possible mitigating measures. Neither DG HR nor the Offices have undertaken a comprehensive analysis leading to an estimate of the medium to long-term reference sickness absence rate (at Commission and at local level), on which to base an assessment of the current situation, the possible gap (if any), and the cost-effectiveness of the measures to address it. In addition, there is no assessment of the overall (internal and external), cost of sick leave. Verification of sickness absences by the Medical Service (Report finding N° 4) Currently, there is no harmonisation of medical verifications between the main working sites of the Commission (i.e. Brussels, Luxembourg, Ispra). Significant differences exist with regard to the type of controls performed (i.e. on the premises of the Commission, at the home of staff), the timeliness of verifications and the staff coverage achieved.

In addition, the decision as to which absences should be verified is left to the professional judgement of the doctors who do not have a set of objective criteria to support their screening of the very high number of certificates received each day. The use of objective criteria could ensure a more consistent approach among doctors and between the three working sites of the Commission. Recommendations To address this issue, the IAS formulated the following recommendations: Measurement, analysis and reporting on sickness absence level The IAS recommend that DG HR should improve the measurement, analysis and reporting on sickness absences by complementing the existing annual sickness absence rate with other relevant indicators and by performing a comprehensive and detailed analysis of the individual and organisational factors which can influence the sickness absence level. DG HR should also further enhance the existing IT tools (e.g. HR Analytics platform), to enable an automated analysis to be made of data so as to identify sickness patterns, against more detailed analysis of the Commission's population (according to pre-defined criteria). At the operational level and on the basis of more detailed data provided centrally, the Offices (OIB, OIL and PMO) should perform a comprehensive analysis of the sickness absences in their own organisations with the aim of identifying concrete, cost-effective measures to reduce their local level of sickness absence. Identification of the reference sickness absence rate The IAS recommend that DG HR should (on the basis of comprehensive and detailed analysis of the individual and organisational factors), identify a reference of the sickness absence rate, which should be used as the internal benchmark for the Commission to objectively highlight areas of possible concern. In a second stage, DG HR should define, in cooperation with the DGs/Services a reference rate of sickness absence for families of DGs (defined on the characteristics of their population such as staff age, status of staff, in addition to the current definition by type of activities). At the operational level, and using guidance and data provided by DG HR, the Offices (OIB, OIL, PMO) should identify their own reference rate of sickness absence, based a comprehensive analysis of the particular individual and organisational factors existing in those Offices. Verification of sickness absences by the Medical Service The IAS recommend that DG HR should increase the availability of doctors in certain working sites and contract medical control services from external providers in order to harmonise the verification capacity of the Medical Service. DG HR should also ensure that the professional judgement of the doctor as regards the selection of cases for verification by the Medical Service is supported by objective criteria. The criteria adopted should ensure that the selection process ensures adequate coverage of the whole population (by DG/Service, by duration of absence), together with ensuring a more consistent approach both among the doctors and between the working sites. The audited services have established action plans which the IAS considers satisfactory to address the recommendations. 1.2.Audit on the objective setting process in the context of the preparation of the annual management plans Audit objectives and scope The overall objective of the audit was to assess the effectiveness of processes in place regarding the setting of objectives and performance indicators in the context of the preparation of Management Plans (MPs) with the aim of identifying possible improvements as well as good practices amongst individual DGs. The audit followed a multi-tier approach covering: At corporate level: the overall framework created by SG and DG Budget to support the DGs/Services to set objectives and performance indicators when preparing their MPs; At operational DG level: the process of setting objectives and performance indicators, the quality of the objectives and indicators and the provisions put in place to monitor their achievements; At Agency level: whether the objectives set by the Executive Agency are in line with the objective of its parent DGs. The audit was conducted in the SG and DG BUDG for their central role as well as in seven operational DGs/Services (DG CLIMA, DG CONNECT, DG DGT, DG ECHO, DG HOME, DG JUST, DG MARE) and one Executive Agency (Executive Agency for Small and Medium-sized Enterprises (EASME)).

The audit covered the process of setting objectives and indicators for the 2015 MP. There are no observations/reservations in the 2014 Annual Activity Reports (AARs) of the sampled DGs that relate to the area/process audited. The fieldwork was finalised at the end of September 2015. All observations and recommendations relate to the situation as of that date. Post-audit event: the central services have in the meantime carried out a comprehensive overhaul of the strategic planning and programming cycle, which resulted notably in new instructions for the planning documents in November 2015. The IAS has not yet carried out a follow-up audit. Major audit findings The IAS has identified the following three very important issues: Set of instructions (Report finding N° 1) The set of instructions developed by the Central Services is the main tool to adequately guide the DGs/Services in the process of setting their objectives and indicators and to ensure coherence amongst DGs/Services. Currently, the complex structure of the set of instructions, the lack of clarity and proper guidance on key areas and their storing in several repositories, do not ensure that the staff involved in the process of setting of objectives and indicators adequately understand the main concepts and requirements. In this respect, the IAS observed differences between the objectives and indicators (and the MPs) set by the DGs audited in terms of number, granularity and quality of the information provided, affecting the readability and comparability of the DGs/Services' MPs. The IAS observed that the objectives in the MPs are often set at a level which is too high to be able to capture the day-to-day work, impairing the use of the MPs as a management tool. Quality of individual objectives and indicators (Report finding N° 4 summarising Report findings N° CONNECT 3, N° HOME 2, N° JUST 2) Although the quality of the objectives is overall satisfactory, these are not sufficiently accompanied by RACER indicators and proper key performance information (data sources, baselines/milestones and targets) that would allow the DG to adequately measure and report on its performance. There is also no common understanding of the classification of the indicators as impact, result or output. Process for setting, monitoring and reporting of objectives and indicators (Report finding N° 5 summarising Report findings N° CLIMA 3, N° CLIMA 4, N° CONNECT 2, N° HOME 1, N° HOME 3, N° JUST 1, N° JUST 3) The process for setting objectives and indicators in the DGs/Services is not sufficiently described and supported by internal guidance to ensure that they are of an adequate quality. In addition, the decisions underlying the setting of indicators are not sufficiently documented. The IAS observed that the monitoring of the objectives set in the MP is not emphasised by the Central services in the instructions, despite being a key pillar of the performance framework. At DG level, management is not regularly provided with information on the progress made in achieving the objectives and indicators defined in the MP. In addition, information on the key characteristics of the indicators included in the MP (e.g. availability of data, data source to determine its reliability, unit in charge of the monitoring) are not available to enable the DGs/Services to assess whether each indicator can provide accurate, correct, complete, relevant and timely performance information necessary for a monitoring and reporting of appropriate quality. Recommendations To address these issues, the IAS formulated the following recommendations: Set of instructions SG should revise the instructions to add clarity and provide guidance in the areas not fully covered. SG should also streamline the structure of the set of instructions and ensure their timely availability in a limited number of repositories. Quality of individual objectives and indicators

DGs should improve the quality of the indicators to ensure that they enable an adequate measurement of the progress toward the objectives. Setting, monitoring and reporting of objectives and indicators SG should emphasise the importance of monitoring all objectives and indicators set in the MP in its instructions. The DGs/Services should provide sufficient guidance on the objective setting process, gather and update the key information on the indicators included in the MP and regularly report to the management on the progress towards the achievement of the objectives defined in the MP. Two very important recommendations were each partially accepted by DG HOME and DG JUST (thus a total of four recommendations). The audited services have established action plans which the IAS considers satisfactory to address the (partially) accepted recommendations. 1.3.Audit on the adequacy and effective implementation of DG's Anti-Fraud Strategies Audit objectives and scope The objective of the audit was to assess the effectiveness of the DG's Anti-Fraud Strategies (AFS) in ensuring adequate and effective implementation of governance, risk management and control processes for the prevention, detection and follow-up of fraud. The audit focused on the following main areas and addressed the corresponding sub-questions: Is there an effective oversight, coordination and provision of satisfactory support in place to ensure the delivery of an effective and comprehensive AFS across all expenditure areas of the Commission; Has the necessary advice, coordination and training been provided to DGs and services to establish and maintain and effective an efficient AFS across the Commission; Does the Commission satisfactorily address the issue of "non-financial fraud" in key policy sectors in its strategy; Have services firstly set up procedures and undertaken tasks that are necessary to implement the Commission AFS and thereafter put in place a robust AFS and supporting Action Plan tailored to the DG specific environment, activities and risks to timely and effectively prevent and detect fraudulent activities, and lastly, have they met other key Commission AFS Action Plan requirements; Was the preparation of the AFS by DGs supported by an adequate fraud risk assessment process; Has communication to management and staff of DGs on fraud risk management, ethics, and integrity been sufficiently complete and effective; Have DGs in managing their respective management modes taken the necessary steps to ensure that the Member States (MS) and other bodies receiving Commission funds have received appropriate advice on the nature and extent of their responsibilities and that these are being appropriately met and controlled? OLAF is responsible for the coordination and reporting on the implementation of the CAFS and has an ongoing role to provide services with advice, expertise, and the means to promote best practice within the Commission. Moreover, OLAF in the course of 2016 intends to examine the merits of a revised CAFS for the Commission, "CAFS2". The sampled DGs in addition to OLAF were bigger spending DGs such as DG EMPL, DG AGRI, DG DEVCO and DG NEAR. The IAS also included DG SANTE because fraud in this policy area might not only involve the EU financial interest but could also endanger the health and safety of EU citizens, animals or plants. There are no observations in the DGs' Annual Activity Reports (AARs) that relate to the process audited. The fieldwork was finalised on 31/01/2015. All findings and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues:

Integration of the DGs AFS into the internal control system (Report finding N°2) The IAS has identified weaknesses as to the design and implementation of AFS and governance, risk management and control process for fraud prevention, detection and follow-up of fraud. AFS in most of the selected DGs were based on standalone high-level fraud risk assessments that were not conducted in coordination with the annual risk management exercise, and the concerned DGs have not yet systematically addressed all potentially different fraud risks in all areas for which they are responsible nor weighed up the identified fraud risks with the internal control measures in place. Moreover, actions plans are not always supported by adequate performance measurement and reporting. The update of the AFS Guidance, is an opportunity for OLAF to significantly increase AFS effectiveness. Better coordination of the AFS (Report finding DG AGRI N°1) DG AGRI's AFS is not underpinned by the conduct of a separate or structured (top down/bottom up) fraud risk assessment. The AFS process has not been based on a specific fraud analysis following the OLAF Guidelines or on a screening of the Anti-Fraud measures already in place. Only a small number of Units within the DG had been consulted on the preparation and update of the AFS. Furthermore, the AFS fraud risk assessment and the annual Risk Management exercise are distinct and separate exercises, leading to a lack of coordination and complementarity. Guidance on the conduct of forensic audits (Report finding DG DEVCO N°2) DG DEVCO has no standard terms of reference for forensic audits and has no detailed guidance on the management or conduct of such audits while a number of forensic audits have been undertaken in Delegations. Recommendations To address these issues, the IAS formulated the following recommendations: Integration of the DGs AFS into the internal control system OLAF should provide more guidance to the DGs on (i) how to further integrate the DGs AFS into their internal control systems including how to coordinate the high-level fraud risk assessments with the annual risk management exercise, (ii) the need to address systematically fraud risks in all areas and weigh up the identified fraud risks with the internal control measures in place, and (iii) the need to support the actions plans by adequate performance measurement and reporting. Better coordination of the AFS DG AGRI should better coordinate and integrate the work of the Anti-fraud Coordinator with the DG's annual risk management exercise and recommends a more clear reference to the guidance issued by OLAF and DG BUDG in respect of anti-fraud actions. Guidance on the conduct of forensic audits DG DEVCO, in consultation with OLAF, should immediately review the status and nature of forensic audits and investigations and thereafter as appropriate, agree on the detailed terms of reference and guidelines, including those for communicating with OLAF. The audited services have established action plans which the IAS considers satisfactory to address the recommendations. 2.Agriculture, natural resources and health 2.1.Audit on the design of DG AGRI's management and control systems for greening Audit objectives and scope The overall objective of this audit was to assess whether the processes put in place by DG AGRI for managing and controlling the greening payment have been properly designed in order to effectively contribute to the DG's assurance building process regarding the adequate set-up and effective functioning of the Member State (MS) management and control systems and in order to effectively monitor the implementation of the Common Agricultural Policy's (CAP) greening component. The audit focused on the review of processes put in place by DG AGRI to monitor the correct design by MSs of the implementation of the greening payment. These processes include in particular the preparation and assessment of the notifications of the MS policy choices regarding greening, as well as the advice and support provided to MS. They aim at ensuring a smooth and correct implementation of the greening payment and at preventing, at an early stage, possible issues which may lead, later on, to higher error rates or recoveries in the clearance of accounts procedure.

As there has been no greening related expenditure yet, the 2014 Annual Activity Report (AAR) of DG AGRI does not include any reservations related to greening. However, it includes a reservation on direct payments with regard to 15 Paying Agencies covering six MS. In addition, in Annex 10 of its 2014 AAR , DG AGRI identified additional risks for the implementation of the reformed system of direct payments including risks related to greening. The IAS finalised the fieldwork on 08 June 2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues: Assessment of the notifications for equivalent practices (Report finding N° 2) MS can choose certain equivalent practices , substituting all or some of the greening requirements. These equivalent practices shall yield equivalent or greater benefit for the environment and are listed in Annex IX to the Direct Payment Regulation . The Commission has to assess within seven months of being initially notified whether these practices are indeed covered by Annex IX. If not, then the Commission rejects them through implementing acts. Five MS notified equivalent practices which were all deemed to be covered by Annex IX to the Regulation and therefore accepted through a Commission decision, even though DG AGRI's assessment had showed that further modifications were still required for some of them to be fully compliant. Indeed the implementing act did not grant DG AGRI the possibility to use a "stop the clock" procedure where MS did not address all the issues raised by the Commission in a satisfactory manner and within the statutory deadlines. Following the Commission decision, DG AGRI sent letters to MS requesting the outstanding changes, but has not yet defined a procedure on how to follow-up whether these issues have been satisfactorily dealt with in practice at the end of the assessment process. Risk of double funding between greening measures and rural development programmes with regard to agroforestry and afforested areas (Report finding N° 4) According to the legislation governing greening payments , the list of possible Ecological Focus Areas which can be funded under greening includes agroforestry land as well as afforested areas, which also receive support under the European Agricultural Fund for Rural Development (EAFRD). However, expenditure funded under the EAFRD shall not be the subject of any other financing under the Union's budget . Furthermore, contrary to other EAFRD measures which could also be possibly subject to double funding with the greening requirements, for measures regarding agroforestry and afforested areas, the rural development legislation does not include any provisions for reducing payments in order to avoid double funding occurring in practice. In addition, the IAS noted that there is a lack of detailed guidance to MS on how to exclude double funding between EAFRD measures for agroforestry and afforested areas and the greening payment, especially regarding agroforestry systems. Improving/clarifying the greening requirements (Report finding N° 6) The greening payment is based on very complex eligibility criteria, which entails a risk of high error in the underlying transactions as well as considerable administrative burden for the MS. Furthermore, in the IAS's view, a clear added value for the environment may not always be demonstrated. The IAS has identified a number of specific complex/ambiguous issues which could easily lead to errors and which could be simplified/clarified through modifications to the Delegated Regulations and Implementing Regulations. In particular, these concern the need to clarify the eligibility criteria and options open to MS regarding greening, overlaps between the rules concerning cross-compliance and greening and the extent to which certain EFAs can be controlled in practice. The IAS noted that as part of the Regulatory Fitness and Performance Programme (REFIT) a simplification process on the CAP legislation, including greening, is currently ongoing: the Commissioner for Agriculture and Rural Development has announced that the rules for greening would be reviewed in early 2016 after one year of implementation. Recommendations To address this issue, the IAS formulated the following recommendations: Assessment of the notifications of the equivalent practices DG AGRI should finalise the procedure for assessing equivalent practices and ensure the necessary follow-up of issues outstanding at the end of the assessment process. In order to better manage future MS notifications for equivalent practices, it should also consider the possibility to introduce a "stop the clock" procedure in the implementing act. Double funding between greening measures and rural development programmes with regard to agroforestry and afforested areas DG AGRI should prepare detailed guidelines for the MS on how to ensure the exclusion of double-funding between support for afforested areas and agroforestry systems measures under the EAFRD and the greening payment.

Improving/clarifying the greening requirements DG AGRI should work together with the MSs and other stakeholders to further identify areas where it might be feasible to make clarifications/simplifications in the short term. It should then monitor closely how greening requirements are being implemented in practice by MS and examine the scope for further simplification/clarification, particularly in the framework of the review of the rules for greening planned after one year of implementation. The audited service has established an action plan which the IAS considers satisfactory to address the recommendations. 2.2.Audit on DG AGRI's management of the approval process of the 2014-2020 Rural Development Programmes (RDPs) Audit objectives and scope The overall objective of the audit was to assess whether DG AGRI's management of the approval process of the RDPs is effective and efficient in ensuring the timely adoption of quality RDPs. The audit covered the processes put in place by DG AGRI in order to assess and approve the draft RDPs. Horizontal aspects such as guidance, supervision, monitoring and reporting; supporting IT systems as well as the overall efficiency of the process (e.g. delays, workload) were also covered. The audit took particular account of the new results-based focus, which is a main feature of the new 2014-2020 period. The audit also considered political expectations regarding further simplification and reduction of red tape. The 2014 Annual Activity Report (AAR) of DG AGRI does not include any reservations in the AAR related to the RDP approval process. However, DG AGRI 2014 AAR contains a reservation concerning 2014 Rural Development expenditure (ABB04), i.e. relating to the 2007-2013 programming period. This reservation covers 28 paying agencies, 16 Member States (MS) and corresponds to an actual amount at risk of EUR 532.5 million. The fieldwork was finalised on 12/06/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues: Efficiency of AGRI's organisation for the assessment and approval of RDPs (Report finding N°1) In most cases, the Commission's observations letters on the draft RDPs were adopted only after the 3-month deadline set in the regulation. The IAS recognises that this situation was in part a consequence of resource constraints and in part a consequence of the late adoption of the applicable regulations. This resulted in certain draft RDPs being of low quality and needing to be further improved. Nonetheless, the IAS considers that DG AGRI could better optimise the use of its resources and further improve its planning and monitoring processes. In particular and in view of the likely scale of the RDP amendments which it will inevitably have to deal with in the coming months, it will be essential to have in place strong planning and monitoring processes, which build on the lessons learnt during the approval phase. Ex-ante conditionalities and performance (Report finding N° 3) A key feature of the 2014-2020 programming period is the move towards a greater focus on performance through, on the one hand, the assessment of Ex-ante Conditionalities (ExAC) and on the other, the set-up of a performance framework with the use of appropriate indicators. The IAS noted some weaknesses in the assessment of certain ExAC as well as the need for enhanced coordination between the European Structural and Investment Funds (ESIF) DGs for the follow-up of the resulting MS action plans. Certain weaknesses were also noted as regards indicators, particularly when specific definitions of rural areas are used. The need for better regulation (Report finding N° 5) The sheer complexity of the regulatory framework means there is an inherent risk of errors in the underlying transactions as well as considerable administrative burden for the MS. The administrative complexity is compounded in cases where there are similar funding instruments in 1st pillar and 2nd pillar. This includes, for example, the payment for agricultural practices beneficial for the climate and the environment and the agri-environment and climate measures, which often require sophisticated management measures and controls to avoid double funding. In addition, the IAS noted that the parts of the regulations covering the performance focus have been formulated in such a way which leaves them open to considerable interpretation that could in turn dilute rather than strengthen their intended impact. Recommendations To address these issues, the IAS formulated the following recommendations: Inadequate RDP amendments procedure

DG AGRI should approve the new procedure for dealing with amendments, reinforce the overall scheduling, ensure there is real-time monitoring and reporting at central level and make sure the necessary resources are redeployed based on a workload assessment to reduce as far as possible any delay. Adequate assessment and monitoring of ex-ante conditionalities DG AGRI should ensure that all applicable ExACs are adequately assessed by, for example, developing a practical template to be used internally. Additionally, DG AGRI should liaise with the other ESIF DGs to finalise and adopt a procedure for monitoring the Action Plans to fulfil ExACs, with a clear allocation of roles and responsibilities between the various ESIF DGs. Complexity of regulation In the short term, DG AGRI should continue its efforts to encourage MS to choose straightforward options (e.g. use of simplified cost options, clear eligibility rules for projects, etc.) as well as to collect information on the costs of control in the MS. It should also closely monitor the implementation of the programmes to help address in advance potential cases of double funding, including carry-over of agri-environmental contracts concluded before 2012. In the longer term (i.e. for future programming periods), it should ensure that any future transitional arrangements are proportionate and do not overly impact on the new programming period. There is also a need to review whether it remains appropriate to have similar funding instruments under both pillars of the Common Agricultural Policy (and hence tackle more fundamentally the risk of double funding). The audited service has established an action plan which the IAS considers satisfactory to address the recommendations. 2.3.Audit on payment suspensions and interruptions in the 2014-2020 Common Agricultural Policy framework Audit objectives and scope The overall objective of the audit was to assess whether DG AGRI has effectively managed the processes for interrupting, suspending and/or reducing payments in accordance with the 2014-2020 Common Agricultural Policy legal bases. The audit covered DG AGRI's management of interruptions, suspensions and reductions, which are applied in case of deficiencies in Member States' (MS) management and control systems and/or risk of irregular expenditure, in accordance with the following legal provisions: For interruptions of interim payments of the European Agricultural Fund for Rural Development (EAFRD), in accordance with Art. 36.7 of R1306/2013 ("Horizontal Regulation" or "HZ"), which refers to Art. 83 of the Common provisions regulation (CPR ) and Art. 22.4 of the implementing regulation R908/2014 ; For suspensions and reductions of interim payments (EAFRD) or monthly payments (EAGF), in accordance with Art. 41 HZ. The IAS audit took place at an early stage of DG AGRI's application of this new regulatory framework. Hence, the number of interruptions, suspensions and reductions applied so far has been relatively limited. The focus of the IAS’ work was therefore in practice largely on the systems and procedures put in place by DG AGRI, with a view to identifying possible improvements. There are no observations/reservations in the DG's 2014 Annual Activity Report (AAR), which relate to the area/process audited. The fieldwork was finalised on 9/11/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues: Legal basis (Report finding N° 1) There is a lack of consistency in the wording and scope of Art. 22.4 R908/2014 with the provisions of Art. 83 CPR, and, as a result, in how payment interruptions are implemented in practice, for example with respect to the period of the interruptions and the level at which they have been approved. Concerning suspensions/reductions, there is also a lack of consistency in the interpretation and application of Art. 41.1 HZ and 41.2 HZ.

Internal guidance and procedures (Report finding N° 2) DG AGRI's internal guidance and procedures do not sufficiently clarify how to interpret the provisions for interrupting, suspending and/or reducing payments in a consistent manner. In addition, further criteria were not developed to guide decision-making, notably in relation to the assessment of the seriousness/gravity of the deficiencies identified and when requesting action plans in the context of suspensions/reduction procedures. Application of guidance and procedures (Report finding N°3) For the EAFRD, compliance with the 45-day payment deadline has not been achieved in certain cases when payments were interrupted for short periods only and then followed by a reduction/suspension procedure. Furthermore, different practices exist for recording the end of the period of interruption ("stop-the-clock procedure") and procedures are not always applied in the most efficient manner. With respect to suspensions/reductions under Art. 41.2, used in case action plans are not sufficiently implemented, there is a lack of consistency in the approach followed for the two pillars in requesting action plans from the MS. Furthermore, the overall time it takes between the various steps to request an action plan under Art. 41.2 and to take a final decision on reduction/suspension has been rather long. Recommendations To address these issues, the IAS formulated the following recommendations: Legal basis DG AGRI should clarify the scope of application of Art. 22.4 R908/2014 in relation to Art. 83 CPR and consider whether the drafting of Art. 22.4 should be reviewed. The DG should also consult the Legal Service in order to: i) confirm DG AGRI's interpretation on the application of Art.41.1 for the first pillar, and, ii) clarify when to apply Art. 41.1 and 41.2 for the second pillar. Internal guidance and procedures DG AGRI should update its internal guidance and procedures and clarify the interpretation of the applicable regulatory framework for each pillar as well as outline criteria for proposing interruptions and suspensions/reductions (including a de-minimis approach). Furthermore, for pillar 2, DG AGRI should explain in a clearer way when to request action plans in the context of Art. 41.2 and, in particular, how these relate to the corrective action plans resulting from AAR reservations. Application of guidance and procedures In the case of significant deficiencies or irregularities, DG AGRI should use Art. 83 CPR as a legal basis in view of the longer maximum period for interrupting so as to allow finalising the suspension/reduction procedure within the 45-day payment deadline. In this respect, the registration of the time of the interruption (“stop the clock” process) should be fully consistent between the different units. Finally, the procedures should be applied in the most efficient manner. With respect to the application of Art. 41.2 for reductions/suspensions, DG AGRI should ensure more consistency when requesting action plans, notably by referring to the possible use of Art.41.2 (b) at all stages of the process. It should also try to reduce the time taken between the various steps leading to a reduction/suspension decision, where this relates to a failure to implement adequately an action plan. The audited service has established an action plan which the IAS considers satisfactory to address the recommendations. 2.4.Gap analysis on new legislation/design of 2014-2020 programming period of European structural and investment funds Phase 2 in DG MARE Audit objectives and scope Phase 2 of the gap analysis aimed at a more in depth examination of the design and preparations for the management of the Multi-annual Financial Framework 2014-2020 programming period by DG MARE, and to the extent possible, its implementation in practice. In conducting phase II, the IAS clearly recognises that the development of the control architecture is very much an on-going process. The audit focused on the DGs' processes for: The negotiation, assessment and adoption of the Operational Programmes (OPs);

Guiding and supervising the set-up of the Member States' (MS) management and control systems. Particular emphasis was given to new elements of management and control systems as compared to the 2007-2013 programming period as well as aspects related to the results orientation of the 2014-2020 programming period. There are no observations/reservations in the 2013 Annual Activity Report (AAR) that relate to the area/process audited. The fieldwork was finalised on 30/01/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following four very important issues: Supervising MS' management and control systems (Report finding N° 1) Certain gaps need still to be addressed as regards the audit approach, both in terms of the European Structural and Investment Funds (ESIF) DGs' single audit strategy and DG MARE's own audit strategy for 2014-2015. Despite common areas, currently the approach as regards using other auditors' work for building-up assurance and/or conducting joint missions is not yet sufficiently developed and there is no inter-service agreement on cooperation between the audit services of the ESIF DGs for a single audit strategy for the programming period 2014-2020. There is little explanation as to how DG MARE will be able to rely on the work of the Audit Authority (AA) to obtain assurance. In addition, it is not clear how DG MARE's own specificities will be taken into account. Although the OP approval process has yielded key information on the MS' management and control systems, this has not yet been taken into account in the audit risk assessment for the DG's review of the designation package. Neither has the audit plan been updated to reflect the impact of delays in the late submission of the OPs. Also, due to inefficiencies in the underlying processes, the IAS found that DG MARE is not optimising its audit work at the OP approval stage to identify potential weaknesses in the MS' management and control systems. OP negotiation and adoption process (Report finding N° 2) There are delays in the OP adoption process, partly due to changes in the new Commission working methods, which have lengthened the consultation process. The respective roles and responsibilities of the various units involved in the process are not clearly defined. Guidance on how to prepare observations was only made available to staff once the IAS fieldwork was completed, with the result that observations sent to the MS were often not specific enough, inconsistent and in some cases even redundant. Furthermore, where observations have been provided to MS, the revised OPs often do not clearly demonstrate how those observations have been addressed, which can in turn hinder the DG's ability to effectively follow them up. Results orientation and performance framework (Report finding N° 3) A key feature of the 2014-2020 programming period is the shift to a performance framework and an essential part of any performance framework is the use of appropriate performance indicators. In line with the underlying legislation, the main focus was on getting the MS to use common indicators to assess progress in achieving policy objectives. However, in practice these are often poorly defined and whilst they can be useful for reporting in overall aggregate terms, they are not always relevant for certain specific measures and/or are by default not applicable in certain situations. The MS can include potentially more useful specific result indicators in the OP, but generally, the DG has not actively encouraged this. In addition, the information provided by the MS on the basis used to estimate the value of milestones/targets and the calculation method is of a very general nature only and there is currently no practical guidance available to desk officers on how to assess and negotiate with the MS on performance related issues in the draft OPs. The IAS found that in certain cases, weaknesses related to indicators and target setting in the draft OPs were not clearly reflected in the observations sent to the MS. Assessment of fulfilment of Ex- ante conditionalities (Report finding N° 4) The fulfilment of Ex-ante conditionalities (ExAC) constitutes a key part of the DG's assessment process as to whether an OP is fit for purpose and can deliver against policy objectives. However, the practices vary among the Units involved in the assessment and DG MARE has yet to further define the respective roles and responsibilities of the horizontal units as well as the approach for timely assessing whether certain conditionalities are met. The grids used to document the assessment are not sufficiently detailed and do not capture all the steps involved in the process. Furthermore, DG MARE currently does not have an overview of the overall state of play as regards unfulfilled ExAC across the OPs and the related MS' action plans. Recommendations To address these issues, the IAS formulated the following recommendations: Supervising MS' management and control systems DG MARE should further develop and clarify its audit strategy with respect to how it will obtain assurance on the reliability of the AAs and to what extent DG MARE could carry out joint audit missions and/or use other ESIF DGs' auditors' work for building-up assurance. Concerning the designation package review it should update the risk assessment and adapt its plan accordingly to take account of the latest information available as a result of the OP approval process. It should ensure that any weaknesses identified in the OPs as regards MS' management and control systems descriptions are properly reflected in the observations sent to MS. OP negotiation and adoption process DG MARE should establish more stringent target delays for the main steps of the process and carefully monitor the final phases before the OP's adoption, including the follow-up given to the Commission's observations. The DG should also clarify the respective roles and responsibilities of the units involved in the assessment process and ensure that any observations made are sufficiently clear and specific enough to form the basis for subsequent negotiations/discussions with MS.

Results orientation and performance framework DG MARE should develop guidance on the definitions for common indicators and on the checks to be performed by desk officers when assessing the plausibility of milestones/targets. It should also prepare guidance for MS on the use of specific indicators and look to ensure the quality of related information provided by the MS as regards target setting and/or the nature of projects, especially where baseline values are not included. Assessment of fulfilment of Ex- ante conditionalities DG MARE should clarify the respective roles and responsibilities of those involved in the assessment process, ensuring a common understanding of the approach to be taken and improve the template used, together with the underlying documentation. It should ensure the timely assessment of ExAC, update and communicate regularly to all the actors involved the latest state of play on unfulfilled conditionalities and related action plans and ensure an effective follow-up. The audited service has established an action plan which the IAS considers satisfactory to address the recommendations. 2.5.Audit on the management of grants under 2014-2020 Consumer and health programmes in CHAFEA Audit objectives and scope The overall objective of this audit was to assess the adequacy and effective application of the Internal Control System (ICS) related to managing grants under the new programming period (2014-2020) by CHAFEA. In particular, the audit assessed whether or not the ICS provide reasonable assurance regarding compliance with the relevant legislation and ensured sound operational management of the grant process. The audit focused on grant management under the Health and Consumer programmes by CHAFEA and covered the following sub-processes: Calls for proposals – preparation, approval and publication/dispatch; Evaluation – selection of experts, evaluation of proposals, adjustment of proposals, awarding decision and ex-post publication of the list of awarded grants; Contracting – transformation of the proposal into a grant agreement, respect of the deadlines; Payment – budgetary commitments and pre-financing; Ccommunication - provision of information to applicants and cooperation with and reporting to the parent DGs regarding grant management. CHAFEA's 2014 AAR contains no observations/reservations that relate to the processes audited. The fieldwork was finalised on 25/11/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following very important issue: Internal grant management procedures (Report finding N°1) Significant weaknesses exist concerning CHAFEA's documentation of internal grant management procedures, which is either incomplete, located across a range of documents or not up to date. The documentation of procedures does not yet cover certain key parts of the grant management cycle, such as monitoring the grant implementation and grants closure, or contain only limited instructions on specific issues, such as the prevention of double funding. This lack of comprehensive written procedures, compounded by factors outside CHAFEA's direct control and stemming from the respective work programmes, has resulted in a number of weaknesses concerning planning and documenting the evaluation process, addressing the risk of double-funding, and documenting key decisions when preparing grant agreements, including the non-retroactive award of grants, pre-financing rates and the reasons for waiving financial viability checks.

Recommendation To address this issue, the IAS formulated a recommendation which can be summarised as follows: Internal grant management procedures The Agency should update, finalise and consolidate the existing grant management procedures taking into consideration the requirements of the Financial Regulation and the functionalities of the Horizon 2020 ICT tools. The audited service has established an action plan which the IAS considers satisfactory to address the recommendation. 2.6.Audit on DG's CLIMA and ENV's externalisation to EASME of the life programme 2014-2020 Audit objectives and scope The overall objective of the current audit was to assess whether DG ENV's and DG CLIMA's externalisation arrangements with EASME are effective and efficient to support the achievement of the objectives of the LIFE 2014-2020 programme whilst ensuring sound financial management. The audit covered the externalisation of the LIFE programme 2014-2020 to EASME, in particular (1) the governance framework, the cooperation and coordination between the parent DGs and EASME and (2) the design and early implementation of the supervision framework. The 2014 Annual Activity Reports (AAR) of DG ENV and DG CLIMA do not include any reservations related to the externalisation process of the LIFE programme 2014-2020 to EASME. The IAS finalised the fieldwork on 11/09/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS did not identify any material risks that would give rise to critical or very important recommendations. 3.Cohesion 3.1.Audit on the monitoring of the action plans for unfulfilled Ex-ante Conditionalities in DG REGIO and DG EMPL Audit objectives and scope The overall objective of the audit was to assess, taking into account the 2014-2020 regulatory framework, whether DG REGIO and DG EMPL were adequately prepared to effectively and efficiently monitor and assess the implementation by the Member States (MS) of the action plans for partially fulfilled and unfulfilled ex-ante conditionalities (ExAC). The audit focused on the early stage of the monitoring process and the preparedness of DG EMPL and DG REGIO to deal with the wave of action plans which are expected to be implemented at the end of 2015 and in 2016. The audit scope included an assessment of the following four areas: The efficiency and the effectiveness of the coordination and monitoring at DG level and between DG EMPL and DG REGIO;

The efficiency and the effectiveness of the coordination and monitoring at unit level and between horizontal and geographical units as well as with line DGs; The adequacy of the management by the relevant units of the interaction with the MS, in order to support a timely and effective implementation of the action plans related to partially fulfilled and unfulfilled ExAC, while considering reducing unnecessary regulatory burden; The robustness of the decision making process of the ExAC Suspension Committee, i.e. the suspension of payments at Operational Programme (OP) adoption in case of significant prejudice triggered by the non-fulfilment of the ExAC by the MS. In addition, in the light of the recent Commission Decision on Better Regulation issued on 19 May 2015, the audit took account of the regulatory burden arising for MS in terms of fulfilling those plans and the Commission DGs in terms of monitoring their effective implementation. The fieldwork was finalised on 30 June 2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS identified the following two very important issues: Monitoring and reporting of unfulfilled Ex-ante Conditionalities (Report finding N° 1) The current monitoring and reporting arrangements are not sufficiently accurate as to how many actions/action plans have to be completed and by when and are therefore not considered as a reliable source of information for the different stakeholders in the organisation, in particular senior management. Better regulation principles and cooperation across the Commission services (Report finding N° 2) In addition, given the importance of the "better regulation" agenda, the IAS considers that the recently launched study on the use of new simplification provisions in the early implementation phase of the ESI funds provides an ideal opportunity for the DGs to assess the implications for MS authorities and beneficiaries of the potential burden imposed by the regulatory changes of the 2014 – 2020 programming period. However, the next steps (notably the implications of the potential costs and administrative burden deriving from the EU regulatory framework for MS and beneficiaries) have yet to be defined. Also, in view of the newly created "Structural Reform Support Service" in the Secretariat General, it is essential that there is effective cooperation across the Commission services in the future. Recommendations To address these issues, the IAS formulated recommendations which can be summarised as follows: Reporting and monitoring of Ex-ante conditionalities DG REGIO and DG EMPL should further improve their monitoring and reporting arrangements by, on the one hand, better and more streamlined reporting to senior management and, on the other, more focused and prioritised monitoring at the operational level. In particular, the quality of the reports to senior management should be improved, notably the criticality of the state of play of the action plans and, where relevant, the potential impact that delays may have on the actual implementation of the funds/OPs. Better regulation and simplification principles DG REGIO and DG EMPL should assess the implications for MS authorities and, if applicable, for beneficiaries of EU funds of the potential burden imposed by regulatory changes and make sure these are fed through to the 2014-2020 MFF mid-term review, together with preparations for the new programming. In addition, and depending on the precise role of the newly established Structural Reform Support Service, to avoid any potential inefficiencies or overlaps, the DGs should inform this new body as regards the monitoring and assessment of the implementation of ExAC action plans by the MS. The audited services have established a joint action plan which the IAS considers satisfactory to address the recommendations. 3.2.Limited Review of the calculation and the underlying methodology of the residual error rates for the 2014 reporting year in DG EMPL Audit objectives and scope

The objective of this engagement was to review the calculation and underlying methodology of the error rates and Cumulative Residual Risk (CRR) reported by DG EMPL in its (draft) 2014 Annual Activity Report (AAR), and in doing so, contribute to help mitigate the discharge risk enabling DG EMPL to take appropriate actions, if any, before their disclosure in the final AAR and in the Commission's Synthesis report. The limited review covered the following aspects related to the European Social Fund (ESF) 2007-2013 : The methodology for the calculation of the error rates and CRRs for the 118 Operational Programmes (OP) and the 2014 annual error rate (DG level) under the ESF 2007-201; The calculated CRR (at OP and DG level); The presentation of the error rates and CRRs in the draft 2014 AAR (including compliance with the Standing Instructions for the 2014 AAR). The IAS reviewed the revised draft 2014 AAR transmitted by DG EMPL to the Central Services on 3 March 2015 and the error rates and CRR calculations up to that date. As DG EMPL's CRR calculation tables were updated on an on-going basis until the draft AAR was issued, all data reported in the draft AAR and reviewed by the IAS were still provisional as at 3 March 2015. The IAS fieldwork was finalised on 6 March 2015. All observations and recommendations relate to the situation as of that date. However, the IAS also reviewed DG EMPL's final AAR (issued on 31 March 2015, subsequent to the IAS' draft report being sent on 26 March 2015) to assess whether IAS recommendations related to the 2014 reporting year have been taken into account in the final AAR. Major audit findings Given the nature of this engagement, no audit opinion was formulated. However, the review made three very important findings related to: The error rate and CRR calculation process (Report finding N° 1) The IAS acknowledges the inherent risks, some deriving from limitations due to the regulatory framework, impacting on the accuracy and reliability of the information reported by Member States (MS) authorities. Notably, error rates related to the previous year are used to estimate the errors relating to the current year. While this may be valid in most cases, the IAS notes that the error rate and amount at risk may be potentially misstated in cases where significant changes to the management and control systems have been made. The way in which financial corrections are assessed and taken into account for the calculation of the CRR (Report finding N° 2) The figures reported by MS on withdrawals, recoveries and financial corrections vary considerably in terms of reliability, due in part to the limitations of the way in which they are reported to the Commission, but also because the Audit Authorities only perform limited checks on them. The way in which DG EMPL presents key information in its (draft) AAR on financial corrections (Report finding N° 3) The IAS reviewed DG EMPL's draft 2014 AAR and identified specific issues related to the disclosure of the financial corrections taken into account in the calculation of the CRR and the presentation of the upper limit. The IAS subsequently reviewed the final AAR (issued on 31 March 2015) and noted that the text was largely improved. Recommendations To address these issues, the IAS formulated recommendations which can be summarised as follows: Calculation of error rates and of the cumulative residual risk The IAS recommends that, for the next AAR exercise (2015 reporting year), DG EMPL should analyse for each OP whether it is valid to use the error rate relating to the previous year's expenditure as a best estimate for the reporting year when calculating the CRR and amount at risk. It should apply alternative approaches (e.g. flat rate estimates) if this is not the case.

Concerning the CRR, the IAS notes that this is one of the key factors behind the decision to make a reservation. DG EMPL should therefore issue specific guidance as regards the documentation of the (currently) fully manual CRR calculation process, including: (i) the set-up of an adequate audit trail, and (ii) the performance of additional checks on the data included in the calculation. In addition, retroactive modifications of previous annual error rates per OP should be systematically explained and documented. Corrective capacity (withdrawals and recoveries and financial corrections) DG EMPL should fully ensure the audit trail of financial corrections and consistency of information used at both OP and DG levels and, inter alia, document its assessment on withdrawals and recoveries (and, where applicable, other financial corrections) reported by MS authorities. In addition, the IAS recommended to DG REGIO that negative CRR figures for individual OPs should not be carried forward into subsequent years' calculations. Given that both DGs essentially share the same methodology and this issue could pose a risk to the inherent reliability of the underlying calculation, the IAS recommends that DG EMPL coordinates with DG REGIO to ensure a coherent approach to assessing the potential impact and to find an appropriate solution. Presentation and Reservations in the (draft) AAR The IAS recommended that for the 2014 AAR DG EMPL already: Discloses the actual figures of financial corrections taken into account for the calculation of the CRR with an explanation of the main changes compared to the figures declared by MS; Clarifies the text of the AAR stating that the "upper limit" is an estimation based on error rates derived from flat rates, statistically validated error rates and non-statistical information. The IAS reviewed DG EMPL's final AAR (issued on 31 March 2015) and noted that the text was improved as regards the explanations on financial corrections and CRR, but the "upper limit" concept has not been clarified as recommended by the IAS. The IAS therefore invited DG EMPL to address this issue in its 2015 AAR. In addition, taking note of the European Parliament's draft 2013 Discharge report (issued on 12 February 2015) as regards the AAR reporting requirements, and subject to confirmation of the final discharge resolution, the IAS recommended DG EMPL to coordinate with DG REGIO to ensure a consistent presentation of information as from the 2015 AAR as regards: The reasons for making/not making reservations in cases where there are exceptions to applicable Commission guidance or approved audit strategies; The timing, origin and the amount of corrective measures, including information aimed at reconciling the year in which the payment is made, the year in which the related error is detected and the year in which recoveries or financial corrections are disclosed in the notes to the accounts. The audited service has the DG has, to the extent possible, already implemented the recommendations for its 2014 AAR and established an action plan which the IAS considers satisfactory to address the remaining recommendations. 4.Research, energy and transport 4.1.Audit on H2020 grant management in DG CONNECT: from the preparation of the work programme to the signature of the grant agreements Audit objectives and scope The overall objective of the audit was to assess the effectiveness and efficiency of the internal control system for grant management in DG CONNECT and in particular if the calls for proposals effectively support the achievement of the Horizon 2020 (H2020) objectives and if the best research projects are selected and translated into grant agreements in compliance with the applicable rules. This audit focused on the first implementation phases of H2020 from the preparation of the work programme to the signature of the grant agreements. There are no observations/reservations in the DG's 2014 Annual Activity Report that relate to the area/process audited. The fieldwork was finalised on 19/06/2015. All observations and recommendations relate to the situation as of that date.

Major audit findings The IAS did not identify any material risks that would give rise to critical or very important recommendations. 4.2.Audit on the participant guarantee fund for FP7 and H2020 in DG RTD, DG ECFIN and ERCEA Audit objectives and scope The overall objective of the audit was to assess whether the participant guarantee fund is efficiently and effectively used to manage the risk of non-recovery of sums due by defaulting beneficiaries. The audit focused on: Strategy, high-level coordination, policies and procedures; Monitoring and supervision; Operational processes for contributions, interventions and returns to beneficiaries; Asset management. The audit covered the activities of DG RTD as designated service, the activities of DG ECFIN in terms of asset investment and the operational activities performed by DG RTD and ERCEA. There are no observations or reservations in the Annual Activity Report that relate to the audited areas. The fieldwork was finalised on 5 November 2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS did not identify any material risks that would give rise to critical or very important recommendations. 4.3.Audit on the governance and supervision of the nuclear decommissioning assistance programmes in DG ENER Audit objectives and scope The overall objective of this audit was to assess whether the governance and supervision of the programmes by DG ENER is adequate and effective. Specifically, the audit assessed DG ENER’s supervision of the implementing bodies and national implementation structures, as well as the monitoring of the operational and financial execution. The audit also followed up one "Important" recommendation outstanding after the 2012 audit performed by DG ENER's IAC. The audit covered the decommissioning programmes for the 2014-2020 period and DG ENER’s role in the governance and supervision of the implementation. There are no observations/reservations in the DG's 2014 Annual Activity Report that relate to the area/process audited.

The fieldwork was finalised on 23/06/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following critical issue and very important issue: Assessment of the ex-ante conditionalities – critical (Report finding N° 1) The nuclear decommissioning regulations require the Member States to fulfil ‘ex-ante conditionalities’ in order to provide assurance, in the form of a financing plan, that the safe completion of the decommissioning can be achieved after termination of Union financial assistance. Furthermore, Member States have to provide the Commission with a detailed decommissioning plan, including a schedule and corresponding cost structure. The regulations allowed the Commission to suspend payments in case these ‘ex-ante conditionalities’ were not fulfilled in a satisfactory manner. These ex-ante conditionalities were introduced to address the criticism made by the European Court of Auditors (ECA) in its Special Report 16/2011 and echoed by the European Parliament in its decision on the 2011 discharge for the European Commission. The audit found that DG ENER did not assess, as required by the regulations, whether the assurance provided by the financing plans established by Member States was satisfactory. Control Strategy of DG ENER - very important (Report finding N° 2) DG ENER has not yet defined an overall control strategy specifying how it will obtain reasonable assurance on the legality/regularity of the underlying transactions of the assistance programmes and the performance of the programmes based on the assurance provided by the implementing bodies and on its own monitoring missions. Recommendations To address this issue, the IAS formulated the following recommendations: Assessment of the ex-ante conditionalities As a matter of urgency, DG ENER should perform and document an in-depth review/assessment of the robustness of the financing plans considering the economic-financial-budgetary situation in each Member State and of the relevance and feasibility of the detailed decommissioning plans based on clear internal guidance developed beforehand and, in parallel, consult with the Legal Service and DG BUDG to establish which legal possibilities the Commission still has vis-à-vis the Member State concerned to provide further assurance and address the identified weakness (e.g. suspension of payments). Control Strategy of DG ENER DG ENER should, as part of its overall supervision of the Nuclear Decommissioning Assistance Programmes, define a comprehensive control strategy aimed at providing reasonable assurance with regard to (i) the legality and regularity of the underlying transactions and (ii) the performance of the programmes. The audited service has established an action plan which the IAS considers satisfactory to address the recommendations. 4.4.Audit on the supervision on the implementation of CEF in DG ENER Audit objectives and scope The overall objective of the audit was to assess whether the arrangements for supervising and monitoring the implementation of the Connecting Europe Facility (CEF) 2014-2020 programme were effective to support the achievement of the CEF objectives. The audit focussed on the implementation of the new CEF programme in the transport and energy sector, in particular: The design and early implementation of the supervision framework;

The cooperation, coordination and communication between the parent DGs and the Agency and with other stakeholders; The implementation of the governance framework. Due to the complex scheme underlying the implementation of CEF and the close link with the implementation of the Trans European Network-E policy, the audit also covered the supervision of the implementation of the Projects of Common Interest (PCIs) as the latter ensure the achievement of the policy objectives. There are no observations/reservations in the DG's 2014 Annual Activity Report that relate to the area/process audited. The fieldwork was finalised on 11 November 2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following very important issue: DG ENER's supervision strategy on PCIs development (Report finding N° 1) Although different mechanisms for the supervision of PCIs implementation exist (and more are planned for the near future), DG ENER has not yet established a formalised consolidated strategic document defining what it aims to achieve with its supervision activities over the full duration of the implementation of the CEF, and how it will be able to assess their effectiveness. In addition, DG ENER does not have a formalised strategic document setting out how the different reports on the PCIs implementation received from various stakeholders will be used and followed up whilst, at the same time, avoiding duplication or gaps in the reported information. The IAS also noted that DG ENER does not yet have an operational comprehensive monitoring tool to collect data for the whole list of PCIs in order to enable the follow-up of their implementation and to store the related information provided by the various mechanisms and sources. Recommendation To address this issue, the IAS formulated the following recommendation: DG ENER's Supervision strategy on PCIs development Building on the existing supervision elements, DG ENER should further develop and formalise an overarching supervision strategy on the PCIs development for the entire implementation period. This strategy should include achievable objectives and key performance indicators and should demonstrate the early detection of possible issues and to which extent the measures envisaged will collectively enable the progress of the PCIs to be monitored. DG ENER should also formalise and implement a strategy for the exploitation of the reporting on PCIs implementation to ensure an efficient use of the existing reports provided by different stakeholders. In addition, DG ENER should rapidly finalise the development of a reliable and comprehensive tool for monitoring the implementation of the PCIs development. The audited service has established an action plan which the IAS considers satisfactory to address the recommendation. 4.5.Audit on strategic planning and programming / activity based management in JRC Audit objectives and scope The objective of the engagement was to assess the effectiveness of the JRC's process for setting objectives, performance indicators and targets, for aligning JRC's activities (Activity Based Management), and for monitoring and reporting on their achievement in the context of the strategic planning and programming cycle.

The audit focussed on: Setting of objectives, indicators and targets in the management plan; Preparation of the work plan for the JRC work programme; Monitoring of the objectives, performance indicators and related targets in the management plan; Periodic reporting and the annual activity report process. There were no observations/reservations in the DG's 2014 Annual Activity Report that relate to the area or process audited. The fieldwork was finalised on 30/06/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following very important issue: Objectives, indicators and targets (Report finding N° 4) Although SMART objectives have been defined in some cases, these are not always accompanied by RACER indicators to enable the measurement of the extent to which the objectives have been achieved. This is exemplified by one of the two indicators established in the Horizon 2020 (H2020) legal base ('number of peer-reviewed publications in high impact journals'), which is not adequately measured and reported in the JRC management plan. This is an important deficiency as it results in unreliable reporting on the performance of JRC's activities. The calculation of the same indicator by peer DGs in the H2020 Research Family (for indirect research) follows different and more structured criteria. Furthermore, weaknesses were noted in the definition of objectives and indicators to measure the economy and efficiency of the DG's operations and the mix of the different types of indicators is not always balanced. Finally, the information describing the targets (in the management plan and annual activity report) is not always sufficient to explain how the targets were set and if the targets are sufficiently ambitious to ensure an efficient performance of JRC. Further improvements are also possible in the internal controls to ensure the quality of the performance measurement system. Recommendation To address this issue, the IAS formulated the following recommendation: Objectives, indicators and targets JRC should improve the quality control on the strategic planning and programming cycle in particular with reference to the consistency of the indicators, the application of 'RACER criteria', and the definition and description of the targets. Within this framework, and in order to ensure full compliance with the H2020 legal base and to align JRC with the Research Family DGs, DG JRC should seek to establish a common approach with the Research family DGs for the calculation of the H2020 indicators. The audited service has established an action plan which the IAS considers satisfactory to address the recommendation. 4.6.Audit on the supervision on the implementation of CEF in DG MOVE Audit objective and scope The overall objective of the audit was to assess whether the arrangements for supervising and monitoring the implementation of the Connecting Europe Facility (CEF) 2014-2020 programme were effective to support the achievement of the CEF objectives.

The audit focussed on the implementation of the new CEF programme in the transport and energy sector, in particular: The design and early implementation of the supervision framework; The cooperation, coordination and communication between the parent DGs and the Agency, and with other stakeholders; The implementation of the governance framework. Due to the complex scheme underlying the implementation of CEF and the close link with the implementation of the Trans European Network-Transport policy, the audit also covered the supervision of the corridors development, as the latter ensure the achievement of the CEF programmes' policy objectives. There are no observations/reservations in the DG's 2014 Annual Activity Report that relate to the area/process audited. The fieldwork was finalised on 12 November 2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following very important issue: DG MOVE's supervision strategy on corridors development (Report finding N° 1) Although a strategy for the implementation of the core network corridors and some mechanisms for supervision of the corridors' development exist, DG MOVE has not yet established a formalised consolidated strategic document defining, on the basis of a robust assessment of supervision needs and possibilities, what it aims to achieve with its supervision activities, how it will supervise (monitor and steer) the corridor development until the end of the implementation of the programme and how it will be able to assess the effectiveness of its supervision activity. Recommendation To address this issue, the IAS formulated the following recommendation: DG MOVE's supervision strategy on corridors development Building on the existing elements, DG MOVE should further develop and formalise, based on a robust assessment of needs and possibilities, a comprehensive overall strategy for the supervision of the corridor development, setting out the supervision needs, the tools to be used and the degree of assurance to be provided. The strategy should define objectives and indicators allowing to measure the performance of the supervision activities and determining how detected issues will be addressed. The audited service has established an action plan which the IAS considers satisfactory to address the recommendation. 4.7.Audit on the set-up of the Common Support Centre for H2020 in DG RTD Audit objective and scope The overall objective of the audit was to assess the adequacy of the set-up of the Common Support Center (CSC) to fulfil its mandate, which is to provide high quality services, achieve efficiency gains and rationalisation of processes. The scope covered the adequacy and effective application of the governance, internal control system and risk management process related to the management of the CSC. The audit covered the five CSC Units.

There were no reservations for the area under review in the 2013 Annual Activity Report of DG RTD. The fieldwork was finalised on 19/06/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following very important issue: Governance and decision making process (Report finding N° 1) According to the current CSC governance, the Steering Board is the sole decision-making body and its decisions, binding for all the implementing bodies, can only be implemented once officially approved. This occurs during the Steering Board meetings (twice a year) or, as alternative, by written procedure (used only once so far). Consequently, the frequency of the decision-making does not allow an immediate implementation of key decisions even in those cases where agreement is reached at the level of the Executive Committee (which is in charge of preparing the meeting of the Steering Board). Recommendation To address this issue, the IAS formulated the following recommendation: The CSC should take initiatives to ensure a more efficient decision-making process. In this respect, the CSC may consider revising its operating rules and distinguish the operational decisions that could be taken by the Executive Committee if a consensus is reached from those of strategic/political nature that can only be taken at the level of the Steering Board. As an alternative strategy, the frequency of the meetings of the Steering Board should be increased as well as the use of written procedures. The audited service has established an action plan which the IAS considers satisfactory to address the recommendation. 4.8.Audit on H2020 grant management in DG RTD: from the preparation of the work programme to the signature of the grant agreements Audit objective and scope The overall objective of the audit was to assess the effectiveness of the grant management process. The audit focused on: Whether the calls for proposals effectively support the achievement of the Horizon 2020 (H2020) objectives; Whether the processes in place ensure that the most promising research projects are selected and translated into grant agreements, in compliance with the applicable rules; DG RTD's role and responsibilities in the design of the business processes/procedures (as defined by the Common Support Centre for the entities implementing H2020 funds) and their implementation by DG RTD; The work programme preparation and the management of the calls (proposal submission, selection and monitoring of experts, evaluation of proposals, grant award and contracting) under its direct remit; The reporting mechanism to obtain information on the implementation of the work programme for delegated calls (i.e. feedback loop for policymaking). There are no observations/reservations in the 2014 Annual Activity Report of DG RTD that relate to the area/process audited.

The fieldwork was finalised on 11/12/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS did not identify any material risks that would give rise to critical or very important recommendations. 4.9.Audit on the management and control systems for the implementation of LIFE 2014-2020 in EASME Audit objective and scope The overall objective of the audit was to evaluate the effectiveness and efficiency of EASME's management and control systems for the implementation of the LIFE 2014-2020 Programme. The audit focussed on: The control environment, including the control strategy, roles and responsibilities, decision making, and risk assessment processes and reporting arrangements; The adequacy of the internal control system put in place by EASME for managing the awarding of grants, ex-ante controls including pre-payments; The adequacy of the internal control system put in place by EASME to supervise the evaluation of proposals for LIFE action and operating grants and the project monitoring by external contractors. There are no observations/reservations in the 2014 Annual Activity Report of EASME that relate to the area/process audited. The fieldwork was finalised on 21 August 2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues: Control strategy (Report finding N° 1) EASME's control strategy for the LIFE 2014-2020 programme to support the annual declaration of assurance of its Authorising Officer by (Sub) Delegation is not complete as measurable control objectives and key performance indicators on the achievement of those objectives are not yet defined and the risk based approach is not sufficiently detailed. Furthermore, the control strategy does not describe all controls, which are currently performed (for example in relation to the external contractor). Internal procedures for the LIFE programme implementation (Report finding N° 2) The EASME Manual of Procedures does not currently include procedures for the implementation of the LIFE 2014-2020 programme. EASME staff applies operational procedures that were adopted by DG ENV and which are not yet adapted to EASME's specific needs and workflow. Consequently, they require some re–designing to adapt them to the new LIFE 2014-2020 programme. The informal internal notes and instructions and the Grants Manual (only partly updated) do not cover the main procedures for the management of LIFE, notably those in the key areas of expert selection and management, evaluation of proposals, contract preparation and project monitoring. Grants management (Report finding N° 3) There is no formalised procedure in EASME for the approval of experts to be added to the initial pool provided by the contractor in charge of the evaluation of proposals.

In addition, the IAS detected shortcomings in the management of declarations of absences of conflict of interest and noted that the current guidelines are too vague for cases where existing situations of conflict of interest have not been declared. Concerning the performance of the evaluation of grant proposals by an external contractor, the IAS noted that in one case the quality of the evaluation reports produced by the contractor was not "fully satisfactory", and the Agency had to re-perform tasks that were actually contracted out. However, for this particular contract, it did not take measures to reduce the amount to be paid to the contractor or to impose payment of liquidated damages. In another case, the Agency extensively reviewed the work performed by the contractor but could not produce a robust assessment showing that the extent and scope of the review were cost-effective. Recommendations To address these issues, the IAS formulated the following recommendations: Control strategy EASME should complete its control strategy applicable to the new programme, by including control objectives to be attained at the end of the programme's lifecycle and setting target values to measure the effectiveness and efficiency of the key controls applicable to the different stages of the implementation of LIFE (i.e. award, contracting, monitoring) and further develop the different elements of its risk-based control approach (including notably also the monitoring of the activities of the external contractors) and how the elements of the control strategy provide the building blocks of assurance regarding the legality and regularity of the use of resources. Internal procedures for the LIFE programme implementation EASME should develop and implement operational procedures specific to the implementation of LIFE by EASME, train its staff on how to apply them and ensure that they are uploaded on the EASME intranet. Grants management EASME, should formalise the procedure for the approval of experts in order to ensure the consistent use of clear criteria, adequate documentation and clear assignment of responsibilities. It should also provide more detailed guidance on how to deal with evaluation procedures where external experts are found not to have declared an existing case of conflict of interest. The Agency should systematically perform checks to prevent double funding in relation to operating grants. Finally, the Agency should ensure that future decisions to internalise evaluation work or to revise the work of the contractors are supported by a robust cost-effectiveness analysis and that a clear procedure for the application of liquidated damages to underperforming contractors is defined and implemented in order to detect and sanction failures to comply with contractual agreements. The audited service has established an action plan which the IAS considers satisfactory to address the recommendations. 4.10.Audit on the preparedness of the management and control systems for the SME instrument in EASME Audit objective and scope The overall objective of the audit was to assess EASME's preparedness to adequately manage the implementation of the dedicated Small and Medium sized Enterprises (SME) instrument under Horizon 2020 (H2020), notably if EASME has adequate internal controls to provide its Authorising Officer by Delegation (AOD) with reasonable assurance regarding the sound financial management of the SME instrument and the legality and regularity of the underlying transactions and if it has adequate internal controls to effectively monitor and evaluate the implementation of the SME instrument. There were no reservations in EASME’s 2013 and 2014 Annual Activity Reports. The fieldwork was finalised on 18/06/2015. All observations and recommendations relate to the situation as of that date. Major audit findings The IAS has identified the following three very important issues:

Control framework (Report finding N° 1) EASME's control strategy for the SME Instrument to support the annual declaration of assurance of its AO(Sub)D is not complete as measurable control objectives and key performance indicators on the achievement of those objectives are not yet defined and the risk based approach is not sufficiently detailed. In this context, it should be noted that the common ex-post control strategy for H2020 is not yet fully established and the assurance provided by this building block cannot yet be evaluated. Furthermore, the Agency has not yet developed or finalised its internal control methodology and tools, including checks to be performed in case of potential fraud (in particular double funding). Guidance to evaluators and quality of evaluations (Report finding N° 2) Based on the projects funded in 2014, it is expected that approximately 25% of the funding of a certain type of projects (innovation projects) will co-finance subcontracting costs. The stage of evaluation of proposals is a key moment at which the eligibility of subcontracting foreseen in a proposal and whether it provides good value-for-money is checked. This is of particular importance as this element is not subject to subsequent ex-post verifications. However, the audit identified weaknesses in the guidance given to the evaluators in this respect. Issues were also identified with the quality of the evaluations performed and with the internal methodology for following-up on the work of the evaluators as in two out of four cases tested the assessment of subcontracting costs and the value for money principle was not justified. Workload analysis (Report finding N° 3) The Agency has not yet performed a workload assessment of all the sectors implementing the SME Instrument. The performance monitoring tools currently in place are not sufficient to establish adequately the level of staff needed, as e.g. they do not allow measuring the average time spent on different tasks in order to be able to plan better use of resources in the future. Recommendations To address these issues, the IAS formulated the following recommendations: Control framework EASME should complete its control strategy applicable to the new programmes (in line with the applicable DG BUDG guidance and once developed, the common Research family control provisions), by including control objectives to be attained at the end of the programmes' lifecycle and setting target values to measure the effectiveness and efficiency of the key controls applicable to the different stages of the implementation of the SME Instrument (i.e. award, contracting, monitoring). In t