[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 18.9.2007

SEC(2007) 1220

COMMISSION STAFF WORKING DOCUMENT

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL ESTABLISHING THE EUROPEAN INSTITUTE OF TECHNOLOGY [COM (2006) 604 FINAL/2, OF 13.11.2006]: LEGISLATIVE FINANCIAL STATEMENT Adaptation following the negotiations with the Council and the EP

COMMISSION STAFF WORKING DOCUMENT

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL ESTABLISHING THE EUROPEAN INSTITUTE OF TECHNOLOGY [COM (2006) 604 FINAL/2, OF 13.11.2006]: LEGISLATIVE FINANCIAL STATEMENT Adaptation following the negotiations with the Council and the EP

NAME OF THE PROPOSAL:

Regulation of the European Parliament and the Council establishing the European Institute of Technology

ABM / ABB FRAMEWORK

Policy Area(s) concerned and associated Activity/Activities:

Sub-Heading 1a: Competitiveness for Growth and Employment

BUDGET LINES

Budget lines (operational lines and related technical and administrative assistance lines (ex- B.A lines)) including headings:

15 02 11 "European Institute of Technology"

15 02 11 01 “Governing Structure”

15 02 11 02 “Knowledge and Innovation Communities (KICs) activities, in part innovation/research/education capacity”.

Duration of the action and of the financial impact:

Starting in 2008 with an open end. The financial impact on the EU General Budget for 2008–2013 will be € 308.7 million (operational expenditure).

Budgetary characteristics:

Budget line | Type of expenditure | New | EFTA contribution | Contributions from applicant countries | Heading in financial perspective |

15021101 15021102 | Non-comp Non-comp | Diff Diff | YES YES | YES YES | YES YES | Heading 1a Heading 1a |

SUMMARY OF RESOURCES

Financial Resources

Summary of commitment appropriations (CA) and payment appropriations (PA);

EUR million

Total number of human resources | 5,5 | 5,5 | 3 | 3 | 3 | 3 |

- 5. CHARACTERISTICS AND OBJECTIVES

5.1. Need to be met in the short or long term

In the short term the objectives will be to two fold:

- To provide a stable, solid foundation to the EIT governance structure; in view of the long-term development of the EIT;

- To select and designate 2 to 3 KICs in the first, initial stage.

5.2. Value-added of Community involvement and coherence of the proposal with other financial instruments and possible synergy

The EIT is the only Community initiative that integrates in a mutually supportive manner the three elements of the knowledge triangle (research, innovation and education). It will naturally build on, but it will go beyond a traditional network approach, by establishing autonomous strategic partnerships, based on mid to long term innovation planning to achieve EIT challenges.

5.3. Objectives, expected results and related indicators of the proposal in the context of the ABM framework

The Regulation states that 2 to 3 KICs will be launched in the initial stage. For the sake of the estimates, the working hypothesis is that 3 KICs will be launched in the initial stage. The 3 of them will start in 2010; and that they will run through the remainder of the financial perspective 2007–2013 and beyond. We assume that they will develop at similar speed, reaching cruising speed in 2013.

Also the proposal is based on the assumption that at a cruising speed, a KIC could involve:

- 1000 staff, made up of 400 scientific and 600 technical and administrative support staff;

- 400 doctoral candidates; and

- 600 master candidates.

100 of the scientific staff would have important teaching activities (40% of their time), while the remainder work 95% on research and innovation. The same breakdown is assumed for support staff.

The coordination and integration costs of the KICs will be a major item of expenditure. These costs arise from the ambitious, multi-annual, integrated nature of KICs. They are likely to be very much larger than anything previously experienced and to go far beyond the financing scope of other Community instruments.

In particular, each KIC will need:

1 –Coordination of scientific and administrative tasks. The benchmark is that 10 % of total staff time (all categories) will be devoted to such activities. This involves payroll costs plus other costs estimated at 33 % of payroll costs. In other words, payroll costs are assumed to represent 75% of the overall coordination costs and the other costs the remaining 25%.

2 - Integration of the different activities. This implies:

- Knowledge transfer. It implies in particular the development and implementation of new education programmes at master and doctoral level, and regular joint seminars and conferences. This is a cost of developing a truly European generation of research graduates, well adapted for business. Delivering these educations and training activities is expected to use 40% of the time of academic staff and 5 % of the time of researchers. Payroll costs are assumed to represent 75% of the overall knowledge transfer costs and other running costs 25%.

- Development and implementation of multidisciplinary activities and innovation management. The multidisciplinary dimension of KIC activities will require management and innovation support that goes well beyond anything that might be available from other EU budget sources. A lump sum is included to cover these (1.5 Million Euros pa for a KIC at cruising speed).

- Mobility costs. KICs will need to build a common working community for all their innovation, research and education activities, while remaining geographically dispersed. This challenge can only be overcome if staff and students move regularly across sites and teams, make use of dispersed laboratory facilities and share knowledge and information across the whole team. This implies important mobility costs.

- Equipment and material costs: The management of dispersed sites in a sustained integrated KIC will require sophisticated communication. This would involve the installation, operation and maintenance of state-of-the-art ICT systems, both software and hardware, to facilitate daily work, joint meetings, seminars, handling of joint experiments, sharing and dissemination of information and experience. This would apply to each of the innovation, research and education pillars. These costs have been covered by a lump sum (4 Million Euros pa for a KIC at cruising speed).

This means that the resources available for co-ordination and integration, accumulated across the financial period, would approximately be:

- 734 person-year devoted to scientific and coordination activities;

- 404 person-year scientific staff devoted to knowledge transfer activities;

- 606 person-year support staff devoted to knowledge transfer activities.

Plus:

- Provision for the mobility of 2940 scientific staff and 4400 support staff

- Provision for the mobility of 2900 PhD candidates and 4400 Master students

Indicators:

Innovation and research activities need a minimum duration of time before producing their first outcomes. Use will be made in the initial period of establishment of the EIT and implementation of the first initial KICs of input indicators such as the number and type of partner organisation within a KIC, including its European trans-national dimension; number of organisations from third countries; implementation of the budget with regards to the objectives (% of money actually used); percentage of financial contribution originating from non Community sources, with a particular focus on private sector contribution; number of Master and PhD degrees programmes and their trans-sectoral focus.

In the long run, these indicators should be supplemented by a set of outcome oriented indicators such as the number of KICs adopted after the adoption of the first and subsequent SIAs; actual number and evolution of the number of patents generated in EU and the revenue generated from IPRs; actual number of spin-offs; starts-up and SME's created ;the number and amount of contracts with business; number of Master and PhD degrees and diplomas awarded by participating universities.

5.4. Method of Implementation (indicative)

( Centralised Management

( directly by the Commission

( indirectly by delegation to:

( executive Agencies

X bodies set up by the Communities as referred to in art. 185 of the Financial Regulation

( national public-sector bodies/bodies with public-service mission

( Shared or decentralised management

( with Member states

( with Third countries

( Joint management with international organisations (please specify)

Relevant comments:

The EIT will be a Community body which has legal personality, and which pursuant Article 185 of the Financial Regulation, receive grants from the Community budget.

From a financial management and control perspective, the EIT will be treated as other bodies set up under EC Treaty and generally referred to as Community agencies. This means that paragraph 47 of the Inter-Institutional Agreement, which establishes a co-operation between the Council and EP to agree on the financing of new Community agencies, is applicable to the EIT.

Since one of the objectives of the EIT is to facilitate private sector participation, its internal rules (e.g. on financial or personnel issues) will need to reflect its objectives and the need for sufficient operational flexibility to be attractive to its business and research/academic partners.

6. MONITORING AND EVALUATION

An extended impact assessment for which background work was done by external consultants during summer 2006, has been carried out which integrates the requirements for an impact assessment and for an ex-ante evaluation. The results of this exercise may be found in the Impact Assessment report.

The EIT activities will be subject of continuous monitoring and periodic independent evaluations, to ensure both the highest quality of outcome and the most efficient use of resource. The Governing Board will define the modalities to ensure an appropriate evaluation.

Moreover, the Commission will commission an independent external evaluation of the EIT activities no later than 2011 and every five years after the entry into force of a new Financial Framework. It will cover all activities of the EIT and the KICs will look at the effectiveness, sustainability, efficiency and relevance of the activities pursued and their relation with Community policies.

7. ANTI-FRAUD MEASURES

According to the legal instrument, the Commission shall have the right to ensure that the financial interests of the Community are duly protected. All decisions adopted and contracts concluded by the EIT, shall provide explicitly that the European Anti-fraud Office (OLAF) and the Court of Auditors may carry out on-the-spot inspections of the documents of all contractors and sub-contractors which have received Community funds, including at the premises of the final beneficiaries. OLAF will be entitled to carry out internal investigation in the EIT bodies and the Governing Board will adopt the necessary measures to help OLAF carry out internal investigations.

8 Details of resources

8.1 Objectives of the proposal in terms of cost and resource

1 – Scientific and administrative coordination costs |

2.1 – Knowledge transfer |

Year 2008 | Year 2009 | Year 2010 | Year 2011 | Year 2012 | Year 2013 |

Officials or temporary staff[2] (XX 01 01) | A*/AD | 4 | 4 | 2 | 2 | 2 | 2 |

B*, C*/AST | 1,5 | 1,5 | 1 | 1 | 1 | 1 |

Staff financed[3] by art. XX 01 02 |

Other staff[4] financed by art. XX 01 04/05 |

TOTAL | 5,5 | 5,5 | 3 | 3 | 3 | 3 |

The needs for human and administrative resources shall be covered within the allocation granted to the managing DG in the framework of the annual allocation procedure.

8.2.2. Description of tasks deriving from the action

Commission services will basically carry out the following tasks:

- In the initial stage (years 2008 and 2009) the Commission will concentrate on the setting-up of the central governing structure of the EIT and on assisting it to carry out its tasks; to prepare its internal and financial rules and to launch the procedures for the recruitment of support staff.

- Once the EIT and the first Knowledge Communities are established, the Commission will concentrate on the monitoring of the EIT (budgetary issues, annual reports, multi annual work programme and on the preparation fo t.

8.2.3. Sources of human resources (statutory)

( Posts currently allocated to the management of the programme to be replaced or extended

X Posts pre-allocated within the APS/PDB exercise for year 2007 – 2 posts

X Posts to be requested in the next APS/PDB procedure 2008 – 2 posts

X Posts to be redeployed using existing resources within the managing service (internal redeployment) 1.5 posts

( Posts required for year n although not foreseen in the APS/PDB exercise of the year in question

8.2.4. Financial cost of human resources and associated costs not included in the reference amount

EUR million (to 3 decimal places)

Type of human resources | Year 2008 | Year 2009 | Year 2010 | Year 2011 | Year 2012 | Year 2013 |

Officials and temporary staff* (XX 01 01) | 0.589 | 0.589 | 0.321 | 0.321 | 0.321 | 0.321 |

Staff financed by Art XX 01 02 (auxiliary, END, contract staff, etc.) (specify budget line) |

Total cost of Human Resources and associated costs (NOT in reference amount) | 0.589 | 0.589 | 0.321 | 0.321 | 0.321 | 0.321 |

*Reference costs: 107.000 Euros pa

8.2.5. Other administrative expenditure not included in reference amount

EUR million (to 3 decimal places)

Year 2008 | Year 2009 | Year 2010 | Year 2011 | Year 2012 | Year 2013 | TOTAL |

XX 01 02 11 01 – Missions | 0.100 | 0.050 | 0.050 | 0.050 | 0.050 | 0.050 | 0.350 |

XX 01 02 11 02 – Meetings & Conferences | 0.200 | 0.200 |

XX 01 02 11 03 – Committees | 0 | 0 | 0 | 0 | 0 | 0 |

XX 01 02 11 04 – Studies & consultations | 0.500 | 0.500 |

XX 01 02 11 05 - Information systems | 0 | 0 | 0 | 0 | 0 | 0 |

2 Total Other Management Expenditure (XX 01 02 11) | 0.300 | 0.050 | 0.050 | 0.550 | 0.050 | 0.050 | 1.050 |

3 Other expenditure of an administrative nature (specify including reference to budget line) | 0 | 0 | 0 | 0 | 0 | 0 |

Total Administrative expenditure, other than human resources and associated costs (NOT included in reference amount) | 0.300 | 0.050 | 0.050 | 0.550 | 0.050 | 0.050 | 1.050 |

[1] See points 19 and 24 of the Interinstitutional agreement.

[2] Cost of which is NOT covered by the reference amount.

[3] Cost of which is NOT covered by the reference amount.

[4] Cost of which is included within the reference amount.