TABLE OF CONTENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GENERAL INTRODUCTION

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

Council Recommendation on the 2009 discharge

Introduction

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

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

Chapter 2 - Revenue

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

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

Commission's response:

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

Chapter 3 - Agriculture and Natural Resources

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

Commission's response:

The requested action has been taken.

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

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

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

Commission's response:

The requested action has been taken.

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

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

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

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

Commission's response:

The Commission is taking the requested action.

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

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

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

Commission's response:

The requested action has been taken.

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

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

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

• Facilitate tailor made advice of farm advisory services;

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

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

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

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

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

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

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

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

Commission's response:

The requested action has been taken.

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

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

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

Commission's response:

The Commission is taking the requested action.

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

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

Commission's response:

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

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

Commission's response:

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

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

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

Commission's response:

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

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

Chapter 4 - Cohesion

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

Commission's response:

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

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

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

Commission's response:

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

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

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

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

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

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

Commission's response:

The Commission has taken the requested action.

Data on recoveries and corrections are published in:

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

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

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

Chapter 5 - Research, Energy and Transport

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

Commission's response:

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

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

Commission's response:

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

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

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

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

Commission's response:

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

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

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

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

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

Commission's response:

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

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

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

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

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

Commission's response:

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

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

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

Chapter 6 - External aid, Development and Enlargement

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

Commission's response:

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

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

Commission's response:

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

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

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

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

Commission's response:

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

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

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

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

Commission's response:

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

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

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

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

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

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

Commission's response:

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

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

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

Commission's response:

The Commission is taking the requested action in respect of:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

The Commission is taking the requested actions.

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

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

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

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

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

Commission's response:

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

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

- overall evaluation of environmental mainstreaming in development cooperation;

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

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

Chapter 7 - Education and Citizenship

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

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

Commission's response:

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

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

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

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

Commission's response:

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

Implementation of the new programmes will be greatly simplified.

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

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

Chapter 8 - Economic and Financial Affairs

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

Commission's response:

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

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

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

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

Commission's response:

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

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

Chapter 9 - Administrative and other expenditure

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

Commission's response:

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

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

Commission's response:

The Commission has taken the recommended action.

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

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

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

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

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

Commission's response:

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

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

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

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

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

Commission's response:

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

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

Commission's response:

The requested action has been taken.

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

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

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

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

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

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

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

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

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

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

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

Commission's response:

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

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

Commission's response:

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

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

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

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

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

Commission's response:

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

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

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

Commission's response:

The Commission accepts the request which is already being implemented. The Commission has provided National Agencies with qualitative feedback since the