Communication from the Commission to the European Parliament and the Council - Synthesis of the Annual Activity Reports and declarations of the Directors-General and Heads of Service
Date: 2002-07-24
Institutions: European Commission
Subjects: EU action, European Commission, action programme, activity report, administration of the Institutions

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 24.7.2002
COM(2002) 426 final

COMMUNICATION FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Synthesis of the Annual Activity Reports and declarations of the Directors-
General and Heads of Service

TABLE OF CONTENTS

1.

2.

2.1.

2.2.

3.

3.1.

3.2.

3.3.

3.4.

4.

Introduction................................................................................................................. 4

Global assessment of the Commission’s action in 2001..................................... 5

Main political achievements in 2001 ...................................................................... 6

Cross-cutting elements drawn from the Annual Reports .................................... 9

The implementation of the reform in 2001 .......................................................... 13

Priority setting, allocation and efficient use of resources.................................. 13

Changes to human resource policy...................................................................... 14

Audit, financial management and control ............................................................ 16

Cross-cutting elements on the Reform stemming from the Annual Reports . 17

The implementation of internal control standards in 2001................................ 18

4.1.

Overview of the implementation of the key components of internal control... 19

4.1.1. Control environment................................................................................................ 20

4.1.2. Performance and risk management ..................................................................... 20

4.1.3.

Information and communication............................................................................ 21

4.1.4. Control activities ...................................................................................................... 21

4.1.5. Audit and evaluation ............................................................................................... 22

4.2.

5.

5.1.

5.2.

Overall conclusions and actions to support further the development of the
implementation of internal control......................................................................... 22

The reservations expressed by the authorising officers by delegation........... 23

Types of reservation ............................................................................................... 24

Main themes/trends................................................................................................. 26

5.2.1. Financial systems and decentralisation of financial responsibilities ............... 26

5.2.2. Shared management/Director-General’s lack of power to influence............... 26

5.2.3. Audit and control...................................................................................................... 27

5.2.4. Recruitment and training ........................................................................................ 27

5.2.5. Modernisation of the Commission’s accounting framework and systems...... 28

6.

6.1.

6.2.

General conclusions ............................................................................................... 29

Situation of the Commission.................................................................................. 29

Actions planned to resolve problems ................................................................... 30

2

1.

INTRODUCTION

The White Paper on Reform1 identified the need for better accountability and
responsibility  regarding  the  effectiveness  of  Commission  activities.  For  this
reason,  in  the  framework  of  the  introduction  of  Activity-Based  Management
(ABM)2  and  the  charter  of  the  Authorising  Officer  by  Delegation  (AOD),
Directors-General and Heads of Service were required to produce an Annual
Activity Report including a declaration of assurance and annual accounts.

Activity-Based  Management  is  translated  in  the  Commission’s  organisation
by a policy-driven, integrated cycle with 4 components:

(cid:1)  At  the  beginning  of  the  strategic  planning  and  programming  cycle,  the
Annual  Policy  Strategy  identifies  priorities  and  related  initiatives  and
establishes the global framework for resources.

(cid:1)  Based  on  this  framework,  the  Preliminary  Draft  Budget  specifies  the
detailed  resource  needs,  while  the  Commission’s  Legislative  and  Work
programme translates the political priorities into concrete action.

(cid:1)  The  Commission’s  services  establish  their  operational  programming  in
their Annual Management Plans, which link the resources available to the
activities and actions foreseen in the policy domain concerned.

(cid:1)  To close the cycle, each Director-General or Head of Service produces a
report  on  the  work  carried  out,  the  use  of  resources  and  the  results
achieved  by  his/her  service,  accompanied  by  a  declaration  expressing
his/her responsibility3.

The  year  2001  is  the  first  year  for  which  complete  Annual  Activity  Reports
(hereinafter  called  Annual  Reports)  were  produced  by  all  Directors-General
and  Heads  of  Service  by  1  May  2002.  These  Annual  Reports  should
therefore be considered as a first  step towards a  totally  consistent  cycle  for
several reasons. First of all, Activity-Based Management is being introduced
progressively  (in  particular,  in  2001  only  few  services  had  a  management
plan  in  place,  and  the  first  Annual  Policy  Strategy  was  adopted  for  2002).
Secondly, the internal control standards have still to be further implemented
in  the  coming  years.  Thirdly,  declarations  of  assurance  were  subscribed  by
Directors-General for the first time.

the 

these  reasons 

For 
first  delivery  of  Annual  Reports  cannot  be
homogeneous.  They  are  somewhat  disparate,  but  it  would  be  unrealistic  to
expect this first exercise to be perfect. Notwithstanding these understandable
imperfections,  this  first  exercise  is  a  positive  result  of  the  Reform:  the
introduction  of  Annual  Reports  does 
transparency  and
accountability,  because  for  the  first  time  the  Commission  brings  out  in  the
open positive and negative issues regarding its functioning.

improve 

1 COM(2000)200, 1st March 2000
2 See Communication (SEC(2001)1197/6&7) of 25 July 2001
3 White Paper on Reform, Action 82

3

                                                
This  Synthesis  aims  at  presenting 
(and
shortcomings)  of  the  Commission  with  respect  to  its  five  years’  strategic
objectives4. It will then analyse the state of implementation of the Reform in
general and of the internal control standards in particular. Reservations and
observations made by services are summarised in terms of the main issues
arising and overall significance for the Commission as a whole.

the  main  achievements 

In  this  Synthesis  the  most  important  cross-cutting  elements  drawn  from  the
Annual  Reports  are  highlighted  and  specific  actions  to  tackle  them  are
announced. The Commission endorses these actions and will report on
their  progress  in  next  year’s  Synthesis  of  Annual  Reports.  The
Commission  also  takes  note  of  the  action  plans  linked  to  the  remaining
reservations  and  requests  the  responsible  Directors-General  and  Heads  of
Service to report on their progress in the Annual Report for 2002. It should be
noted  that  this  Synthesis  is  also  based  on  work  carried  out  by  the  Internal
Audit  Service,  the  findings  of  which  have  been  taken  into  account  in
establishing the action plan enclosed.

The  Synthesis  will  be  transmitted  to  the  European  Parliament,  the  Council
and  the  European  Court  of  Auditors.  It  will  be  accompanied  by  all  Annual
Reports from the Directors-General and Heads of Service.

2.

GLOBAL ASSESSMENT OF THE COMMISSION’S ACTION IN 2001

On the basis of the Annual Reports for 2001, this Commission can report that
during its second year in office it was broadly on target towards meeting the
strategic  objectives  defined  for  the  period  2000-20055,  even  though  some
areas experienced specific difficulties.

The following paragraphs will:

1)  recall  the  main  political  achievements  of  the  Commission  in  2001  in  the
framework of its five-year strategic objectives and

2) focus on the most important cross-cutting elements drawn from the Annual
Reports.

2.1.

Main political achievements in 2001

Promoting new forms of governance

This  objective  comprises  four  main  aspects:  a  greater  participation  of
institutional actors at national, regional and local level in the conception and
implementation  of  Community  policies,  better  regulation,  the  contribution  of
the Commission to the preparation of the next inter-governmental conference

4 The Commission's Strategic Objectives for 2000-2005: "Shaping the New Europe" (COM(2000)154)

5COM(2000)154 final of 9.2.2000, available on http://europa.eu.int/comm/index_en.htm

4

                                                
and  the  success  of  the  internal  reform  process  (the  state  of  play  of  the
internal reform in 2001 is detailed separately under point 3).

The Commission adopted in July a White Paper on European governance
advocating the need for joint reform by all institutions within the boundaries of
the present Treaties, then launched a broad consultation process with other
European  Union  institutions,  national  governments,  regions,  cities  and  civil
society.  The  wish  expressed  by  the  European  Parliament  to  take  position
before the Commission took steps on actions with legislative implications led
the Commission to intensify the dialogue with the Parliament and to postpone
actions  on  "Better  Regulation"  by  6  months.  In  the  light  of  comments
received,  the  Commission  presented  in  November  2001  a  consultation
document on "Better Regulation" to the Laeken European Council.

Another important concrete step in this field was the adoption of a regulation
(n°  1049/2001)  on  access  to  documents  produced  by  the  European
Parliament, the Council and the Commission. This new regulation ensures a
greater degree of transparency on documents, laying a fundamental basis for
improved governance in the Union.

2001  also  saw  agreement  on  the  establishment  of  the  Convention,  which
began  its  work  on  28  February  2002  and  is  intended  to  prepare  the  2004
inter-governmental conference that will shape a new Europe.

The new economic and social agenda

In  its  strategic  objectives  for  2000-2005,  the  Commission  identified  the
creation  of  a  new  economic  and  social  dynamism  in  the  Union  as  a  major
priority.  Optimising  the  potential  of  the  Internal  Market  should  benefit  all
citizens  and  enterprises, 
the  creation  of  new  employment
opportunities, and reinforcing companies’ competitiveness.

through 

The  Commission  thoroughly  prepared  and  co-ordinated  the  introduction  of
the  Euro  on  1  January  2002.  This  is  now  largely  recognised  as  a  major
success.

supported 

by  measures 

Positive  steps  were  taken  in  2001  in  creating  the  European  Company
Statute, 
facilitating
entrepreneurship. Significant progress has also been made in delivering the
numerous  actions  announced  in  the  Financial  Services  Action  Plan.
Significant  initiatives  to  modernise  competition  policy  were  launched,  in
particular  a  reform  of  anti-trust  policy  leading  to  shared  enforcement
responsibilities.

encouraging 

and 

A Green Paper on the reform of the Common Fisheries Policy was published
and intensive exchanges took place with the various stakeholders in order to
prepare the Commission’s proposals adopted in 2002.

In  the  context  of  the  creation  of  the  European  Research  Area,  the
Commission adopted proposals on the Framework Programme for Research
and  Technological  Development  2002-2006  and  launched  the  debate  and
initiatives  concerning  mobility  of  researchers,  research  infrastructures,

5

international  and  regional  dimensions  in  order  to  improve  effectiveness  and
coherence of research in Europe.

The new Regulatory Framework for electronic communications was adopted
in December 2001.

At  the  end  of  2001  all  Structural  Funds  interventions  were  adopted,  thus
providing a new impetus for cohesion policy.

introducing 

the  environmental  dimension 

As a result of significant efforts deployed by the Commission, the sustainable
development strategy for the European Union was adopted at the Göteborg
European  Council 
the
economic and social chapters of the Lisbon process. In this framework, major
progress  was  registered  in  the  internal  market  of  gaz  and  electricity,  the
single  sky,  Galileo  and  the  development  of  trans-European  networks.  The
Commission  took  also  initiatives  to  facilitate  accessibility  to  the  e-learning
and  development  of  life-long  learning  in  order  to  promote  the  knowledge
society and support the unemployed in their efforts to re-integrate active life.
Sustainable  development  was  further 
the
Commission for 2002 and 2003.

identified  as  a  priority  by 

into 

The  Commission  began  implementing  the  Union's  social  policy  agenda,
endorsed  by  the  Nice  European  Council.  The  European  Employment
Strategy  has  been further  pursued and  the  open  method of  co-ordination  in
the  field  of  social  inclusion  has  been  launched.  The  Council  and  the
European  Parliament  have  been  pursuing  negotiations  on  a  number  of
Commission legislative proposals in fields including health and safety at the
workplace, the involvement of workers and equal treatment between women
and men.

Stabilising our continent and boosting Europe’s voice in the world

This  objective  stems  from  three  major  challenges:  geopolitical  shifts,
globalisation and the weaknesses of the international system. On these three
lines, the action of the Commission in 2001 was quite successful.

On  the  enlargement  side,  the  Union  made  substantial  progress  on  the  18
chapters  of  the  enlargement  negotiations  that  were  foreseen  in  the  “road
map”  for  2001.  This  enabled  the  Union  to  be  on  target  for  completing  the
negotiations  with  up  to  ten  candidate  countries  by  the  end  of  2002.
Monitoring  of  the  implementation  of  the  acquis  communautaire  was  also
actively  pursued  by  the  Commission’s  services.  This  activity  will  need  to
continue and be reinforced in 2002 and 2003, at the same time as the actual
membership  of  candidate  countries  is  being  prepared.  This  twin  task  will
require a greater investment in human resources from the Commission, as it
has  already  been  pointed  out  in  the  Annual  Policy  Strategy  and  in  the
Preliminary Draft Budget for 2003.

In  the  area  of  trade  policy,  the  Commission  contributed  actively  to  the
successful launch of a new multilateral trade  round  (the  Doha  Development
Agenda) at the World Trade Organisation’s Ministerial Conference at Doha in
November  2001.  Together  with  continuing  progress  in  other  bilateral  and

6

regional  negotiations,  notably  the  EU-Mercosur  talks,  this  has  helped  to
restore  confidence  in  the  prospects  for  the  global  economy  and  address
legitimate  public  concerns  about 
relationship  with  sustainable
development,  another  priority  identified  by  the  Commission  for  2002  and
2003.

its 

On the development co-operation side, in February 2001 the Council adopted
the  Commission’s  “Everything  but  Arms”  initiative,  granting  duty-free  and
quota-free access to imports from least developed countries. United Nations
members  signed  up  to  the  objective  of  providing  similar  access  at  the  3rd
United Nations Conference for the least developed countries in May 2001.

In  the  aftermath  of  the  events  of  11  September,  the  Commission  reacted
swiftly  in  contributing  to  the  fight  against  terrorism  and  in  co-ordinating  a
political  and  financial  package  for  the  reconstruction  of  Afghanistan,  even
though  existing  procedures  need  to  be  reviewed  to  ensure  a  prompt  and
international  crises.  These  events  also
efficient  response 
demonstrated  the  limits  of  the  resources  available  under  Heading  4  of  the
Financial  Perspectives  and  underlined  the  need  for  a  specific  and  efficient
flexibility instrument that would enable the Commission to respond quickly to
unforeseen  international  crises  and  play  a  global  role  on  the  international
scene.

to  major 

A better quality of life for all

The main objective of the Union in this field is to fulfil the expectations of the
European citizens and make choices that improve effectively their day-to-day
life.

Maritime,  air  and  road  safety  and  safe  energy  supplies  were  strengthened
through  the  Commission action.  In  the  areas  of consumer  protection,  public
health and food safety, the Commission presented proposals for a regulation
on traceability and labelling of genetically modified organisms, issued a green
paper  on  consumer  protection,  proposed  a  regulation  on  sales  promotion
within  the  Internal  Market  and  continued  preparatory  work  for  the  launch  of
the new European Food Authority.

As far as the environment is concerned, the Commission adopted a proposal
for  a  sixth  Community  environment  action  programme  for  the  period  2001-
2010.  The  Commission  contributed  effectively  to  the  European  Union’s
success  in  rescuing  the  Kyoto  Protocol  on  climate  change  and  adopted  in
October  proposals  to  ratify  the  Protocol  and  to  implement  the  Union’s
commitments.

The  terrorist  attack  of  11  September  placed  the  security  issue  at  the  top  of
the political agenda. The EU agreement on European Arrest Warrant and the
Framework  Decision  on  definition  of  terrorism  acts  illustrate  the  way  the
Union  can  respond  rapidly  to  major  events  that  concern  all  citizens.  The
Commission  also  adopted  a  communication  on  preventive  alert  in  case  of
emergency. It also developed initiatives to counter the health threats due  to
bio-terrorism,  as  requested  by  the  European  Council  meeting  at  Gent.
However,  progress  in  the  implementation  of  the  Tampere  agenda  for  the

7

establishment of an area of freedom, security and justice has been slow
in the Council and this is a concern for 2002 and beyond.

2.2.

Cross-cutting elements drawn from the Annual Reports

A  certain  number  of  cross-cutting  elements  emerges  from  the  Annual
Reports of Directors-General:

Implementation of the shared cost Research programmes

Several  Directors-General  dealing  with  these  programmes  identify  the
complexity of the financial management of indirect actions, resulting from the
legislative framework, which creates a risk  of  overpayment,  as an  important
issue and ask for a common approach by the different services dealing with
the Research framework programmes. The main problems are linked to:

(cid:1)  the  existence  of  complex  and  multiple  systems  for  cost  reimbursement

and their related implementing rules;

(cid:1)  the  lack  of  penalties  in  the  standard  contracts  in  case  of  exaggerated

declarations by the beneficiaries.

Several  audits  in  different  services  and  Court  of  Auditors  audit  findings
highlighted the necessity to take additional action in this domain.

Action 1: the Commission will adopt before end of 2002 a detailed action plan
addressing  the  complexity  of  financial  management  of  indirect  actions
through  simplification  and  enhanced  consistency  between  the  different
systems  currently  in  place  and  through  improved  contract  management.  To
address existing risks the effectiveness of controls exercised by the relevant
services  will  be  increased,  and  work  intensified  on  the  protection  of  the
financial interests of the Community.

External relations:

In  the  framework  of  the  improvement  of  external  aid  management  and  its
impact,  the  Commission  put  in  place  a  wide-ranging  reform  of  the
management of EU external assistance programmes notably through the
creation  of  the  EuropeAid  co-operation  office.  Good  progress  was  made  in
implementing  the  reform,  including  the  launch  of  a  new  approach  to
programming to boost quality, a new evaluation strategy and greater clarity in
the  respective  responsibilities  of  Relex  DGs.  The  first  positive  results  were
seen  in  an  improved  profile  of  budget  execution  in  2001  and  progress  with
reducing  the  backlog  of  old  and  dormant  commitments.  However,  several
Annual Reports underline that, as 2001 was the first year of implementation
of this reform, further efforts are necessary to reach its objectives. Moreover,
2001  saw  also  the  launch  of  the  devolution  exercise,  which  aims  at  giving
much more management and financial responsibility to EU delegations as far
as external assistance  programmes  are  concerned. This  exercise  continues
in  2002  and  2003,  so  that  its  full  benefits  will  only  be  visible  after  its
completion.

8

External relations require specific attention on two sides. On the political side,
reservations  raise  the  question  of  the  real  responsibility  of  the  Authorising
Officer by Delegation for joint actions undertaken under the Common Foreign
Security  Policy,  as 
the  Council.  These
they  are  decided  solely  by 
reservations  have  important  political  implications  that  the  Commission  will
discuss in its inter-institutional relations. On the managerial side, reservations
stress the risks linked to direct budgetary assistance to third countries, which
have to be specifically taken into account when evaluating the impact of this
type of assistance. Other reservations stress the general risks attached to the
management of external aid.

the 

following 

Internal  Auditor’s  Annual  Report, 

Action  2:  While  confirming  the  substance  of  the  Relex  reform,  on  several
the
occasions,  and 
Commission  has  noted  the  necessity  to  examine  the  scope  for  synergies
between the services involved in External Relations. Relex Commissioners,
in  agreement  with  the  President  and  Vice-President  Kinnock,  should
reexamine  how  the  resources  and  structures  of  DGs  Relex,  Development
and  EuropeAid  can  best  be  organised  in  the  longer  term  in  order  to  serve
Relex  Commissioners  in  the  conduct  of  their  portfolios,  which  remain
unchanged. The Commission will examine proposals to this effect before the
end of the year. The Commission’s assessment is that, taking into account
that 2001 was still a start-up phase, further efforts are needed to consolidate
the reform to make it fully effective. In this context the Commission will also
assess  and  make  transparent  the  risks  linked  to  external  aid  and  in
particular to direct budgetary assistance as a form of development aid and
communicate any major conclusions to the other institutions; it will also carry
out  an  evaluation  of  the  operation  of  the  devolution  exercise  next  year,  in
order to draw lessons on the effectiveness and efficiency of the introduction
of changes after implementation of the external aid reform.

Nuclear safety:

In  the  complex  domain  of  nuclear  safety,  including  both  the  security  of
nuclear  installations  and  of  the  global  environment,  important  issues  have
been  highlighted  in  several  Annual  Reports:  the  question  of  the  technical
expertise  available  in  the  Commission  to  supervise  effectively  assistance
activities  in  the  nuclear  area,  the  problems  connected  to  the  level  of
verifications of environmental radioactivity in  the framework  of  art.  35  of  the
Euratom  Treaty,  the  decommissioning  funds  for  the  Commission’s  nuclear
facilities  and  the  question  of  EC  legal  competence  in  the  field  of  nuclear
safety.

All these qualifications may be read against a political background where the
Commission’s  legal  competence  in  the  field  is  questioned  by  a  number  of
Member  States,  whilst  being  called  upon  for  example  to  furnish  technical
assistance to improve nuclear safety in the candidate countries. The Annual
Reports concerned point to an insufficient capability of the Commission in the
nuclear  field.  It  is  necessary  to  clarify  the  Commission’s  competence  in  the
field  of  nuclear  safety,  to  answer  citizens’  expectations  on  this  point  and  to
ensure  that  the  highest  safety  standards  are  met  in  all  (current  and  future)
Member States.

9

Action 3: The specific reservations will be addressed before the end of the
year  through,  on  the  one  hand,  a  package  of  proposals  to  create  an
operational 
identification  of  EU  safety
for 
standards and the preservation of decommissioning funds, and on the other
hand,  by  looking  carefully  at  the  way  in  which  nuclear  expertise  is  shared
among the competent services in order to improve its effectiveness.

framework 

legislative 

the 

Structural (regional, employment, agricultural and fisheries) funds:

On  these  aspects,  some  Annual  Reports  reflect  the  difficulties  that  the
Commission  encounters  in  having  to  cope  with  decentralising  management
of  Community  funds  to  Member  States  while  retaining  the  full  responsibility
for the execution of the Community Budget. The Commission considers that
the  current  provisions  on  accountability  and  sharing  of  responsibility  with
Member States are not satisfactory and should be reviewed to reflect better
the  actual  situation.  In  this  respect,  it  should  be  noted  that  the  subsidiarity
rule means that the Commission has to operate without full political authority
whilst  retaining  under  the  Treaty  full  responsibility  for  the  funds  disbursed.
The  management  aspects  of  these  issues  are  specifically  dealt  with  under
action 12.

in  meeting 

Action  4:  the  Commission  will  seek  to  clarify  with  the  Council  its  share  of
the  shared
responsibility 
management  of  the  Structural  Funds.  The  Commission  will  also  make
proposals  in  order  to  align  its  monitoring  and  control  powers  to  its
responsibilities.

the  objectives  established 

for 

Enlargement:

In  order  to  assure  a  smooth  integration  of  the  Candidate  Countries  the
Commission’s  services  need  to  guarantee  the  extension  of  a  number  of
activities  to  the  new  Member  States  and  are  willing  to  assure  their  full
participation  to  the  EU  policies  from  the  first  day  of  accession.  Moreover,
several  Annual  Reports  of  the  Directors-General  express  concerns  both  on
the actual monitoring of the implementation of the  acquis  communautaire  in
the candidate countries and on the real capacity of a  number  of  services  to
guarantee, with current staff levels, the extension of their activities to the new
Member States in an effective way. For this reason, after a careful screening
of  all  services’  needs,  the  Commission  has  presented  a  Communication  to
the  Budgetary  Authority  on  the  impact  of  enlargement  on  its  activities  and
human  resources  dealing  with  the  global  needs  from  2003  up  to  2008.  For
2003, the Commission has identified an absolute minimum of 500 extra staff.

the  Commission  all  possibilities 

The Commission stresses the absolute necessity to ensure the appropriate
financing  in  2003  of  the  expenses  for  500  staff  for  preparations  of
enlargement.  To  this  end,  the  Budgetary  Authority  should  explore  together
with 
in  2002  certain
administrative  expenditures  (frontloading)  and  wherever  possible  to  make
supplementary  appropriations  available  via  transfers  between  institutions.
Sufficient  appropriations  for  the  recruitment  of  staff  for  enlargement  are
essential  for  the  Commission  to  be  in  a  position  to  guarantee  adequate

to  anticipate 

10

preparation  of  enlargement  and 
‘acquis
communautaire’ as from the first day of accession. The Commission draws
the attention of the other Institutions, the Member States and the candidate
states about the importance of these preparations.

full  application  of 

the 

Governance:

is  proceeding  with 

The  Commission 
the  actions
announced in the White Paper on European Governance and will present  a
package  of  measures  in  autumn,  together  with  the  final  report  on  the
consultation process.

implementation  of 

On  the  basis  of  the  positive  response  by  the  Laeken  European  Council  in
December 2001 to its consultation document, the Commission proposed on 5
June  2002  an  Action  Plan  on  "Better  Regulation"  for  simplifying  and
improving  the  quality  of  the  regulatory  environment  without  changing  the
the  Commission  adopted  2
Treaty.  Alongside 
communications on minimum standards of consultation (subject to a separate
public  consultation  running  until  the  end  of  July  2002)  and  impact
assessment.

the  Action  Plan, 

The  Commission  has  stressed  that  implementing  the  "Better  Regulation"
Action  Plan,  proposed  in  June  2002,  requires  joint  efforts  by  the  three
institutions  as  well  as  Member  States.  The  Commission  has  therefore
proposed that implementation of the Action Plan should be supported by an
inter-institutional  agreement  between  Parliament,  Council  and 
the
Commission  for  those  actions  that  depend  on  all  three  institutions.  The
European  Council  in  Seville  endorsed  this  approach  and  called  upon  the
institutions to complete such an agreement by the end of 2002.

The  Commission  will  implement  the  measures  listed  in  the  Action  Plan  for
Better Regulation of 5 June 2002, and will work towards an inter-institutional
agreement  for  the  measures  which  fall  within  Parliament,  Council  and
Commission competences. The Commission will also present in the Autumn
a  second  package  of  measures  in  follow-up  to  the  White  Paper  on
European  Governance,  which  will  include  proposals  on  the  treatment  of
infringements, comitology, regulatory agencies and tripartite contracts.

3.

THE IMPLEMENTATION OF THE REFORM IN 2001

After  a  comprehensive  internal  consultation  process,  the  Commission
presented its White Paper on Reform in the beginning of 2000. Its aim is to
modernise  the  Commission's  administration.  The  strategy  indicated  in  the
White Paper focuses on three main objectives:

(cid:1)  improving  the  effectiveness  of  the  whole  organisation  through  better

priority setting and matching of tasks with resources;

(cid:1)  maximising  staff  performance  through  considerable  changes  in  human

resource management and staff policy;

11

(cid:1)  an overhaul of financial management, on the basis of a precise definition
of the responsibilities of each actor. This will ensure that taxpayers’ money
is used in the best way through the improvement of financial management,
efficiency and accountability.

The  White  Paper  included  an  ambitious  action  plan  to  translate  the  above-
mentioned  global  objectives  into  concrete  actions,  following  a  challenging
timetable.  Considering 
foresaw  a  complete
implementation of the Reform by end 2002, the year 2001 was crucial for the
rooting  of  the  Reform  in  the  Commission.  It  should  be  recalled  that  the
Annual Reports are one important result of the implementation of the Reform,
in particular of the principles of transparency and accountability.

initial  calendar 

that 

the 

3.1.

Priority setting, allocation and efficient use of resources

To  guarantee  effectiveness  in  all  its  activities,  the  Commission  wanted  to
concentrate  on  core  policy  objectives,  translating  them  into  priority  actions
matched  with  the  appropriate  resources,  thus  reaffirming  the  primacy  of
political  priorities.  This  implies  that  at  the  beginning  of  the  year  the
Commission  first  establishes  its  own  priorities  and  then  initiates  the
budgetary procedure for the following year: this led in 2001 to the creation of
a  strategic  planning  and  programming  (SPP)  cycle,  meant  to  guide  all
Commission  activities  related  to  priority  identification,  budgetary  procedure
and Legislative and Work Programme preparation on the basis of a thorough
matching of activities and resources (Activity-Based Management).

It should be noted that one of the aspects to which the Commission has now
given  a  higher  profile  in  the  Annual  Policy  Strategy  process  is  inter-
institutional dialogue. It has been decided that each year, after adopting the
Annual  Policy  Strategy  for  the  coming  year,  the  Commission  will  initiate  a
dialogue  with  the  European  Parliament  and  the  Council  on  the  priorities
identified  in  the  Annual  Policy  Strategy.  On  this  basis  it  will  present  a
Stocktaking  document  that  reflects  the  dialogue  with  the  institutions  before
adopting its Legislative and Work Programme. For this, the Commission and
the  European  Parliament  have  agreed  on  an  understanding  that  set  up  the
timeframe and operational details for this dialogue.

As most Annual Reports show, the progress made in this area in 2001 as far
as implementation is concerned is considerable: the milestones of the cycle
(see  introduction)  were  identified  and  introduced  by  services.  In  particular,
the  preparation  of  annual  management  plans  by  all  services  was  a  major
step  forward.  Certain  reports  express  the  view  that  the  introduction  of  ABM
has  helped  them  to  focus  their  activities  on  clear  priorities  with  clear
objectives.  It  can  therefore  be  concluded  that  the  Commission  delivered  in
2001  what  had  been  announced  in  the  White  Paper,  and  that  this
represented  a  significant  achievement  given  the  considerable  time  and
resource constraints under which services had to work and the fact that such
a major change can only be implemented on a progressive basis.

On  a  more  long-term  perspective,  it  is  clear  that  the  introduction  of  the
strategic  planning  and  programming  cycle  and  of  Activity-Based
Management  is  a  “cultural  change”.  However,  it  is  very  positive  that  the

12

implementation  has  followed  the  original  pattern  without  major  delays  or
problems and has revealed important aspects that had not been stressed as
such in the White Paper.

It is important to recall also the different experiences previously developed by
the  various  services  in  this  area  of  the  Reform:  a  few  services  already  had
some  advanced  management  instruments,  most  services  only  had  day-to-
day  programming  tools,  very  few  did  not  dispose  of  any  significant
instrument.  This  is  why  Activity-Based  Management,  although  successfully
introduced  at  Commission  level  in  2001,  could  not  present  a  homogeneous
level of ownership across the different Commission’s services.

Concerning  externalisation,  the  Commission  adopted  in  December  2001  a
revised  draft  proposal  for  a  Council  Regulation  introducing  the  concept  of
“executive agencies” to manage Community programmes in the framework of
the  “delegation”  form  of  externalisation,  integrating  the  suggestions  and
amendments  made  by  the  Court  of  Auditors  and  the  Parliament.  The
Commission  also  adopted  in  November  2001  a  communication  on  the
“decentralised” form of externalisation, defining the terms and  conditions for
using networks of national bodies. Finally, an internal guide was developed to
define the tasks that may be “subcontracted”, containing a standard form  of
contract.

3.2.

Changes to human resource policy

This second pillar of the Reform aimed at an overall modernisation of human
resource policy in the Commission. Firstly the Commission initiated a series
of  actions  to  fully  exploit  the  potential  for  reform  under  the  existing  Staff
Regulations. A large number of decisions on aspects of the new staff policy
where  taken  in  2001.  Secondly,  the  Commission  prepared  a  proposal  for  a
Regulation amending the Staff regulations on some aspects.  Because of  its
very  nature  this  required  a  certain  period  of  internal  consultations  with  staff
and “concertations” with the trade unions, in order to enable the Commission
to  present  a  balanced  package  of  proposals  of  changes  to  the  Staff
Regulations to the Council. The most important objectives are:

–  strengthening the principle of merit in the European Civil Service through a

better link between performance and career development;

–  modernising the policy on equal opportunities, social facilities for staff and
working conditions. Such modernisation is essential in order to be able to
continue  to  recruit  and  retain  the  best  staff  in  an  ever  more  competitive
environment for highly qualified multilingual staff;

–  maintaining  budgetary  rigour  in  carrying  out  the  reform.  The  proposed
costs are modest in the context of a major reform and are in accordance
with  the  Commission’s  commitment  to  respect  the  expenditure  ceiling  of
Heading  V  of  the  Financial  Perspectives.  In  addition,  the  measures  will
lead to durable cost control in the medium term.

Delays  occurred  in  2001  with  respect  to  the  initial  timetable  for  the
preparation  of  a  wide  set  of  orientation  documents.  Nevertheless,  the

13

discussions  in  the  framework  of  a  high  level  body  chaired  by  the  former
Secretary-General  of  the  Council,  Mr  Ersboell,  brought  a  very  positive
outcome: the agreement reached between the Commission and trade unions
representing the majority of staff in electoral terms on the global package of
personnel  policy  reform.  This  agreement  includes  a  commitment  of  the
Commission to withdraw the package proposal on the basis of an agreement
with OSPs in case the Council proposes by unanimous vote to deviate from
any  of  the  guarantees  listed  in  it. This  agreement  provides  a  solid  basis  for
the continuation of the process.

The process of consultation with the staff and “concertations” with the trade
unions led to the following results:

–  The  October  2001  “Global  Package  for  the  reform  of  personnel  policy”,
which comprised 15 chapters. The first nine were for final decision of the
Commission: the social strand, covering measures on family-related leave
and  flexible  working  arrangements;  equal  opportunities;  social  policy  and
infrastructure  for  staff;  moral  harassment;  training;  mobility;  reporting
wrongdoing;  discipline;  maintaining  professional  standards;  recruitment;
middle  management;  pay  and  pensions.  The  last  six  issues  were
discussed 
the  Commission:  appraisal  and
promotion;  career  structure;  non-permanent  staff;  mediation  service;
flexible retirement and general review of the Staff Regulations.

final  orientation  of 

for 

–  On  20  December  the  Commission  approved  a  draft  Regulation  on
modifications to the Staff Regulations and implementing rules for appraisal
and  promotion  with  a  view  to  submit  them  to  the  inter-institutional  Staff
Regulations  Committee  for  an  opinion.  The  draft  Regulation  incorporates
all changes to the basic rules governing the European Public Service that
the Commission deems necessary.

The work carried out in 2001 enabled the Commission to adopt the remaining
decisions  during  the  first  quarter  of  2002  (guidelines  on  Job  Descriptions;
guidelines  on  mobility; 
the  conduct  of  administrative  enquiries  and
to  national  experts  on
the  rules  applicable 
disciplinary  proceedings; 
detachment  to  the  Commission;  reporting  wrongdoing,  social  policy,  the
mediation  service, 
training  guidelines  and  maintaining  professional
standards, appraisal and promotion) and to submit the draft Regulation to the
Council with a view to finalise the legislative process by mid-2003.

3.3.

Audit, financial management and control

This chapter of the Reform was dictated by the need to modernise financial
management  and  restore  public  confidence  in  the  management  of  the
European Union's budget and the control of expenditure. The Reform aims to
make  procedures  simpler,  faster  and  more  accountable  by  decentralising
management  responsibility  to  those  closer  to  the  decision-making  process
and improving transparency. Key features of the Reform in this field are:

–  Increased  accountability  for  authorising  expenditure:  rules  must  be
simplified  and  made  easier  to  understand  and,  as  far  as  possible,  those
responsible  for  the  management  process  should  also  be  responsible  for

14

authorising  expenditure.  In  2001,  based  on  an  assessment  of  the
associated risks, organisational structure and cost effectiveness, services
implemented  new  financial  management  circuits  outlining  the  key  stages
involved  in  the  authorisation  of  financial  transactions  and  respecting  the
basic principle that the initiation and verification functions of a transaction
should  be  kept  separate.  Each  Commission  service  also  appointed  an
internal audit  capability  to  assist  the  Director-General  or  Head  of  Service
in verifying the effectiveness of internal controls.

–  Separating  financial  control  from  auditing:  until  2000,  both  the  ex-ante
control of expenditure and part of its auditing after the event were carried
out  by  the  same  central  service,  suggesting  a  potential  for  conflict  of
interest. Mid 2001, the  Internal Audit  Service  became  independent of  the
Financial Control. Its role is crucial for giving assurance to the Commission
through its independent opinion on the quality of management and control
systems.

–  The Central Financial Service, created mid 2000, focused in 2001 on the
proposal  for  the  recast  of  the  Financial  Regulation,  on  the  definition  and
guidance  on  internal  control  standards  and  risk  management  for  the
Commission  services,  on  the  reinforcement  of  contract  management  and
public  procurement  in  the  Commission  services.  In  addition,  special
attention was given to the requested support through a help-desk, training
and  information.  Finally,  the  necessity  to  enhance  the  central  financial
information  systems  led  to  focus  action  on  the  overall  quality  of  the
existing system and the development of new functionalities  set out  in  the
invoice  register,  recovery
White  Paper  (contract  database,  central 
management).

–  The requirement for all Directors-General and Heads of Service to provide
an  annual  declaration  assuring  the  legality  and  regularity  of  underlying
transactions and on the use of resources in accordance with the principles
of sound financial management.

This chapter of the Reform is the most advanced in terms of implementation
since  it  was  given  the  highest  priority  on  the  basis  of  the  fairly  detailed
recommendations of the Committee of Independent Experts. The overhaul of
financial management and  control procedures required a  significant number
of actions to be implemented at service level. However, as is indicated from
the  Annual  Reports,  whilst  significant  progress  has  been  made  in  these
areas,  there  remains  much  to  be  done  to  make  the  financial  management
improvements long-lasting. A number of services highlighted in  their  Annual
Reports the problems involved in responding to such fundamental  changes,
given  limited  numbers  of  appropriately  qualified  resources,  training  and
internal  organisational  difficulties.  In  recognition  of  the  problems  faced  by
services, specialist needs in the financial domain will be addressed in future
recruitment plans (see action 14).

The issue of internal control and financial management has been given new
impetus by the new Financial Regulation, which mirrors the key principles of
the  financial  reform,  and  which  takes  effect  from  1  January  2003.  The
transfer  of  the  centralised  prior  approval  function  means  that  services  will

15

need  to  focus  on  their  state  of  readiness  for  assuming  full  decentralised
responsibilities  (see  action  12).  In  addition,  the  supporting  central  financial
and  accounting  information  systems,  which  are  still  characterised  by  some
weaknesses, will need to be improved accordingly (see actions 16 and 17).

3.4.

Cross-cutting  elements  on  the  Reform  stemming  from  the  Annual
Reports

Lack of human resources:

A considerable number of Annual Reports point out that the human resource
needs for the implementation of the Reform were under-estimated. It should
be recalled that the normal place for the Commission to examine all human
resource  needs  and  make  decisions  in  this  context  is  the  Annual  Policy
Strategy (APS) cycle leading to the adoption of the Preliminary Draft Budget
and to the decision on allocation of resources.

The Commission has already undertaken some actions in this context. In July
2000, 230 posts were allocated to Commission departments  to facilitate  the
implementation  of  the  Reform.  In  2000,  a  Peer  Group  of  Commissioners
acknowledged  needs  for  1254  posts,  of  which  580  were  devoted  to  the
reinforcement  of  programme  management  and  control  for  external  aid  and
structural actions. It should be recalled that the Commission decided already
in its APS 2003 to reallocate across services a third of the posts that should
become  available  through  early  retirement  to  implement  the  Reform.
However,  it  is  recognised  that  some  of  these  actions  take  time  to  become
fully  effective.  More  generally,  a  more  systematic  effort  at  identifying  the
resources needs related to activities is necessary, particularly in view of the
new roles played by different services and actors in the Commission flowing
from the Reform process.

Action  5:  Regarding  the  lack  of  human  resources  with  respect  to  the
implementation  of  the  Reform,  the  Commission  will  pay  attention  to  the
needs expressed by Directors-General in their Annual Reports in the context
of the next strategic planning and programming cycle which starts end 2002.
In this context, the Secretariat-General will draw up a new methodology for
assessing the resources needs of both existing and new activities.

Lack of guidance:

In  several  Annual  Reports,  Directors-General  complain  about  the  lack  of
guidance  given  by  central  services  on  various  aspects  of  the  Reform.  It
should be recalled that the Commission is already giving special attention to
internal communication and training and methodology for essential aspects of
the  Reform.  However,  to  address  concerns  about  the  completeness  and
adequacy of guidance the Commission will strengthen its efforts in this field,
notably  regarding  Activity-Based  Management. 
the
preparation  of  the  Annual  Management  Plans  for  2003  represent  a  crucial
step for services to ensure a more performance-oriented management.

is  noted 

that 

It 

Action 6: The Secretariat-General will, in close cooperation with the DG for
the
Budget  and 

for  Personnel  and  Administration,  review 

the  DG 

16

coordination  mechanisms  between  the  central  services  with  a  view  to
improving  the  service  and  advice  provided  to  operational  services.  In
addition,  the  Secretariat-General  will  prepare  a  detailed  ABM  Guide  by
October  2002  and  will  assist  services  in  the  preparations  of  their  Annual
Management Plan for 2003.

Information systems:

Another  point  for  concrete  action  emerging  from  several  Annual  Reports  is
the need to solve the interoperability problems between information systems.
Currently  users  are  hindered  from  exploiting  the  full  potential  of  existing
systems.  Building  on  the  e-Commission  initiative,  the  Commission  will
actively  pursue  the objective  of  establishing  seamless  systems,  enabling  all
services to improve their efficiency and performance.

Action 7: An inter-service working group will be mandated to coordinate the
interoperability of existing management information systems. This group will
establish an action plan by November 2002 and supervise its execution.

4.

THE IMPLEMENTATION OF INTERNAL CONTROL STANDARDS IN 2001

Internal control covers the globality of the policies and procedures conceived
and put in place by an entity’s management to ensure the economic, efficient
and  effective  achievement  of  the  entity’s  objectives;  the  adherence  to
external rules and to management policies and regulations; the safeguarding
of  assets  and  information;  the  prevention  and  detection  of  fraud  and  error,
the  quality  of  accounting  records  and  the  timely  production  of  reliable
financial and management information.

On 13 December 2000, the Commission approved, together with the charters
for  authorising  officers  by  delegation  and  sub-delegation,  a  set  of  Internal
Control  Standards  designed  to  reflect  this  wide  definition  of  internal  control
(SEC  (2000)  2203).  These  standards  should  be  seen  as  a  set  of  basic
conditions which should be met by all the Commission’s internal  services  in
all  aspects  of  the  Commission’s  management,  not  just  financial  matters.  In
this context it is important to note that control systems should seek to strike a
reasonable  balance  between  the  risks  to  be  addressed  and  the  costs
incurred in minimising these risks. No system can provide, at an acceptable
cost level, an absolute guarantee that all errors will be detected or deliberate
fraud prevented.

taking  particular  account  of 

Each of the Directors-General and Heads of Services produced on 30  June
2001 an intermediate report on the degree of implementation of the reform in
financial  management, 
level  of
implementation  of  the  standards.  The  Commission  on  7  November  2001
approved 
reports
(SEC(2001)1723/6).  This  document  demonstrated  that  significant  progress
had been made in achieving a set of intermediate, baseline requirements as
at the end of June 2001, but that progress was still to be made in a number
of key areas in order to implement the control standards in full. Furthermore,
the  communication  on  Activity-Based  Management,  which  underpinned  a

summarising 

intermediate 

document 

these 

the 

a 

17

number  of  the  control  standards,  clearly  stated  that  certain  key  measures
were  expected  to  be  implemented  on  a  progressive  basis  over  a  period
beyond 31 December 2001.

Reflecting  the  progressive  nature  of  the  implementation  of  the  control
standards and the associated timescales, and in order to help services chart
their progress in this first year of Annual Reports, the Commission specified a
further set of intermediate baseline requirements to be met by 31 December
2001 and adopted an updated calendar in this respect (SEC(2001) 2037/4).
This  allowed  the  Directors-General  and  Heads  of  Services  to  gauge  what
would  need  to  be  implemented  by  that  date,  noting  of  course  that  certain
measures  would  depend  on  the  date  of  Commission  decisions  and
availability  of  central  guidelines  or  would  need  to  be  implemented  on  a
progressive basis.

4.1.

Overview  of  the  implementation  of  the  key  components  of  internal
control

The  responsibility  for  establishing  and  maintaining  effective  internal  control
lies  with  the  Directors-General  and  Heads  of  Services.  In  Chapter  3
"Management and Control issues - Internal Control standards" of the Annual
Reports, Directors-General and Heads of Services were invited to set out the
progress  made  on  all  management  related  issues  and  to  provide  further
details  of  any  major  weaknesses  or  risks  which  might  affect  their  annual
declaration. As a way of charting the progress made, they were expected to
report on the extent to which the 31 December baseline requirements for the
internal  control  standards  have  been  met.  The  individual  reports  varied
considerably  in  terms  of  the  depth  of  analysis  given  to  management  and
control  issues  and  the  extent  to  which  these  might  impact  on  the  overall
declaration, but all attempted to provide some key pointers as to the progress
made  and  some  even  included  developments  that  occurred  in  the  first
quarter  of  2002.  It  should  also  be  noted  that,  for  this  first  exercise,  the
assurances  provided  by  the  Directors-General  were  largely  based  on
judgements  of  the  situation  as  at  the  end  of  2001,  rather  than  covering  the
year as a whole.

The  progress  made  by  the  Commission  services  is  examined  in  relation  to
each of the five key components under which the internal control standards in
use within Commission services  are  grouped,  namely:  Control  environment,
performance  and  risk  management,  information and  communication,  control
activities and audit and evaluation.

4.1.1. Control environment

Control  environment  refers  to  the  basic  conditions  in  which  the  service
functions  including  organisational  and  administrative  structure  and  the
management  of  human  resources.  Specifically,  the  control  standards  cover
the  following:  ethics  and  integrity;  defining  the  mission,  role  and  tasks;
ensuring  staff  competence;  staff  performance;  delegation  and  managing
sensitive functions.

18

For  the  control  standards  covered  under  this  heading  75%  of  Directors-
General  estimated  that  they  had  been  able  to  meet  at  least  the  baseline
requirements of 31 December 2001.

A  number  of  requirements,  such  as  the  need  for  more  frequent  staff
performance  and  job  descriptions,  can  only  realistically  be  implemented  in
line with a range of new initiatives, which have yet to take full effect. Certain
other  key  areas,  such  the  identification  and  management  of  sensitive
functions, require further work. Almost half of the Commission services have
yet to undertake the detailed analysis required to identify such posts and any
associated  mitigating  controls.  For  sensitive  posts  for  which  mitigating
controls  are  considered  inadequate,  mandatory  mobility  should  be  used.
Given  the  difficulties  faced  by  services  in  implementing  this  standard,  there
will  need  to  be  a  concerted  effort  on  the  part  of  the  Commission  central
services  to  assist  them  through  the  provision  of  practical  advice  and
guidance.

4.1.2. Performance and risk management

Performance  and  risk  management  includes  key  management  issues
connected  to  planning,  programming  and  monitoring  performance  and
underpins  the  principles  of  the  ABM  approach.  Specifically,  the  control
standards cover the objective-setting process, multi-annual programming, the
production  of  annual  management  plan,  monitoring  performance  against
objectives and indicators and risk analysis and risk management.

Some  75%  of  Directors-General  estimated  that  they  had  meet  at  least  the
baseline  requirements  of  31  December  2001  for  these  control  standards.
However, it should be noted that many of these standards, particularly those
concerned  with  planning  and  monitoring,  underpin  ongoing  initiatives  in  the
field of ABM and are expected to be implemented progressively over a longer
time period.

On risk assessment and risk management, most services undertook in 2001
a  high  level  review  of  their  risk  priorities,  which  for  the  Commission  as  a
whole  represented an  important first  step  in the move  towards  embracing  a
culture of risk management. It should be emphasised that for many Directors-
General this was the first time in which they considered risks on quite such a
formal  basis  and  the  first  time  risks  of  a  non-financial  nature  had  been
considered  so  explicitly.  Whilst  this  constitutes  in  itself  a  significant  move
forward,  it  is  clear  that  these  are  early  stages  in  the  process.  Information
provided  in  the  Annual  Reports  on  risks  is  of  a  very  varied  nature  and
suggests  that  there  is  some  uncertainty  about  how  to  assess  and  manage
risks and indeed how to consider them in relation to  the overall  declaration.
As  yet,  risk  management  is  not  an  embedded  part  of  the  Commissions’
working practices and a sustained effort will be required  both on  the  part of
main services and that of the central services to ensure that this is achieved.

4.1.3.

Information and communication

Information and communication covers the setting up of adequate processes
to  manage  internal  information  and  report  on  issues  such  as  budget  and

19

management  plan  execution  and  use  of  resources.  Specifically,  the  control
standards cover the  adequacy  of management  information, mail  registration
and filing system and the reporting of improprieties.

Some  70%  of  Directors-General  estimated  they  had  been  able  to  meet  at
least the baseline requirements of 31 December 2001. As for a number of the
control  standards,  gradual  implementation  is  foreseen  in  these  areas,
particularly 
information  and  mail
registration.

regarding  adequate  management 

4.1.4. Control activities

Control  activities  focus  on  the  key,  everyday  control  functions  exercised  as
part  of  services’  normal  business.  Specifically,  the  control  standards  cover
the  documentation  of  procedures,  ensuring  proper  segregation  of  duties,
supervision  functions,  recording  exceptions  and  ensuring  the  continuity  of
operations.

Some  70%  of  Directors-General  estimated  that  they  had  meet  at  least  the
baseline requirements of 31 December 2001. Significant progress has been
made  in  a  number  of  areas,  notably  in  the  segregation  of  duties  and
continuity  of  operations,  but  other  key  areas  still  need  to  be  developed  by
most  services.  In  practice  the  documentation  of  procedures  is  something
which requires continual review and update. However, the immediate priority
has been to ensure that financial procedures have been documented. Whilst
considerable effort has been devoted to this, some 15 services indicate that
they have yet to finalise their work in this area. It should be recognised that
this  can  be  a  complicated  and  very  time  consuming  process.  In  addition
services  will  also  need  to  ensure  that  operational  procedures  are  also
documented.

The  effective  supervision  of  others  is  key  to  the  development  of  a  strong
internal control framework and most services are currently in the process of
defining and implementing what is appropriate for their circumstances. Some
basic  guidance  has  been  developed  centrally  to  help  them,  but  central
services  will  need  to ensure  that  this  is  further  enhanced  and  accompanied
by practical support.

4.1.5. Audit and evaluation

Audit and evaluation covers the proper management of internal and external
audit  issues,  the  evaluation  function  and  the  processes  for  management’s
own  self  review.  Specifically,  the  control  standards  cover  the  recording  and
correction  of  internal  control  weaknesses;  the  proper  follow  up  of  audit
reports  (external  and  internal);  the  setting  up  and  functioning  of  an  internal
audit  capability;  the  setting  up  of  or  access  to  a  proper  evaluation  function
and the annual review by management of its own internal control procedures.

Some  75%  of  Directors-General  estimated  that  they  had  met  at  least  the
baseline requirements of 31 December 2001.

20

This steady progress reflects the fact that many of the very specific baseline
requirements  were  largely  achieved,  for  example  the  setting  up  of  internal
audit  capabilities  and  the  annual  review  of  internal  control  procedures.
However, it should be noted that, due to recruitment difficulties in 2001, many
internal  audit  capabilities,  although  established  in  2001,  will  carry  out  a  full
programme  of  audit  work  only  after  new  competent  staff  will  be  made
available (from 2002 onwards).

Progress  has  been  made  by  services  in  implementing  procedures  to  deal
with the recording and correction of internal control weaknesses in respect of
of  financial  procedures,  but  will  need  to  be  extended  in  2002  to  cover
operational procedures.

Some  services  still  have  to  set  up  a  dedicated  evaluation  function  able  to
provide  effective  support  to  policy  making.  Furthermore,  evaluation  findings
will  be  used  in  underpinning  the  selection  of  objectives  and  priorities  in  the
framework of Annual Management Plans.

4.2.

Overall conclusions and actions to support further the development of
the implementation of internal control

The overall conclusions, to be drawn from the reports, are generally positive
and encouraging in terms of how  services  judge  their  own  progress  against
specific  requirements  in  the  field  of  internal  control.  Nevertheless  progress
needs  to  be  maintained  to  ensure  that  internal  control  standards  are  fully
implemented  and  that  the  Commission  services  move  steadily  towards  a
position of a sound and mature framework of internal control.

2001 was a transitional year in which services faced a number of significant
changes  and  were  required  to  deal  with  numerous  challenging  new
initiatives.  The  impact  of  these  factors  should  not  be  underestimated.
Developing  a  sound  framework  of  internal  controls  is  an  evolving  process
which  needs  to  be  maintained 
the  ongoing  commitment  of
management.

through 

The information presented in the Annual Reports on these areas reflects an
increased  understanding  of  internal  control  issues.  However,  it  should  also
be  remembered  that  this  is management’s first formal  requirement  to  report
on  such  a  basis  and,  to  an  extent,  this  was  reflected  in  the  varied  way
services reported their own specific management and control issues. As was
noted  above,  for  most  services  the  internal  audit  structures  were  not  fully
operational  for  the  duration  of  the  year  in  question.  In  future,  one  would
expect  there  to  be  more  explicit  reference  to  audit findings,  the  implications
for  the  state  of  internal  control  and  indeed  the  implications  for  the  annual
declaration.  The  role  of  the  central  support  services  should  not  be
underestimated  either.  Services  have  been  required  to  manage  numerous
initiatives  and,  whilst  the  ultimate  responsibility  for  internal  control  rests
squarely  with them, they need to be guided and supported throughout. This
will be particularly the case with the new Financial Regulation.

Based upon the evaluation of the implementation of the standards in 2001 as
described above:

21

Action  8:  DG  for  Budget,  in  collaboration  with  the  Secretariat-General  and
DG  for  Personnel  and  Administration,  will  provide  enhanced  support  and
practical  guidance  for  the  standards  covering  sensitive  functions  and
supervision,  which  are  considered  as  very  important  for  a  smooth
functioning of the Commission services, before the end of 2002.

Action 9: All Commission services will give particular attention in 2002 to the
design and documentation of internal control procedures, in particular those
financial  procedures  aimed  at  preventing  errors  and  detecting  irregularities
and the recording of exceptions.

5.

THE RESERVATIONS EXPRESSED BY THE AUTHORISING OFFICERS BY DELEGATION

The  Charter  for  Authorising  Officers  by  Delegation  requires  each  Director
General  or  Head  of  Service  to  sign  a  declaration  in  which  he  or  she  will
express  reasonable  assurance  on  whether  the  resources  assigned  to  the
activities described in the accompanying Annual Report have been used for
their  intended  purpose  and  in  accordance  with  the  principles  of  sound
financial management  and  that  the  control  procedures  put  in  place  give  the
necessary guarantees concerning the legality and regularity of the underlying
transactions.  On  this  point,  it  should  be  noted  that  the  guidelines  for  the
declarations were not interpreted in absolutely the same way by all services.
It could have been envisaged to ask Directors-General and Heads of Service
to  reconsider  the  declarations  in  order  to  get  a  more  homogeneous
interpretation, but this iterative process would have been complex and time-
consuming.  Moreover,  this  problem  could  be  addressed  adequately  in  the
context of this exercise by requiring the services to address both reservations
and observations, whether they are in the declaration or in the report.

The Charter foresees that the declaration may contain reservations aimed at
highlighting risks associated with the operations and actions managed by the
Directorate-General  or  Service.  Such 
to
malfunctioning  in  the  design  or  application  of  management  and  internal
control  systems.  They  should  also  refer  to  the  remedial  measures  taken  or
planned.  It  has,  however,  to  be  clear  that  the  use  of  reservations  do  not
intend to make the declaration meaningless, but  on the  contrary  to  propose
additional actions for reducing identified risks.

reservations  should  point 

The  guidance  provided  to  services  prior  to  making  the  declarations  set  out
the specific criteria in this regard. In summary, reservations were expected to
cover  material  problems  or  deficiencies  that  could  limit  the  ability  of  the
Authorising  Officer  by  Delegation  to  provide  the  reasonable  assurance
required under the declaration. In the preparation process, it was also agreed
that Directors-General could make observations in the “conclusions” section
of  the  report  in  order  to  highlight  important  issues  related  to  the  good
functioning  of their  services  or  the  Commission as  a  whole,  but  which  were
not considered as reservations in the scope of the declarations.

This section of the Synthesis:

22

–  summarises,  for  all  services,  the  types  of  observations  and  reservations

made;

–  concentrates on the areas of management internal control systems;

–  draws  out  the  main  themes  and  common  issues  arising,  assesses  the
implications  and  significance  for  the  Commission  as  a  whole  and
concludes on the necessary actions to be taken.

5.1.

Types of reservation

The reservations contained in the declarations vary considerably in terms of
scope  and  content.  Nine  Directors-General  made  neither  reservations  nor
observations  in  the  declarations  themselves.  Others  included  ‘reservations’
and/or  ‘observations’  in  their  declaration,  or  did  not  clearly  distinguish
between  the  two.  Given  that  this  is  the  first  year  of  this  Commission-wide
exercise,  for  the  purposes  of  the  Synthesis  no  distinction  will  be  made
between 
term
reservations  and  observations.  For  convenience 
“qualifications” will be deemed to cover both reservations and observations.

the 

Twenty-seven  services  qualified  their  declarations  of  assurance  in  the
declaration itself, or by direct reference to material elsewhere in their reports.
In total, and taking into account reservations and observations made in both
the declaration itself and the main part of the reports, 135 qualifications were
made by 31 services.

The guidance required Directors-General, for each reservation, to provide an
analysis  of  the  problem,  an  assessment  of  the  impact  (quantifiable  if
possible)  and  conclusions  (including  necessary  actions  and  timetables).
Directors-General were also recommended to define the framework  used  to
assess  the  level  of  materiality6.  The  presumption  is  that  any  reservation
included in the declaration is, by definition, of a material nature, whether this
be in quantitative or qualitative terms, or by nature or context. About one half
of  the  total  number  of  qualifications  made  by  all  Directors-General  were  in
fact  accompanied  by  clearly  defined  action  plans  or  details  of  measures
already launched to address the issue concerned. Even then, there were few
instances of clearly identified and quantified potential impacts and very little if
any  mention  of  materiality.  In  general,  there  were  very  few  specific
references to materiality either in the wording of the declarations themselves
or in the supporting text in the body of the report.

However, it should be noted that not all qualifications were judged to require
a  specific  action  plan,  either  because  of  their  nature  or  their  limited
materiality,  or  because  they  were  of  a  temporary  nature  or  the  costs  to
improve  the  current  situation  would  outweigh  the  expected  benefits.  For
many of these cases the action plan is provided by one of the overall actions
foreseen  in  this  Synthesis.  For  others  the  qualification  might  be  more  of  a
general  remark  on  the  political  environment  and  therefore  does  not  require
per se an action plan.

6 The exact definition of the concept of materiality can be found in SEC(2002)401 on page 14

23

                                                
It  should  be  recognised  that  this  was  the  first  time  that  Directors-General
were  required  to  make  such  declarations.  However,  a  more  consistent
approach  to  the  process  and  to  ensuring  that  the  declarations  reflect  as
accurately as possible the real situation will be necessary. Much will depend
on  the  increased  understanding  that  will  come  through  experience  of  this
process.  There  are  clearly  a  number  of  issues  which  caused  particular
problems.  For  many  Directors-General  materiality  proved  a  difficult  concept
to define and there will clearly need to be an attempt to deal with this issue in
good  time  for  the  next  year’s  exercise,  as  this  is  a  fundamental  judgement
which is key to ensuring the credibility of the annual declaration exercise as a
whole:  in  plain  language,  materiality  means  importance.  Nevertheless,  as
they develop a greater understanding of the annual reporting process and, in
particular,  the  need  to  limit  reservations  to  genuinely  material  issues,  one
would  expect  services  to  be  more  consistent  in  how  they  deal  with  these
matters in future years.

Given  the  varied  way  in  which  reservations  and  observations  have  been
expressed  further  consideration  will  need  to  be  given  to  the  guidance
provided  to  Directors-General  on  what  to  include  as  reservations.  Some
issues may only be transitional in nature, such as that of cross delegations,
on  which  9  Directors-General  made  qualifications.  These  issues  will
nevertheless  need  to  be  considered  for  future  treatment.  A  number  of
services  experienced  changes  of  Authorising  Officers  by  Delegation  (AOD)
during the year 2001 and noted this in the declaration or in the report itself,
without  specifically  concluding  on  the  impact  or  otherwise  of  this  on  the
declaration.  This  issue  was  foreseen  in  the  guidance  provided  to  Directors-
General  and  has  been  further  considered  in  a  new  guidance  designed  to
clarify arrangements in future years (SEC (2002) 657).

Action  10:  the  Secretariat-General,  in  collaboration  with  DG  for  Budget,
DG  for  Personnel  and  Administration  and  the  Internal  Audit  Service,  will
review and enhance before end of 2002 the methodology and guidance for
producing  the  Annual  Reports  for  2002,  paying  particular  attention  to  the
question of materiality, to the definition of the scope of potential reservations
to  be  included  in  the  accompanying  declarations  and  to  the  handling  of
cross delegations.

5.2.

Main themes/trends

Issues common to many services are analysed in more detail below, together
with their potential significance for the Commission as a whole.

5.2.1. Financial systems and decentralisation of financial responsibilities

Almost  half  the  Directors-General  who  made  qualifications  pointed  to
concerns about financial management systems and the adequacy of internal
controls  (21  qualifications).  Issues  raised  included  specific  financial  circuit
design  matters,  the  documentation  of  procedures,  controls  executed  over
contract  management  procedures,  supervision  arrangements  and  whether
services  will  be  properly  equipped  to  cope  with  fully  decentralised  financial
responsibilities.  This  issue  has  of  course  been  given  added  impetus  by  the

24

revised Financial Regulation which is now due to take effect from 1 January
2003 and which no longer foresees the centralised ex-ante visa function.

Action  11:  In  advance  of  the  new  Financial  Regulation,  Directors-General
and Heads of Service have already begun to put in place adequate internal
control  systems.  They  will  evaluate  by  November  2002  the  degree  of
assurance on the readiness of the internal control systems in place, notably
the adequacy of financial circuits, and the Commission central services will
undertake  the  necessary  measures  to  support  them  in  this  regard.
Specifically, the new or modified elements of  the  new  Financial  Regulation
and its implementing rules will be integrated into the present internal control
framework by October 2002. Tools will be continued to be developed by DG
for  Budget,  in  collaboration  with  the  Secretariat-General  and  DG  for
Personnel  and  Administration,  to  assist  Commission  services  in  adapting
their  existing  controls  systems  to  meet  the  new  requirements  and  an
extensive training programme will be developed to support the process.

5.2.2. Shared management/Director-General’s lack of power to influence

Of  the  total  number  of  qualifications  made,  23  were  clearly  perceived  to  be
outside  the  direct  control  of  the  Director-General.  However,  a  number  of
qualifications  which  might  have  a  significant  dependency  on  the  actions  of
outside bodies, nevertheless fall to the Commission or the service to manage
in  part,  or  in  some  cases  completely.  The  issue  of  shared  or  decentralised
management  arrangements,  in  relation  with  Member  States,  was  a  clear
concern  for  a  number  of  Directors-General.  Some  of  them  also  cited  the
problems  of  decentralised  agencies,  where  although  the  Director-General
may  be  the  appointed  Authorising  Officer  by  Delegation,  he  or  she  has  no
clear mandate for carrying out effective control.

Action  12:  DG  for  Budget,  in  collaboration  with  DG  for  Personnel  and
Administration  and  the  concerned  services,  will  analyse  this  problem  by
March 2003. It will make a proposal to the Commission on the scope of the
responsibilities  of  the  Authorising  Officer  in  each  domain  where  shared
management applies. This should enable the Directors-General to take the
appropriate measures in case of uncertainties or identified problems.

5.2.3. Audit and control

Almost half the Directors-General referred either directly or indirectly to audit-
related  issues,  including  difficulties  in  undertaking  on-the-spot  checks
required  as  part  of  management’s  own  control  activities  and  the  work  and
role of their own internal audit capabilities. Ability to perform expected levels
of  on-the-spot  checks  was  often  constrained  by  resourcing  problems  or  by
difficulties  in  obtaining  the  necessary  systems  information  from  Member
States.  Regarding  the  functioning  of  internal  audit  capabilities,  several
Directors-General  pointed  to  their  relative  newness  and  acknowledged  that
the assurances  provided  so far  have  been  limited,  particularly  in  supporting
the  annual  declarations.  The  issue  of  audit  and  control  is  an  evolving  one
which  has  been  subject  to  much  debate  throughout  the  Commission,
including  the  annual  reports  of  both  the  Internal  Audit  Service  and  of
Financial Control. In this context, adequate control structures will need to be

25

operational  by  the  end  of  2002  in  each  service  and  coherent  central
monitoring  arrangements  defined.  A  clear  distinction  between  audit  and
control  will  be  made  in  line  with  internationally  accepted  principles  of  good
governance.

Action  13:  the  Commission  will  ensure  that,  before  1  December  2002,  the
responsibilities of the key actors  in audit and  control,  including  on  the  spot
checks, are clarified in accordance with the stated principles of the Reform
the  new  Financial  Regulation,  best  practice  and
White  Paper  and 
internationally accepted principles of good governance.

5.2.4. Recruitment and training

Issues  connected  with  the  lack  of  human  resources  were  raised  by
approximately half the Directors-General (32 qualifications). A wide range of
specific issues were raised, including deficiencies in the recruitment process
itself, a lack of suitably qualified people on reserve lists and the ensuing need
to  train  inexperienced  staff.  In  order  to  tackle  these  recurring  requests,  the
Commission will put in place the following action:

Action  14:  DG  for  Personnel  and  Administration  will  review  as  soon  as
possible  in  2002  profiles  for  new  recruitments  needed  by  services  in
financial  management  and  related  issues,  compare  these  with  the  current
launch  additional  open
competitions  programme 
competitions  as  appropriate.  In  this  respect,  DG  for  Personnel  and
Administration  will  draw  up  a  plan  to  be  executed  by  the  new  European
Personnel  Selection  Office,  EPSO,  as  from  early  2003.  As  an  interim
measure,  the  recruitment  of  temporary  agents  on  vacant  permanent  posts
will be extended up to the point at which sufficiently long reserve lists for the
related competitions will be exploitable.

this  area  and 

in 

Action  15:  DG  for  Budget  will  provide  the  necessary  training  for  staff  on
financial  management  as  well  as  training  specifically  geared  to  the
implementation of the new Financial Regulation. Together with the services,
DG  for  Personnel  and  Administration  and  DG  for  Budget  will  organise  the
necessary  training  sessions  for  the  different  actors  in  the  expenses  cycle.
Actions in this context are ongoing, and will be reinforced.

5.2.5. Modernisation of the Commission’s accounting framework and systems

Several  Directors-General  made  qualifications  in  this  respect  and  DG  for
Budget  itself  had  2  major  reservations  in  this  domain.  When  referring  to
modernisation  in  the  Commission’s  accounting  area  there  are  three  key
issues:  modernisation  of 
framework  and  associated
the  accounting 
procedures;  problems  related  to  the  central  supporting  information  system
(Sincom);  and  problems  concerning  local  information  systems  and  in
particular their links with the central system.

(cid:1)  The  modernisation  requirements  related  to  the  Commission’s  accounting
framework concern the extent  to  which  the financial  reporting  information
derived from outside the central accounting system is reliable and to what
extent  this  framework  complies  with  internationally  accepted  accounting

26

principles  and  standards.  While  maintaining  an  ongoing  priority  on  the
quality  of  the  current  operational  system,  a  modernisation  of  the
accounting  system  through  the  implementation  of  accrual  accounting,  as
foreseen  by  the  recast  Financial  Regulation,  is  expected  to  address  this
concern.

(cid:1)  In  Sincom  the  redundancy  of  some  data  inside  the  information  systems
architecture,  and  especially  the  risk  of  lack  of  coherence  of  information
presented  to  the  Authorising  Officers,  on  one  hand,  and  the  central
services,  on  the  other  hand,  constitute  a  genuine  source  of  concern.  DG
for  Budget  has  launched  already  end  2001  a  “coherence”  project  in  this
regard.  Coherence  will  also  benefit  from  the  decentralisation  of  control
functions  by  the  recast  Financial  Regulation.  In  addition,  DG  for  Budget
has  also  undertaken  actions  for  strengthening  the  security  controls  and
audit trail to be carried out in the system. The Commission intends to deal
with these issues urgently on the basis of a coherent and feasible project
plan.

(cid:1)  Finally,  some  qualifications  refer  to  limitations  in  local  systems  and  the
need to enhance the quality of their interfaces with the central information
system. In this context, the Commission accepts the different action plans
mentioned in the respective Annual Reports. The services are also invited
to  identify,  where  possible,  common  solutions  and  to  collaborate  closely
with  the  Central  Financial  Service  in  order  to  optimise  the  overall  project
plan referred to above, notably concerning the functionality which could be
provided in the central systems and effective project management.

the  other 

Action 16: the Commission will, by the end of 2002, adopt and communicate
to 
the
modernisation  of  the  accounting  framework,  including  the  progressive
evolution towards an accrual accounting basis.

Institutions  a  coherent 

implementation  plan 

for 

Action 17: the Commission will adopt by the end of 2002 a communication
with  the  strategic  orientations  for  the  future  core  financial  information
systems. When fixing the project plan, absolute priority will be given to three
aspects  :  avoiding  inconsistencies  through  redundancy  of  data  and
applications,  enhancing 
trail
provisions in the system and implementing the new Financial Regulation by
1 January 2003.

the  security  controls  and  audit 

further 

6.

GENERAL CONCLUSIONS

The general conclusions that can be drawn from the reports and declarations
are  generally  positive,  considering  that  it  is  a  first  experience  for  the
Commission.

6.1.

Situation of the Commission

The  Annual  Reports  and  declaration  exercise  has  been  introduced  and
designed as a crucial Reform and structural management accountability tool.
Its novelty lays in its simplicity and effectiveness in enhancing accountability

27

and  transparency,  in  combination  with  its  fundamental  features  of  self
assessment  and  ownership  of  the  exceptions  noted  by  management  itself.
Which  in  turn  gives  it  an  extra  impetus  for  management  ownership  for
remedial action in those areas which are under the Commission's control.

The  overall  picture  emerging  from  this  Synthesis  may  not  be  comforting  in
that  it  gives  a  much  sharper  and  challenging  picture  of  the  present  state  of
the art of controls in the Commission than ever before. But that revelation in
and of itself signifies Reform in action; which is to be seen in addition to the
actions  presently  undertaken  in  the  context  of  Reform,  which  show  that
progress  has  been  made  towards  the  implementation  of  a  more  efficient
organisation,  although  more  work  is  clearly  needed  to  redress  over  time
many of the risks exposed.

There are also structural issues emerging from this procedure that will cause
the Commission to make an extra effort even, possibly, beyond that foreseen
in  Reform,  such  as  progressing  on  intra-governance  issues,  institutional
accounting  and  information  systems  control  weaknesses,  human  resource
constraints  as  well  as  on  the  structural  question  of  how  to  reconcile  the
delegation  risks  -  inherent  to  all  operating  structures  predicated  on  the
subsidiarity  principle  -  on  the  one  hand,  whilst  the  Commission  maintaining
budget responsibility on the other.

Moving  forward,  the  Commission  also  takes  note  of  the  learning  curve  that
goes  with  a  first  time  introduction  of  new  management  instruments,  almost
unprecedented  for  many  Member  States,  as  the  Annual  Reports  and
declaration  exercise.  And  much  welcomes 
lessons  drawn  and
recommendations  for  improvement  made  as  to  process,  for  the  years
coming.  In  spite  of  these  improvements,  it  is  not  excluded  that  other
observations  and  reservations  will  be  raised  in  the  years  ahead.  The
Commission is not aware of anything that, on the whole, may materially effect
the picture emerging from this commendable first year's effort. This picture is
clearly based on the information available to the Commission. Elements like
shared management may limit this information.

the 

The  timing  of  the  whole  Annual  Report  exercise  will  also  need  to  be
reviewed.  On  basis  of  articles  60§7  and  181§4  of  the  new  Financial
Regulation,  the  Synthesis  will  need  to  be  made  available  to  the  other
Institutions  before  the  15  June  from  2004  onwards.  Consequently,  the
Commission may bring partially forward already in 2003 the timetable of the
Annual Reports and Synthesis. Any proposals in this regard will be taken into
account in the revised guidelines foreseen in action 9.

It is also necessary to point out that the problems or weaknesses brought out
by the introduction of declaration of assurance in the Commission should not
be  read  as  a  worsening  of  the  Commission  management.  All  the  problems
pinpointed pre-existed the Reform, but their recognition and ownership by the
Commission now ensures that effective action will be taken, action which will
be monitored and followed up.

28

6.2.

Actions planned to resolve problems

In  this  context,  the  Commission  notes  that  the  range  of  issues  raised  by
Directors  General  in  their  reservations  is  such,  that  it  is  clear  all  problems
may  not  be  solved  at  once.  Indeed,  the  Commission  is  facing  resource
constraints, both financial and human. It also has to maintain an appropriate
balance  between  investing  more  resources  in  improving  administration  and
management and/or in reinforcing its capacity to develop and deliver policy.
This  may  imply  that  choices  have  to  be  made  between  different  priorities,
which may require some adjustments in the timeframe for the actions set out
in the synthesis.

The  Commission  takes  note  of  all  the  qualifications  made  and  any  ensuing
actions planned by the Directors-General. For any qualifications not covered
by  the  general  actions  indicated  above,  the  Commission  urges  services  to
ensure that proper action plans and accompanying timetables are drawn up
by September 2002.

Finally,  the  Commission  notes  that  Directors-General  should  submit  the
details of  the action plans  to the  responsible  Commissioner  who  should,  on
the basis of the Annual Report and any other relevant information at his/her
disposal,  agree  the  final  version  of  the  detailed  action  plan.  Individual
Commissioners  will  then  be  responsible  for  supervising  the  implementation
by the Directors-General concerned of the agreed measures.

In line with the principle of collective political accountability of the College and
within  the  framework  agreement  on  relations  between  the  European
Parliament  and  the  Commission,  the  Members  responsible  for  the  Budget
and  for  administrative  Reform  will  present  the  Synthesis  to  the  competent
bodies  of the  European  Parliament,  in  particular  the  Committee  on  Budgets
and the Committee on Budgetary Control.

The other Commissioners will present their political appreciation for their area
of  responsibility  according  to  arrangements  agreed  with  the  Parliamentary
Committees.  They  can  ask  the  Director-General  to  present  his/her  Annual
Report to the Parliamentary Committee concerned.

Action  18:  AAR  action  plans  will,  by  September  2002,  be  included  in  the
Annual  Management  Plans  for  2002.  These  action  plans  will  be  translated
into  the  Annual  Management  Plans  for  2003  as  appropriate.  Progress  will
be monitored by the Commissioner responsible and will be reviewed in the
next Annual Report exercises.

29

Action Plan

The order of the actions only reflects their position in the document and is not a
priority order.

A) Cross cutting political issues

Action 1: As far as research programmes are concerned, the Commission will adopt
before  end  of  2002  a  detailed  action  plan  addressing  the  complexity  of  financial
management  of  indirect  actions  through  simplification  and  enhanced  consistency
between  the  different  systems  currently  in  place  and  through  improved  contract
management. To address existing risks the effectiveness of controls exercised by the
relevant  services  will  be  increased,  and  work  intensified  on  the  protection  of  the
financial interests of the Community.Action 2: While confirming the substance of the
Relex  reform,  on  several  occasions,  and  following  the  Internal  Auditor’s  Annual
Report, the Commission has noted the necessity to examine the scope for synergies
between  the  services  involved  in  External  Relations.  Relex  Commissioners,  in
agreement  with  the  President  and  Vice-President  Kinnock,  should  reexamine  how
the resources and structures of DGs Relex, Development and EuropeAid can best be
organised in the longer term in order to serve Relex Commissioners in the conduct of
their portfolios, which remain unchanged. The Commission will examine proposals to
this effect before the end of the year. The Commission’s  assessment  is  that,  taking
into  account  that  2001  was  still  a  start-up  phase,  further  efforts  are  needed  to
consolidate  the  reform  to  make  it  fully  effective.  In  this  context  the  Commission  will
also assess and make transparent the risks linked to external aid and in particular to
direct  budgetary  assistance  as  a  form  of  development  aid  and  communicate  any
major  conclusions  to  the  other  institutions;  it  will  also  carry  out  an  evaluation  of  the
operation  of  the  devolution  exercise  next  year,  in  order  to  draw  lessons  on  the
effectiveness and efficiency of the introduction of changes after implementation of the
external aid reform.

Action 3: The reservations in the field of nuclear safety will be addressed before the
end  of  the  year  through,  on  the  one  hand,  a  package  of  proposals  to  create  an
operational legislative framework for the identification of EU safety standards and the
preservation of decommissioning funds, and on  the  other  hand,  by  looking  carefully
at  the  way  in  which  nuclear  expertise  is  shared  among  the  competent  services  in
order to improve its effectiveness.

Action  4:  the  Commission  will  seek  to  clarify  with  the  Council  its  share  of
responsibility in meeting the objectives established for the shared management of the
Structural  Funds.  The  Commission  will  also  make  proposals  in  order  to  align  its
monitoring and control powers to its responsibilities.

B) Implementation of the Reform

Action 5: Regarding the lack of human resources with respect to the implementation
of  the  Reform,  the  Commission  will  pay  attention  to  the  needs  expressed  by
Directors-General in their Annual Reports in the context of the next strategic planning
and  programming  cycle  which  starts  end  2002.  In  this  context,  the  Secretariat-
General will draw up a new methodology for assessing the resources needs of both
existing and new activities.

30

Action  6:  Regarding  the  continued  implementation  of  the  Reform,  the  Secretariat
General  will,  in  close  cooperation  with  the  DG  for  Budget  and  the  DG  for
Administration,  review  the  coordination  mechanisms  between  the  central  services
with a view to improving the guidance and advice provided to operational services. In
addition, the Secretariat-General will prepare a detailed ABM Guide by October 2002
and  will  assist  services  in  the  preparations  of  their  Annual  Management  Plan  for
2003.

Action  7:  An  inter-service  working  group  will  be  mandated  to  coordinate  the
interoperability of existing management information systems. This group will establish
by November 2002 an action plan and supervise its execution.

Action  8:  DG  for  Budget,  in  collaboration  with  the  Secretariat-General,  will  provide
enhanced  support  and  practical  guidance  for  the  standards  covering  sensitive
functions  and  supervision,  which  are  considered  as  very  important  for  a  smooth
functioning of the Commission services, before the end of 2002.

Action 9: All Commission services will give particular attention in 2002 to the design
and  documentation  of  internal  control  procedures,  in  particular  those  financial
procedures aimed at preventing errors and detecting irregularities and the recording
of exceptions.

Action  10:  the  Secretariat-General,  in  collaboration  with  DG  for  Budget,  DG  for
Personnel and Administration and the Internal Audit Service, will review and enhance
before end of 2002 the methodology and guidance for producing the Annual Activity
Reports  for  2002,  paying  particular  attention  to  the  question  of  materiality,  to  the
definition  of  the  scope  of  potential  reservations  to be  included  in the  accompanying
declarations and to the handling of cross delegations.

Action  11:  In  advance  of  the  new  Financial  Regulation,  Directors-General  and
Heads  of  Service  have  already  begun  to  put  in  place  adequate  internal  control
systems.  They  will  evaluate  by  November  2002  the  degree  of  assurance  on  the
readiness of the internal control systems in place, notably the adequacy of financial
circuits, and the Commission central services will undertake the necessary measures
to support them in this regard. Specifically, the new or modified elements of the new
Financial  Regulation  and  its  implementing  rules  will  be  integrated  into  the  present
internal control framework by October 2002. Tools will be continued to be developed
by DG for Budget, in collaboration with the Secretariat-General and DG for Personnel
and Administration, to assist Commission services in adapting their existing controls
systems to meet the new requirements and an extensive training programme will be
developed to support the process.

C) Horizontal management themes

Action 12: DG for Budget, in collaboration with DG for Personnel and Administration
and  the  concerned  services,  will  analyse  the  problems  arising  from  shared
management by March 2003. It will make a proposal to the Commission on the scope
of  the  responsibilities  of  the  Authorising  Officer  in  each  domain  where  shared
management  applies.  This  should  enable  the  Directors-General  to  take  the
appropriate measures in case of uncertainties or identified problems.

31

Action  13:  the  Commission  will  ensure  that,  before  1  December  2002,  the
responsibilities  of  the  key  actors  in  audit  and  control,  including  on  the  spot  checks,
are clarified in accordance with the stated principles of the Reform White Paper and
the new Financial Regulation, best practice and internationally accepted principles of
good governance.

Action  14:  DG  for  Personnel  and  Administration  will  review  as  soon  as  possible  in
2002 profiles for new recruitments needed by services in financial management and
related issues, compare these with the current competitions programme in this area
and  launch  additional  open  competitions  as  appropriate.  In  this  respect,  DG  for
Personnel  and  Administration  will  draw  up  a  plan  to  be  executed  by  the  new
personnel  selection  office,  EPSO,  as  from  early  2003.  As  an  interim  measure,  the
recruitment  of  temporary  agents  on  vacant  permanent  posts  will  be  extended  up  to
the  point  at  which  sufficiently  long  reserve  lists  for  the  related  competitions  will  be
exploitable.

Action  15:  DG  for  Budget  will  provide  the  necessary  training  for  staff  on  financial
management as well as training specifically geared to the implementation of the new
Financial  Regulation.  Together  with 
for  Personnel  and
Administration  and  DG  for  Budget  will  organise  the  necessary  training  sessions  for
the  different  actors  in  the  expenses  cycle.  Actions  in  this  context  are  ongoing,  and
will be reinforced.

the  services,  DG 

Action 16: the Commission will, by the end of 2002, adopt and communicate to the
other  Institutions  a  coherent  implementation  plan  for  the  modernisation  of  the
accounting  framework,  including  the  progressive  evolution  towards  an  accrual
accounting basis.

Action 17: the Commission will adopt by the end of 2002 a communication with the
strategic  orientations  for  the  future  core  financial  information  systems.  When  fixing
threeaspects:  avoiding
the  project  plan,  absolute  priority  will  be  given 
inconsistencies  through  redundancy  of  data  and  applications,  enhancing  further  the
security  controls  and  audit  trail  provisions  in  the  system  and  implementing  the  new
Financial Regulation by 1 January 2003.

to 

Action  18:  the  missing  or  inadequate  action  plans  will,  by  September  2002,  be
included  in  the  Annual  Management  Plans  for  2002.  These  action  plans,  like  the
other action plans, will be translated into the Annual Management Plans for 2003 as
appropriate. Progress will be monitored by the Commissioner responsible and will be
reviewed in the next Annual Report exercises.

32