Communication from the Commission to the European Parliament, the Council and the European Court of Auditors - Synthesis of the Commission’s management achievements in 2005
Date: 2006-06-07
Institutions: European Commission
Subjects: European Commission, activity report, administration of the Institutions, environmental risk prevention, financial management, management accounting, personnel administration

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.6.2006 
COM(2006) 277 final 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN 
COURT OF AUDITORS 

Synthesis of the Commission’s management achievements in 2005 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

3. 

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

Assurance gathered through the annual activity reports .............................................. 5 

Global picture: a more solid and wide-ranging assurance … ...................................... 5 

Based on an enhanced methodology ............................................................................ 6 

Recurring reservations ................................................................................................. 7 

Major cross-cutting issues arising from the annual activity reports and 
recommendations received........................................................................................... 9 

3.1. 

Performance management and internal control............................................................ 9 

3.1.1.  Effectiveness of internal control in the Commission ................................................... 9 

3.1.2.  Risk management as a way of embedding internal control in the administrative 

culture......................................................................................................................... 10 

3.1.3.  Performance management.......................................................................................... 10 

3.2. 

Governance ................................................................................................................ 11 

3.2.1.  Follow-up of audit reports.......................................................................................... 11 

3.2.2.  Outsourcing and agencies .......................................................................................... 11 

3.2.3.  Shared services........................................................................................................... 12 

3.2.4.  Simplification............................................................................................................. 13 

3.3. 

Financial management and reporting ......................................................................... 14 

3.3.1.  Financial rules ............................................................................................................ 14 

3.3.2.  Roadmap to an integrated control framework............................................................ 14 

3.3.3.  Ex-ante and ex-post controls...................................................................................... 15 

3.3.4.  Accounting and financial reporting............................................................................ 16 

3.4. 

IT systems and continuity of operations .................................................................... 18 

3.4.1. 

IT systems .................................................................................................................. 18 

3.4.2.  Crisis management and business continuity .............................................................. 18 

3.5. 

Human resources........................................................................................................ 19 

3.5.1.  Adequacy of competencies ........................................................................................ 19 

3.5.2.  Recruitment ................................................................................................................ 19 

3.5.3.  Mobility...................................................................................................................... 20 

3.5.4.  Reporting on human resources in the Commission ................................................... 20 

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4. 

Conclusions ................................................................................................................ 19 

Annex 1 .................................................................................................................................... 22 

Annex 2 .................................................................................................................................... 27 

Annex 3 .................................................................................................................................... 32 

Annex 4 .................................................................................................................................... 36 

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1. 

INTRODUCTION 

In this annual synthesis, the Commission reports on policy results and on how it has managed 
the human and financial resources provided to implement Community policies. For the first 
time,  the  Synthesis  of  policy  achievements  [COM(2006)  124]  sets  out  in  a  separate 
document  the  progress  made  in  2005  in  meeting  the  Commission’s  strategic  objectives  and 
provides  an  account  of  policy  achievements  during  the  past  year.  This  2005  Synthesis  of 
Commission  management  accompanies  the  policy  synthesis  and  reports  on  how  the 
Commission has performed its management responsibilities and on the assurance its internal 
control  systems  provide  in  this  respect.  According  to  Article  60(7)  of  the  Financial 
Regulation,  the  Commission  shall  send  the  annual  synthesis  to  the  budgetary  authority  no 
later than 15 June each year. 

By  adopting  this  synthesis,  the  Commission  assumes  its  political  responsibility  for 
management by its Directors-General and Heads of service, on the basis of the assurances and 
reservations issued by them in their annual activity reports, acknowledging that further efforts 
are needed to solve a number of weaknesses. In this synthesis, the Commission also takes a 
position  on  the  cross-cutting  issues  stemming  from  the  examination  of  these  reports  and 
raised by the Internal Auditor, the European Court of Auditors, the Discharge Authority, or 
identified  by  the  Audit  Progress  Committee  and  by  the  Director-General  for  Budget  in  his 
report  “Overview  on  the  state  of  internal  control  in  Commission  Directorates-General  and 
Services” [SEC(2006) 567]. 

The  Commission  takes  overall  responsibility,  pursuant  to  Article  274  of  the  EC  Treaty,  for 
implementing the EU budget. This Synthesis sets out the Commission’s conclusions on each 
main  management  area  and  on  systemic  cross-cutting  issues.  It  is  the  apex  of  the 
Commission’s  accountability  architecture,  of  which  the  annual  activity  reports  of  the 
delegated  authorising  officers  constitute  the  pillars.  More  generally,  this  Synthesis  also 
provides  a  summary  of  the  progress  made  in  2005  towards  fully  developing  the 
performance  potential  of  the  Commission’s  management  and  control  systems  in  areas 
such as: 

•  Promoting  the  Commission’s  accountability:  the  annual  activity  reports  for  2005  were 
based on a stronger methodology and a more coherent approach to common concerns (Part 
2.2  below);  full  accrual  accounting  was  applied  to  the  EU  budget  for  the  first  time, 
although a number of transitional problems had to be resolved (Part 3.3.4). 

•  Enhancing  effective  performance  management:  the  culture  of  effectiveness  of  internal 
control  continued  to  gather  pace  and  will  be  further  embedded  by  focusing  more  on 
proportionality  and  cost-effectiveness  of  controls  (Part  3.1.1);  2005  was  the  first  year  of 
introduction of the new Commission-wide methodology on risk management (Part 3.1.2); 
action to improve the quality of objectives and indicators was launched (Part 3.1.3). 

•  Reinforcing  the  Commission’s  responsibility  and  monitoring  capacity:  improvements 
aimed  at  simplification  were  proposed  or  implemented  (Part  3.2.4);  an  action  plan  on 
moving to an integrated internal control framework was presented (Part 3.3.2); the follow-
up  of  action  plans  (Part  3.2.1)  and  the  reliability  and  robustness  of  internal  control 
strategies (Part 3.3.3) were improved. 

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The 2005 Synthesis covers the first year in which a budget entirely managed by the Barroso 
Commission will be subject to the discharge procedure. 

2. 

ASSURANCE GATHERED THROUGH THE ANNUAL ACTIVITY REPORTS 

2.1. 

Global picture: a more solid and wide-ranging assurance … 

The  Commission  notes  with  satisfaction  that  the  principles  of  the  Reform  are  now  firmly 
embedded in the daily management of its Directorates-general and Services. The Commission 
welcomes the overall improvement in the way the 2005 annual activity reports underpin the 
assurance contained in the attached declarations signed by the delegated authorising officers. 
Reservations (cf. list in Annex 3) are more precise and reasoned than in previous years and 
explanations are also often given on the overall impact on reasonable assurance. 

The  reports  themselves  were  generally  more  focused  and  explicit  and  thus  of  growing 
importance as fundamental accountability and communication instruments. Having examined 
the  annual  activity  reports  and,  in  particular,  the  declaration  of  assurance  signed  by  each 
Director-General and Head of service, the Commission notes that assurances were given by 
all  delegated  authorising  officers.  A  number  of  general  issues  arising  out  of  this  analysis 
warrant highlighting: 

•  Shared  management  with  Member  States.  The  Commission  notes  that  the  reservations  in 
this  area  are  more  focused  compared  to  earlier  exercises.  For  example,  the  2005  reports 
indicate the programme  or the geographical area covered by the weaknesses. In its view, 
only  full  cooperation  and  efforts  from  national  authorities,  in  the  terms  indicated  in  the 
action  plan  for  an  integrated  control  framework  (see  below),  will  make  it  possible  to 
achieve  a  breakthrough  in  reaching  reasonable  assurance  for  the  areas  concerned  by  the 
reservations. Increased efforts to align audit strategies, planning and risk management with 
Member  States,  reliance  on  the  work  of  other  controllers  and  systematic  use  of 
management reporting from Member State bodies are also foreseen in the action plan for 
an integrated control framework (see below) and recommended by the Internal Auditor. 

The  Commission  will  continue  to  work  towards  reinforcing  assurance  from  the 
national  authorities  managing  EU  funds.  This  should  further  strengthen  the  overall 
assurance as to the legality and regularity of operations. 

•  External  actions,  through  centralised,  decentralised  and  joint  management.  As  regards 
third  countries,  the  high  level  of  risk  inherent  in  operations  is  considered  to  be  under 
control and the only reservation made in this area relates to the sharing of responsibilities 
between the Commission and  the United Nations in the framework of implementation of 
the EU contribution to UNMIK Pillar IV in Kosovo. 

The  Commission will work with the  representatives of the United Nations to resolve 
the matter in 2006. 

•  Internal actions, centralised management. In the Research area in particular, but also more 
generally  in  the  area  of  internal  policies,  the  Commission  is  aware  of  systemic  control 
problems linked to the reimbursement of costs, which lead to recurring errors, notably with 
personnel costs. It expects the simplification measures and reinforced control mechanisms 
undertaken  under  the  6th  Framework  Programme  to  lead  to  visible  progress  as  the 

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programmes mature and the new system of mandatory certificates of cost declarations by 
independent auditors becomes embedded. However, only a thorough simplification of the 
funding  mechanism  will  address  the  underlying  problem.  Assurance  from  National 
Agencies under indirect centralised management should also be improved. 

The  Commission  will  continue  its  efforts  to  bring  about  simplification  in  the 
implementation  of  Community  programmes  and  examine  the  systemic  control 
problems  linked  to  the  reimbursement  of  costs.  In  particular,  the  Rules  for 
Participation  proposed  by  the  Commission  for  the  7th  Research  Framework 
Programme  foresee the use of simplified  funding mechanisms such as greater use of 
lump-sums, scales of unit costs and average rates, based on proportionality and cost-
effectiveness  of  controls,  while  at  the  same  time  preserving  the  EU’s  financial 
interests.  As  part  of  the  action  plan  for  an  integrated  control  framework  (see  Part 
3.3.2  below),  the  Commission  will  continue  its  efforts  to  simplify  the  regulatory 
framework and fine-tune the use of audit certificates, with a reinforced coordination 
on these issues between the relevant departments. By these means, backed up by the 
application  of  sanctions  where  necessary,  the  cost  statement  controls  will  be  able  to 
become more efficient and effective. 

•  Administrative  expenditure.  Measures  adopted  by  the  Paymaster’s  Office  have  stabilised 
the information system for calculating salaries and pensions, and the reservation expressed 
in the 2004 statement by the resource unit manager has been lifted in the 2005 report. The 
OIB  has  disclosed  difficulties  in  contract  and  procurement  management  on  the 
programming side, which should be solved during 2006. 

The  Commission  considers  that  reasonable  assurance  can  be  obtained  from  the 
annual  activity  reports  in  the  area  of  administrative  expenditure.  Although  the 
reservations  on  procurement  programming  and  on  administrative  appropriations  in 
delegations  did  not  jeopardise  the  reasonable  assurance  provided  by  the  Director 
General, the Commission will ensure that this service implements effective corrective 
measures in order to minimise the likelihood of similar situations arising in the future. 

Conclusion 

Overall,  the  Commission  considers  that  the  internal  control  systems  in  place,  with  the 
limitations described in the 2005 annual activity reports, provide reasonable assurance 
on  the  legality  and  regularity  of  operations,  for  which  the  Commission  is  responsible 
under Article 274 EC. However, it acknowledges that further efforts are needed to solve 
a  number  of  weaknesses,  in  particular  those  highlighted  in  the  reservations  of  the 
delegated authorising officers. 

The  Commission  will  ensure  that  its  delegated  authorising  officers  will  continue  their 
efforts  to  guarantee  that  reasonable  assurance  in  the  declarations  accompanying  the 
annual reports is effectively underpinned by appropriate internal control systems. 

2.2.  … Based on an enhanced methodology 

Striving  for  continuous  improvement  and  simplification,  the  guidelines  for  the  2005  annual 
activity reports were further enhanced in the following ways: 

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•  Reporting  requirements  for  2005  were  lighter  and  more  focused  on  the  impact  of  key 
actions. In this way the annual activity reports achieved a better balance between policy 
results  and  internal  control  and  financial  management  issues,  making  for  clearer  and 
more robust input for decision making and easier communication of results. 

•  Increased  accountability  was  pursued  through  explicit  declarations  and  an  appraisal  of 
the inherent nature and characteristics of the management, risk and control environment in 
which  Directorates-General  operate,  and  of  the  elements  and  results  of  the  management 
and control system which support the assurances required in the declaration. 

•  Work  was  undertaken  in  2005,  and  pursued  in  2006  prior  to  the  adoption  of  the  annual 
reports, to provide guidance on assessing the materiality of weaknesses (including systemic 
ones) and encouraging a common methodology and materiality thresholds by ‘families’ 
of Directorates-General adapted to their specific situation. A common methodology has 
been  agreed  for  the  shared  management  family  and  proposed  for  the  research  family. 
Progress was also made by the internal policies family. 

•  All Directorates-General were also asked to disclose the materiality criteria used and to 
include  their  overall  conclusion  on  the  combined  impact  of  the  reservations  on  the 
declaration as a whole. 

The  peer  review  of  potential  reservations  contributed  greatly,  through  a  large  number  of 
family and bilateral meetings, to refine the definition of reservations in terms of content and 
consistency in dealing with similar problems. It also represented a qualitative breakthrough in 
the  use  of  materiality  criteria  and  in  the  quantification  of  the  impact  of  reservations.  As 
concerns  methodology,  and  aiming  at  strengthening  reservation  and  not  at  reducing  their 
number, delegated authorising officers considered that: 

•  the  existence  of  a  risk  did  not  necessarily  justify  a  reservation  unless  a  problem  had 
actually occurred during the year covered by the report or the control system was not able 
to prevent such events with material impact; 

•  a  critical  audit  recommendation  would  justify  entering  a  reservation  only  if  (1)  the 
underlying  weakness  falls  into  the  area  covered  by  the  declaration  of  assurance,  (2)  the 
delegated  authorising  officer  accepts  that  the  current  internal  control  system  does  not 
address  the  identified  weaknesses  appropriately  and  (3)  he/she  considers  that  the 
materiality threshold is exceeded. 

Conclusion 

Much  progress  has  been  achieved  in  2005  in  improving  accountability  and  ensuring  a 
more  coherent  approach  by  ‘families’  of  Directorates-General  dealing  with  similar 
activities. Work in the various ‘families’ will be continued, so that each area, including 
those  for  which  a  common  methodology  could  not  yet  be  established,  benefits  from  a 
specific,  coherent  methodology.  Further  work  by  families  will  be  carried  out  on 
indicators relating to control and the level of assurance (see Part 3.1.1 below). 

2.3. 

Recurring reservations 

Reservations  serve  to  identify  problematic  areas,  where  action  should  be  concentrated  to 
ensure that operations are legal and regular and that the use of resources is sound. A recurring 

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reservation  may  constitute  a  problem  in  itself.  In  this  respect,  the  Commission  notes  that 
recurring reservations are different in nature: 

•  Reservations  whose  scope  reduces  from  year  to  year  or  for  which  the  action  plan  is 
bearing fruit (reservations issued by the Directorate-General for Regional Policy on ERDF 
or Cohesion Fund in certain Member States or candidate countries; reservation on IACS in 
Greece by the Directorate-General for Agriculture and Rural Development; reservations on 
the  coverage  of  ex-post  controls  and  on  the  European  Refugee  Fund  by  the  Directorate-
General  for  Freedom,  Security  and  Justice;  reservation  on  accrual  accounting  for  the 
European Development Fund by the Directorate-General for Budget). 

The  Commission  notes  that  in  some  cases  resolution  of  the  underlying  problem  will 
imply  further  efforts  from  third  parties  (Member  States  in  the  case  of  shared 
management). 

•  Reservations  relating  to  structural  problems  hindering  full  and  permanent  resolution 
under the current regulatory framework of the issue specified in the reservations (issues 
raised  by  several  Directorates-General  on  the  fifth  research  framework  programme; 
reservation on the European Standardisations Organisations by the Directorate-General for 
Enterprise and Industry; reservation on the preferential import of high quality beef by the 
Directorate-General for Agriculture and Rural Development). 

The Commission will continue to take corrective action through innovative measures 
aimed  at  the  design  of  funding  mechanism  (for  instance  in  the  area  of  the  research 
framework  programmes,  the  greater  use  of  subsidies  based  on  lump-sum  payments 
and scales of unit costs will be envisaged). 

•  Reservations  relating 

to  weaknesses  affecting  operations  carried  out  outside 
headquarters  or  operations  carried  out  at  headquarters  and  related  to  activities 
managed  outside  headquarters,  whose  resolution  has  proved  difficult  due  to  the 
particular situation caused by physical distance and very small entities (reservation on the 
absence of a structured and systematic ex-post control system for grants, disclosed by the 
Directorate-General  for  Communication;  two  reservations  concerning  administrative 
appropriations by the Directorate-General for External Relations). 

The  Commission  considers  that,  given  the  amounts  at  stake,  these  reservations  have 
only  limited  consequences  at  Commission  level.  It  will  ensure  that  the  relevant 
Directors-General take the necessary action in 2006 to resolve these issues. 

•  Weaknesses/inabilities  to  attain  a  Directorate-General  or  Service’s  objectives  that  do not 
fall  under  the  scope  of  the  declaration  of  assurance  (reservation  on  the  inability  to 
perform  an  annual  audit  of  Community  bodies  by  the  Internal  Audit  Service;  reservation 
on nuclear safety by the Directorate-General for Energy and Transport; reservation on the 
Council’s office for sickness insurance by the Paymaster Office. It should be noted that the 
declaration  of  assurance  covers  the  use  of  resources  for  their  intended  purpose,  in 
accordance with  the principles  of  sound  financial  management,  on the  one  hand, and  the 
fact that the control procedures put in place give the necessary guarantees concerning the 
legality and regularity of the underlying transactions, on the other hand. 

The Commission considers that these issues, given their nature and the fact that they 
do  not  fall  completely  under  the  scope  of  the  assurance  declaration,  could  in  the 

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future be raised rather in the body of the annual activity reports. 

A  few  new  reservations  are  also  issued  on  cross-cutting  issues  relating  to  accounting  and 
financial  reporting  and  the  data  centre’s  building  weaknesses  influencing  continuity  of 
operations of IT systems. This is addressed below in Parts 3.3.4 and 3.4.1. 

3. 

MAJOR  CROSS-CUTTING  ISSUES  ARISING  FROM  THE  ANNUAL  ACTIVITY  REPORTS 
AND RECOMMENDATIONS RECEIVED 

3.1. 

Performance management and internal control 

3.1.1.  Effectiveness of internal control in the Commission 

As the Internal Auditor and the overview report note, Commission Directorates-General and 
Services  have  made  considerable  progress  in  internal  control:  the  annual  activity  reports 
show, for example, that most Directorates-General and Services have diversified and adapted 
financial  circuits  to  the  different  needs  and  risks  identified;  some  Directorates-General  are 
increasingly monitoring that commitments and payments are evenly spread over the year, in 
an attempt to reduce the concentration of budget transactions at year end; risk management is 
further embedded in the management process and results of controls and lessons to be drawn 
are being monitored more and more closely. Nevertheless, both the Internal Auditor and the 
Court  of  Auditors  have  asked  the  Commission’s  Directorates-General  and  Services  to 
continue  their  efforts  to  make  effective  use  of  new  tools  and  controls,  having  noted  some 
remaining  weaknesses.  Exchange  of  experiences  and  tools  between  Directorates-General  in 
this context is being consolidated as part of the network of Internal Control Coordinators. 

Effective and efficient internal control systems can be established through focusing on clearly 
defined  and  achievable  control  objectives,  with  target  indicators  measuring  their  desired 
development over time and ensuring proportionality and cost-effectiveness of controls. In 
particular: 

•  Effectiveness  and  efficiency  of  internal  control  systems,  including  the  way  they  manage 
the  risks  relating  to  legality  and  regularity  in  budget  implementation,  will  be  monitored 
through  qualitative  and  quantitative  indicators.  More  dynamic  use  will  be  made  of 
scoreboards, with a regular review of the usability and pertinence of the indicators for each 
target population. 

•  Proportionality and cost-effectiveness of controls will be pursued through simplification 
and  adequacy  of  management  methods,  the  final  goal  being  a  good  balance  between  the 
need for control and the resources available for control. Using more lump-sum and flat-rate 
payments  in  grants,  assurance  declarations  from  third  parties  responsible  for  budget 
implementation  tasks  and  audit  certificates  are  expected  to  lessen  the  complexity  of 
controls carried out by the Commission directly, but new approaches will also be needed to 
define the regulatory and technical framework, for example, for lump-sum payments. 

Finally,  internal  control  and  risk  management  will  have  to  be  integrated  in  a  common 
framework, in line with the current international practice and on the basis of experience with 
the 24 existing internal control standards and the common risk methodology put in place last 
year. 

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Conclusion 

The Commission will develop indicators for control objectives, covering in particular the 
way internal control systems tackle the risk associated with the legality and regularity of 
operations.  Reporting  on  internal  control  effectiveness  will  be  further  strengthened  in 
annual  activity  reports  where  necessary.  The  Commission  also  invites  the  European 
Parliament  and  the  Council  to  support  efforts  to  adapt  the  legal  framework  to  ensure 
effective  application  of  the  principles  of  proportionality  and  cost-effectiveness  of 
controls. 

3.1.2.  Risk  management  as  a  way  of  embedding  internal  control  in  the  administrative 

culture 

The  Commission  adopted  a  Commission-wide  risk  management  framework  in  2005,  as 
foreseen in the 2004 Synthesis Report, establishing a common approach to risk management. 
Subsequently,  Commission  Directorates-General  and  Services  started  integrating  this 
common  methodology  into  their  planning  exercises,  identifying  critical  risks  and  related 
responses  in  their  annual  management  plans  for  2006.  This  first  pilot  exercise  increased 
ownership within Directorates-General, helped to raise risk awareness across the Commission 
and  also  had  an  impact  on  the  control  strategy  of  Directorates-General  and  on  the  control 
focus. 

The  main  risks  identified  relate  to  strategy,  planning  and  systems  (ineffective  control 
strategies, insufficient IT availability, maintenance and security), to people and organisation 
(lack  of  certain  types  of  expertise,  lengthy  recruitment  procedures,  over-dependence  on 
contract staff, unclear roles and responsibilities, and building and staff security issues), and to 
external  factors  (lack  of  political  support  outside  the  Commission,  pandemics,  incorrect 
understanding and application of rules and regulations by external partners). 

The  overview  on  internal  control  suggests  that  efforts  to  increase  the  use  and  value  of  risk 
management  should  be  pursued  so  as  to  embed  it  into  regular  and  continuous  management 
activities,  beyond  activity  planning.  In  this  respect,  steps  will  be  taken  to  ensure  further 
involvement  of  senior  and  middle  management,  sharing  of  experiences  among  departments 
and further consideration on how to handle risks within families of Directorates-General. 

Conclusion 

The  Commission  will  further  embed  risk  management  in  its  regular  management 
process  and  integrate  risk  assessment  in  its  internal  control  systems.  It  will  continue 
work  on  how  to  consolidate  risk  management  around  groups  of  Directorates-General 
(‘families’) faced with similar concerns. 

3.1.3.  Performance management 

The first phase of the performance review, launched by the 2004 Synthesis Report, has been 
carried out and has led to the establishment of a first repository of standard objectives and 
indicators that can be used for two horizontal activities common to all Directorates-General 
(“Policy strategy and coordination” and “Administrative support”). The second phase, started 
in 2006, focuses on objectives and indicators for spending programmes. As suggested by 
the Court of Auditors and the European Parliament (see also Part 3.1.1 above), this phase 
will also for the first time look at indicators which have a direct link to legality and regularity. 

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In  the  field  of  performance  management,  the  Commission  encourages  Directorates-General 
with similar activities to work more closely together and to share their experience in order to 
promote  a  more  coherent  and  efficient  approach.  Further  fine-tuning  of  available 
instruments,  such  as  management  plans  and  activity  reports  to  ensure  their  use  as  effective 
management  tools  adding  value  at  all  levels  and  allowing  solid  monitoring  and  quick 
corrective action, will be pursued. 

Conclusion 

The Commission will continue its review of objectives and indicators, with a particular 
focus on spending programmes in 2006 and on other Commission tasks in 2007. 

3.2. 

Governance 

3.2.1.  Follow-up of audit reports 

The Commission’s Audit Progress Committee plays a major role in monitoring the follow-
up  of  audit  or  audit-related  recommendations  and  in  providing  the  Commission  with  a 
comprehensive  picture  of  the  major  findings  and  remedial  action.  In  March  2005,  the 
Commission decided to expand the mandate of this body to the follow-up recommendations 
from the Court of Auditors and the Discharge Authority. Setting up a database to keep track 
of recommendations from these sources underpinned the effectiveness of the Audit Progress 
Committee’s reporting to the Commission. 

As  stated  in  the  overview  on  internal  control,  almost  all  Directorates-General  report  that 
appropriate action plans have been put in place in order to remedy the weaknesses identified 
by  the  Internal  Auditor  or  the  Internal  Audit  Capabilities  and  that  implementation  of  these 
action  plans  is  regularly  monitored.  As  the  Internal  Auditor  notes,  whereas  acceptance  of 
internal audit recommendations by Commission Directorates-General is very good, there is 
often considerable delay in implementation of action plans. The Internal Auditor suggests 
that  the  follow-up  of  such  recommendations  be  regularly  monitored  at  senior  management 
level, and fully integrated into normal management planning. The Audit Progress Committee 
will play a role in this: drawing on the Internal Audit Service's follow up work, it will alert 
those  Commissioners  and  Services  where  there  is  a  significant  delay  in  the  completion  of 
action plans. The Commission also notes the Internal Auditor’s commitment to issuing fewer 
and more focused recommendations, thereby also addressing requests made by Directorates-
General in this regard. 

Conclusion 

The Commission will ensure that its Directorates-General draw up precise action plans, 
taking into account priorities assigned and resource constraints, and on this basis follow 
up audit recommendations in good time. 

3.2.2.  Outsourcing and agencies 

The  first  three  executive  agencies  were  heading  towards  their  full  launch  in  2005,  one  of 
which  became  fully  operational  in  the  second  half  of  2005.  Recruitment  has  been  the  main 
challenge in the setting-up phase. Because of difficulties in this area, one of the agencies is 
still  not  fully  operational.  The  existing  executive  agencies  will  produce  their  first  fully-

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fledged  annual  activity  reports  for  the  2006  exercise,  which  will  be  taken  into  account  in 
subsequent synthesis reports. 

During  the  transition  period,  Executive  Agencies  worked  in  close  cooperation  with  parent 
Directorates-General in the preparation of the hand over of files. To ease the creation process 
of  new  agencies  for  the  new  programming  period  and  to  benefit  from  lessons  learned,  the 
Commission has launched a revision of its internal guidelines, and future agencies will also 
use standard Service Level Agreements with the Commission’s horizontal departments. The 
transition to the new programming period, the setting-up of new agencies and the evaluation 
of  existing  ones  will  need  to  be  closely  monitored  to  ensure  that  lessons  learned  and  best 
practices are taken on board. 

In 2005, as already indicated in the previous Synthesis Report, the Commission proposed an 
operating  framework  for  regulatory  agencies,  in  the  form  of  a  draft  interinstitutional 
agreement.  This  draft  agreement  aims  to  establish  minimum  standards  and  rules  of  good 
governance  for  the  creation,  functioning  and  oversight  of  regulatory  agencies.  The 
interinstitutional  agreement  proposed  by  the  Commission  was  welcomed  by  the  European 
Parliament, but the Council was unable to adopt it. 

Under the current rules, the Internal Auditor of the Commission has to audit each regulatory 
agency  every  year.  In  his  annual  activity  report,  the  Internal  Auditor  notes  that  this 
obligation  could  not  be  completely  met.  The  amendment  to  the  Financial  Regulation  being 
proposed by the Commission provides for each regulatory agency to set up its own internal 
audit function, which should solve the problem from 2007 onwards. 

Conclusions 

The  Commission  recently  revised  its  guidelines  on  the  setting-up  and  functioning  of 
executive  agencies,  so  that  existing  executive  agencies  as  well  as  new  ones  can  evolve 
within a stable and complete framework, providing in particular for smooth delegation 
and  reporting  arrangements  between  such  agencies  and  the  parent  Commission 
Directorates-General. 

The input of all institutions is necessary to negotiate a comprehensive framework, and to 
clarify  the  respective  responsibilities  of  the  institutions  and  of  the  regulatory  agencies. 
This  framework  would  be  applicable  to  the  creation  of  future  agencies  and,  at  a  later 
stage,  to  those  already  in  existence.  The  Commission  calls  on  the  Council  to  adopt  the 
proposed framework on regulatory agencies, to suggest amendments or other options. 

3.2.3. 

Shared services 

The  Internal  Auditor  recommends  exploring  the  potential  for  using  “shared  services”  to 
increase  management  efficiency  and  effectiveness,  citing  as  examples  the  areas  of  IT 
services, communication and management of financial resources and staff. 

An  overview  on  the  state  of  internal  control  indicates  that  small  departments  and  offices 
especially  encounter  difficulties  as  regards  business  continuity,  staff  competence  and 
mobility,  and  points  to  possible  alternatives  such  as  the  sharing  of  services  amongst 
Directorates-General  and  ad  hoc  helpdesks  run  by  central  departments  to  assist  operational 
departments in specialised tasks. 

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Conclusion 

The Commission recognises the potential added value of inter-service arrangements for 
small departments, provided such arrangements are based on a cost-benefit analysis and 
made in accordance with the applicable rules, while preserving the responsibility of each 
delegated  authorising  officer.  Its  central  departments  will  develop  a  range  of  practical 
solutions  and  in  so  doing  ensure  the  balance  of  responsibilities  and  accountability 
between Directorates-General and Services. 

3.2.4. 

Simplification 

The  Reform  progress  report  of  21  December  2005  identified  simplification  as  an  important 
cross-cutting  priority  for  the  Commission  in  all  spheres  of  internal  management.  Four  main 
strands  can  be  identified:  legislative  simplification,  simplification  of  expected  controls, 
simplification of future spending programmes, and simplification of internal procedures and 
working methods. 

In the area of legislative simplification, the Commission presented the results of a screening 
exercise of pending legislative proposals and, in September 2005, announced its intention to 
withdraw 68 of these. In October, a new phase of its legislative simplification programme was 
presented, based on the result of stakeholder consultations. The Commission also presented its 
position on a common methodology for measuring administrative burden to be applied by EU 
institutions and Member States when assessing the impacts of EU legislative initiatives. 

In the negotiations of the Financial Perspectives for 2007- 2013, the proposals put forward by 
the  Commission  pursued  the  overall  goal  of  simplification  as  regards  the  legislative 
instruments  and  the  spending  programmes.  An  example  of  this  is  the  Commission 
proposal  for  a  simplified  set  of  regulations  to  promote  more  coherence  and  effectiveness  in 
the  Union’s  external  policies.  Overall,  complementarities  between  programmes  have  been 
systematically  sought  to  enhance  their  impact  and  derive  the  best  value  from  funds  at 
European level. 

The  risk  analyses  conducted  by  Directorates-General  in  relation  to  their  2006  Annual 
Management Plans regularly pinpoint incorrect understanding and application of Community 
rules  and  regulations  by  intermediaries  and  beneficiaries  among  the  critical  risks;  some 
simplification of these rules would certainly help to manage this risk. It is important that the 
legislative authority should consider the feasibility of proposed controls and the related cost-
benefit. The Commission’s proposal for the Rules for Participation in the Seventh Framework 
Programme, for example, provides for greater use to be made of flat-rate (including scale of 
unit  costs)  and  lump-sum  payments  within  the  terms  of  the  Financial  Regulation.  The 
alternative  of  relying  only  on  verifying  the  eligibility  of  real  costs  has  proven  to  be  very 
difficult in terms of control and administrative burden for the Commission. 

A  number  of  internal  procedures  were  simplified  in  2005.  In  the  area  of  financial 
management, the Implementing Rules of the Financial Regulation were amended to simplify 
the rules for awarding contracts and grants, particularly where small amounts are concerned. 
The Commission also launched an initiative to simplify human resource management and 
administrative  procedures.  A  Task  Force  was  created  and  mandated  to  consult  with  staff 
and  to  propose  measures  to  simplify  procedures  that  are  unnecessarily  complex  and 
cumbersome. 

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Conclusion 

The  Commission  will  keep  the  simplification  of  the  regulatory  framework  under 
consideration  during  the  negotiations  on  all  the  legislations  and  programmes  for  the 
Financial Perspectives 2007-2013.  

The  Commission  will  continue  to  simplify  its  internal  procedures,  and  calls  on  the 
legislative authority to pay the necessary attention to these aspects. 

3.3. 

Financial management and reporting 

3.3.1.  Financial rules 

In  2005,  the  Commission  adopted  amendments  to  the  Implementing  Rules  of  the  Financial 
Regulation,  which  simplified  the  rules  on  procurement  and  grants  for  the  benefit  of 
tenderers,  applicants  and  beneficiaries  as  well  as  the  Institutions’  departments.  The 
Commission  also  proposed  several  further  amendments  to  the  financial  rules:  first,  an 
amendment  to  the  Implementing  Rules  of  the  Financial  Regulation,  designed,  among  other 
things, to introduce simplification measures, due to enter into force in mid-2006; second, the 
scheduled triennial revision of the Financial Regulations and its linked Implementing Rules, 
due to be applicable as from 1 January 2007.  

Through  the  latter,  the  Commission  has  launched  a  proposal  to  introduce  a  new  budgetary 
principle of effective and efficient internal control in the financial regulation, in order to 
improve  the  effectiveness  and  efficiency  of  operations,  the  reliability  of  financial  reporting, 
the  protection  of  the  financial  interests  of  the  Communities  and  the  management  of  risks 
relating to the legality and regularity of the underlying transactions. The risk of irregularity or 
illegality in the underlying transactions, inherent to the implementation of a basic act, will be 
addressed by an adequate level of control, in order to reach a tolerable level of risk, taking 
into account the multi-annual character of programmes as well as the nature of the payments 
concerned. 

Conclusion 

its  Implementing  Rules  as  soon  as  possible 

The Commission calls on the legislative authority to adopt the basic acts by the end of 
2006  and  the  Financial  Regulation  by  mid  2006  in  order  to  enable  the  Commission  to 
adopt 
in  autumn  2006,  so  that 
implementation can start in due time for the new programming period. The Commission 
will start preparation and define its management and control strategy, organisation and 
tools beforehand. 

3.3.2.  Roadmap to an integrated control framework 

In 2005, the Commission adopted a Roadmap to an Integrated Internal Control Framework 
and  assessed  the  gap  between  the  internal  control  framework  in  the  Commission  and  the 
Court of Auditors’ “single audit” opinion. In the same context, it issued in January 2006 an 
Action plan towards an Integrated Internal Control Framework, including sixteen actions (in 
the  areas  of  simplification  and  common  control  procedures;  management  declarations  and 
audit assurance; sharing audit results and cost-benefit analysis; and addressing sector specific 
gaps). The final aim of all these measures is to ensure more effective and efficient internal 

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control of EU funds and to provide a sound basis on which the Court of Auditors can draw 
up a more positive statement of assurance. 

The Commission considers the cooperation of Member States and other third parties on which 
the  Commission  confers  budget  implementation  tasks  to  be  crucial  for  the  success  of  the 
integrated internal control framework, as this should provide assurance on the correctness of 
their  management  of  EU  funds.  In  this  respect,  the  newly  adopted  Interinstitutional 
Agreement on budgetary discipline and sound financial management provides, in line with the 
action  plan,  that  the  relevant  audit  authorities  in  the  Member  States  will  produce  an 
assessment  concerning  the  compliance  of  management  and  control  systems  with  the 
regulations  of  the  Community  and  that  Member  States  will  undertake  to  produce  an  annual 
summary at the appropriate national level of available audits and declarations. 

Conclusion 

The Commission is committed to establishing an integrated internal control framework. 
It notes that its success will also greatly depend on the cooperation of other parties, such 
as the Council and the European Parliament, national departments responsible for the 
management and control of the use of EU funds and Supreme Audit Institutions in the 
Member States. 

3.3.3.  Ex-ante and ex-post controls 

The  2005  annual  activity  reports  show  improvements  both  in  ex-ante  and  in  ex-post 
controls,  indicating,  for  example,  the  wider  use  of  checklists  to  harmonise  and  document 
controls  carried  out;  greater  precision  in  the  results  of  the  ex-ante  and  ex-post  controls 
performed  and  the  conclusions  to  be  drawn  for  the  declaration  of  assurance;  how  such 
controls  fit  within  the  internal  control  strategy  and  framework;  and  how  they  are  used  as 
monitoring instruments and management tools. 

The  compulsory  audit  certificates  (e.g.  under  the  6th  Framework  Programme  for  research) 
were  conceived  to  enhance  the  accuracy  of  cost  claims  submitted  for  ex-ante  controls  in 
relation  to  direct  management.  Progress  in  this  area  is  also  expected  from  the  guidelines 
issued  in  2005  by  the  ex-post  control  network  on  a  common  terminology  for  ex-post 
controls,  a  template  for  ex-post  control  reports  and  on  the  classification  of  errors  and  their 
impact on reasonable assurance. 

It  is  also  worth  considering  the  proactive  and  preventive  nature  of  ex-ante  controls,  which 
also  reduces  the  cost  of  unnecessary  recoveries  afterwards.  At  the  beginning  of  a  new 
programming period, as will be the case in 2007, ex-ante controls can focus more clearly on 
cost categories or types of beneficiaries and thus identify the areas at greatest risk in terms of 
errors and weaknesses. Further consideration should then be given to modulating the depth of 
ex ante controls according to those risk areas identified. 

Further  improvements  are  also  needed  in  demonstrating  the  reliability  and  robustness  of 
internal control strategy and structures, through, for example, better balancing of ex-ante 
and ex-post controls; making ex-ante and ex-post desk reviews more effective (in particular 
by  timing  reviews  so  that  corrective  action  is  still  feasible,  focusing  on  substance,  cost 
categories  or  types  of  beneficiaries  subject  to  frequent  errors  or  higher  risks,  and  ensuring 
sufficient  coverage);  integrating  feedback  of  control  results  for  enhancing  existing  controls; 
reinforcing  supervision  and  the  effectiveness  of  controls,  making  audit  certificates  and 

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management  declarations  more  effectively  usable;  and  promoting  further  coherence  and 
synergies within Directorates-General with similar activities. 

Based  on  the  report  in  Annex  4,  special  attention  needs  to  be  drawn  on  the  conditions  for 
using  negotiated  procedures,  following  the  increase  in  number  and  value  of  contracts 
established following this procedure. 

Conclusion 

The  Commission  will  continue  to  develop  its  internal  procedures,  in  particular  in  the 
form  of  exchanges  of  good  practices  within  the  ex-post  control  network,  among  other 
things by formalising common guidelines on sampling methods and the related level of 
confidence,  and  in  the  form  of  an  adequate  control  strategy  to  ensure  proportionality 
between ex-ante and ex-post controls.  

3.3.4.  Accounting and financial reporting 

On  1  January  2005,  the  Commission  moved  the  general  accounting  of  the  EU  from  cash-
based  to  accrual-based  accounting,  thus  complying  with  international  public  accounting 
standards  and  the  legal  obligation  fixed  under  the  Financial  Regulation.  The  Commission 
Directorates-General have been placed under considerable pressure, in particular to establish 
opening balances and cut-off estimates for the first time. 

On  31  March  2006,  the  Commission's  Accounting  Officer  communicated  to  the  European 
Court  of  Auditors  the  first  accounts  of  the  European  Communities  to  be  prepared  in 
accordance with internationally accepted accounting standards. These accounts were the fruit 
of  three  years'  intensive  work  by  all  Commission  departments,  and  by  the  other  institutions 
and agencies: 

•  Accounting rules were developed which were relevant to the Communities' activities and 
which  complied  with  international  standards,  together  with  accounting  manuals  for  the 
application of these rules; 

•  The IT systems were developed in order to support the new accounting requirements; 

•  The  administrative  procedures  of  all  the  Commission's  services  were  adapted  so  as  to 
record accounting events when they occur, and not only when cash is received or paid, or 
at the year end only, and thus allow accrual-based accounts; 

•  The balances necessary to open the first accrual-based accounts were determined. 

This work was completed by January 2005, in time so that the 2005 financial year could start 
on the right basis. Since January 2005: 

•  The opening balances have been checked and validated by the authorising departments; 

•  The expenses to be accrued at the beginning and end of each year have been estimated by 

all departments; 

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•  The  systems  of  each  department  have  been  examined  by  the  Commission's  Accounting 
Officer  to  ensure  that  they  are  capable  of  recording  and  communicating  the  required 
accounting information; 

•  The  Commission's  accounts  were  prepared,  and  consolidated  with  those  of  the  other 

institutions and agencies. 

The  Commission  has  thus  respected  the  time-limits  set  in  the  Financial  Regulation  for  the 
preparation  of  financial  statements  which  comply  in  all  material  respects  with  international 
standards,  and  has  respected  its  commitment  to  the  European  Parliament  and  to  Council  to 
report on its progress towards this goal1, which they considered to be particularly ambitious. 

The work is however not yet complete, the imprest accounts and the European Development 
Funds need to be moved to modernise IT systems. These delays arise from the difficulties in 
introducing new systems and the  required training in geographically dispersed services, and 
do not have a material impact on the accounts. 

Although the transition has been successfully managed and comprehensive tests have been 
conducted,  checks  of  local  systems  at  the  end  of  2005  highlighted  concerns  on  three  local 
systems which could not be validated. Material errors have been found in the figures supplied 
by at least one DG which has been asked to present corrected figures.  

Two Directorates-General formulated reservations indicating uncertainties on the posting of a 
number  of  transactions  following  the  new  accrual  accounting  rules,  but  confirmed  the 
quality of the transaction data entered in the system on 31 March 2006. For these reasons, and 
also because the provisional accounts are currently being audited by the Court of Auditors and 
corrections  may  be  necessary  before  the  approval  of  the  final  consolidated  accounts  by  31 
July 2006, the Directorate-General for Budget issued a systemic, provisional and time-bound 
reservation  in  its  2005  annual  activity  report.  Joint  accounting  analysis  is  currently  being 
performed by this Directorate-General and other Directorates-General in an attempt to check 
and improve accounting quality and make any necessary accounting corrections. 

Despite  the  efforts  made  by  Commission  services  to  check  and  to  recheck  the  opening 
balances and the accrued expenses, the Court of Auditors may find further errors, which must 
be  corrected  in  the  final  accounts  which  are  due  by  31  July  2006.  The  risk  of  error  is 
exacerbated by the relative lack of qualified accounting staff in the Commission, the delays by 
some services which led to hurried work, and by delays in developing certain accounting and 
reporting tools in the IT system. Future developments include the incorporation of the imprest 
accounts held in the Commission's external delegations in the central accounting system and 
the incorporation of the European Development Funds into the accrual accounting system. 
Moreover,  when  the  revised  financial  framework  comes  into  force,  the  Accounting  Officer 
will sign off the final accounts, declaring that they were prepared in accordance with both 
the  provisions  on  the  presentation  of  the  accounts  and  accounting  principles,  rules  and 
methods. 

Following  a  request  made  by  the  Internal  Auditor,  the  Commission  has  completed  its 
inventory  of  bank  accounts  co-managed  by  Commission  staff  but  not  opened  by  the 
Commission  Accounting  Officer.  The  operational  conclusions  are  that  there  should  be  a 

1 

The Commission has presented half-yearly progress reports until that on progress to 31 May 2005. 

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formal  register  of  those  handled  by  staff  in  the  Commission  delegations  when  they  act  as 
second signatory to accounts in the name of an authority in the beneficiary country, and that 
the register should be regularly reviewed to ensure that dormant accounts are closed.  

Conclusion 

The  Commission  recognises  the  extraordinary  effort  done  by  its  departments  to  allow 
the  moving  to  accrual-based  accounting.  However,  notwithstanding  the  considerable 
efforts  deployed  by  each  service,  the  magnitude  of  the  task  and  the  services' 
unfamiliarity with the new accounting procedures mean that there is a risk that errors 
and  omissions  remain  in  the  provisional  accounts.  The  Commission  will  make  every 
effort  to  ensure  that  any  material  error  found  by  its  auditors  is  corrected  in  the  final 
accounts,  due  to  be  approved  by  31  July  2006.  Based  on  the  lessons  learnt  from  the 
problems and delays encountered during this first year of accrual-based accounting, the 
Commission will further strengthen its accounting processes and systems to improve the 
quality  of  the  financial  information  and  meet  the  deadlines  for  subsequent  years’ 
accounts. 

3.4. 

IT systems and continuity of operations 

3.4.1. 

IT systems 

Information  technology  (IT)  has  become  an  essential  factor  that  directly  supports  the 
Commission's  administration  activities  and  most,  if  not  all,  of  its  operational  and  policy 
activities.  In  November  2005,  the  Commission  adopted  a  revised  e-Commission  strategy  to 
deliver  better  quality  and  more  transparent  IT  services  to  both  its  own  staff  and  to 
external  stakeholders.  New  baseline  requirements  on  IT  were  also  introduced  in  the 
Commission’s internal control framework. 

As  regards  the  continuity  of  operations  relating  to  the  IT  infrastructure,  the  Directorate-
General for Informatics has issued a horizontal reservation in its  annual  activity report  on 
the  inadequacy  of  the  data  centre  building  infrastructure  (insufficient  physical  security  and 
housing  conditions  of  technical  data  rooms),  covering  all  critical  IT  systems  hosted  in  this 
centre.  The  Internal  Auditor  emphasises  the  need  to  further  clarify  the  roles  and 
responsibilities  of  horizontal  and  operational  departments  in  the  IT  area,  including  security, 
planning, continuity of operations, development and management of IT information systems. 

Conclusion 

The issue of the suitability of the data centre building infrastructure hosting IT systems 
will be addressed as a matter of priority. Current reflections on the best IT governance 
arrangements  should  lead  to  operational  conclusions  in  2006  designed  to  improve 
management efficiency, effectiveness and economical use of resources. 

3.4.2.  Crisis management and business continuity 

2005 has seen the introduction of the concept of business continuity in the new Internal Rules 
of  procedures  of  the  Commission.  Several  annual  activity  reports  have  raised  the  issue  of 
business  continuity,  and  two  operational  Directorates-General  posted  a  reservation  in  this 
area,  linked  to  the  risk  of  unavailability  of  IT  services  provided  to  Member  States  for 
Community-wide programmes and information exchange. 

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Building  on  work  already  done  to  prepare  for  pandemics,  the  Secretariat-General  is 
developing a policy framework, with the help of the relevant Directorates-General, to ensure 
business continuity in the event of a business disruption affecting the Commission. Moreover, 
responding  to  the  European  Council’s  call  for  the  development  of  emergency  response 
capabilities  both  at  Member  State  and  at  EU  level,  the  Commission  implemented,  in 
December  2005,  a  new  specific  coordination  process  to  improve  the  coherence  and 
consistency of the Commission’s response to major crises requiring action at European level. 

Conclusion 

The Commission will adopt Commission-wide policy guidelines and continue to develop 
corresponding business continuity plans. 

3.5. 

Human resources  

Enlargement  and  implementation  of  the  revised  Staff  Regulations  (new  career  structure, 
modern  working  conditions  and  equal  opportunities,  safeguarding  professional  and  ethical 
standards…)  remained  priority  issues  in  2005.  Emphasis  was  placed  on  providing 
Commission departments with guidance on the application of the new rules to ensure correct 
and  uniform  implementation.  In  addition,  new  initiatives,  including  the  simplification  of 
administrative  procedures  and  an  increased  “professionalisation”  in  the  area  of  human 
resources management, were also launched. 

3.5.1.  Adequacy of competencies 

Some  Directorates-General’s  annual  activity  reports  and  the  overview  on  internal  control 
identify a lack of specialised staff for financial management and other specific functions (e.g. 
translation,  interpretation,  informatics,  customs,  taxation,  research  and  nuclear  inspection). 
This takes place against a background where the Commission has to recruit highly specialised 
staff in various sectors and to adapt its recruitment policy accordingly. 

Conclusion 

The Commission will identify any shortfalls and communicate its specific needs so that 
they are promptly taken into consideration and included in the work programme of the 
interinstitutional  European  Personnel  Selection  Office.  The  action  plan  to  recruit 
experts and further develop training will be continued.  

3.5.2.  Recruitment 

The  overall  results  of  the  recruitment  of  nationals  from  the  new  Member  States  are 
satisfactory.  There  are  however  still  some  gaps  in  middle  management  positions,  in  the 
AST/B* category and in certain profiles, such as AD linguists. It is expected that targets fixed 
for the period 2004-2006 will be difficult to reach by the end of 2006 and efforts will have to 
be continued in 2007 and beyond. 

Since  1995,  the  Commission  has  set  annual  targets  for  the  recruitment  and  appointment  of 
women  to  management  and  other  A*/AD  level  posts.  Noteworthy  progress  has  since  been 
achieved.  Nevertheless,  efforts  in  this  domain  must  be  maintained.  The  senior  management 
target of 20% was substantially exceeded, reaching 32.8%. The overall target for A*/AD level 

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posts  of  50%  was  slightly  surpassed,  reaching  51.4%.  However,  middle  management 
appointments fell short of the 30% target, reaching only 24.4%. 

The overall vacancy rate for the Commission decreased significantly in 2005, but recruitment 
problems were experienced in the set-up of executive agencies. 

3.5.3.  Mobility 

In  2005,  mobility  within  and  between  Directorates-general  and  Services  affected  a  similar 
percentage of staff as in 2004 (around 15% of permanent staff). This includes both mobility in 
response to advertised posts and mobility for sensitive posts and for heads of unit. In 2005, 
12.5%  of  all  Commission  jobs  were  flagged  as  ‘sensitive’,  but  in  spending  Directorates-
General this figure rose to more than 40%. 

The  overview  on  internal  control  points  to  a  number  of  difficulties  linked  to  compulsory 
mobility having disruptive effects for departments and staff (i.e. continuity, staff competence 
and  strategic  alignment  and  management  of  HR  resources).  This  applies  in  particular  to 
compulsory  mobility  for  sensitive  posts  and  to  the  high  staff  turnover  experienced  in  some 
departments and the short-term contracts for non-permanent skilled staff. 

The Commission has responded to the growing emphasis on mobility in 2005 by increasing 
career  guidance,  providing  a  range  of  courses  for  staff  to  help  them  prepare  for  mobility, 
gathering  and  disseminating  best  practices,  preparing  a  strategy  for  career  management  of 
staff.  The  Commission  has  set  up  a  working  group  to  reflect  on  how  to  better  manage 
mobility  so  as  to  achieve  the  ultimate  objective  of  'the  right  person  in  the  right  job'.  This 
group is looking  at  issues  as compulsory  versus voluntary mobility and mobility for middle 
managers.  The  issue  of  compulsory  mobility  is  particularly  challenging  for  small  services 
with a high percentage of staff on sensitive posts. 

Conclusion 

The  Commission  will  adjust  its  management  of  mobility,  where  necessary,  so  as  to 
achieve  the  ultimate  objective  of  ‘the  right  person  in  the  right  job’,  in  particular  as 
regards  sensitive  posts.  Proposals  will  be  made  during  2006  to  mitigate  the  impact  of 
mobility,  with  particular  attention  for  specialised  functions  and  on  small  Directorates-
General and sites. 

3.5.4.  Reporting on human resources in the Commission 

In 2005, the Commission carried out two exercises designed to identifying the staff involved 
in external communication, on one hand, and in internal control and financial management, on 
the  other  hand.  As  currently  designed,  the  Job  Information  System  (JIS)  does  not  provide 
reliable  reporting  on  human  resources  by  corporate  process  (for  instance,  communication, 
financial  management,  monitoring  of  application  of  EU  law…).  This  system  needs  to  be 
developed further in order to permit a detailed analysis of the use of the Commission’s human 
resources. 

EN 

20 

   EN 

 
Conclusion 

The  Commission  will  take  measures  to  improve  its  human  resource  IT  systems,  in 
particular  its  Job  Information  System,  so  that  it  enables  the  organisation  to  have  a 
global  and  reliable  view  of  its  current  human  resources  and  to  produce  a  detailed 
analysis by corporate processes. 

4. 

CONCLUSIONS 

By  adopting  this  synthesis,  the  Commission  assumes  its  political  responsibility  for 
management by its Directors-General and Heads of service, on the basis of the assurances and 
reservations issued by them in their annual activity reports, acknowledging that further efforts 
are needed to solve a number of weaknesses. In this synthesis, the Commission also takes a 
position  on  the  cross-cutting  issues  stemming  from  the  examination  of  these  reports  and 
raised by the Internal Auditor, the European Court of Auditors, the Discharge Authority, or 
identified  by  the  Audit  Progress  Committee  and  by  the  Director-General  for  Budget  in  his 
report  “Overview  on  the  state  of  internal  control  in  Commission  Directorates-General  and 
Services” [SEC(2006) 567]. 

Overall,  the  Commission  considers  that  the  internal  control  systems  in  place,  with  the 
limitations described in the 2005 annual activity reports, provide reasonable assurance on the 
legality and regularity of operations, for which the Commission is responsible under Article 
274  EC.  However,  it  acknowledges  that  further  efforts  are  needed  to  solve  a  number  of 
weaknesses,  in  particular  those  highlighted  in  the  reservations  of  the  delegated  authorising 
officers. 

The Commission will ensure that its delegated authorising officers will continue their efforts 
to guarantee that reasonable assurance in the declarations accompanying the annual reports is 
effectively underpinned by appropriate internal control systems. 

EN 

21 

   EN 

 
Annex 1 

2005 Synthesis’ multiannual objectives 

This Annex summarises and updates the Commission’s objectives addressing the major cross-
cutting  issues.  To  meet  these  objectives,  a  series  of  initiatives  have  and  will  be  launched, 
some of which were already identified in 2004 synthesis. 

Performance management and internal control 

Objective 

Initiative(s) to meet the objective 

1.  Achieving  an  effective 

internal 
control  system  and  ownership  of 
internal 
and 
processes  at  all  levels  in  each  DG 
and service. 

concepts 

control 

(cid:190)  To ensure the effectiveness of internal 
control, with the assistance of central 
services, the internal control coordinator in 
each service should carry out a regular 
review of the effectiveness of internal control 
issues at least, in the context of the twice-
yearly information to Commissioners and of 
the annual activity report. 

Responsible service(s) and 
timetable 

services, 

All 
continuous 
action  with  the  support  and 
guidance  of  DG  BUDG  and 
the ICC network. 

(cid:190)  The Commission will for the first time look 
to develop the indicators for legality and 
regularity of transactions. 

services, 

continuous 
All 
action  by  ‘families’  with  the 
support of BUDG and SG. 

2.  Promoting 

Commission’s 
accountability 
annual 
activity  reports  and  their  synthesis 
solidly  based  on  assurances  from 
managers.  

through 

(cid:190)  The Commission will continue its efforts to 
adapt the legal framework to ensure the 
effective application of the principles of 
proportionality and cost-effectiveness of 
controls. 

(cid:190)  Some Commission departments should give, 

where needed, a fuller explanation of their 
environment and the risks faced, including 
risks that remain even after mitigating 
measures have been taken. The impact of 
their environment and risks should be made 
more explicit and in most cases fuller 
explanations should be given on the overall 
impact of reservations on the reasonable 
assurance. 

services, 

All 
in 
action 
proposals. 

their 

continuous 
legislative 

All  services 
annual reporting exercise. 

the  2006 

in 

(cid:190)  With the assistance of central services, work 
by ‘families’ will be continued, so that each 
area benefits from a specific, coherent 
methodology.  

Services  concerned,  SG  and 
DG 
before 
BUDG 
the  2006 
completion  of 
annual activity reports. 

3.  Establishing 

effective 
and 
risk  management 
comprehensive 
making  it  possible  to  identify  and 
deal  with  all  major  risks  at  service 
and  Commission  level  and  to  lay 
down  appropriate  action  to  keep 
including 
them  under 
disclosing resources needed to bring 
major risks to an acceptable level. 

control, 

(cid:190)  The Commission will further embed risk 

management in its regular management 
process and integrate risk assessment in its 
internal control systems. 

(cid:190)  The Commission will address how to deal 
with risk management within ‘families’ of 
similar activities in services. 

All 
the 
services,  with 
assistance  of  DG  BUDG, 
continuous 
as 
specified 
SEC(2005) 
1327. 

action 

in 

By  2007  the  Commission 
should have gained sufficient 
experience 
submit 
concrete  proposals  in  this 
context. 

to 

EN 

22 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.  Making  objectives  and  indicators  a 
policy 
tool 
and  management 
allowing,  on  the  one  hand,  the 
Commission 
its 
performance  and,  on  the  other, 
stakeholders  to  assess  the  outcome 
of  the  Commission’s  work  and  its 
benefit for citizens. 

to  monitor 

(cid:190)  The Commission will continue its review of 

objectives and indicators, with a particular 
attention on spending programmes in 2006 
and on other Commission tasks in 2007. 

Services  concerned  with  the 
support  of  SG  and  BUDG 
should 
feed  progressively 
into 
the  2007  and  2008 
annual management plans. 

Governance 

Objective 

Initiative(s) to meet the objective 

5.  Ensuring  a  smooth  implementation 
audit 

accepted 

internal 

of 
recommendations. 

6.  Clarifying  the  respective  roles  and 
responsibilities  of  Commission 
services and regulatory agencies. 

(cid:190)  Follow-up of action plans stemming from 
internal audit recommendations should be 
regularly monitored at senior management 
level, and fully integrated into regular 
management planning. 

(cid:190)  The input of all institutions is necessary to 
negotiate a comprehensive framework, to 
clarify the respective responsibilities of the 
institutions and of the regulatory agencies. 
This framework would be applicable to the 
creation of future agencies and, at a later 
stage, to those already in existence. The 
Commission calls on the Council to adopt the 
proposed framework on regulatory agencies, 
suggest amendments, or reflect on new 
possibilities. 

Responsible service(s) and 
timetable 

services, 

All 
action. 

continuous 

Ongoing action. 
All  services  concerned  with 
the assistance of SG and DG 
BUDG. 

7.  Ensuring 

that 

inter-service 
arrangements for small services are 
based on a cost-benefit analysis and 
made in accordance with applicable 
rules,  while 
the 
responsibility  of  each  delegated 
authorising officer. 

preserving 

(cid:190)  The Commission will develop practical 
solutions respecting the balance of 
responsibilities and accountability.  

Interested  DGs  with 
the 
support  of  BUDG  and  SG, 
by the end of 2006.  

8.  Ensuring strong follow-up of action 
the  expressed 
plans  related 
the 
for 
reservations, 
progress to be made in 2006. 

to 
notably 

Concerned DGs. 

(cid:190)  The Commission will integrate the follow-up 
of action plans related to the expressed 
reservations in the regular follow-up 
procedures by senior management and for the 
deadlines foreseen in 2006 will report on, 
progress to the respective Commissioner in 
the context of the regular follow-up meetings 
on audit and control. 

EN 

23 

   EN 

 
 
 
 
 
 
 
 
 
Financial management and reporting 

Objective 

Initiative(s) to meet the objective 

accountability 
a 
internal 

9.  Enhancing 
by 
comprehensive 
establishing 
control 
integrated 
framework 
the 
requirements  set  out  in  the  ECA’s 
opinions on ‘single audit’. 

line  with 

in 

• 

Implementation  of  the  action  plan  adopted 
towards an Integrated Internal Framework. 

10.  Improving 

efficiency 
and 
accountability  by 
strengthening 
ensuring  proportionality  and  a 
sound balance between ex-ante and 
ex-post  controls  and  by  further 
harmonisation  and  better  focusing 
of ex post controls. 

(cid:190)  Further attempts have to be made to achieve 
closer harmonisation of methodology and 
definition of common ex-post control 
strategies and ensure proportionality between 
ex ante and ex post controls, at least at the 
level of ‘families’ of services operating in the 
same budget area. 

Responsible service(s) and 
timetable 

DG BUDG together with the 
services 
external 
and 
partners 
concerned. 
Progressively  up  to  the  end 
of 2008. 

All 
the 
services  with 
assistance  of  DG  BUDG, 
continuous action. 

(cid:190)  Common guidelines on sampling methods 
and related level of confidence should be 
finalised. 

Concerned  services  with  the 
support  of  DG  BUDG, 
progressively  up  to  the  end 
of 2007. 

11.  Increasing 

responsibility 

and 
accountability  at  the  level  of  the 
Commission  as  a  whole  by  the 
signing-off  of  the  accounts  by  the 
and 
Accounting  Officer 
by 
improved  quality  of 
financial 
information. 

(cid:190)  Under the proposed amendments to the 

Financial Regulation submitted to the 
legislator, the Accounting Officer will sign 
off the accounts. 

(cid:190)  The Commission will further strengthen its 

accounting processes and systems to improve 
the quality of the financial information and 
the respect of deadlines. 

into 

Accounting  Officer  by  the 
the 
entry 
amendments to the Financial 
Regulation. 

force  of 

services, 

All 
continuous 
action  with  the  assistance  of 
the 
the 
Accounting Officer. 

services 

of 

12.  Making 
more 
by 
efficient 
simplification measures. 

financial  management 
applying 

(cid:190)  Services are called upon to apply the 

simplification measures that are being 
introduced by the basic acts proposed under 
the next generation of programmes (2007-
2013) and the amendments to the financial 
rules. 

(cid:190) 

In order to ensure that the new programming 
period can start under the new legislative 
framework, the Commission calls on the 
legislative authority to adopt the basic acts 
and Financial Regulation so that it can adopt 
in due time its Implementing Rules. 

All  services  concerned  as 
from  the  entry  into  force  of 
these legal provisions. 

Legislative  authority  for  the 
basic  acts  and  Financial 
Regulation.  DG  BUDG  and 
concerned  services  by  the 
end of 2006. 

EN 

24 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Human resources 

Objective 

Initiative(s) to meet the objective 

13.  Simplifying  procedures  to  increase 
both  efficiency  and  employee 
satisfaction. 

14.  Aligning resources and needs better 
to  make  sure  that  staff  have  the 
skills  and  qualifications  necessary 
to perform their duties, in particular 
financial 
areas 
in 
management, 
science, 
linguistics and IT. 

as 
audit, 

such 

(cid:190)  The Task Force for the simplification of 
administrative procedures will propose 
specific measures to simplify and improve 
human resource management and 
administrative procedures. 

(cid:190) 

In parallel, the Commission will present 
specific measures to simplify and improve 
the Commission’s staff appraisal system 
(Career Development Review). These 
measures will complement those presented 
early 2006 which were already implemented 
in the current exercise. 

(cid:190)  Following the conclusions of the evaluation 
on the Strategic Alignment of Human 
Resources, various measures are being 
prepared. 

(cid:190)  The Commission will identify any shortfalls 

and communicate its specific needs so that 
they are promptly taken into consideration 
and included in the work-programme of the 
inter-institutional European Personnel 
Selection office. Provision of specialised 
training and measures to improve the 
recruitment procedures and, in particular in 
areas where a shortage of skilled staff is 
identified. 

(cid:190)  The Commission will take measures to 

improve its Job Information System so that it 
enables the organisation to have a global 
view of its current human resources and to 
produce easily detailed analysis by corporate 
processes.  

(cid:190)  The Commission will adjust its management 

of mobility, where necessary, so as to achieve 
the ultimate objective of ‘the right person in 
the right job’, in particular as regards 
sensitive posts. Proposals will be made 
during 2006 to mitigate the impact of 
mobility, with particular attention for 
specialised functions and small DGs and 
sites. 

Responsible service(s) and 
timetable 

DG  ADMIN  by  the  end  of 
2006. 

DG  ADMIN  by  the  end  of 
2006 

DG  ADMIN  and  EPSO, 
ongoing tasks. 

DG ADMIN in collaboration 
with  DIGIT,  SG  and  DG 
BUDG. 

DG ADMIN in collaboration 
with  SG  and  DG  BUDG,  by 
the end of 2006. 

EN 

25 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
IT systems and continuity of operations 

Objective 

Initiative(s) to meet the objective 

15.  Ensuring  the  suitability  of  the  data 
centre  hosting  IT  systems  and 
business continuity. 

(cid:190)  The Commission will address the issue of the 
suitability of the data centre hosting IT 
systems and ensure that current reflections on 
the best IT governance arrangements lead to 
operational conclusions in 2006. 

(cid:190)  The Commission will adopt Commission-
wide policy guidelines and continue to 
develop corresponding business continuity 
plans. 

Responsible service(s) and 
timetable 

DIGIT,  OIB  and  OIL 
2006 

in 

All services with the support 
of  SG  and  ADMIN,  by  the 
end of 2006. 

EN 

26 

   EN 

 
 
 
 
 
 
 
Annex 2 

State of play of the 2004 Synthesis’ multiannual objectives 

This  Annex  reports  on  the  progress  realised  in  2005  against  the  reference  framework  laid 
down by the 2004 Synthesis containing the Commission’s multiannual objectives to address 
the major crosscutting management issues. 

Governance issues 

Objective 

Initiative(s) to meet the objective 

Responsible 
service(s) and 
timetable 

services, 

All 
continuous 
action  with  the 
and 
support 
guidance  of  DG 
BUDG  and  the 
ICC network. 

Progress made in 2005 

Continuous action. 

The culture of effectiveness of internal control 
continued to gather pace, as results from the annual 
activity reports (see in particular Part 2 thereof) and 
as the 2005 Synthesis summarises under Part 3.1.1. 

Exchanges of experiences and good practices took 
place regularly within the Internal Control 
Coordinators’ Network and training, tools and 
support have continued to be provided with the 
assistance of DG BUDG. 

All 
services, 
according  to  the 
guidelines 
on 
annual  activity 
reports. 

Continuous action. 

By adopting the 2005 synthesis, the Commission 
assumed its political responsibility for management 
by its Directors-General and Heads of services, on 
basis of the assurances and reservations issued by 
them in their annual activity reports, acknowledging 
that further efforts are needed to solve a number of 
weaknesses. The Commission has also adopted 
conclusions on each main management area and on 
systemic crosscutting issues. 

(cid:190)  To ensure the effectiveness of 
internal control, with the 
assistance of central services, 
the internal control coordinator 
in each service should carry out 
a regular review of the 
effectiveness of internal control 
issues, based on available 
information on results of 
controls, exceptions made and 
relevant scoreboards, in order to 
enhance related procedures or 
modify control systems. This 
review should be conducted, at 
least, in the context of the 
twice-yearly information to 
Commissioners and of the 
annual activity report. 

(cid:190)  The Commission will continue 
fully to exert its accountability, 
by using the synthesis to bring 
transparency to the critical 
crosscutting issues emerging 
from services’ assurances. The 
latter will give a full account on 
whether the assurance is 
consistent with the reservations 
identified. 

(cid:190)  The Commission-wide 

methodology which will be set 
up by the autumn of 2005 will 
introduce risk assessment into 
the decision-making process on 
priorities and resource 
allocation. This will be given 
firmer shape in the management 
plans and annual activity reports 
of services. 

DG  BUDG,  SG 
and 
for 
IAS 
methodology  by 
the  autumn  of 
all 
2005, 
services 
for 
application, 
starting 
2006 
management 
plans. 

from 
annual 

(cid:190) 

In a medium term perspective, 

Action finished, objective continuous. 

The  Commission  established  the  Commission-wide 
methodology  for  risk  management  by  adopting  the 
Communication  "Towards  an  effective  and  coherent 
the  Commission  services" 
risk  management 
[SEC(2005) 1327] in October 2005. 

in 

resources  allocation 

As  a  result,  risk  management  has  started  to  be 
included in the decision making process on priorities 
and 
the  annual 
management  plan  2006.  It  contributed  to  broader 
awareness  raising  of  risk  management  and 
to 
defining  and  monitoring  action  plans  to  manage 
critical risks. 

through 

1.  Achieving 

effective 
functioning  of 
internal control 
system 
and 
ownership  of 
internal control 
concepts 
and 
processes at all 
level  in  each 
DG 
and 
service. 

2.  Promoting 

solidly 
on 

Commission’s 
accountability 
a 
through 
synthesis 
report 
based 
assurances 
from  managers 
in  the  annual 
activity 
reports.  

3.  Establishing 
effective 
and 
comprehensive 
risk 
management 
it 
making 
to 
possible 
identify 
and 
deal  with  all 
major  risks  at 
service 
and 
Commission 
level and to lay 
down 
appropriate 
action  to  keep 

EN 

27 

   EN 

 
 
 
 
 
 
 
 
 
 
 
under 

them 
control, 
including 
disclosing 
resources 
needed 
to 
bring  major 
risks 
an 
to 
acceptable 
level. 

the methodology should also 
address how to deal with risk 
management within ‘families’ 
of similar activities in services. 

the 

By  2007 
Commission 
should 
have 
gained  sufficient 
experience 
to 
submit  concrete 
proposals  in  this 
context. 

To be launched in 2007, as foreseen 

(cid:190) 

4.  Clarifying  the 
respective 
roles 
and 
responsibilities 
of Commission 
services 
and 
regulatory 
agencies. 

Interinstitutional negotiations 
should be pursued in 2005 
based on the Commission’s 
draft interinstitutional 
agreement on a framework for 
regulatory agencies. The 
respective roles and 
responsibilities of the 
Commission services and the 
regulatory agencies will be 
clarified in parallel. 

SG,  BUDG  and 
services 
concerned, 
starting in 2005. 

Ongoing. 
Inter-institutional  work  is  progressing.  The  EP  has 
designated a “rapporteur” and adopted a resolution in 
2005, whereas the Council was not able to adopt the 
draft interinstitutional agreement. 

Activity-based management 

Responsible 
service(s) and 
timetable 

SG,  BUDG  and 
services 
concerned, 
continuous  task, 
starting from the 
2006 
annual 
management 
plans  and 
2005 
activity reports. 

the 
annual 

Progress made in 2005 

Ongoing. 

The peer review exercise has been launched in 2005. 
Three  different  phases  are  foreseen.  The  first  phase 
aiming  at  establishing  a  repository  of  standard 
objectives and indicators for the two horizontal ABB 
activities has been completed in 2005. 

The  second  phase,  started  in  2006,  will  aim  at 
producing more focussed and far-reaching objectives 
and  indicators  for  spending  programmes,  including 
indicators  that  have  a  direct  link  to  legality  and 
regularity. 

Objective 

Initiative(s) to meet the objective 

(cid:190)  The Commission will analyse 
the existing objectives and 
indicators in the context of a 
peer review by ‘families’ and 
with the support from the 
central services, to review how 
objectives and indicators can 
become more operational tools 
for management within the 
Commission. 

5.  Making 

objectives  and 
a 
indicators 
policy 
and 
management 
tool  allowing, 
the  one 
on 
hand, 
the 
Commission to 
monitor 
its 
performance 
and,  on 
other, 
stakeholders  to 
assess 
the 
outcome of the 
Commission’s 
its 
work  and 
benefit 
for 
citizens. 

the 

6.  Reinforcing 

(cid:190)  Commission departments 

annual  activity 
reports 
to 
ensure  better 
accountability. 

should give, where needed, a 
fuller explanation of their 
environment and the risks faced, 
including risks that remain even 
after mitigating measures have 
been taken. The impact of their 
environment and risks on 
management and controls 
should be made more explicit 
and in most cases fuller 

All  services  in 
the  2005  annual 
reporting 
exercise. 

Continuous action. 

Guidelines  on  the  annual  activity  reports  for  2005 
indicate  that  reports  should  always  disclose  the 
include  overall 
materiality  criteria  used  and 
conclusions  on 
the 
impact  of 
the  combined 
reservations on the declaration as a whole. The 2005 
annual activity reports better underpin the assurance 
contained  in  the  attached  declarations  signed  by  the 
delegated authorising officers. Reservations are more 
precise  and  reasoned  than  in  previous  years  and 
explanations  are  also  often  given  on  the  overall 

EN 

28 

   EN 

 
 
 
 
 
 
 
 
 
 
explanations should be given on 
the overall impact of 
reservations on the reasonable 
assurance. 

(cid:190)  A reflection on the possible 

simplifications to strike a better 
balance between policy results 
and internal control and 
financial management issues at 
the level of both annual activity 
reports and synthesis will be 
held in the second half of 2005. 

(cid:190)  Guidance to the services will be 
reinforced and will integrate all 
instructions referenced in 
several Commission decisions 
in one global set. 

(cid:190)  With the assistance of central 

services, a common 
methodology to determine the 
materiality threshold of 
weaknesses, including systemic 
ones, will be prepared for the 
2005 annual activity reports and 
in order to assess more 
coherently their impact on the 
reasonable assurance for 
‘families’ of shared 
management, research and 
internal policies. 

SG,  DG  BUDG 
and  all  services 
before end 2005. 

Services 
concerned,  SG 
and  DG  BUDG 
by  November 
2005. 

impact on the reasonable assurance. 

Action completed. 

Guidelines for 2005 AARs introduced several 
simplifications and consolidation in order to strike 
for a better balance between policy results and 
management issues. For the first time, a synthesis of 
the policy achievements in 2005 has been established 
and presented to Parliament in March with the annual 
policy strategy for 2007. 

Action completed. 

Guidelines for 2005 AARs have been reinforced and 
stabilised, and contain all relevant instruction 
stemming from other sources (e.g. Commissioners’ 
Code of Conduct). 

Action ongoing. 

encouraging 

Work was undertaken in 2005, and pursued in 2006 
prior to the adoption of the annual activity reports on 
(including 
assessing  materiality  of  weaknesses 
systemic  one) 
common 
a 
and 
methodology and materiality thresholds by ‘families’ 
of  services  adapted 
their  specific  situation. 
Preliminary  conclusions  on  materiality  and  on 
determination of reservations impact were introduced 
into  the  guidelines  for  2005  AARs.  A  common 
shared 
methodology 
management  family  and  proposed  for  the  research 
family.  Progress  was  also  made  by  the  internal 
policies family. 

agreed 

been 

has 

for 

to 

Financial management and reporting 

Objective 

Initiative(s) to meet the objective 

7.  Enhancing 

(cid:190)  A Roadmap setting out the 

accountability 
by  establishing 
a 
comprehensive 
integrated 
internal 
control 
framework 
line  with 
requirements 
set  out  in  the 
ECA’s 
opinions 
‘single audit’. 

in 
the 

on 

action which has to be taken by 
the Commission and by the 
Member States’ administrations 
to bridge the gap identified 
between the current control 
framework and the defined 
features of the integrated 
internal control framework will 
be adopted by the Commission 
and submitted to the other 
institutions concerned for 
approval. 

Responsible 
service(s) and 
timetable 

DG  BUDG  and 
services 
other 
concerned 
by 
the end of 2005. 

Progress made in 2005 

Action completed, objective ongoing. 

Following  the  adoption  by  the  Commission  of  the 
roadmap  towards  an  integrated  internal  control 
framework  in  June  2005,  the  Commission  services 
have  assessed  the  gap  between  the  existing  control 
framework and the internal control principles set out 
by the Court of Auditors in its opinion 2/2004. Based 
on  the  work  carried  out  by  its  service  and  the 
synthesis established by the Commission, a panel of 
Member  States’  experts,  the  ECOFIN  Council,  the 
Court of Auditors and the Commission services have 
validated  the  Commission  analysis  and  proposed 
practical  solutions  to  the  weaknesses  observed.  The 
action  plan  towards  an  integrated  internal  control 
framework,  adopted  by  the  Commission  in  January 
and  SEC(2006)  49], 
2006 
summarises 
this  work  and 
identifies the main actions to be undertaken. 

the  conclusions  of 

[COM(2006)  9 

EN 

29 

   EN 

 
 
 
 
 
 
 
 
 
 
 
8. 

9. 

Improving 
efficiency  and 
strengthening 
accountability 
by 
further 
harmonisation 
and 
better 
focusing  of  ex 
post controls. 

Increasing 
responsibility 
and 
accountability 
at  the  level  of 
the 
Commission 
as  a  whole  by 
the  signing-off 
of the accounts 
by 
the 
Accounting 
Officer. 

10.  Making 
financial 
management 
more  efficient 
by 
applying 
simplification 
measures. 

(cid:190)  Further attempts have to be 
made to achieve closer 
harmonisation of methodology 
and definition of common ex-
post control strategies, at least at 
the level of ‘families’ of 
services operating in the same 
budget area. Specific proposals 
and possible action in this 
respect will be progressively 
explored and the next synthesis 
report will clearly identify the 
progress made and remaining 
weaknesses to be addressed.  

(cid:190)  Under the proposed 

amendments to the Financial 
Regulation submitted to the 
legislator, the Accounting 
Officer will sign off the 
accounts. 

All services with 
the  assistance  of 
DG 
BUDG, 
continuous 
action. 

Continuous action. 

Guidelines  were  issued  in  2005  by  the  ex-post 
control  network  on  a  common  terminology  for  ex-
post  controls,  a  template  for  ex-post  control  reports 
and on the classification of errors and their impact on 
the reasonable assurance. 

Efforts  were  also  made  in  the  services  to  reinforce 
strategy and methodology for ex-post controls.  

Ongoing. 

The  proposed  revision  of  the  Financial  Regulation, 
due to enter into force by 1 January 2007, contains a 
provision in this respect. 

Accounting 
Officer  by 
the 
entry  into  force 
the 
of 
to 
amendments 
Financial 
the 
Regulation. 

services 
All 
concerned 
as 
from  the  entry 
into  force  of  the 
to 
amendments 
the 
rules 
implementing 
the 
Regulation. 

Financial 

(cid:190)  Services are called upon to 

make use of the simplification 
measures to be introduced by 
the amended rules 
implementing the Financial 
Regulation, in particular 
concerning small value 
contracts and grants and 
proportionate controls based on 
the analysis of risks. In the 
coming years, any further 
simplification introduced by the 
revised financial regulation will 
have to follow this process. 

Ongoing. 

in 

contained 

Simplification  measures 
the 
amendments already adopted are being implemented, 
in  particular  by  services  managing  grants  and 
contracts  of  a  limited  amount.  The  basic  acts 
proposed  under  the  next  generation  of  programmes 
(2007-2013)  and  the  further  amendments  to  the 
financial 
(e.g. 
foresee 
proportionality) and measures (e.g. concerning lump 
sum  payments  and  scales  of  unit  costs)  that  should 
allow further simplification. 

principles 

rules 

Human resources 

Objective 

Initiative(s) to meet the objective 

11.  Simplifying 
procedures 
to 
increase  both 
efficiency  and 
customer 
satisfaction. 

(cid:190)  Specific measures will be 
presented to simplify and 
improve the Commission’s staff 
appraisal system (Career 
Development Review). 

Responsible 
service(s) and 
timetable 

DG  ADMIN  by 
the end of 2005. 

Progress made in 2005 

Ongoing. 

First  simplification  measures  to  the  Commission’s 
staff appraisal system were put in place for the 2006 
staff  appraisal  exercise.  In  the  longer  term,  the 
system could be upgraded in order to better align two 
objectives,  namely 
for  optimum 
performance  and  career  development  for  staff  while 
retaining  the  positive  components  of  the  current 
system. 

search 

the 

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12.  Aligning 

(cid:190)  Following the conclusions of 

DG  ADMIN,  by 
the end of 2005. 

the evaluation on the Strategic 
Alignment of Human 
Resources, an action plan will 
be devised by the end of 2005. 

resources  and 
needs  better  to 
make  sure  that 
staff  have  the 
and 
skills 
qualifications 
necessary 
to 
perform 
their 
duties, 
in 
in 
particular 
areas  such  as 
financial 
management, 
audit,  science, 
linguistics  and 
IT. 

(cid:190)  Provision of specialised training 
and measures to improve the 
recruitment procedures and, in 
particular in areas where a 
shortage of skilled staff is 
identified. 

DG 
ADMIN, 
EPSO,  ongoing 
tasks. 

(cid:190)  An analysis of human resource 
devoted to internal control will 
be progressively carried out as 
requested by the Court of 
Auditors 

services, 
All 
on 
based 
guidelines  to  be 
drawn up by DG 
ADMIN, 
SG 
and  DG  BUDG 
by  the  end  of 
2005. 

Ongoing. 

As  a  result  of  the  evaluation  on  the  strategic 
alignment  of  Human  Resources  (HR)  Management, 
DG  ADMIN  launched  an  initiative  to  improve  the 
HR  Management  in  the  Commission.  Concrete 
results  are  plans  for  an  HR  professional  training 
programme  or  modules  as  well  as 
ideas  for 
certification  in  this  area.  One  of  the  groups  also 
identified  HR  good  initiatives  and  best  practices 
(Induction,  Knowledge  management,  staff  surveys, 
communication, flexi-time arrangements, etc). Other 
concrete  results  were  further  improvements  to  the 
HR  database  system  for  staff  (Sysper2)  and  the 
establishment  of  the  e-CV  system,  which  is  a  data-
base  development  containing 
the  professional 
profiles of Commission staff. 

Ongoing. 

On the basis of the specific requests by services DG 
ADMIN coordinates and regularly updates the input 
of  the  Commission  to  the  planning  of  selection 
procedures by EPSO. As regards specialised training 
DG  ADMIN  is  constantly  adjusting  its  training 
planning to the identified needs. In 2005, the area “e- 
Commission” was maintained, while training courses 
in  the finance,  budget  and  audit field  were added  to 
the priority training domains. 

Ongoing. 

The Job Study finalised in June 2005 showed that the 
data  in  the  Job  Information  System  (JIS)  needed 
restructuring  in  order  to  permit  data  searches  that 
would  give  the  required  results.  Therefore,  work 
continued  in  to  develop  an  approach  which  would 
allow the institution to conduct better analysis of the 
allocation  of  human  resources.  This  approach 
foresees that the updating of data in JIS starting with 
the job descriptions of staff involved in management 
and control issues will be pursued through the Heads 
of  Human  Resources  network.  The  first  results  will 
be available in 2006. 

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Annex 3 

Trends in services’ reservations 

This  Annex  sums  up  the  reservations  expressed  by  Commission  services.  In  services’  2005  annual  activity  reports,  31  reservations  were  expressed 
(after 32 in 2004 and 49 in 2003). 

The table set out below gives an overview of the reservations issued by the services in 2003, 2004 and 2005 by ‘families’ of services. 

DG 

Reservations 2005 

Reservations 2004 

Reservations 2003 

AGRI 

2 

1. Preferential import of high quality beef (“Hilton” 
beef) – risk of non-respect of product definition; 
2. Insufficient implementation of IACS in Greece 

3 

1. EAGGF Guidance: MS control systems 
2. IACS in Greece; 
3. "Hilton" beef 

REGIO 

3 

1. Management and control systems for ERDF in 
UK-England; 
2. Management and control systems for ERDF in 
Spain; 
3. Management and control systems for the 
Cohesion Fund in Spain 

EMPL 

1 

1. Systèmes de gestion et de contrôle des 
programmes opérationnels en Angleterre (UK) 

FISH 

0 

0 

1. Management and control systems for ERDF in 
one Member State; 
2. Management and control systems for the 
Cohesion Fund in one Member State - 2000/06; 
3. Management and control systems of ISPA in one 
candidate country 

1. European Social Fund - Member states' 
management and control systems of some 
operational programmes 

1. FIFG: Insufficient implementation of 
management and control systems for two national 
programmes in one Member State 

3 

1 

1 

1. EAGGF Guidance programmes; 
2. International Olive Oil Council; 
3. Import of Basmati rice;  
4. IACS in Greece; 
5. "Hilton" beef 

1. Management and control systems for ERDF in Greece - 
2000/06; 
2. Management and control systems of URBAN & 
INTERREG - 2000/06; 
3. Management and control systems for ERDF in Spain - 
2000/06; 
4. Management and control systems for the Cohesion Fund in 
Greece, Spain and Portugal - 2000/06; 
5. Management and control systems of ISPA 

1. European Social Fund - Member states' management and 
control systems  

1. FIFG expenditure. Analysis of the Management and Control 
systems not yet completed for all Member States 

5 

5 

1 

1 

JRC 

1 

1. Status and correctness of the closing balance 

1 

1. Cash flow - competitive activities 

1 

1. Cash flow, assets and liabilities from competitive activities 

EN 

32 

EN 

 
  
  
  
  
RTD 

1 

1. Exactitude des déclarations de coûts et leur 
conformité avec les clauses des contrats de 
recherche du 5ème PCRD 

INFSO 

2 

1. Errors relating to the accuracy and eligibility of 
cost claims and their compliance with the 
provisions of reserach contracts under FP5; 
2. Allocation of research personnel 

ENTR 

2 

1. Errors relating to accuracy and eligibility of 
costs claims and their compliance with the 
provisions of research and eligibility of costs 
claims and their compliance with the provisions of 
the research contracts under the 5th Research 
Framework Programme; 
2. Uncertainty regarding cost claims of the 
European Standardisation Organisations 

TREN 

2 

1. Risque de surpaiement concernant le 5éme 
Programme Cadre; 
2. Sûreté nucléaire 

EAC 

2 

1. Insuffisante assurance quant à la gestion à 
travers les agences nationales 
2. Insuffisante assurance quant à la fiabilité et 
l'exhaustivité des montants inscrits au bilan de la 
Commission et au compte de résultat économique 

ENV 

0 

0 

SANCO 

1 

1. Health crisis management (crisis management 
tools and systems, in particular IT systems, not 
adapted to support highly critical activities in case 

0 

0 

1 

1. Frequency of errors in shared cost contracts 

1 

1. Frequency of errors in shared cost contracts 

2 

1. Frequency of errors in shared cost contracts; 
2. Research staff working on operational tasks 

2 

1. Frequency of errors in shared cost contracts; 
2. Research staff working on operational tasks 

2 

4 

1. Frequency of errors in shared-cost contracts in 
the research area; 
2. Uncertainty regarding cost claims of the 
European Standardisation Organisations 

1. Frequency of errors in shared cost contracts; 
2. Contractual environment of DG TREN LUX; 
3. Nuclear safety; 
4. Inventory in nuclear sites 

0 

0 

0 

0 

2 

6 

3 

1. Frequency of errors in shared-cost contracts in the research 
area; 
2. Financial management of conferences organised under the 
Innovation Programme 

1. Frequency of errors in shared cost contracts; 
2. Burden of the past; 
3. Contractual environment of DG TREN Luxembourg; 
4. Expertise for control of nuclear security; 
5. Nuclear safety; 
6. Verifications under Art. 35 of the Euratom Treaty 

1. Burden of the past (observation in 2002 AAR); 
2. On the spot controls (observation in 2002 AAR); 
3. Implementation of Art. 35 of FR Implementing Rules 

2 

1. Potentially abnormal RAL; 
2. Grants- Eligible costs 

0 

0 

EN 

33 

EN 

 
  
 
 
of a Public Health crisis). 

JLS 

2 

1. Insufficient number of ex-post controls missions 
and lack of a fully-fledged methodology in the area 
of direct management in 2005;2. Management and 
control systems for the European Refugee Fund for 
the UK for 1002-2004 

ESTAT 

0 

0 

ECFIN 

TRADE 
AIDCO 

0 

0 
0 

0 

0 
0 

ELARG 

1 

1. Legal status and liability of contractual partner in 
the framework of implementation of EU EU 
contribution to UNMIK Pillar IV in Kosovo 

ECHO 

0 

0 

DEV 

0 

RELEX 

2 

0 
1. Insuffisances du contrôle et de l’information de 
gestion ; 
2. Insuffisances de la gestion administrative en 
délégations, et principalement au niveau de la mise 
en place et du respect des circuits financiers 

(1) Les réserves exprimées par la DG RELEX 
s'inscrivent dans la continuité des réserves émises 
lors des deux exercices précédents ; leur 
formulation a été affinée. 

2 

2 

0 

0 
0 

1 

1 

0 

0 

1. Faiblesse des systèmes de gestion du Fonds 
européen pour les Réfugiés au Royaume-Uni et au 
Luxembourg;2. Mise en œuvre encore incomplète 
des contrôles ex-post sur place 

0 

0 

1. Errors in the declaration of eligible costs in 
relation to grants; 
2. Insufficient number of ex-post controls carried 
out in 2003 

0 

0 
0 

1. Gaps in Roumania's and Bulgaria's capacity to 
manage and implement increasing amounts of aids 

1. Non respect of the contractual procurement 
procedures by a humanitarian organisation for 
projects funded by ECHO 

3 

0 

0 
1 

3 

1. Errors in the declaration of eligible costs in relation to 
grants; 
2. Weakness in project management procedures; 
3. Insufficient number of ex-post controls carried out in 2003 

0 

0 
1. Partnership with an NGOs association 

1. Inherent risk in decentralised systems; 
2. Gaps in systems and transaction audits; 
3. Uncertainties regarding claims of financial intermediaries 

0 

0 

0 

0 

2 

1. Internal control standards in Directorate K; 
2. Internal control standards in Delegations 

2 

1. Internal control standards in Directorate K; 
2. Internal control standards in Delegations 

EN 

34 

EN 

 
  
 
 
TAXUD 

MARKT 

COMP 

1 

0 

0 

1. Trans-European networks for customs and tax: 
availability and continuity 
0 

0 

COMM 

1 

1. Supervision (ex-post controls on grants) 

ADMIN 

DIGIT 

0 

1 

1. Business continuity risks due to inadequacy of 
the data centres building infrastructure 

PMO 

1 

1. Council's antenna for sickness insurance 

OIB 

OIL 
EPSO 

OPOCE 

BUDG 

SG 
BEPA 
SJ 
SCIC 
DGT 

IAS 

1 

0 
0 

0 

2 

0 
1 
0 
0 
0 

1 

1. Deficiency in OIB’s contracts & procurement 
management 
0 
0 

0 

1. Accrual accounting for the European 
Development Fund; 
2. Accrual accounting of the Community Budget - 
three local systems 

0 
1. Weak general internal control environment 
0 
0 
0 

1. Audit of community bodies (traditional agencies) 

0 

0 

0 

2 

0 

0 

1 

0 

0 
0 

0 

2 

0 
0 
0 
0 
0 

1 

0 

0 

0 

1. Relays and networks - grands centres; 
2. Functioning of Representations EUR-15 

0 

0 

1. Council's antenna for sickness insurance 

0 

0 
0 

0 

1. Accrual accounting for the Community and the 
EDF budgets; 
2. Subsystems of SINCOM 2: accesses control 

1 

0 

0 

3 

0 

2 

1 

0 
0 

0 

3 

1. Monitoring of the application of the preferential treatments 

0 

0 

1. Relays and networks; 
2. Representations; 
3. Copyrights - press cuts 

0 

 - 

1. Council's antenna for sickness insurance; 
2. Paul Finet Foundation 

1. Lack of long term planning of the buildings policy. 

0 
0 

0 

1. Accrual accounting; 
2. Syncom subsystems; 
3. Accounting management of European Development Fund 

0 
0 
0 
0 
0 

0 
0 
0 
0 
0 

0 
0. 
0 
0 
0 

1. Audit of Community agencies 

1 

1. Audit of Community agencies 

OLAF 
TOTAL 

0 
31 

0 

0 

0 
32 

0 

0 
49 

EN 

35 

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Rapport sur les procédures négociées – exercice 2005 

Annex 4 

1. 

BASE LEGALE 

L'article 54 des Modalités d'Exécution (ME) du Règlement Financier (RF) établit l'obligation, pour les 
ordonnateurs  délégués,  de  recenser  les  marchés  faisant  l'objet  de  procédures  négociées.  En  outre  la 
Commission doit annexer au résumé des Rapports Annuels d'Activités (RAA) visé à l'art. 60.7 du RF 
un rapport sur les procédures négociées. 

2. 

METHODOLOGIE 

2.1. 

Les données concernant le nombre des marchés suivant une procédure négociée 
et le nombre des marchés toutes procédures confondues, ainsi que la valeur de 
ces marchés, sont fournies par les DG, Services ou Offices concernés. 

Pour la première fois dans cet exercice de recensement, l’outil informatique « ABAC-Contracts » a été 
mis  à  la  disposition  des  Services.  Cette  base  de  données  a  été  mise  en  exploitation  au  début  de 
l’exercice  budgétaire  2005  et  les  Services  sont  tenus  d’y  intégrer  l’ensemble  des  contrats  signés  à 
partir du 1er janvier 2005.  

2.2. 

Une distinction a été faite entre les 37 DG, Services et Offices qui n’octroient pas 
d’aide  extérieure,  et  les  3  DG  (AIDCO,  ELARG  et  RELEX)  passant  des 
marchés dans le cadre d'actions extérieures (base légale différente: Chapitre 3 
du  Titre  IV  de  la  Deuxième  Partie  du  RF)  ou  pour  compte  de  la  Commission 
mais en dehors du territoire de l'UE. 

En  effet,  ces  3  DG  présentent  des  aspects  particuliers  en  ce  qui  concerne  la  collecte  des  données 
(déconcentration  des  services,  absence  d’accès  direct  de  certaines  délégations  à  ABAC),  le  nombre 
total (très élevé) de marchés passés, l'application d'autres seuils pour les procédures négociées, ainsi 
que la possibilité de recours à la procédure négociée dans le cadre du mécanisme de réaction rapide 
(urgence  impérieuse).  Pour  ces  raisons,  les  marchés  de  ces  DG  nécessitent  une  approche  statistique 
distincte. 

3. 

RESULTATS GLOBAUX DU RECENSEMENT 

3.1. 

Les DG, Services ou Offices en général 

Sur base des réponses reçues des 37 DG, Services ou Offices, les statistiques suivantes ont été établies: 
454 marchés négociés pour une valeur totale de 295 087 502 euros ont été attribués sur un ensemble 
de 2.191 marchés toutes procédures confondues, pour une valeur totale de 945 627 435 euros. 

La proportion moyenne pour l'Institution du nombre de procédures négociées par rapport au nombre 
de  marchés  passés  s'élève  dès  lors  à  20,7%.  La  moyenne  de  l'Institution  calculée  par  rapport  au 
montant des marchés attribués (au lieu du nombre de marchés) s'élève à 31,2%. 

Il a été considéré que la proportion pour une DG/Service doit être estimée comme "notablement plus 
élevée  que  la  moyenne  enregistrée  au  niveau  de  son  Institution",  quand  elle  dépasse  de  moitié  la 
proportion moyenne, c'est-à-dire lorsqu'elle est supérieure à 31,1%. Ainsi, 7 DG, Services ou Offices 
sur 37 ont dépassé le seuil de 31,1% en 2005. 

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36 

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Par  ailleurs,  l'évolution  par  rapport  à  la  moyenne  des  deux  exercices  précédents  (2003-2004)  pour 
l’ensemble de ces DG est la suivante: augmentation de 4,1% en nombre de procédures et de 20% en 
montant.  Ainsi,  8  DG  présentent  une  augmentation  interannuelle  qui  peut  être  considérée  comme 
sensible par rapport aux années précédentes (supérieure à 10%). 

3.2. 

Les DG opérant hors Union Européenne 

Une DG n’a pas fourni les données ventilées de la  manière adéquate, ce qui a empêché d’établir un 
calcul global pour ce groupe de DG. Sur la base des réponses reçues des 2 autres DG concernées, les 
statistiques sont les suivantes : 295 marchés négociés pour une valeur totale de 177.436.732 euros ont 
été attribués sur l’ensemble de 3 102 marchés toutes procédures confondues, pour une valeur totale de 
1 316 129 953 euros. La proportion moyenne pour ces 2 DG du nombre de procédures négociées par 
rapport  au  nombre  de  marchés  passés  s’élève  dès  lors  à  9,5%.  La  moyenne  des  2  DG  calculée  par 
rapport au montant des marchés attribués (au lieu du nombre de marchés) s’élève à 13,5%. 

4. 

ANALYSE DES JUSTIFICATIONS ET MESURES CORRECTIVES 

Quatre catégories de justifications sont évoquées par les DG ayant dépassé les seuils susmentionnés. 
En  premier  lieu,  les  déviations  statistiques  résultant  d'un  faible  nombre  de  marchés  passés  (toutes 
catégories confondues) ou de l'utilisation intensive de contrats cadres (ce qui, en intégrant dans un seul 
contrat  « cadre »  un  nombre  élevé  de  contrats  « spécifiques »,  réduit  le  nombre  total  de  marchés 
passés)  par  les  DG  concernées.  Ces  situations  peuvent  avoir  pour  conséquence  d'augmenter  le 
pourcentage de procédures négociées par réduction de la base applicable (ensemble de marchés, toutes 
catégories  confondues).  Dans  ces  cas,  un  pourcentage  élevé  n'équivaut  pas  nécessairement  à  un 
recours excessif aux procédures négociées. 

Une  deuxième  série  d'arguments  met  en  évidence  des  situations  objectives  du  secteur  d'activité 
économique où le nombre d'opérateurs (candidats ou soumissionnaires) peut être fort limité, voire en 
situation de monopole. Il arrive de ne pas avoir d’offres suite à un appel d’offres avec publication. Des 
situations de captivité technique peuvent également apparaître. Ceci est notamment le cas de certaines 
prestations  dans  le  domaine  informatique  et  de  la  maintenance  des  immeubles.  En  particulier, 
l’augmentation  de  la  proportion  de  procédures  négociées,  mesurée  en  montant,  relève  d’un  nombre 
limité de marchés se trouvant dans cette situation.  

En  troisième  lieu,  les  marchés  complémentaires,  lorsqu'ils  ne  peuvent  pas  être  techniquement  ou 
économiquement séparés du marché principal (initial), sont évoqués. 

Finalement,  certaines  procédures  négociées  sont  expressément  prévues  comme  des  procédures 
ordinaires, non spéciales, par les dispositions applicables (services juridiques et services de l'annexe 
II-B de la directive 2004/18/CE). 

Plusieurs mesures sont proposées par les DG pour infléchir la situation. D'une part, le renforcement 
de leur structure interne, soit par le transfert de ressources internes vers l'activité contractuelle, soit 
par  l'introduction  ou  l’amélioration  des  instruments  de  contrôle ;  d’autre  part  l’amélioration  de  la 
formation du personnel et l’établissement de documents types. Les procédures de marchés devront 
être  intégrées  dans  la  revue  régulière  sur  l’efficacité  du  contrôle  interne,  notamment  l’analyse  de  la 
dépendance éventuelle envers certains contractants. En tout état de cause, les procédures et contrôles 
doivent être correctement documentés pour assurer la piste d’audit. 

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