Communication from the Commission to the European Parliament, the Council and the Court of Auditors - Synthesis of the Commission's management achievements in 2008
Date: 2009-06-08
Institutions: European Commission
Subjects: European Commission, activity report, administration of the Institutions, financial management, management accounting, personnel administration

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.6.2009 
COM(2009) 256 final 

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

Synthesis of the Commission's management achievements in 2008 

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

Synthesis of the Commission's management achievements in 2008 

1. 

INTRODUCTION 

In  line  with  Article  274  of  the  EC  Treaty,  the  Commission  takes  overall  responsibility  for 
implementing  the  EU  budget.  This  is  one  of  the  most  important  tasks  entrusted  to  the 
European  Commission,  as  the  EU  budget  is  an  important  tool  for  delivering  the  Union's 
policies, and the effectiveness of EU spending can have a key influence on the EU's ability to 
fulfil the expectations of its citizens.  

The  operational  implementation  of  the  budget  is  delegated  by  the  College  to  the  Directors-
General,  who,  as  "authorizing  officers  by  delegation"  (AOD),  are  responsible  for  the  sound 
and  efficient  management  of  resources  and  for  ensuring  adequate  and  effective  control 
systems in their services.  

Directors-General  report  on  the  performance  of  their  duties  in  the  annual  activity  report 
(AAR)1, which includes a signed declaration of assurance focusing on their responsibilities as 
AODs  and  covering  the  legality  and  regularity  of  financial  transactions.  This  is  the  main 
vehicle through which they document their accountability to the College. The content of 
these  reports  is  discussed  with  the  Commissioner(s)  responsible  before  signature  by  the 
Director-General.  

By  adopting  this  Synthesis  Report,  the  Commission  assumes  its  political  responsibility 
for  management  by  its  Directors-General  and  Heads  of  Service,  on  the  basis  of  the 
assurances  and  reservations  made  by  them  in  their  annual  activity  reports.  It  also  identifies 
key management issues to be addressed as a matter of priority, which have been identified in 
the AARs (even if they have not required a reservation), and defines lines of action to address 
identified weaknesses.  

This is the last Synthesis Report adopted during the mandate of this Commission. The aim of 
obtaining an unqualified statement of assurance by the European Court of Auditors (ECA) has 
mobilized  energies  and  focused  attention  on  fundamental  issues  such  as  simplifying 
legislation,  implementing  an  integrated  internal  control  framework,  strengthening  the 
Commission's supervisory role in shared management of EU funds, and working towards an 
agreement on a common approach to tolerable risk.  

The Commission is satisfied that, although there is still room for improvement, in the last five 
years significant progress has been achieved in the management of funds in important areas of 
EU  expenditure,  in  particular  cohesion,  research,  and  agriculture.  This  progress  has  been 
possible  thanks  to  far-reaching  changes  to  management  and  control  systems,  working 
methods, and culture.  

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Article 60 of the Financial regulation 

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2. 

STRENGTHENING THE FOUNDATION OF ASSURANCE 

2.1. 

Enhancing control mechanisms to ensure legality and regularity of transactions 
Commission-wide 

In  2008,  the  Commission  delivered  on  the  commitments  undertaken  in  the  2007 
Synthesis  Report  as  regards  measures  to  strengthen  control  mechanisms  to  ensure 
legality  and  regularity.  It  considers  that  steady  improvements  are  being  made  in 
the  Commission  adopted  a 
effective  risk  management.  In  October  2007 
Communication revising the Internal Control Standards and underlying framework2, 
replacing  the  original  24  for  16  internal  control  standards  for  effective 
management.  The  new  system  entered  into  force  on  1  January  2008.  For  the  first 
time,  Commission  services  were  explicitly  required  to  draw  a  conclusion  on  the 
effectiveness of their internal control systems in the annual activity reports. Almost 
all  services  included  a  specific  conclusion  on  the  overall  effectiveness  of  their 
internal control system and where relevant identified actions to address weaknesses.  

These actions concern both Commission services and implementing partners (notably 
the  Member  States)  and  a  strong  impetus  was  given  in  this  area  in  February  2008 
with  the  adoption  of  the  "Action  Plan  to  strengthen  the  Commission's 
supervisory  role  under  shared  management  of  structural  actions"3.  The  most 
recent  report  on  this  plan's  implementation  was  published  in  early  20094.  Its  main 
conclusion  was  that  substantial  progress  has  been  made.  Highlights  of  the  report 
indicate that the Commission has: 

•  adequately  supervised  the  procedure  concerning  annual  summaries  by  issuing 
clear guidance and by dealing with cases of non-compliance (an assessment also 
made by the ECA in its annual report);  

•  demonstrated a more rigorous response to the detection of systems deficiencies by 
the adoption of 10 formal decisions to suspend interim payments (as compared to 
1 in 2007); 

•  demonstrated  its  capacity  to  report  accurately  and  in  a  timely  way  on  the 
corrections  resulting  from  its  own  control  and  audit  activity  through  the 
transmission of quarterly reports on financial corrections;  

•  significantly increased  the volume of financial corrections relating to 2000-2006 
programmes  and  projects  applied  in  2008  for  ERDF,  ESF  and  Cohesion  Fund  – 
from 288 million EUR in 2007 to over 1,5 billion in 2008; 

•  carried  out  the  planned  actions  to  make  first-level  management  checks  more 
effective,  including  targeted  audits,  issuance  of  guidance  notes,  training  and 
seminars. 

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Communication to the Commission: SEC(2007) 1341. 
COM(2008) 97, 18.2.2008. 
COM(2009) 42, 3.2.2009. 

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In 2008, the Commission also conducted an analysis of the impact of the "Action 
Plan  towards  an  Integrated  Internal  Control  Framework"5,  adopted  in  early 
2006  as  part  of  the  Commission's  strategy  to  obtain  an  unqualified  DAS.  The  final 
report  was  published  in  February  20096.  The  Communication  noted  significant 
progress in strengthening internal control systems during this Commission's mandate.  

An  essential  element  in  building  reasonable  assurance  is  the  role  of  the  internal 
audit function. In 2008, an external quality assessment of the Commission's Internal 
Audit  Service  (IAS)  was  completed,  certifying  that  its  audit  activity  within  the 
Commission  generally  complies  with  the  Standards  and  Code  of  Ethics  of  the 
Institute  of  Internal  Auditors.  Following  this  certification,  actions  were  taken  to 
enhance the IAS's effectiveness, among which a more detailed definition of the audit 
universe,  a  quantitative  assessment  of  the  audit  coverage,  and  intensified  planning 
and  risk  assessment  in  favour  of  a  single  audit  approach  and  establishment  of  an 
audit report users’ group that developed a revised internal audit reporting template, 
as well as a fully fledged vocational training programme for internal auditors.  

As  regards  the  control  culture,  in  2008,  the  Commission's  Audit  Progress 
Committee (APC) was able to ascertain that Commission services continue to make 
good  progress  in  implementing  strong  systems  of  internal  control.  The  number  of 
critical  recommendations  issued  by  the  IAS  went  down  to  zero  in  2008  (from  6  in 
2007).  Also,  the  acceptance  of  IAS  recommendations  in  2008  was  almost  100%. 
Although a positive trend in their follow-up was evident, timely  implementation of 
"critical" and "very important" recommendations is still an important challenge.  

The  APC  regularly  examined  the  follow-up  given  to  audit  recommendations  and 
drew  the  attention  of  the  responsible  Commissioners  and,  where  necessary,  of  the 
College, to abnormal delays and residual risks not adequately addressed. 

The  Commission  will  continue  to  give  the  highest  priority  to  evaluating  the 
implementation of internal control and addressing identified weaknesses in a timely 
manner. 

The  Commission  has  instructed  all  its  services  to  ensure  the  speedy  and  effective 
implementation  of  all  accepted  audit  recommendations,  with  special  attention  on 
those considered "Critical" or "Very Important". 

2.2. 

Improving the clarity and coherence of the Annual Activity Reports (AAR)  

Following up on the conclusions of the 2007 Synthesis Report, for the 2008 Annual 
Activity  Reports  (AAR)  the  Secretariat-General  and  the  Directorate-General  for 
Budget  took  further  steps  to  ensure  that  reports  and  declarations  presented  a 
consistent  assessment  of  supervisory  and  control  systems,  with  clear  explanations 
made  of  the  reasons  and  control  processes  leading  to  the  absence,  presence  or 
removal of reservations.  

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COM(2006) 9 and SEC(2006) 49 
COM(2009) 43, 4.2.2009. 

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In  early  2009,  in  preparation  for  the  formal  peer-review  exercise,  central  services 
held  bilateral  meetings  with  Directorates-General  that  had  reservations  in  the  past 
and/or might have reservations in 2008, in order to promote harmonised approaches 
in presenting the evidence underlying the decision to lift or make a reservation.  

During  the  peer-review  exercise  a  number  of  issues  were  identified  which  might 
affect the quality of the evidence offered by AARs, in particular the presentation of 
results of ex-ante and ex-post controls as a basis for the assurance.  

Although the efforts made so far to ensure a consistent level of quality of AARs are 
bearing  fruit,  it  seems  pertinent  to  carry  out  an  analysis  of  all  the  factors  which 
condition  the  quality  of  AARs,  in  order  to  better  target  the  support  that  central 
services  can  offer,  as  well  as  the  measures  that  should  be  taken  by  the  individual 
Directorates-General and Services.  

The Commission has instructed the Secretariat-General and the Directorate-General 
for  Budget  to  carry  out  an  assessment  of  the  factors  affecting  the  quality  of  AARs 
and  to  promote  measures  to  improve  their  quality  in  time  for  the  report  on  2009 
activities.  

3. 

ASSURANCE  GATHERED  THROUGH  THE  ANNUAL  ACTIVITY  REPORTS  AND 
RESERVATIONS MADE BY THE DIRECTORS-GENERAL 

Having examined the Annual Activity Reports, in particular the declarations signed by each 
Director-General, the Commission notes that they all indicated reasonable assurance as to 
the adequate use of resources and on the fact that the implemented control procedures give the 
necessary  guarantees  concerning  the  legality  and  regularity  of  the  underlying  transactions. 
Some Directors-General disclosed residual weaknesses and made reservations in their AAR, 
without calling into question the overall level of assurance given.  

At  the  close  of  the  reporting  exercise,  there  were  15  reservations  made  Commission-wide. 
This is a reduction with respect to the same period last year and would seem to confirm the 
steady downward trend in the number of reservations entered (17 for AAR 2007, 20 for AAR 
2006).  The  scope  of  the  reservations  in  shared  management  also  showed  some  reduction 
(fewer programmes and Member States covered). 

In total, 12 Directors-General expressed reservations in 2008 (13 in 2007) with three having 
two  reservations  each.  Four  reservations  made  in  2007  could  be  lifted.  As  was  the  case  in 
2007, the majority of the reservations entered in 2008 concerned either the quality of Member 
States' control systems or errors detected at beneficiary level. Seven reservations were based 
on issues having an impact on the reputation of the service or the Commission. 

The results of the analysis of the AARs, as well as the reservations and the assurance obtained 
by the Directors-General, are examined in this section and, where relevant, put in perspective 
against the assessment of the European Court of Auditors for 20077.  

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This Synthesis Report follows the new structure of the 2007 annual report of the ECA.. 

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3.1. 

Cohesion, agriculture and natural resources 

3.1.1.  Cohesion 

Cohesion policy represents one of the core policies of the EU, implemented with the 
Member States under 'shared management'. In 2008, the Commission has delivered 
on its commitment to carry out ongoing and new actions in the "Communication on 
an  action  plan  to  strengthen  the  Commission's  supervisory  role  under  shared 
management of structural actions" (see section 2.1 above).  

Furthermore, as a result of the actions taken by the Commission over the last years, 
the  ECA  considered  in  its  annual  report  2007  that  some  improvements  had  been 
achieved in the control systems of the cohesion policy area. Whereas in its report for 
2006 the Court gave a "red light" to both systems and transactions for expenditure in 
structural actions, in 2007 it gave a "yellow light" to the control systems8.  

Nevertheless, the level of errors in expenditure declared by the Member States and 
reimbursed by the Commission in the programmes covered in the chapter "Cohesion" 
led to the Court's giving this area a "red light" for transactions - the only remaining 
"red light" in its 2007 report.  

The corrective measures taken by the Commission in 2008 have led to an increase in 
financial corrections: 

•  As  regards  the  European  Regional  Development  Fund  (ERDF)  and  Cohesion 
Fund,  financial  corrections  in  2008  amounted  to  €  1  041  million  (€  368  million 
related  to  the  1994-1999  period  and  €  673  million  related  to  the  2000-2006 
period).  At  the  end  of  2008,  103  procedures  (covering  approximately  145 
programmes) were in progress for the 2000-2006 programming period, for which 
the estimated amount of financial corrections is approximately € 950 million, and 
55 procedures (covering approximately 58 programmes) were in progress for the 
1994-1999  programming  period,  for  which  the  estimated  amount  of  financial 
corrections is approximately € 1.2 billion.  

•  In  2008,  financial  corrections  for  the  European  Social  Fund  (ESF)  amounted  to 
the 1994-1999 period and € 496 million 

€521.7 million (€ 25.7 million related to 
related  to  the  2000-2006  period).  Moreover,  at  the  end  of  2008,  a  further  14 
financial  correction  procedures  are  in  the  pipeline  for  the  period  1994-1999 
(estimated  amount  of  supplementary  correction  of  €  387  million)  and  13 
additional  procedures  have  been  launched  for  the  period  2000-2006  (estimated 
amount  of  supplementary  correction  of  €257  million  based  on  pre-suspension 
letters  sent  to  Member  States  by  the  end  of  2008).  As  a  consequence  of  the 
precautionary  approach  in  2008,  interrupted  payments  amounted  to  EUR  1.3 

8 

A "green light" means that the error rate for the area of expenditure as a whole lies below the level of 
materiality (2%) and that the ECA considers existing supervisory and control systems to be effective; a 
"yellow light" means that the error rate lies between 2% and 5% and supervisory and control systems 
are  deemed  partially  effective;  a  "red  light"  means  that  the  error  rate  lies  above  5%  and  the  Court 
considers  supervisory  and  control  systems  ineffective.  Source:  "Information  Note:  Annual  Report  on 
the 2007 EU Budget", ECA, page 6.  

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billion  for  all  operational  programmes  in  reserve.  The  interruption  of  some 
payments has led to a very low materiality of the risk.  

When  significant  deficiencies  are  identified,  the  Directors-General  in  charge  of  the 
structural  funds  systematically  make  a  reservation,  unless  there  is  reliable  audit 
evidence  that  an  action  plan  to  remedy  the  weaknesses  is  being  implemented 
effectively by the national authorities and first results have been produced.  

In  its  Report  on  the  implementation  of  the  Action  Plan,  the  Commission  has 
recognised that the Action Plan addresses both the causes and effects of the high rate 
of  error  found  by  the  European  Court  of  Auditors  in  structural  actions  expenditure 
but that further time is needed before the impact of the actions can be measured by a 
reduction of the error rate at the level of interim reimbursements. 

The following is a brief summary of the reservations made by Directors-General in 
the area 'Cohesion':  

•  Concerning the European Regional Development Fund (ERDF), the Director-
General  for  Regional  Policy  entered  a  reservation  for  four  Member  States 
(Belgium,  Germany,  Italy,  and  Spain)  and  for  21  INTERREG  programmes.  He 
also expressed a reservation on the management of the Cohesion Fund in the road 
sector in Bulgaria, for reputational reasons (see section 4.2 below). 

•  As  regards  the  European  Social  Fund  (ESF),  the  Director-General  for 
Employment, Social Affairs and Equal Opportunities issued a reservation for 
seven Member States (Spain, the United Kingdom, France, Italy, Poland, Belgium 
and Luxemburg), one less than in 2007. 

3.1.2.  Agriculture and natural resources 

As to the chapter 'Agriculture and Natural Resources', the ECA report 2007 gave a 
'yellow  light'  to  both  systems  and  transactions.  However,  the  Court  gave  a  "green 
light"  for  the  expenditure  under  European  Agricultural  Guarantee  Fund  (EAGF), 
which represents 85% of total agricultural expenditure9.  

Here, as in the cohesion area, the Commission's enhanced control activities have led 
to  concrete  results:  in  2008,  corrections  by  the  Commission  and  Member  States  in 
the area of agriculture amounted to EUR 1.3 billion.  

The  Commission  has  followed  up  on  the  issue  of  the  conservation  of  fisheries 
resources, which was singled out as a point of concern in the Synthesis Report 2007. 
It  secured  i.a.  the  adoption  by  the  Council  of  innovative  and  tough  new  rules  to 
prevent, deter and eliminate illegal, unreported and unregulated (IUU) fishing and of 
new  conservation  measures,  and  launched  an  unprecedented  and  successful  control 
campaign to protect the sensitive blue-fin tuna stocks. 

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The  Court  also  gave  a  green  light  to  revenue,  economic  and  financial  affairs  and  administrative 
expenditure. This means that for around 45% of total Community expenditure the Court gave a green 
light. 

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Given the serious shortcomings of the CFP as highlighted by the Court of Auditors in 
2007,  the  Commission  launched  a  full  review  of  the  policy  in  order  to  prepare  the 
ground  for  a  far-reaching  reform.  A  Green  Paper  was  published  in  the  spring  of 
2009, launching the public consultation on the CFP reform. 

The following is a brief summary of the reservations made by Directors-General in 
the area 'Agriculture and Natural Resources':  

•  For the first time since a reservation was made in 2002, the Director-General for 
Agriculture and Rural Development was able to lift his reservation relating to 
the  implementation  of  IACS  in  Greece  as  Commission  audits  confirmed  that 
Greece  had  complied  with  its  action  plan  and  created  a  new,  operational  Land 
Parcel  Identification  System.  In  his  2007  annual  activity  report  he  made  a 
reservation  on  expenditure  in  Rural  Development  as  a  whole  because  he  had  no 
reasonable  assurance  that  the  control  statistics  and  error  rates  reported  by  the 
Member  States  were  reliable.  For  2008  he  entered  a  reservation  limited  to  the 
expenditure  in  axis  2  of  rural  development  ('improving  the  environment  and  the 
countryside'),  because  the  control  statistics  reported  by  Member  States  and 
verified  and  validated  by  the  certification  bodies  show  an  error  rate  (3.8%) 
significantly above the materiality threshold currently used by the ECA. He also 
entered  a  reservation  in  relation  with  management  and  control  systems  for 
SAPARD in Bulgaria and Romania (see 4.2 below). 

•  The  Director-General  for  Maritime  Affairs  and  Fisheries  entered  a  reservation 
concerning the eligibility of costs in direct centralised management reimbursed to 
Member  States  for  expenditure  in  the  field  of  control  and  enforcement  of  the 
Common Fisheries Policy. The identified weakness relates to public procurement 
carried out by a Member State. 

•  The Director-General for Environment was able to lift the reservation entered in 
the  2007  AAR  relating  to  eligibility  of  expenditure  claims  from  grant 
beneficiaries, in light of the implementation of the action plan, the increase in the 
number  of  audit  reports  and  payments  audited,  and  the  sharp  decrease  in  errors 
detected. 

The  Commission  is  committed  to  continued  improvement  of  shared  management 
under its control, and to supporting the competent authorities in the Member States 
by providing i.a. guidance notes, training and advice.  

The Commission has shown its strong political commitment to reducing the residual 
error  rate  and,  where  necessary,  suspending  payments  and  making  financial 
corrections,  to  show  that  the  EU  budget  is  being  managed  rigorously.  It  will  strive 
for  a  coherent  approach  to  managing  weaknesses  encountered  in  the  different 
programmes falling under this heading, including closing older ones and improving 
the  completeness  and  reliability  of  the  reporting  on  recoveries,  in  particular  as 
regards the data provided by the Member States.  

3.2. 

Research, Energy, and Transport 

For the  Framework Programme 6 (FP6),  which accounts for the  vast majority of 
final  payments  against  cost  claims  in  2008,  the  Directorates-General  involved 

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(Enterprise  and  Industry,  Energy  and  Transport,  Information  Society  and 
Media,  and  Research)  have  defined  a  common  audit  strategy  covering  the  period 
2007-2010. This aims to assess the legality and regularity of transactions through the 
identification and correction of systematic errors in the largest beneficiaries coupled 
with random and risk-based sampling of the remaining beneficiaries.  

By  the  end  of  2008,  the  management  processes  required  to  implement  the 
multiannual-control strategy are largely in place. The strength of the audit effort has 
been maintained in line with the initial targets foreseen. For example, DG Research 
is  poised  to  exceed  its  target  to  complete  750  FP6  audits  over  the  four-year 
implementation period; current plans foresee a total of 896 audits. 

Reservations were made by each of the four Research family services due to the rate 
of  residual  errors  affecting  cost  claims  in  the  6th  Framework  Programme.  The 
joint audit strategy is part of the internal control system which aims to achieve a 2% 
residual risk level over the programming period; however, at the halfway stage of the 
implementation of the strategy the services reported cumulative error rates in excess 
of 2%.  

A  key  component  of  this  strategy  was  that  systemic  errors  detected  would  be 
corrected  across  non-audited  contracts  for  the  same  beneficiary.  However,  the 
services reported a significant number of contracts for which such errors still need to 
be  quantified,  corrected  and  the  amounts  recovered.  They  therefore  made 
reservations on the accuracy of cost claims. 

A  mid-term  review  of  the  audit  strategy  has  been  completed  confirming  that  the 
principles  of  the  FP6  audit  strategy  are  sound  and  that  its  implementation  is 
progressing  well.  However,  it  needs  to  be  reinforced  in  a  number  of  areas,  such  as 
the process leading to the correction of systematic errors, and further efforts will be 
made to simplify eligibility rules to reduce the risk of error. 

The  Commission  has  made  considerable  efforts  to  improve  its  management  of  the 
research  policy  within  the  limits  of  the  applicable  legal  and  financial  framework. 
Reporting  on  2008  activity,  reservations  were  expressed  once  again  by  the 
responsible Directors-General as regards Framework Programme 6.  

The  Commission  will  work  to  attain  a  level  of  residual  error  conducive  to  an 
unqualified DAS in the research area. Nevertheless, despite the harmonised approach 
adopted and the first results of the mid-term review, there are signs that the common 
multi-annual audit strategy might not be sufficient to meet the objectives of reducing 
the overall level of error below the currently accepted threshold of materiality (2%).  

The  Commission  therefore  reiterates  its  call  for  a  common  understanding  of  the 
concept of tolerable risk of error, and will make proposals accordingly, on the basis 
of its Communication of 16 December 2008. 

The  Director-General  for  Enterprise  and  Industry  was  able  to  lift  a  reservation, 
entered 
in  European 
Standardisation. 

in  2007,  regarding  beneficiaries  of  grants 

involved 

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3.3. 

External aid, development and enlargement 

The  reservation  entered  by  the  Director-General  for  Enlargement  regarding 
management  of  pre-accession  assistance  in  Bulgaria  is  the  only  one  affecting  the 
expenditure  under  the  Chapter  "External  Aid,  Development  and  Enlargement" 
(see also 4.2).  

As  regards  the  other  activities  under  this  chapter,  the  Commission  will  continue 
monitoring  and  improving  the  implementation  of  the  framework  agreements  on 
financial  and  contractual  procedures  signed,  inter  alia,  with  a  number  of  UN 
agencies10  and  the  World  Bank11.  It  will  also  continue  its  efforts  towards  greater 
transparency  of  end  beneficiaries,  provided  that  the  rules  concerning  the  respect  of 
personal  data  and  of  security  requirements  are  respected.  Efforts  to  better  use  and 
share audit results within the RELEX-family will continue. 

3.4. 

Education and Citizenship  

In  2007  the  Director-General  for  Communication  made  a  reservation  regarding 
deficiencies  of  the  DG's  internal  control  system  in  the  absence  of  ex-post  controls. 
Following  the  setting  up  a  centralised  ex-post  control  unit  in  this  Directorate-
General, a high level of (mainly formal) errors in transactions was detected, leading 
the Director-General to introduce a new reservation for 2008. A number of measures 
are  described  in  detail  in  the  AAR's  action  plan  and  it  seems  reasonable  to  expect 
that the problem will be solved by end of 2009.  

The other reservation entered by the Director-General for Communication has been 
described in section 4.4. 

The  Director-General  for  Justice,  Freedom  and  Security  entered  a  reservation 
regarding  the  delays  in  the  implementation  of  the  Schengen  Information  System  II 
(SIS II), an IT tool for exchanging information among the law-enforcement bodies of 
the Member States. The reservation is made for reputational reasons, as the problems 
have  actually  been  identified  at  the  level  of  the  contractor.  The  Commission  is 
following  the  issue  closely  and  will  continue  to  report  regularly  to  the  European 
Parliament and the Council.  

The Director-General for Justice, Freedom and Security lifted the two reservations 
made  in  2007  concerning  the  implementation,  under  shared  management,  of  the 
European Refugee Fund, as he judged that controls and reinforcement of systems in 
the Member States were sufficiently advanced. For the period 2008-2013 a new basic 
act  covering  the  European  Refugee  Fund  III  addresses  the  issues  identified  for  the 
previous Fund.  

As  a  result  of  significant  deficiencies  in  recording  assets  related  to  material 
infrastructure  and  IT  projects,  the  Accountant  was  not  in  a  position  to  validate  the 
local  accounting  system  of  DG  JLS  in  2008  but  an  Action  Plan  to  remedy  this 
deficiency has been put in place in January 2009. 

10 
11 

Financial and Administrative Framework Agreement/ FAFA 
Trust Fund and Co-Financing Framework Agreement 

EN 

10 

   EN 

 
                                                 
In  the  area  of  Education  and  Culture,  concerning  centralised  indirect  management 
through  National  Agencies, although the overall assurance on the control system is 
satisfactory,  the  analysis  of  the  ex-post  declarations  for  2007,  together  with  the 
results  of  monitoring  visits  during  2008,  revealed  that  insufficient  or  ineffective 
primary  or  secondary  controls  exist  in  a  limited  number  of  cases  in  the 
implementation of the Youth in Action Program. These cases are closely monitored 
and appropriate follow-up measures are taken as and when needed. 

The Commission is aware of the weaknesses identified in the areas under Heading 3 
of the financial framework. It will continue to closely follow developments relating 
to the reservation on SIS II, in particular, and more generally on the development of 
large-scale IT systems. 

3.5. 

Economic and Financial Affairs 

In  the  AAR  2006  and  2007,  the  Director-General  for  Economic  and  Financial 
Affairs included a reservation due to the fact that an ex-post control had identified a 
potential  problem  with  the  implementation  of  'additionality'  requirements  in  the 
programme  Growth  &  Employment  Initiative  (1998-2002)  run  by  an  external 
implementing  body.  The  preliminary  findings  pointed  to  weaknesses  in  the  control 
system  of  that  external  body,  which  were  considered  serious  enough  to  justify  a 
reservation.  Following  the  results  of  the  ex-post  control  report,  the  internal  control 
systems  of  both  the  external  implementing  body  and  the  responsible  Commission 
service  have  been  revised  in  depth.  Detailed  guidelines  for  "additionality"  were 
developed  and  provided  to  the  implementing  body,  which  has  confirmed  their 
application in writing as of 2008. Moreover, an agreement has been established with 
the external body, detailing the monitoring and controls to be carried out by it with 
respect to the implementation of the facility 

While the control framework currently in force is considered appropriate for ensuring 
the  sound  management  of  budgetary  appropriations,  its  effectiveness  when 
implementing  the  new  Community  programmes  in  relation  to  the  setting  of 
additionality requirements has not yet been tested.  

For this reason, the Director-General for Economic and Financial Affairs entered a 
reservation in his 2008 report, on the possibility that the new mitigating controls put 
in place following the results of the ex-post control report are not fully effective for 
the new programme. This will be confirmed in 2009. 

The  Commission  supports  the  decision  by  the  Director-General  for  Economic  and 
Financial Affairs to concentrate resources on improving the control structure in place 
for the management of the new financial programme for the same financial activity 
to  remedy  weaknesses  identified  for  the  previous  financial  programme.  In  2009 
assurance  will  be  sought  via  a  specific  internal  audit  assignment  and  ongoing 
monitoring by the operational services.  

EN 

11 

   EN 

 
4. 

CROSS-CUTTING ISSUES  

4.1. 

IT systems 

The  APC  has  drawn  the  attention  of  the  College  to  the  need  to  review  compliance 
with  the  Commission's  communication  on  IT  governance12  and  interoperability13. 
The APC also worked on the basis of several IT-related audits discussed in 2008, and 
called attention to the implementation of the Commission Decision on IT security14. 

Developing  efficient,  cost-effective  and  user-friendly  IT  tools  that  are  adapted  to 
specific  needs  while  ensuring  their  inter-operability  and  security  across  the 
Commission remains a high priority. To succeed in this endeavour, the Commission 
is  attaching  particular  attention  to  adequate  training  for  its  staff  and  a  robust 
governance  of  IT  developments.  Efforts  should  also  be  pursued  to  improve 
management  of  projects  and  service  providers,  in  order  to  ensure  that  IT  systems 
support effectively and efficiently the implementation of EU policies. 

4.2. 

Implementation of programmes in Bulgaria and Romania 

Rigorous controls by the Commission have brought to light some irregularities in the 
management  of  pre-accession  funds  –  in  Bulgaria  since  2007  and  in  Romania  in 
2008. 

The Director-General for Enlargement therefore maintained his reservation already 
made in 2007 regarding critical systems weaknesses in the management of PHARE 
funds  by  two  payment  agencies  in  Bulgaria.  Two  other  Directors-General  have 
entered  reservations  linked  to  problems  in  connection  with  management  of  pre-
accession  funds  in  2008:  the  Director-General  for  Regional  Policy,  as  regards 
management  and  control  systems  for  the  Cohesion  Fund  in  the  road  sector  in 
Bulgaria,  and  the  Director-General  for  Agriculture  and  Rural  Development,  as 
regards management and control systems for SAPARD in Bulgaria and Romania.  

The  Director-General  for  Agriculture  and  Rural  Development  reports  important 
IACS control deficiencies in Romania and Bulgaria leading to high error rates. The 
authorities of these Member States have been requested to draw up an action plan to 
address these deficiencies. 

The  Directorates-General  for  Regional  Policy,  Employment,  Social  Affairs  and 
Equal Opportunities, for Justice, Liberty and Security, and for Maritime Affairs 
and  Fisheries  signalled  issues  in  their  AARs  in  relation  with  management  and 
control  in  Bulgaria  for  the  programming  period  2007-2013;  however,  none  of  the 
problems flagged warranted a reservation in their 2008 reports. 

The relevant Directorates-General will continue to closely coordinate their actions in 
relation to management of EU funds in Bulgaria and Romania. . 

12 
13 
14 

SEC(2004)1267. 
SEC(2004) 1265. 
C(2006) 3602. 

EN 

12 

   EN 

 
                                                 
In  co-operation  with  the  national  authorities,  the  Commission  will  continue  to 
support the reform efforts being made in Bulgaria and Romania to ensure that all the 
underlying problems are solved and the management of all EU funds is conducted in 
strict respect of all applicable rules and procedures.   

4.3. 

Annual summaries and national declarations 

The  Commission  continued  to  analyse  annual  summaries  received  from  Member 
States  (2008  was  the  second  year  that  the  national  authorities  were  required  to 
furnish annual summaries for expenditure under 'shared management') and to inform 
the  European  Parliament,  working  to  maximise  their  added  value  in  terms  of 
providing  increased  assurance  on  management  and  control  systems  in  the  Member 
States. 

An  interim  evaluation  shows  that  for  both  the  'Cohesion'  and  the  'Agriculture  and 
Natural  Resources'  areas,  most  Member  States  seem  to  have  complied  or  mainly 
complied  with  the  minimum  requirements  of  the  legislation  and  as  set  out  in  the 
Commission's guidance notes. These summaries could provide true added value for 
the management and control of EU expenditure if they are of the appropriate scope, 
approach and timing, and carried out according to international standards15.  

In addition, some Member States (the Netherlands, Denmark, Sweden and the United 
Kingdom)  provide  national  declarations,  thereby  increasing  their  accountability  for 
the  use  of  EU  funds,  although  the  Commission  points  to  the  differences  between 
them which restrict comparability and the assurance that can be obtained. 

The  Commission  considers  that  the  submission  by  the  Member  States  of  annual 
summaries reinforces their accountability for the use of EU funds and contributes to 
its  own  assurance.  It  will  draw  on  the  lessons  learned  to  adapt,  if  necessary,  the 
guidelines  for  the  next  round  of  summaries,  will  continue  offering  support  to  the 
Member  States,  and  calls  on  them  to  append  an  overall  assurance  statement  as 
recommended by the Commission.  

The Commission encourages all Member States to follow the example of those that 
already provide annual national declarations. 

4.4. 

Compliance with applicable legislation on intellectual property rights 

The Director-General for Communication has entered a reservation, on reputational 
grounds,  in  view  of  the  possible  infringement  of  copyright  for  activities  of 
Commission services, in view of the risk that copyright and related rights might not 
have been acquired for certain communication products.  

Given the overall presence of electronic communication media, these activities may 
have  an  impact  in  all  Member  States,  where  differences  still  exist  in  national 
copyright  legislations.  Since  there  is  no  collective  management  of  copyrights  at 
European level, owners of rights have to be identified in each Member State, often at 

15 

Opinion  Nr.  6/2007  of  the  European  Court  of  Auditors.  For  Cohesion  Policy  only  7  Member  States 
included an overall assurance statement for 2008. 

EN 

13 

   EN 

 
                                                 
different  levels  (collecting  societies,  publishers  or  broadcasters,  authors  or  other 
persons who have a right on the content).  

The  Commission  will  regularly  assess  whether  the  measures  taken  are  sufficient  to 
mitigate  the  risks  in  a  complex  and  rapidly  changing  technological  and  legal 
environment. An action plan will be prepared before the end of 2009, including all 
necessary measures, from awareness raising and training to the drafting of common 
guidelines.  

5. 

CONCLUSIONS 

•  The  efforts  made  in  moving  towards  an  unqualified  DAS  have  had  a  largely 
positive  effect  on  the  institution:  they  have  focused  minds  and  channelled 
energies,  leading  to  a  major  change  in  the  management  and  control  systems, 
working methods and culture in the Commission.  

•  The Commission will continue to monitor closely the implementation of all action 
plans accompanying reservations, and pay special attention to recurring ones.  

•  The  Commission will continue its work on  effective external communication on 
control-related issues with both final beneficiaries and national authorities. Better 
information is necessary in order to reduce errors and misunderstandings. 

•  The  Commission  will  continue  to  demonstrate  the  effectiveness  of  its  own 
controls, including full reporting on the correction of errors, also for those relating 
to payments of previous years.  

•  The  Commission  reiterates  its  intention  to  continue  requiring  recovery  of  undue 
payments. It notes that from 2007 to 2008 the amounts recovered were doubled, 
reaching a total of EUR 3 billion. It will take actions to ensure that Member States 
fulfil  their  obligations  concerning  the  quality  of  reporting  on  recoveries  and 
financial corrections. 

•  The  Commission  will  encourage  Member  States  to  include  an  overall  assurance 
statement 
in  shared 
management.  The  Commission  will  assess  how  additional  assurance  can  be 
gained from the national management declarations. 

their  annual  summaries  for  funds 

implemented 

in 

•  The  Commission  believes  that  a  tolerable  risk  approach  represents  a  sound  and 
efficient stewardship of EU funds. It presented a communication on this issue in 
December  2008  using  structural  funds  and  rural  development  as  illustrative 
examples.  The  examples  will  be  further  developed  and  extended  into  concrete 
proposals  for  tolerable  risk  levels  as  soon  as  possible.  Proposals  for  research, 
transport, energy, external aid, development and enlargement, and administration 
will be submitted for consideration by the Budgetary Authority in 2010.   

* * * 

This  is  the  last  Synthesis  Report  adopted  by  this  Commission.  Modernizing  its  systems  to 
ensure the highest standards of stewardship of EU funds including the legality and regularity 

EN 

14 

   EN 

 
of  transactions  has  been  one  of  its  top  priorities.  Between  2004  and  2009,  the  European 
Commission  has  consolidated  the  reform  begun  in  2000,  an  achievement  which  will  have 
lasting consequences. 

The work done in the last five years has led to significant improvements in the management 
of the EU budget and this work will be continued, in particular in dealing with the problems 
highlighted by the reservations of the authorizing officers by delegation.  

The  Commission  considers  that  the  internal  control  systems  in  place,  with  the  limitations 
described in the 2008 AARs, provide reasonable assurance that the resources assigned to its 
activities have been used for their intended purpose and in accordance with the principles of 
sound  financial  management.  It  also  considers  that  the  control  procedures  put  in  place  give 
the necessary guarantees concerning the legality and regularity of underlying transactions for 
which the Commission takes overall responsibility pursuant to Article 274 of the EC Treaty. 

EN 

15 

   EN 

 
Annex 1: Other cross-cutting management issues 

1. 

HUMAN RESOURCES 

In  April  2007,  the  Commission  presented  its  "screening"  of  its  human  resources  and 
committed itself to maintain stable staffing for the period 2009-2013 (after all enlargement-
related  personnel  are  integrated)  and  to  meet  new  staffing  needs  in  key  policy  areas 
exclusively through redeployment. The report also contained an analysis of the Commission's 
overhead. It was welcomed by the Parliament and an update was presented in April 2008. A 
follow-up report was prepared in early 2009. 

In  2008,  the  Commission  made  a  particular  effort  to  meet  the  challenges  presented  by  the 
financial  and  economic  crisis  by  re-deploying  staff  to  the  departments  charged  with  the 
management and follow-up of the crisis, and the implementation of the European Economic 
Recovery  Plan  (in  particular  the  Directorates-General  for  Competition,  Internal  Market, 
Economic  and  Financial  Affairs).  The  Commission  is  satisfied  that  its  flexibility  and  the 
commitment of its staff made it possible to respond to the crisis in a swift and effective way. 

During  2008,  the  Commission  undertook  two  further  screening  exercises  to  find  ways  of 
rationalizing  human  resources  between  Headquarters  and  Delegations,  in  the  external 
relations field, and also in terms of its external communication activities. The downward trend 
in the number of people working in administrative and support functions is confirmed, despite 
slight  increases  for  certain  specific  functions  (financial  management  and  inter-institutional 
cooperation). The various aspects of this review are currently being assessed by the services 
concerned. 

As regards recruitment, following selection procedures carried out by the European Personnel 
Selection Office (EPSO), in 2008 Institutions were able to draw on reserve lists amounting to 
78%  of  the  published  target  number  of  laureates  (70%  in  2007).  Notwithstanding  this 
improvement,  a  programme  for  fundamental  reform,  the  EPSO  Development  Programme 
(EDP),  was  formally  agreed  by  all  Institutions  in  2008.  The  Programme  contains  22 
recommendations  for  action  which  focus  on  speeding  up  and  streamlining  selection  and 
introducing  greater  predictability  for  laureates  and  Institutions  on  the  availability  and 
management of reserve lists. Implementation will be achieved progressively over the period 
2008 to 2010. 

Regarding  the  recruitment  of  staff  from  the  EUR-12  countries,  the  targets  for  the  period  to 
end-2008 were exceeded for both administrator and assistant grades. A significant proportion 
of staff were however recruited as temporary agents (22% for EUR-10 and 41% for EUR-2). 
At 1 January 2009, recruitment of EUR-15 was blocked for 18 services at AD level and 12 at 
AST grade pending fulfilment of their quotas. Taking account of the competitions underway, 
the  service  responsible  judged  that  the  number  of  EUR-12  nationals  passing  competitions 
should be sufficient to meet recruitment needs. 

EN 

16 

   EN 

 
2. 

ETHICS 

In 2008, a Communication from Vice-President Kallas to the Commission16 outlined a series 
of  actions  to  enhance  the  environment  for  professional  ethics  in  the  Commission;  these 
covered  the  clarification  of  rules  and  their  application,  as  well  as  awareness  raising  and  the 
issuance of a Statement of Principles of Professional Ethics to apply Commission-wide. 

Also in 2008, Internal Audit Service (IAS) concluded its audit of ethics in the Commission. 
The  objective  of  the  audit  was  to  assess  the  adequacy  of  the  overall  design  of  the  ethics 
framework  of  the  Commission;  and  whether  the  Commission's  ethics  framework  has  been 
implemented  effectively  in  the  services  selected  for  this  audit:  ADMIN,  SG,  OIB,  RTD, 
INFSO, and TRADE.  

The scope of the audit covered the framework, rules implementation and monitoring of ethics 
focussing  on  risks  concerning  conflict  of  interest,  procurement,  grant  management  in 
research,  and  non  financial  risks  such  as  misuse  of  insider  information  The  scope  did  not 
cover the Code of Conduct of the Commissioners , the Lobby Register, or the ethical content 
of EU policies. 

The  IAS  recognized  that  the  process  of  implementing  and  adapting  the  ethics  framework  is 
evolutionary  and  the  Commission  has  acted  proactively  on  ethics  and  awareness  raising  in 
recent years The overall conclusion of the audit was that the basic elements of a proper ethics 
culture  are  covered  by  the  existing  Commission  ethics  framework,  which  is  based  on  an 
appropriate balance between, on the one hand, trust in the integrity and sense of responsibility 
of staff and, on the other hand, instruments facilitating ethics management, so that, in general, 
there is limited need for additional rules. 

3. 

SECURITY 

Since the start of the present Commission a series of initiatives have been taken to improve 
the  quality  of  service  in  internal  security,  in  view  of  the  challenges  posed  by  the  global 
security  situation,  the  developing  policy  competences  of  the  Commission  and  the  increased 
size and complexity of the institution. 

An information note from Vice-President Kallas and the President, addressed to the College 
under  the  title,  "Review  of  security  policy,  implementation  and  control  within  the 
Commission",  which  covered  physical  security  as  well  as  security  of  information,  was 
adopted in 2008.  

16 

SEC(2008) 301, 5.3.2008. 

EN 

17 

   EN 

 
                                                 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

Annex 2: Overview of reservations 2004 – 2008 

AGRI 

2 

1. Expenditure for rural 
development measures 
under Axis 2 (improving 
the environment and the 
countryside) of the 2007-
2013 programming period. 

2. Management and 
control system for 
SAPARD in Bulgaria and 
Romania. 

1. Insufficient 
implementation of IACS 
in Greece. 

1. Insufficient 
implementation of IACS 
in Greece. 

2 

2. Exactitude of rural 
development control data 
of Member States giving a 
first indication of the error 
rate in this policy area. 

1 

1. Reservation on ERDF 
management and control 
systems for the period 
2000-2006 in:  

1. Reservation concerning 
the ERDF management 
and control systems for 
the period 2000-2006 in: 

REGIO 

1) Belgium (5 
programmes) 

2) Germany (2 
programmes) 

3) Italy (12 programmes) 

4) Spain (13 programmes) 

5) INTERREG (21 
programmes). 

1) The CZECH 
REPUBLIC (for the three 
OP Infrastructure, Industry 
and Enterprise and the 
Joint Regional Programme 
and the SPD Objective 2 
Prague) 

2 

2 

2) FINLAND 
(Operational Programmes 
Eastern, Northern, South 
and West) 

EN 

1. Reservation concerning 
the management and 
control systems for ERDF 
in United Kingdom - 
England (West Midlands; 
London; North West; 
North East; Yorkshire and
the Humber and East 
(URBAN II programme 
only)) and Scotland (West 
and East Scotland) 

2. Reservation concerning 
the management and 
control systems for ERDF 
in the INTERREG 
programmes (except IIIB 
North West Europe and 
Azores, Canaries, 
Madeira) 

18 

1. Preferential import of 
high quality beef (“Hilton” 
beef) – risk of non-respect 
of product definition. 

2 

2. Insufficient 
implementation of IACS 
in Greece. 

1. EAGGF Guidance: MS 
control systems. 

2. Insufficient 
implementation of IACS 
in Greece. 

3 

3. Preferential imporat of 
high quality beef ("Hilton" 
beef) – risk of non-respect 
of product definition. 

1. Management and 
control systems for ERDF 
in UK-England. 

1. Management and 
control systems for ERDF 
in one Member State. 

2. Management and 
control systems for ERDF 
in Spain. 

3. Management and 
control systems for the 
Cohesion Fund in Spain. 

3 

2. Management and 
control systems for the 
Cohesion Fund in one 
Member State - 2000/06. 

3 

3. Management and 
control systems of ISPA in 
one candidate country. 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

2. Management and 
control system of the 
Cohesion Fund for the 
road sector in 
BULGARIA in 2008. 

REGIO 

3) GERMANY (for OP 
Saarland (objective 2), OP 
Mecklenburg-
Vorpommern (objective 
1), OP Hamburg 
(objective 2) and URBAN 
II Neubrandenburg in 
Mecklenburg-
Vorpommern) 

4) GREECE (on control 
of state aid schemes) 

5) IRELAND (for the four 
mainstream operational 
programmes) 

6) ITALY (OPs Calabria, 
Puglia, Lazio, Sardinia 
and Urban II Taranto) 

7) LUXEMBOURG (for 
the SPD Objective 2 - 
reservation concerning 
non respect of public 
procurement rules, namely 
direct awarding of work 
contracts without call for 
tenders) 

EN 

19 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

REGIO 

8) POLAND (for the 
Regional Operational 
Programme (IROP), the 
SOP Improvement of 
Competitiveness of 
Enterprises (SOP ICE) and 
SOP Transport) 

9) SLOVAKIA (for the 
two OP Basic 
Infrastructure and Industry 
and Services) 

10) SPAIN (reservation 
for 14 Intermediate Bodies 
(with an impact on 21 OPs 
for the parts linked to 
public works) for which a 
procedure of suspension of 
payments has been 
launched, plus the OP 
"Sociedad de la 
Informacion" and the 10 
URBAN programmes) 

11) 51 INTERREG 
programmes (i.e. 81 
programmes, less 3 OPs 
IIIB North West Europe, 
III B Canaries, Acores, 
Madeira and III B Atlantic 
Space, where DG 
Regional Policy has 
carried out audit work 

EN 

20 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

REGIO 

Management and control 
systems for identified ESF 
Operational 
Programmes in Spain, 
United Kingdom, France, 
Italy, Poland, Belgium and 
Luxembourg 
(quantification: 41 million 
€, 0.6%). 

1 

EMPL 

1 

with satisfactory results, 
and further 27 OPs where 
national audit reports 
indicates satisfactory 
results) 

2. Reservation concerning 
the management and 
control systems for the 
COHESION FUND 
(period 2000-2006) in: 

- Bulgaria (National Roads 
Infrastructure Fund),  
- the Czech Republic, 
- Slovakia, 
- Hungary (environmental 
sector) and  
- Poland. 

Management and control 
systems for identified ESF 
Operational Programmes 
in  

- Spain,  
- United Kingdom,  
- France,  
- Italy,  
- Slovakia, 
- Portugal,  
- Belgium and  
- Luxembourg. 

Systèmes de gestion et de 
contrôles de programmes 
opérationnels du FSE en 
Espagne, en Ecosse 
(objectifs 2 et 3, UK), en 
Suède (objectif 3 en 
partie), en Slovaquie, en 
Slovénie, en Lettonie et 
dans les régions Calabre 
et Lazio (IT). 

1 

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

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

1 

1 

EN 

21 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

MARE 

(former 
FISH) 

1 

JRC 

0 

RTD 

1 

Reservation on direct 
centralised management 
concerning the eligibility 
of costs reimbursed for 
expenditure in the area 
of control and 
enforcement of the 
Common Fisheries 
Policy, where the annual 
error rate detected by ex-
post controls is higher than 
the 2% of the annual 
payments made for the MS 
programs and on a 
multiannual basis 
represents more than 2% 
of sample payments. 

0 

0 

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

0 

0 

1 

0 

0 

1 

Status and correctness of 
the closing balance. 

1 

Cash flow - competitive 
activities. 

Rate of residual errors 
with regards to the 
accuracy of cost claims in 
FP6. 

Reservation concerning 
errors relating to the 
accuracy of the cost claims 

1 

and their conformity with 
the provisions of the Fifth 
Research Framework 

2 

Programme (FP5). 

1. Accuracy of the cost 
claims and their conformity 
with the provisions of FP5 
research contracts.  

1 

2. Absence of sufficient 
evidence to determine the 
residual level of persisting 
errors with regard to the 
accuracy of cost claims in 
FP6 contracts. 

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

1 

Frequency of errors in 
shared cost contracts. 

EN 

22 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

Rate of residual errors 
with regards to the 
accuracy of cost claims in 
FP6. 

Reservation concerning 
the rate of residual errors 
with regard to the 
accuracy of cost claims in 
Framework Programme 6 
contracts. 

INFSO 

1 

1 

3 

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

1. Frequency of errors in 
shared cost contracts 

2. Research staff working 
on operational tasks. 

2 

2. Allocation of research 
personnel. 

2 

Rate of residual errors 
with regards to the 
accuracy of cost claims in 
FP6. 

1. Unsatisfactory 
functioning of the 
financing of European 
Standardisation. 

2 

2. Errors relating to 
accuracy and eligibility of 
costs claims and their 
compliance with the 
provisions of the research 
contracts under FP6. 

ENTR 

1 

1. Frequency of errors in 
shared-cost contracts in the 
research area. 

2. Uncertainty regarding 
cost claims of the 
European Standardisation 
Organisations. 

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. 

EN 

23 

EN 

1. Allocation of research 
personnel. 

2. Errors relating to the 
accuracy of cost claims 
and their compliance with 
the provisions of the 
research contracts, FP5. 

3. Absence of sufficient 
evidence to determine the 
residual level of 
persisting errors with 
regard to the accuracy of 
cost claims in Framework 
Programme 6 contracts. 

1. Errors relating to 
accuracy and eligibility of 
costs claims and their 
compliance with the 
provisions of the research 
contracts under FP 5. 

2 

2. Unsatisfactory 
functioning of the 
financing of European 
Standardisation. 

2 

 
  
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

Rate of residual errors 
with regards to the 
accuracy of cost claims in 
FP6. 

Erreurs concernant 
l'exactitude et l'éligibilité 
des déclarations de coûts 
et respect des termes des 
contrats du 5e PCRD. 

Erreurs concernant 
l'exactitude et l'éligibilité 
des déclarations de coûts 
et respect des termes des 
contrats du 5e PCRD. 

1. Risque de surpaiement 
concernant le 5ème 
Programme Cadre. 

2. Sûreté nucléaire. 

1. Frequency of errors in 
shared cost contracts. 

2. Contractual 
environment of DG TREN 
LUX. 

4 

3. Nuclear safety. 

4. Inventory in nuclear 
sites. 

1 

0 

1 

0 

Eligibility of expenditures 
declared by beneficiaries 
of non-LIFE grants. 

1 

1 

0 

1 

2 

2 

0 

1 

Faiblesse des systèmes de 
contrôle constatées dans 
certaines Agences 
Nationales 

Insufficient assurance of 
business continuity of a 
critical activity. 

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. 

Health crisis management. 

0 

0 

0 

TREN 

1 

EAC 

0 

ENV 

0 

SANCO 

0 

EN 

24 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

Delays in the 
implementation of the 
Schengen Information 
System II (SIS II). 

1. Faiblesse des systèmes 
de contrôle et de gestion 
du Fonds européen pour 
les Réfugiés en Italie, pour 
les périodes de 
programmation 2000-
2004, et 2005-2007. 

2. Mise en œuvre 
incomplète des 
mécanismes de 
supervision de la 
Commission en gestion 
partagée pour le Fonds 
européen pour les réfugiés 
2005-2007. 

1 

1 

2 

0 

JLS 

1 

ESTAT 

0 

1. Faiblesse des systèmes 
de contrôle et de gestion 
du Fonds européen pour 
les Réfugiés en Italie, 
pour la période de 
programmation 2000-
2004. 

1. Insufficient number of 
ex-post controls missions 
and lack of a fully-fledged 
methodology in the area of 
direct management in 
2005. 

2 

2. Management and 
control systems for the 
European Refugee Fund 
for the UK for 1002-2004. 

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. 

2 

Absence de garantie sur 
la régularité des 
paiements effectués en 
2006 dans le cadre des 
conventions de 
subvention signées avec 
trois Instituts nationaux 
de statistiques pour 
lesquels des 
manquements ont été 
constatés en 2006. 

0 

1. Errors in the declaration 
of eligible costs in relation 
to grants. 

2 

2. Insufficient number of 
ex-post controls carried 
out in 2003. 

EN 

25 

EN 

 
  
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

Possibility that new 
mitigating controls put in 
place following an ex-post 
control report on funds 
managed by an external 
body entrusted with 
indirect centralized 
management are not 
effective. 

Potential irregularities in 
the management of 
PHARE funds under 
extended decentralised 
management by two 
Bulgarian Implementing 
Agencies (named). 

1 

0 

0 

1 

ECFIN 

1 

TRADE 

AIDCO 

0 

0 

ELARG 

1 

Possibility that 
additionality requirements 
are not sufficiently met. 

Possibility that 
additionality requirements 
are not sufficiently met 

1 

0 

0 

0 

Potential irregularities in 
the management of 
PHARE funds under 
extended decentralised 
management by the 
following Bulgarian 
Implementing Agencies: 

- Central Finance and 
Contract Unit (CFCU) 

- Ministry for Regional 
Development and Public 
Works (MRDPW). 

0 

0 

0 

1 

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

0 

0 

0 

1 

Gaps in Romania's and 
Bulgaria's capacity to 
manage and implement 
increasing amounts of aids 

EN 

26 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

0 

0 

0 

0 

0 

0 

ECHO 

0 

DEV 

0 

RELEX 

0 

TAXUD 

0 

MARKT 

0 

COMP 

0 

EN 

0 

0 

0 

0 

0 

0 

0 

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

1. Internal control 
standards in Directorate K. 

2. Internal control 
standards in Delegations. 

0 

0 

2 

1 

0 

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. 

Trans-European networks 
for customs and tax : 
availability and continuity 

1 

0 

2 

0 

0 

0 

27 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

1. Lift the reservation 
from 2007 on the absence 
of a structured ex-post 
control system, but makes 
a follow-up reservation on 
the quality failings 
revealed by the controls. 

2. Possible infringement 
of intellectual property 
rights by Commission 
departments. 

Ex-post control system. 

Ex-post control system. 

Supervision (ex-post 
controls on grants) 

1. Relays and networks - 
grands centres. 

2. Functioning of 
Representations EUR-15. 

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

Inadequacy of the Data 
Centre building 
infrastructure in 
Luxembourg. 

1 

0 

1 

0 

0 

0 

0 

0 

1 

0 

1 

0 

0 

0 

0 

0 

1 

0 

1 

1 

1 

0 

0 

0 

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

Council's antenna for 
sickness insurance. 

Deficiency in OIB's 
contracts & procurement 
management. 

2 

0 

0 

1 

0 

0 

0 

0 

Council's antenna for 
sickness insurance. 

28 

EN 

COMM 

2 

ADMIN 

0 

DIGIT 

0 

0 

0 

0 

0 

0 

PMO 

OIB 

OIL 

EPSO 

OPOCE 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DG 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Reservations 2004 

BUDG 

0 

SG 

BEPA 

SJ 

SCIC 

DGT 

IAS 

OLAF 

0 

0 

0 

0 

0 

0 

0 

TOTAL 

15 

0 

0 

0 

0 

0 

0 

0 

0 

18 

0 

0 

0 

0 

0 

0 

1 

0 

20 

Audit of community 
bodies (regulatory 
agencies). 

1. Accrual accounting for 
the European 
Development Fund. 

1. Accrual accounting for 
the Community and the 
EDF budgets. 

2. Accrual accounting of 
the Community Budget - 
three local systems. 

Weak general internal 
control environment 

Audit of community 
bodies (traditional 
agencies). 

2 

0 

1 

0 

0 

0 

1 

0 

31 

2 

0 

0 

0 

0 

0 

1 

0 

32 

2. Subsystems of 
SINCOM 2: accesses 
control. 

Audit of Community 
agencies. 

EN 

29 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 3: Multi-annual objectives 

This Annex reports on the progress achieved in 2008 on the new and ongoing actions identified in the 2007 Synthesis Report to address major cross-
cutting management issues. New actions introduced as a follow up to the 2008 Synthesis report are indicated in bold italics.  

(Initiatives stemming from previous years' Synthesis Reports, which were completed in 2007 or before, have been deleted from this table.) 

Internal control systems and performance management 

Subject 

Objective 

Initiative(s) to meet the objective 

Internal 
control 

1. Achieving an effective 
internal control system 
and ownership of internal 
control concepts and 
processes at all levels in 
each DG and service. 

In October 2007 the Commission 
adopted a Communication revising the 
Internal Control Standards and 
underlying framework17, setting out 16 
new internal control standards for 
effective management to replace the 
original set of 24 standards from 1 
January 2008. Services may prioritise 
certain Standards with the aim of 
strengthening the basis of the annual 
declaration of assurance of the 
Directors-General. Furthermore the 
compliance reporting was simplified; 
moving from full reporting to exception 
based reporting on non-compliance.  

Responsible service(s) 
and timetable 

Progress made in 2008 

All DGs 

Continuous action 

In 2008, the Commission conducted an 
analysis of the impact of the "Action 
Plan towards an Integrated Internal 
Control Framework"18, adopted in early 
2006 as part of the Commission's strategy 
to obtain an unqualified DAS. The final 
report was published in February 2009. 
The Communication noted significant 
progress in strengthening internal control 
systems during this Commission's 
mandate. 

Services reported on the effectiveness of 
the implementation of the prioritised 
standards for the first time in the 2008 
Annual Activity Reports.  

17 
18 

EN 

Communication to the Commission: Revision of the Internal Control Standards and the Underlying Framework: Strengthening Control Effectiveness, SEC(2007) 1341. 
COM(2006) 9 and SEC(2006) 49. 

30 

EN 

 
  
                                                 
Assessment of critical success factors 
affecting the quality of AARs and take 
appropriate measures (training for 
staff involved in the preparation of 
AARs, further improvement of 
Standing Instructions) 

To give the preparation of the AARs 
high priority, implementing the 
guidelines prepared by the central 
services 

The Commission will further embed 
risk management in its regular 
management process and integrate risk 
assessment in its internal control 
systems. 

Annual 
activity 
reports and 
Synthesis 

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

Risk 
management 

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

BUDG and SG 

New action 

By September 2009 

All DGs 

New action 

By April 2010 

BUDG, with all DGs 

Continuous action 

Three years after its adoption, DG Budget 
undertook a limited review of the 
operation of the Commission's risk 
management framework. This indicated 
that the framework is well established and 
is understood and applied by management 
and was taken as a starting point by 
services for developing their own more 
specific guidelines and tools tailored for 
their needs. The review revealed no 
reasons for major change but pointed to 
the need to define more clearly the 
handling of cross-cutting risks, an interest 
in sharing information across services on 
risk management generally and on critical 
risks in particular, and a requirement for 
specialist risk management training linked 
to individual services' activities. 

EN 

31 

EN 

 
  
 
Residual risk 

4. Taking further the 
concept of residual risk 

DG BUDG together with 
concerned services 

Completed 

In December 2008 the Commission 
adopted its Communication "Towards a 
common understanding of the concept of 
tolerable risk of error", with which the 
Commission took forward a concept first 
introduced by the Court of Auditors in its 
Opinion 2/2004 (the "single audit 
opinion"). This tolerable risk approach is 
intended to ensure an appropriate balance 
between the risk of not detecting errors 
and the costs of control to ensure that 
control systems are cost effective. The 
illustrative case studies presented covered 
Cohesion Policy and Rural Development. 
They indicated that the Court's standard 
2% materiality threshold may not be 
appropriate for these policies, for which 
risk is high, and that a cost-effective 
tolerable risk level may lie around 5% for 
both policies.  

The Commission will study more 
policy areas and present concrete 
proposals for tolerable risk levels 
during 2010 as requested by the 
Discharge Authority. 

DG BUDG together with 
concerned services 

New action 

By end 2010 

The Communication mentioned above 
launched an inter-institutional debate on 
the tolerable risk of error and the 
Commission will study more policy areas 
and present concrete proposals for 
tolerable risk levels during 2010 as 
requested by the Discharge Authority.  

EN 

Governance 

32 

EN 

 
  
 
 
 
 
 
Subject 

Objective 

Initiative(s) to meet the objective 

Internal audit 
recommenda-
tions 

5. Ensuring a smooth 
implementation of 
accepted internal audit 
recommendations 

Regulatory 
agencies 

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

New: Effective follow-up of critical 
and very important recommendations 
of IAS recommendations should be 
regularly monitored at senior 
management level, and fully 
integrated into regular management 
planning, especially the annual 
management plans. 

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.  

Reservations 

8. Ensuring strong follow-
up of action plans related 
to the expressed 
reservations, notably for 
the progress to be made in 
2009. 

Directors-General will report on 
progress to the respective 
Commissioner in the context of the 
regular follow-up meetings on audit 
and control. The ABM Steering Group 
will closely monitor and regularly 
report to the College on the 
implementation of the remedial actions 

Responsible service(s) 
and timetable 

Progress made in 2008 

All DGs concerned  

New action 

All DGs concerned with 
the assistance of SG and 
DG BUDG. 

End 2009 

Continuous action 

In a Communication of March 200819, the 
Commission drew attention to the lack of 
a common vision on the role and 
functions of regulatory agencies. It 
announced a horizontal evaluation of the 
regulatory agencies by the end of 2009, a 
moratorium on creating new agencies and 
a review of its internal systems governing 
agencies. 

DGs concerned 

Continuous action 

DGs report on the implementation of 
action plans in a given year in their annual 
activity report. This has been specifically 
mentioned in the standing instructions for 
the AARs.  

19 

EN 

Communication from the Commission to the European Parliament and the Council: "European Agencies – the way forward" - COM(2008) 135. 

33 

EN 

 
  
                                                 
that delegated authorising officers have 
committed to carry out in their annual 
activity reports. 

DGs were also invited to mention the 
actions to be taken in the coming year as a 
follow up to previous reservations. This 
requirement was included in the 
guidelines for the 2009 AMPs.  

For all reservations, delegated authorising 
officers have laid down appropriate action 
plans to solve the underlying weaknesses. 
They monitored the implementation of 
action plans and reported to the 
Commissioner responsible.  

The implementation of all action plans 
has also been monitored by the ABM 
Steering Group which invited Directors-
General to report regularly to the Group 
on the state of play of their action plans.  

An outcome of the peer review of the 
2008 AARs is the that the conclusion 
drawn by the Authorising Officer by 
Delegation (AOD) needs to be 
convincingly argued and the building 
blocks for assurance should be 
presented in a complete and logical 
manner, particularly as regards error 
rates detected by controls. Also, services 
calculating error rates on the basis of 
controls performed on high-risk areas of 
their activities need to present results of 
controls in lower-risk fields to justify the 
conclusion that the global exposure was 
lower than materiality 

EN 

34 

EN 

 
  
namely: 

Close coordination of actions 
concerning management and control 
weaknesses identified for the EU 
funds implemented by Bulgarian and 
Rumanian authorities, in order to 
ensure that underlying problems are 
solved and the management of EU 
funds is conducted in strict respect of 
all applicable rules and procedures. 

Set-up of an inter service group on 
copyright issues, to be led by DG 
COMM, to regularly assess whether 
the measures taken are sufficient to 
mitigate the risk in a complex and 
rapidly changing technological and 
legal environment. 

Preparation of an action plan before 
end of 2009, including all necessary 
measures, from awareness raising and 
training to the drafting of common 
guidelines. 

Focus the resources available on 
improving the control structure in 
place for the management of the 
financial programs. In 2009, 
assurance will be sought via a 
specific internal audit assignment 
and ongoing monitoring by the 
operational services. 

New: Closely follow-up the delays in 
the implementation of the Schengen 
Information System II. 

ELARG, MARE, JLS, 
EMPL, AGRI, REGIO 

New action 

COMM, OPOCE, JRC, 
SG 

New action 

ECFIN, SG 

New action 

JLS, SG 

New action 

EN 

35 

EN 

 
  
 
 
 
 
 
 
 
Financial management 

Subject 

Objective 

Initiative(s) to meet the objective 

Implementation of the action plan 
towards an Integrated Internal 
Framework. 

Integrated 
internal 
control 
framework 

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

Responsible service(s) 
and timetable 

All services 

Progress made in 2008 

Completed: In its latest report on the 
Plan20, the Commission reported that as at 
end-December 2008 the implementation 
of 13 actions was completed and that the 
three remaining actions could not be 
implemented or were being taken forward 
in other ways. The Communication noted 
significant progress in strengthening 
internal control systems during the 
mandate of the present Commission. A 
part of this positive impact was attributed 
to actions launched before 2005, but there 
was evidence that progress was 
significantly accelerated with the launch 
of the Action Plan in early 2006. 

REGIO, AGRI, JLS 

New action 

New: Reinforce the accountability of 
Member States for the use of EU 
funds by revising the guidelines for 
the annual summaries to draw on the 
lessons learned, and continue offering 
support to the Member States. 

20 

Impact Report on the Commission Action Plan towards an Integrated Internal Control Framework - COM(2009) 43.  

EN 

36 

EN 

 
  
 
 
 
                                                 
Common guidelines on sampling 
methods and related level of confidence 
should be finalised. 

Services concerned with 
the support of DG BUDG, 
ongoing 

Ex-ante and 
ex-post 
controls 

10. Improving the 
efficiency and 
strengthening 
accountability by ensuring 
proportionality and a 
sound balance between 
ex-ante and ex-post 
controls, and by further 
harmonization and better 
focus of ex-post controls. 

Completed 

Extensive guidelines on audit sampling in 
line with international auditing standards 
have been prepared in the Structural 
Funds to promote coherence in testing 
done by Member State audit authorities21. 
The Commission has provided guidance 
on best practice in the management of 
external audit framework contracts to 
ensure a consistency and high quality of 
audit results22.  

In the research area, the joint audit 
strategy set up in 2007 includes guidance 
on sampling.  

Based on the experience gathered from the 
research audit strategy and taking into 
account that not all elements of the 
approach are transposable to all areas, the 
Commission issued guidance to its 
services on sampling strategies in October 
2008. 

21 
22 

Para 40 & 49 Opinion 02/2004. 
Para 37 Opinion 02/2004. 

EN 

37 

EN 

 
  
 
 
 
                                                 
Accounts 

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

The Commission will further 
strengthen its accounting processes and 
systems to improve the quality of the 
financial information and the respect of 
deadlines. 

All services, continuous 
action with the assistance 
of the services of the 
Accounting Officer 

Continuous action 

The European Court of Auditors 
expressed in 2008 for the first time an 
unqualified opinion on the 2007 
accounting data of the Commission.  

The Accountant's report on the validation 
of local systems for 2008 confirmed that 
these in general are steadily improving. 
All systems which were subject to an in-
depth evaluation during 2008, except one, 
were validated.  

Data from the accounting system indicate 
that late payments are tending to stabilise 
in number and value. In the face of the 
current acute economic crisis, the 
Commission will aim, by 1 October 2009, 
to make first pre-financing payments 
within 20 days from the signature date of 
the contract and a 30-day time limit where 
45 days currently apply for other 
payments. 

EN 

38 

EN 

 
  
Human resources 

Subject 

Objective 

Initiative(s) to meet the objective 

Simplification 

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

Staff skills 

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

Based on a collaborative effort and 
consultation of all Commission staff, 
DG ADMIN prepared a 
Communication to the College 
enshrining the key principles of the 
simplification drive and proposing a 
detailed plan with 85 actions, to be 
carried out within well defined 
deadlines.  

This Communication was adopted by 
the Commission on 4 July 2007 and its 
implementation is ongoing 

Following the conclusions of the 
evaluation on the Strategic Alignment 
of Human Resources, various measures 
were carried out in 2008. 

Responsible service(s) 
and timetable 

Progress made in 2008 

DG ADMIN, ongoing  

Completed 

A report to Commission 
(SEC(2008)2309/3) stated that 48 actions 
have been fully or partially implemented 
and 3 have been abandoned (out of 85 
identified actions) by July 2008. 

DG ADMIN, ongoing 

Continuous action 

HR scorecard per month 
HR report with HR metrics 
Start of a follow-up evaluation to review 
HR processes 

The Commission will identify any 
shortfalls and communicate its specific 
needs so that they are promptly taken 
into consideration and included in the 

DG ADMIN and EPSO, 
ongoing tasks. 

Continuous action  

DG ADMIN carried out a comparative 
study on remuneration in which an 

EN 

39 

EN 

 
  
 
 
 
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. 

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. 

DG ADMIN in 
collaboration with DIGIT, 
SG and DG BUDG by 
end 2007. 

assessment is also made of the 
competitiveness of the Commission for 
certain job profiles. 

Continuous action  

The e-CV project continued. In 2007, 
there were 3.250 e-CVs; by end 2008, 
here were 5.697. 

The matching tool to link job, vacancies 
and the electronic CVs was delivered for 
internal testing in December 2008. 

EN 

40 

EN 

 
  
 
 
Continuity of operations 

Subject 

Objective 

Initiative(s) to meet the objective 

Business 
continuity 

15. Ensuring that the 
Commission is able to 
maintain business 
continuity in case of major 
disruption to its activities 

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. 

Responsible service(s) 
and timetable 

DIGIT, OIB and OIL in 
2006 and in 2007. 

Progress made in 2008 

Continuous action  

A multi-annual (2006-2011) strategy to 
improve the housing conditions for the 
Data and telecom Centres of the 
Commission has been developed and 
approved. This should lead to the most 
critical IT equipments being moved into 
professional data centre type rooms in a 
phased approach and to the refurbishing 
of air conditioning and electrical 
infrastructure in the JMO Data Centre 
room. 

Contracts for the rent of two new data 
centre type rooms in Brussels and in 
Luxembourg were signed. For the one in 
Brussels, the move was completed in 
February 2007 and, for the one in 
Luxembourg, by March 2007. 

A second room in Luxembourg only 
became available in late 2007 and needed 
preparation, so that actual moves into 
them only began in the last quarter of 
2008. Procedures to secure a 
supplementary room in Luxembourg were 
ongoing at the end of 2008. 

EN 

41 

EN 

 
  
 
 
Annex 4: Executive and Regulatory Agencies 

(Council Regulation 58/2003 (Art 9.7) 

In line with practice in most Member States, using agencies to implement key tasks has 
become an established part of the way the European Union works.  

Executive agencies operate in a clear institutional framework, governed by a single legal 
base23. Their tasks must relate to the management of Community programmes or actions, 
they  are  set  up  for  a  limited  period  and  they  are  always  located  close  to  Commission 
headquarters.  The  responsibility  of  the  Commission  for  executive  agencies  is  clear:  the 
Commission  creates  them,  maintains  "real  control"  over  their  activity,  and  appoints  the 
director.  Their  annual  activity  reports  are  annexed  to  the  report  from  their  parent 
Directorate(s)-General.  A  standard  financial  regulation  adopted  by  the  Commission, 
governing  the  establishment  and  implementation  of  the  budget,  applies  to  all  executive 
agencies. A revision of the working arrangements was also agreed in October 2007 with 
the European Parliament, with the aim to further facilitate inter-institutional cooperation 
in this field.  

Six executive agencies have been created:  

•  the  Executive  Agency  for  Competitiveness  and  Innovation  Programme  (EACI  – 

former IEEA) 

•  the Executive Agency for Health and Consumers (EAHC – former PHEA) 

•  the Education, Audiovisual and Culture Executive Agency (EACEA) 

•  the Trans-European Transport Network Executive Agency (TEN-TEA) 

•  the European Research Council Executive Agency (ERC)  

•  the Research Executive Agency (REA).  

23 

Council Regulation (EC) No 58/2003 of 19 December 2002 laying down the statute for executive 
agencies  to  be  entrusted  with  certain  tasks  in  the  management  of  Community  programmes 
(OJ L 11, 16.1.2003). 

EN 

42 

   EN 

 
                                                 
•  Four of these executive agencies were operational in 200824. Their Annual Activity 
Reports,  which  were  attached  to  those  of  their  parent  DG25,  did  not  indicate  any 
particular control issues. The breakdown of staff employed in 2007 by these agencies 
was as follows:  

Contractual 
agents 

and 

Other  external 
agents 

Total 

Seconded 
officials 
temporary 
agents 

EACI 

22 

PHEA 

8 

EACEA  85 

TEN-
TEA 

32 

Total  

131 

47 

20 

277 

67 

366 

7 

17 

69 

28 

362 

106 

514 

The screening of resources by the Commission of April 2007 suggested that there are no 
strong candidates for a new executive agency26. If new needs appear, the starting point of 
the  Commission  will  be  to  explore  the  option  of  extending  the  scope  of  an  existing 
executive agency to cover a new programme.  

The  29  regulatory  agencies  are  independent  legal  entities  and  the  20  of  these  which 
receive  funds  from  the  European  Union  budget  receive  discharge  directly  from  the 
European  Parliament.  In  a  Communication  of  March  2008  "EU  agencies:  the  way 
forward"27 the Commission drew attention to the lack of a common vision on the role and 
functions of regulatory agencies. It announced a horizontal evaluation of the regulatory 
agencies,  a  moratorium  on  creating  new  agencies  and  a  review  of  its  internal  systems 
governing agencies.  

It also proposed to undertake a horizontal evaluation of regulatory agencies which should 
be available by the end of 2009, as well as to set up an inter-institutional working group 
to agree ground rules to apply to all (this Group met for the first time on 10 March 2009).  

24 

25 

26 
27 

No  AAR  was  prepared  by  the  Research  Executive  Agency  and  the  European  Research  Council 
Executive Agency (DG RTD and other research DGs) as these are expected to become completely 
self-supporting during 2009. During the transition, activities are shared between the agencies and 
the different directorates general responsible for the implementation of FP7. 
Executive  Agency  for  Competitiveness  and  Innovation  Programme  (DG  TREN,  ENTR,  ENV); 
Executive  Agency  for  the  Health  and  Consumers  (DG  SANCO);  Education,  Audio-visual  and 
Culture  Executive  Agency  (DGs  EAC,  INFSO,  AIDCO);  Trans-European  Transport  Network 
Executive Agency (DG TREN). 
SEC(2007) 530 "Planning & optimising Commission human resources to serve EU priorities". 
Communication  from  the  Commission  to  the  European  Parliament  and  the  Council:  European 
Agencies – the way forward - COM(2008)135 

EN 

43 

   EN 

 
 
 
 
 
 
                                                 
To  support  the  agencies,  in  June  2008  DG  Budget  published  a  Practical  Guide  on 
Community  Bodies  to  document  the  basic  budgetary  and  financial  management 
processes  and  rules  for  the  creation  and  regular  operation  of  Community  bodies  and 
providing references to relevant key documents. A common website of the Commission 
and  the  regulatory  agencies  was  created  on  the  Commission's  intranet  to  provide  a 
platform for sharing documents of common interest.  

The 'traditional' agencies are granted discharge by the Discharge Authority. All Agencies 
were granted discharge for 2007. CEPOL's accounts for 2007 have received a qualified 
opinion of the Court of Auditors and audits by the Court and the IAS identified serious 
financial management problems. The service responsible for the grant contribution to the 
College's  running  costs  (JLS)  reported  that  following  the  Court's  and  IAS  findings,  an 
OLAF  investigation  was  launched  and  an  action  plan  was  developed  to  remedy  the 
weaknesses identified. Faced with significant under-execution of the budget, the service 
reported it would make available only the funds strictly necessary to cover the College's 
fixed costs in the first part of 2009. 

EN 

44 

   EN 

 
Annex 5: Negotiated procedures 

1. 

LEGAL BASIS 

Article  54  of  the  Implementing  Rules  of  the  Financial  Regulation  requires 
authorising  officers  by  delegation  to  record  contracts  concluded  under 
negotiated  procedures.  Furthermore,  the  Commission  is  required  to  annex  a 
report  on  negotiated  procedures  to  the  summary  of  the  annual  activity  reports 
referred to in Article 60.7 of the Financial Regulation. 

2. 

METHODOLOGY 

A  distinction  has  been  made  between  the  40 directorates-general,  services, 
offices and executive agencies which normally do not provide external aid, and 
those three directorates-general (AIDCO, ELARG and RELEX) which conclude 
procurement  contracts  in  the  area  of  external  relations  (legal  basis  is  different: 
Chapter 3  of  Title IV  of  Part  Two  of  the  Financial  Regulation)  or  award 
contracts  on  their  own  account,  but  outside  of  the  territory  of  the  European 
Union. 

These  three  directorates-general  have  special  characteristics  as  regards  data 
collection  (deconcentration  of  the  services,…),  the  total  number  of  contracts 
concluded,  thresholds  to  be  applied  for  the  recording  of  negotiated  procedures 
(€10 000), as well as the possibility to have  recourse to negotiated procedures in 
the  framework  of  the  rapid  reaction  mechanism  (extreme  urgency).  For  these 
reasons,  a  separate  approach  has  been  used  for  procurement  contracts  of  these 
directorates-general. 

3. 

OVERALL RESULTS OF NEGOTIATED PROCEDURES RECORDED 

3.1. 

The  40  directorates-general,  services,  offices,  or  executive  agencies 
excluding the three "external relations" directorates-general 

On  the  basis  of  the  data  received,  the  following  statistics  were  registered: 
105 negotiated procedures with a total value of € 91.107.841 were processed out 
of a total of 1230 procedures (negotiated, restricted or open) for contracts over 
60 000€ with a total value of € 1.799.341.729. 

For the Commission, the average proportion of negotiated procedures in relation 
to all procedures amounts to 8,54 % in number, which represents some 5,06 % 
of all procedures in value and seems quite reasonable. 

An  authorising  service  is  considered  to  have  concluded  a  "distinctly  higher" 
proportion  of  negotiated  procedures  "than  the  average  recorded  for  the 
Institution"  if  it  exceeds  the  average  proportion  by  50%.  Thus,  the  reference 
threshold for 2008 was fixed at 12,80% (20,46% in 2007). 

Some  13  directorates-general  or  services  out  of  the  40  exceeded  the  reference 
threshold  in  2008.  Among  those,  it  should  be  noted  that  5  directorates-general 

EN 

45 

   EN 

 
concluded  only  one  or  two  negotiated  procedures,  but  because  of  the  low 
number  of  contracts  awarded  by  each  of  them,  the  average  was  exceeded.  In 
addition,  15  out  of  40  directorates-general  haven't  used  any  negotiated 
procedure,  including  4  DG  that  awarded  no  contracts  at  all.  Furthermore,  in 
terms of value 14 have recorded a substantially lower percentage of negotiated 
procedures than the Commission average. 

Moreover, the assessment of negotiated procedures compared with the previous 
years  (2006,  2007)  shows  an  important  decrease  in  the  order  of  one  third  in 
number and 40% in terms of value. 

3.2. 

The three "external relations" directorates-general 

On  the  basis  of  the  data  received,  the  following  statistics  were  registered: 
168 negotiated  procedures  for  a  total  value  of  contracts  €117.778.412  were 
processed out of a total of 2362 procedures (negotiated, restricted or open) for 
contracts over 10 000€ with  a total value of € 2.357.367.571.  

For the three "external relations" directorates-general, the average proportion of 
negotiated procedures in relation to all procedures amounts to 7,11% in number, 
which  represents  some  5%  of  all  procedures  in  value  terms.  Only  one 
directorate-general slightly exceeds the reference threshold of 10,67% (average 
+ 50%). 

If  compared  with  previous  years,  these  directorates-general  have  registered  a 
clear decrease in number of negotiated procedures in relation to all procedures. 

4. 

ANALYSIS OF THE JUSTIFICATIONS AND CORRECTIVE MEASURES  

Three  categories  of  justifications  have  been  presented  by  those  directorates-
general who exceeded the thresholds: 

•  Statistical deviations due to the low number of contracts awarded under all 

procedures.  

•  Objective situations of the economic activity sector, where the number of 
operators  (candidates  or  applicants)  may  be  very  limited  or  even  in  a 
monopoly  situation  (for  reasons  of  intellectual  property,  specific  expertise, 
…).  Situations  of  technical  captivity  may  also  arise  especially  in  the  IT 
domain  (exclusive  rights  connected  to  software  or  maintenance  of  servers 
hosting critical information systems, etc). 

•  Additional services/works, where it was either technically or economically 
impossible  to  separate  these  from  the  main  (initial)  contract,  or  similar 
services/works as provided for in the terms of reference. 

EN 

46 

   EN 

 
Several corrective measures have already been proposed or implemented by the 
directorates-general concerned: 

•  Establishment of standard model documents and guidance documents.  

•  Improvement  in  training  provided  and  an  improved  inter-service 
communication.  In  this  context,  the  Central  Financial  Service  organised  in 
2008  a  series  of  workshops  aimed  at  improving  expertise  in  public 
procurement procedures and at providing a forum for exchange of experience 
and best practices between directorates-general and services. In addition, the 
architecture  of  the  standard  procurement  training  was  reviewed  in  order  to 
reinforce the practical training in procurement procedures preparation.  

•  Improvement  of  the  system  of  evaluation  of  needs  of  directorates-
general/services and an improved programming of procurement procedures. 
their  active 
The  Commission'  horizontal 
communication  and  consultation  policy  with  the  other  DGs  along  the 
following axes: 

services  will  continue 

– 

– 

– 

permanent exchange of information; 

ad-hoc surveys prior to the initiation of market procedures; 

reinforcement of the product management policy especially in the 
IT sector. 

•  Phase-out from situations of technical captivity. The Commission started 
to study a methodological framework for assessing technical captivity in 
specific cases and provide tools to reduce future dependency. 

•  Reinforcement  of  internal  structures  and  the  application  of  control 
standards.  Procurement  procedures  will  continue  to  be  integrated  in  the 
regular reviews of the efficiency of internal control, including the analysis of 
possible  dependence  on  certain  contractors.  In  any  case,  control  procedures 
need to be correctly documented in order to ensure a transparent audit trail. 

EN 

47 

   EN 

 
Annex 6: Summary of waivers of recoveries of established amounts receivable 
in 2008 

(Article 87.5 IR) 

In accordance with Article 87(5) of the Implementing Rules the Commission is required 
to report each year to the budgetary authority, in an annex to the summary of the Annual 
Activity Reports, on the waivers of recovery involving 100 000 € or more.  

The following table shows the total amount and the number of waivers above 100 000 € 
per Directorate-General/Service for the EC budget and the European Development Fund 
for the financial year 2008.  

EC budget: 

Directorate-General/Service  

Amount of waivers in € 

Number of waivers 

AIDCO 

COMP 

EAC 

EACEA 

ELARG 

ENTR 

ENV 

MARE 

INFSO 

RTD 

TREN 

1.497.065,33

11.713.735,70

123.199,00

497.001,12

607.626,00

111.650,00

231.383,16

249.800,61

1.713.872,65

1.227.715,95

407.313,70

6 

3 

1 

2 

1 

1 

1 

1 

4 

5 

2 

18.380.363,22

27 

European Development Fund: 

Directorate-General/Service 

Amount of waivers in €

Number of waivers 

AIDCO 

0 

0 

EN 

48 

   EN 

 
Annex 7: Compliance with payment time-limits and suspension of time-limits 

(Article 106.6 IR) 

Time-limits  for  payments  are  laid  down  in  the  Implementing  Rules  of  the  Financial 
Regulation28  (hereinafter  IR),  and  exceptionally  in  sector  specific  regulations.  Under 
Article 106 IR payments must be made within forty-five calendar days from the date on 
which an admissible payment request is registered or thirty calendar days for payments 
relating  to  service  or  supply  contracts,  save  where  the  contract  provides  otherwise. 
Commission  standard  contracts  are  in  line  with  the  time-limits  provided  for  in  the  IR. 
However,  for  payments  which,  pursuant  to  the  contract,  grant  agreement  or  decision, 
depend  on  the  approval  of  a  report  or  a  certificate  (interim  and/or  final  payments),  the 
time-limit  does  not  start  until  the  report  or  certificate  in  question  has  been  approved29. 
Under  Article  87  of  the  Regulation  of  the  European  Parliament  and  the  Council  laying 
down general provisions on the European Development Fund, the European Social Fund 
and  the  Cohesion  Fund,  a  specific  rule  applies:  payments  have  to  be  made  within  two 
months30.  

Following  the  revised  Implementing  Rules,  which  entered  into  application  on  1  May 
2007,  the  compliance  with  payment  time-limits  was  reported  for  the  first  time  by  the 
Services  in  the  2007  Annual  Activity  Reports31.  Overall,  the  Commission  improved  its 
performance for payments over 2005-2007, in number and in value, even if the average 
time  to  pay  has  not  significantly  decreased.  In  2008,  late  payments  have  stabilised  in 
number and value, the average time to pay has been shortened by a half day.  

The following table summarises the current situation concerning payments made after 
the expiry of the time-limits (hereafter late payments), as resulting from data encoded in 
ABAC: 

Late  payments 
number 

Late  payments 
value 

in 

in 

2005 

42,74% 

2007 

22,57% 

2008 

22,67% 

17,48% 

11,52% 

13,95% 

Average time to pay32 

49,13 days 

47,98 days 

47,45 days 

28 

29 

30 

31 
32 

Commission Regulation (EC) No 2342/2002 of 23 December 2002 (OJ L 357, 31.12.2002, p. 1) 
as last amended by Regulation (EC) No 478/2007 of 23 April 2007 (OJ L 111, 28.4.2007, p. 13). 
Pursuant to Article 106(3) IR, the time allowed for approval may not exceed: 
(a) 20 calendar days for straightforward contracts relating to the supply of goods and services; 
(b) 45 calendar days for other contracts and grants agreements; 
(c)  60  calendar  days  for  contracts  and  grant  agreements  involving  technical  services  or  actions 
which are particularly complex to evaluate. 
Regulation  (EC)  No  1083/2006  of  the  European  Parliament  and  of  the  Council  laying  down 
general  provisions  on  the  European  regional  Development  Fund,  the  European  Social  Fund  and 
the Cohesion fund and repealing Regulation (EC) No 1260/1999 (OJ L 210, 31.7.2006, p. 25). 
Based on available data in ABAC as of end of the financial year 2007. 
Net delays. 

EN 

49 

   EN 

 
 
                                                 
 
 
 
The  cause  of  delays  includes  inter  alia  the  complexity  of  evaluation  of  supporting 
documents, in particular of technical reports requiring external expertise in some cases, 
the difficulty of efficient coordination of financial and operational checks of requests for 
payments, and managing suspensions.  

As far as the payment of interest for late-payments is concerned, the Commission dealt 
with limited requests in the period 2005-2007. However, the amount rose significantly in 
2008, probably due to the fact that as from 1 January 2008 payment of interest for late 
payments  has  been  automatic  and,  in  principle33,  no  longer  conditional  upon  the 
presentation of a request for payment. 

2005 

2007 

2008 

230.736,58 € 

378.211,57 € 

576 027,10 € 

Amounts  of  interest 
paid 
late 
for 
payments 

 *Calculation: 153 requests for interest / 90657 late payments = 0.168% 

The  Commission  is  committed  to  further  improving  the  management  of  payments  and 
instructs its Services to comply constantly with high performance standards, to assess the 
efficiency  of  its  tools  and  to  take  appropriate  corrective  measures  to  ensure  timely 
payments. 

In  the  face  of  the  current  acute  economic  crisis,  the  Commission  has  recently  adopted 
further measures, given the crucial importance of the need for increased fluidity of funds 
for  all  beneficiaries,  and  especially  for  SMEs  and  NGOs34.  Amongst  other  actions,  the 
Commission will aim, by 1 October 2009, to make first pre-financing payments within 
20  days  from  the  signature  date  of  the  contract,  grant  agreement  or  decision  compared 
with the statutory time-limit of 45 days (or 30 days for service and supply contracts). For 
all other payments the Commission will apply, from the same date, a 30-day time limit 
where  45  days  currently  apply.  A  third  measure  is  to  further  promote  the  payments  of 
flat-rates (a scale-of-unit cost) and lump-sums (fixed amount) to accelerate the payment 
of grants. 

33 
34 

With the exception of small amounts (200 euro in total or less). 
Communication  from  Mrs  Grybauskaite  in  agreement  with  the  President  to  the  Commission: 
Streamlining financial  rules  an  accelerating budget  implementation  to  help  economic  recovery  - 
SEC(2009) 477. 

EN 

50 

   EN