Communication from the Commission to the European Parliament, THE Council and the Court of Auditors - Synthesis of the Commission's management achievements in 2009
Date: 2010-06-02
Institutions: European Commission
Subjects: activity report, budgetary control, general budget (EU), implementation of the budget, insurance

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EUROPEAN COMMISSION 

Brussels, 2.6.2010 
COM(2010) 281 final 

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

Synthesis of the Commission's management achievements in 2009 

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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 2009 

1. 

INTRODUCTION 

In line with Article 317 of the Treaty on the Functioning of the European Union (TFEU), the 
European Commission takes overall responsibility for implementing the EU budget. This is an 
important responsibility, as the EU budget is a major tool for delivering the Union's policies, 
and the effectiveness of EU spending influences 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  and  Heads  of  Service,  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 and Heads of Service report 
on  the  performance  of  their  duties  in  the  annual  activity  reports  (AAR)1,  which  include  a 
signed declaration of assurance 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 responsible Director-General or Head of Service.  

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 first Synthesis Report adopted during the mandate of the current Commission. The 
Commissioner  responsible  for  Audit  and  Anti-Fraud  confirmed2  to  the  discharge  authorities 
the  new  Commission's  commitment  to  continue  considering  an  unqualified  Statement  of 
Assurance (DAS) by the European Court of Auditors (ECA) a priority.  

The  previous  Commission's  strategic  objective  of  obtaining  an  unqualified  DAS  mobilized 
energies and focused attention on fundamental issues of good governance and management, 
with tangible  results (see  section  2). The Commission is convinced that significant progress 
has  been  achieved  in  the  management  of  EU  funds  thanks  to  far-reaching  changes  to 
management  and  control  systems,  working  methods,  and  culture.  However,  it  also 
acknowledges  that  there  are  still  areas  which  require  improvement,  for  example  in  shared 
management, where Member States execute some 75% of the budget.  

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Article 60 of the Financial Regulation. 
COCOBU hearing on 26 March 2010. 

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The Commission invites the other Institutions and the Member States to engage in an in-depth 
reflection on how to further improve the design of funding schemes, as well as their delivery, 
management  and  control  mechanisms,  in  order  to  both  enhance  their  effectiveness  on  the 
ground  and  ensure  that  the  control  of  EU  expenditure  is  efficient,  proportional  and  cost-
effective.  

In  this  context,  the  Budget  Review  and  the  triennial  review  of  the  Financial  Regulation3, 
including  further  development  of  the  work  begun  in  20084  on  the  concept  of  tolerable  risk, 
will  be  crucial  in  setting  the  appropriate  conditions  for  a  more  effective  and  efficient 
management of EU funds in the period after 2013.  

2. 

STRENGTHENING THE FOUNDATION OF ASSURANCE 

2.1. 

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

The  Commission's  efforts  to  enhance  control  mechanisms,  both  those  operated  by 
Commission  services  and  those  executed  by  the  Member  States,  in  order  to  ensure  legality 
and regularity with a view to obtaining an unqualified DAS, continued in 2009 with positive 
results.  

The DAS for the year 2008 was the best to date: the ECA gave an unqualified opinion on 
the underlying transactions for 47% of the budget, compared with 6% for 2003; for the first 
time,  there  is  a  "green  light"  for  underlying  transactions  for  the  whole  of  agriculture  and 
natural  resources,  as  well  as  for  the  chapter  education  and  citizenship.  For  the  second 
successive  year,  the  Court  also  gave  a  positive  opinion  on  the  consolidated  accounts. 
Moreover, it acknowledged the qualitative improvements of the AARs (see 2.2 below) and the 
almost full implementation of the Internal Control Standards Commission-wide.  

The  year  2009  also  saw  the  achievement  of  important  milestones  in  efforts  to  improve  the 
management  of  EU  funds,  such  as  the  conclusion  of  the  final  report  on  the Action  Plan  to 
strengthen  the  Commission's  supervisory  role  in  shared  management  of  structural 
actions5, which has led to positive developments in this major expenditure area, including a 
significant increase in financial corrections (see section 3.2 on Chapter 6).  

In 2009, the Commission also adopted the Impact Report on the Commission Action Plan 
towards  an  Integrated  Internal  Control  Framework6,  which  concluded  that  significant 
progress had been made in strengthening internal control systems during the mandate period 
of the previous Commission, and that although some of the improvements could be attributed 
to  measures  introduced  before  2005,  there  was  clear  evidence  that  progress  had  been 
significantly accelerated by the launch of the Action Plan in 2006. 

Essential to building reasonable assurance is the role of the internal audit function. In 2009, 
the  Commission's  Internal  Audit  Service  (IAS)  concluded  its  Strategic  Audit  Plan  for  the 

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COM(2010) 260, 28.5.2010. 
"Towards  a  common  understanding  of  the  concept  of  tolerable  risk  of  error"  -  COM(2008)  866, 
16.12.2008. 
COM(2008) 97, 18.2.2008; see also final report SEC(2009) 1463, 28.10.2009. 
COM(2009) 43, 4.2.2009. 

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period  2007-2009,  having  completed  87%  of  its  2009  work  programme  with  67  reports,  of 
which 32 were follow-up reports and one a consultancy report. The acceptance rate of audit 
recommendations  by  auditees  was  98.8%.  IAS  audits  in  2009  covered  inter  alia  business 
continuity, risk management, procurement and grant management, external policies and DGs' 
supervisory  policies  for  shared  management.  Following  these  audit  engagements  260 
recommendations were issued, including 2 critical and 113 very important ones. 

Two of the IAS engagements in 2009 should be highlighted: first, the IAS follow-up audit on 
the AAR Assurance Process, which concluded in December 2009 that all recommendations 
made  in  the  original  audit  (2007)  had  been  implemented;  second,  the  IAS  audit  of  the 
implementation  of  the  Commission's  risk  management  framework,  conducted  in  2009, 
which  concluded  that  the  Commission's  risk  management  framework  is  consistent  with 
international standards and that it provides a solid basis to support risk management. The IAS 
identified  some  areas  for  improvement,  mainly  to  do  with  the  roles  and  responsibilities  for 
risk management within DGs, a need for further guidelines and clarification on certain issues 
and  the  treatment  of  cross-cutting  risks.  These  issues  are  being  addressed  by  the  central 
services in the course of 2010. 

Progress has been achieved also on the speedy and effective implementation of all outstanding 
accepted audit recommendations considered "critical" or "very important", as called for in the 
2008  Synthesis  Report.  In  2009,  the  Audit  Progress  Committee  (APC)  recorded  that  no 
critical  recommendations  remained  open  six  months  after  their  due  date.  Nevertheless,  the 
APC noted that follow-up of very important recommendations continued to be a challenge (68 
remaining open six months after their due date). 

The Commission will continue to closely monitor the implementation of "critical" and "very 
important" internal audit recommendations. It has called on all Directors-General and Heads 
of Service to ensure that this issue is given the necessary attention by management. 

2.2. 

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

AARs constitute a major source of evidence for the European Court of Auditors (ECA) in the 
approach to the discharge (DAS). The quality of these reports has improved in recent years. In 
2009, in its Annual Report for 2008, the ECA gave all Commission DGs and Services' AARs 
grades of only "A" and "B", and even granted Chapter 5 (Agriculture and Natural Resources) 
an unprecedented "B+"grade7. 

Following an instruction of the College in the Synthesis Report 2008, in 2009 the Secretariat-
General and the Directorate-General for Budget carried out a survey across the Commission, 
to  identify  the  success  factors  which  influence  the  quality  of  AARs.  As  a  response  to  the 
issues identified, a number of measures were implemented:  

•  The  Standing  Instructions  for  the  AARs  were  subject  to  a  major  overhaul,  including  the 
introduction  of  a  clear  distinction  between  Part  2  (information  on  the  financial  and  non-
financial  internal  control  systems)  and  Part  3  (the  building  blocks  supporting  the 
declaration of assurance). 

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An "A" rating means that the AAR provides sufficient evidence (clear and unambiguous) for the Court's 
conclusions;  "B"  means  that  the  AAR  provides  supporting  evidence  for  the  Court's  conclusions.  The 
"+" sign means that there is not evidence to justify a change in the evaluation rating, but nevertheless a 
significant improvement has been observed by the Court. OJ C 269 of 10 November 2009, page 44. 

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•  A new, specific conclusion on the overall functioning of the Internal Control Standards is 

now required in part 2 of the AAR. 

•  A dedicated helpdesk was set up by the Secretariat-General and the Directorate-General for 

Budget to handle questions from Commission services. 

•  An interactive presentation of the Standing Instructions was made available on the intranet, 
facilitating navigation and enabling services to find the answers to specific questions more 
easily. 

•  Training  courses  on  how  to  produce  an  effective  AAR  were  offered  to  staff  drafting  the 
reports, with a view to consolidating the key messages in the Standing Instructions (with 
some 70 staff attending). 

•  The Standing Instructions were issued earlier than in the past (05 November 2009). 

•  The Peer Review of AARs was further enhanced by early interventions by Central Services 
(pre-peer reviews) and systematic feedback to services on the quality of their draft AARs. 

The 2009 AARs show a noticeable improvement across the Commission, both in terms of the 
quality of the evidence presented in support of the assurance and the readability of the reports. 
Central services continued to intervene early in the process of drafting the AARs, discussing 
key issues with DGs and Services and providing guidance as needed to improve the quality of 
the final texts.  

The  Commission  will  continue  working  towards  improving  the  AARs  as  the  main  vehicle 
through  which  the  AODs  document  their  accountability  to  the  College  and  as  a  source  of 
evidence  for  the  DAS.  It  has  instructed  SG  and  DG  BUDG  to  continue  giving  guidance  to 
DGs  and  Services,  through  a  regular  review  of  the  Standing  Instructions,  guidance  notes, 
training measures, peer-review meetings or any other means deemed useful. It has called on 
all  Directors-General  and  Heads  of  Service  to  give  their  active  support  to  all  measures 
promoted by central services to enhance the quality of AARs. 

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  use  of  resources  for  their  intended  purpose,  respect  of  the  principles  of  sound  financial 
management  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.  

Thirteen Directors-General issued a total of twenty  reservations in their 2009 AAR. These 
included nine reservations already made in 2008 and on which action was still ongoing at the 
end of 2009, together with eleven new reservations. This number represents five more than in 
the same period last year (fifteen in 2008). There are several reasons for this: mainly the fact 
that  in  2008,  few  or  no  payments  were  made  under  the  2007-2013  programmes,  which 
reached  maturity  in  2009;  to  the  persistence  of  complex  eligibility  rules  for  grant 

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beneficiaries (an issue which affects funds under direct centralized management: there were 
nine  reservations  concerning  grant  schemes  in  2009  compared  with  four  in  2008);  and  to 
problems in the application of public-procurement rules, a frequently encountered cause of 
errors in shared management.  

An  increase  in  the  number  of  reservations  must  be  seen  as  a  sign  that  sound  financial 
management  is  taken  very  seriously  by  AODs  across  the  Commission,  and  that  there  is  an 
awareness  of  the  real  and  potential  impact  on  the  Commission's  reputation  of  any 
irregularities in the management of EU funds.  

It is also important to point out that, in light of their assessment of control results, several DGs 
were  able  to  lift  reservations  carried  over  from  previous  years,  for  example  in  the  areas  of 
Agriculture  and  Natural  Resources  (DG  MARE),  Economic  and  Financial  Affairs  (DG 
ECFIN), or Education and Citizenship (DG COMM). The Directors-General for Enlargement 
and for Regional Policy were able to lift reservations entered in 2008 relating to management 
of  pre-accession  funds  in  Bulgaria,  while  the  Director-General  for  Agriculture  and  Rural 
Development  was  also  able  to  lift  the  reservation  concerning  SAPARD  in  Bulgaria  and 
Romania. 

Each of the DGs and Services identified the main issues leading to their reservations and set 
out actions to address these. As was the case in the past, DGs and Services have adequately 
justified lifting a reservation, not only stating the measures taken to address the problem, but 
also the evidence to show that the problem has been effectively addressed on the ground. In 
most  cases,  this  meant  having  concrete  information  that  error  rates  have  decreased  to  an 
acceptable level or that systems have been appropriately strengthened.  

3.1. 

Agriculture and natural resources 

In its annual 2008 report, the Court noted for the first time that, overall, the error rate for the 
policy group Agriculture and natural resources was slightly below the materiality threshold of 
2%.  Although  the  error  rate  in  the  area  of  rural  development  was  still  higher  than  for  the 
European  Agricultural  Guarantee  Fund  (EAGF),  it  was  lower  than  in  previous  years.  The 
Court  found  that  the  Integrated  Administration  and  Control  System  (IACS)  was  generally 
effective  in  limiting  the  risk  of  error  or  irregular  expenditure,  but  improvements  are  still 
necessary in selected paying agencies in some Member States.  

In the 2009 AAR, the Director-General for Agriculture and Rural Development entered two 
reservations.  The  first  reservation  concerned  the  expenditure  for  rural  development 
measures  under  Axis  2  (improving  the  environment  and  the  countryside)  of  the  2007-2013 
programming  period,  in  view  of  control  statistics  reported  by  Member  States,  showing  an 
error rate of 3.4%. This reservation was entered because the error rate found is higher than 
the materiality threshold presently used by the European Court of Auditors. 

The second reservation concerned serious deficiencies in IACS in Bulgaria and Romania. 
The  reservation  was  entered  for  reputational  reasons,  as  the  deficiencies  persist  since 
accession and there have been delays in the implementation of action plans foreseen to reach 
closure in 2011.  

The Director-General for Maritime Affairs and Fisheries issued two reservations: one on the 
eligibility  of  payments  made  to  Member  States  to  compensate  additional  costs  in  the 
marketing  of  certain  fishery  products  from  the  Outermost  Regions,  where  it  estimates 
that  3%  of  payments  may  be  irregular.  The  second  reservation  concerned  FIFG  operational 

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programmes; it was quantified at 46.8 million Euros or 41% of payments made in the year for 
FIFG,  which  in  2009  were  particularly  low.  Consequently,  the  error  rate  is  significantly 
higher when expressed in terms of payments made during the year. Expressed as a percentage 
of the average annual payments for the period 2005-2007, the error rate detected is 9.4%. 

The  Director-General  for  Environment  issued  one  reservation  on  the  eligibility  of 
expenditure declared by beneficiaries of grants, in view of the fact that 5,97% of payments 
on grants in 2009 were at risk, or 3.89% of the total amount of payments made in 2009 for the 
relevant ABB activity. 

The Commission is committed to ensuring the effectiveness of controls, performed essentially 
by  the  Member  States,  in  the  area  of  rural  development.  Controls  in  this  area  are  however 
costly and beneficiaries are numerous (3.6 million in 2008). On 26 May 2010 the Commission 
adopted a Communication to the other Institutions8 proposing a tolerable risk level for rural 
development  of  between  2%  and  5%.  The  tolerable  risk  level  is  established  taking  into 
account the cost-effectiveness of the controls and an acceptable level of residual error that is 
justified in the light of these costs. The Commission will continue to work together with the 
competent  authorities  in  the  Member  States  to  optimise  the  effectiveness  of  the  control 
systems. 

Regarding  the  problems  caused  by  complex  eligibility  requirements  for  grant  beneficiaries, 
the  Commission  intends  to  take  concrete  steps to  address  the  main  obstacles.  (see  section  4 
below, "Cross-cutting issues")  

The  Commission  recalls  the  commitments  undertaken  by  the  authorities  of  Bulgaria  and 
Romania  with  respect  to  the  action  plans  drawn  up  to  remedy  the  deficiencies  identified  in 
their IACS, and reiterates that it will closely and strictly monitor their implementation. 

3.2. 

Cohesion 

Cohesion  policy  is  implemented  on  the  basis  of  shared  management  and  represents  around 
31% of the Union budget. It remains the area of expenditure with the highest error rate in the 
DAS 2008 (11%) and is the only policy area still receiving a red light from the Court9. This is 
largely due to the ineffective functioning of specific management and control systems in some 
Member States. 

In  the  light  of  these  high  error  rates,  in  2009  the  Commission  took  significant  initiatives  to 
improve  management  and  control  systems  in  the  area  of  Cohesion.  Having  completed  the 
implementation  of  the  Action  Plan,  in  February  2010  the  Commission  reported10  on  the 
impact  of  these  actions  as  well  as  on  the  implementation  of  additional  actions  by  the 
Commission  under  the  Joint  Audit  Strategy  for  Structural  Actions  ("Audit  Strategy").  Key 
impacts included a significant increase in financial corrections, the value of which increased 
for  both  the  1994-1999  and  2000-2006  periods,  totalling  3  801  M€  in  2008  and  2009, 
compared to approximately 3 567 M€  in total during the years 2000-2007.  

Of the resulting grand total of 7 368 M€  of corrections between 2000 and 2009, some 70% 
were proposed by the Commission and accepted by Member States (meaning Member States 

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See the Commission Communication on Tolerable Risk of Error - COM(2010) 261, 26.5.2010. 
OJ C 269, 10.11.2009, p. 26. 
COM(2010) 52. 

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may  reallocate  the  Commission  contribution  to  additional  eligible  projects,  so-called 
"withdrawals")  and  the  remainder  decided  by  the  Commission  (meaning  amounts  are 
recovered  for  the  EU  budget).  The  Commission  has  stated  its  intention  to  keep  up  the 
momentum  generated  by  the  Action  Plan  and  pursue  rigorous  supervisory  actions  in  the 
context of its Audit Strategy.  

Services  continued  to  develop  guidance  on  management  and  control  systems  set  up  by 
Member States for the implementation of EU funds in the Cohesion Policy area (for example 
by  completing  the  final  chapter  to  be  incorporated  in  the  Audit  Reference  Manual  for  the 
2007-2013  programming  period).  They  revised  the  guidance  note  on  Annual  Summaries, 
received  and  analysed  the  annual  summaries  of  available  audits  and  declarations  from  the 
Member States, due for the third time on 15 February 2010. These showed an improvement 
on previous years, although four Member States' summaries did not comply directly with the 
minimum requirements (they were invited to send additional information). Furthermore, nine 
Member States provided a (voluntary) overall assurance statement. 

The  year  2009  was  also  the  first  in  which  there  was  significant  execution  for  the  2007-13 
programming  period.  The  2007-2013  legislation  in  the  Structural  Funds  requires  Member 
State  authorities  to  provide  annual  control  reports  and  audit  opinions.  There  is  a  first 
indication from  the  results of a special audit inquiry launched by  the Directorates-General 
for  Regional  Policy  and  for  Employment  and  Social  Affairs  that  the  enhanced  control 
provisions in the 2007-2013 regulatory framework and the preventive measures taken by the 
Commission in the key area of cohesion policy have started to have a positive effect on error 
rates.  

During  this  special  audit  inquiry  the  Commission  examined  a  statistical  sample,  selected 
along  the  same  lines  as  that  of  the  Court,  of  payments  made  until  May  2009  in  the  fifteen 
Member States that had declared expenditure up to then. It resulted in eighteen audit missions 
covering  one  hundred  and  sixty-four  projects  co-financed  under  seventeen  operational 
programmes  in  ten  Member  States;  it  concluded  that  the  error  rate  for  the  expenditure 
declared in the audited period by the fifteen Member States is around 5%. The quantifiable 
errors concerned non-compliance with public procurement and eligibility rules. The auditors 
also detected a number of non-quantifiable errors. The frequency of transactions tested which 
were  affected  by  quantifiable  errors  with  a  possible  financial  impact  was  20%  of  total 
transactions. 

There  were  four  reservations  entered  by  AODs  in  this  area:  two  on  the  2000-2006 
programming  period  (DG  REGIO  and  DG  EMPLfor  ERDF  and  ESF,  respectively),  and  for 
the first time two reservations for the 2007-13 programming period (also on ERDF and ESF 
respectively). Each of the reservations clearly identified the Member States and programmes 
concerned and the action taken or proposed to address the weaknesses. 

The  Director-General  for  Employment  and  Social  Affairs  entered  two  reservations:  one 
concerns management and control systems for identified operational programmes under ESF 
2000-2006  (in  Belgium,  Germany,  France,  Italy,  and  Spain)  and  the  other  management  and 
control  systems  for  identified  operational  programmes  under  ESF  2007-2013  (in  Belgium, 
Germany,  Italy,  Luxembourg,  Romania  and  Spain).  The  first  reservation  is  quantified  at 
0,77% of interim payments made for the 2000-2006 period; the second is quantified at 1,60% 
of interim payments for the 2007-2013 period. Both reservations were issued for reputational 
reasons,  in  view  of  serious  deficiencies  in  key  elements  of  the  management  and  control 
systems. 

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The  Director-General  for  Regional  Policy  issued  two  reservations:  one  on  management  and 
control  systems  under  ERDF/Cohesion  Fund  in  the  period  2000-2006  (in  Bulgaria,  Italy, 
Germany,  and  UK  and  concerning  15  Interreg  programmes),  and  another  one  on 
ERDF/Cohesion  Fund  management  and  control  systems  for  the  period  2007-2013  (in 
Germany, Spain, Bulgaria, Italy, and 15 European Territorial Cooperation programmes).  

The first reservation concerned only 0.44% of the ABB activities concerned, due to the fact 
that  payments  have  not  been  executed  for  some  of  the  programmes  in  2009;  the  second 
reservation was quantified at 0.69% of the ABB activity. Both were entered on reputational 
grounds,  in  view  of  serious  deficiencies  in  key  elements  of  the  management  and  control 
systems. 

The  exposure  reported  by  the  DGs  for  the  2007-2013  period  is  based  on  the  assessment  of 
management and control systems in Member States, as in previous years, and their capacity to 
prevent,  detect  and  correct  errors.  It  should  be  borne  in  mind  that  these  systems  are  multi-
annual  and  that  the  annual  error  rate  in  the  DAS  is  likely  to  be  higher  as  it  reflects  errors 
which  can  be  detected  and  corrected  in  subsequent  years  and  will  continue  to  reflect  errors 
made  under  the  previous  programming  period  legislation  under  which  inherent  risk  was 
higher.  

The  Commission  will  continue  to  monitor  closely  annual  summaries  and  engage  with  the 
competent authorities in the Member States in order for these to be more useful for assurance 
purposes. It will also continue to organize the annual meetings of the "Homologues Group" as 
well  as  bilateral  coordination  meetings  and  training  measures.  To  further  reinforce  Member 
States' accountability under article 317 of the TFEU, the Commission included in its proposal 
for  the  triennial  revision  of  the  Financial  Regulation  the  requirement  for  the  responsible 
bodies accredited in the Member States to provide annual management declarations covering 
all funds in shared management.  

The Commission welcomes initiatives by some Member States to provide voluntary national 
declarations  and  undertakes  to  provide  a  consolidated  overview  before  summer  2010  of  the 
added value of the current declarations in terms of assurance.  

The  Commission  also  underlines  the  importance  of  setting  appropriate  benchmarks  for  the 
assessment of its management of risk which take full account of the costs of control and the 
complexity  of  regulations  which  is  a  major  cause  of  error.  It  will  present  its  proposal  for 
tolerable risk levels in the Cohesion area by the end of 2011. 

3.3. 

Research, energy and transport 

As  was  the  case  in  2008,  the  2009  AAR  of  each  of  the  four  Directorates-General 
implementing  actions  under  the  6th  Framework  Programme  in  research  (Enterprise  and 
Industry, Information Society and Media, Research, and Mobility and Transport11) contained 
a reservation in relation to eligibility of costs claimed by grant beneficiaries.  

Each service reported on the implementation of its part of the multi-annual audit strategy and 
lower  cumulative  residual  error  rates  compared  to  2008.  While  this  represents  progress 
towards  the  multi-annual  control  objective  of  reducing  the  residual  error  rate  below  the  2% 
threshold  by  the  end  of  2010,  the  results  of  a  significant  number  of  audits  need  to  be 

11 

Formerly Transport and Energy 

EN 

9 

   EN 

                                                 
implemented through recoveries and the whole audit program completed by the end of 2010. 
On the basis of current results there is, however, the likelihood that the 2% target will not be 
achieved despite significant increases in the numbers of audits carried out compared to plan. 

The  Director-General  for  Enterprise  and  Industry  also  issued  a  reservation  relating  to  the 
reliability  of  the  financial  reporting  by  the  delegated  body  about  the  implementation  of  an 
action  under  joint  management.  Preliminary  audit  evidence  indicated  material  error  in  the 
financial report from the implementing body. It is not possible to quantify the impact, since it 
will  only  be  known  at  the  end  of  the  programme  when  the  final  Union  contribution  is 
calculated on the basis of the costs incurred for the implementation of the programme. 

The  Commission  acknowledges  the  fact  that  complex  eligibility  requirements  for  grant 
beneficiaries  are  the  major  cause  of  the  errors  found  in  the  Chapter  "Research,  energy  and 
transport".  

In  its  Communication,  "Simplifying  the  Implementation  of  the  Research  Framework 
Programmes"12, the Commission presented measures and options for simplifying EU research 
funding and called on the other EU institutions to contribute to the debate and give feedback 
on the options. Beyond the immediate, the Communication also proposes possible directions 
for more radical simplification, such as could subsequently be translated into concrete actions 
or  in  the  form  of  new  legislative  proposals,  including  the  triennial  review  of  Financial 
Regulation.  

Until  such  proposals  are  effectively  implemented,  the  Commission  needs  to  address  the 
problems  caused  by  complex  eligibility  rules  for  grant  beneficiaries.  On  26  May  2010  the 
Commission adopted a Communication to the other Institutions proposing a tolerable level of 
risk in this area of between 2% and 5%13. The tolerable risk level is established taking into 
account  the  cost-effectiveness  of  controls  and  an  acceptable  level  of  residual  error  that  is 
justified in the light of these costs. 

Furthermore, the Commission has set up a dedicated high-level Research Task Force to look, 
inter alia, into management and organizational issues in the research area.  

Joint management presents particular challenges, in terms of management of EU funds, in this 
as  in  other  Chapters  of  EU  expenditure.  The  Commission  has  instructed  the  Secretariat-
General  and  the  Directorate-General  for  Budget  to  launch,  together  with  the  responsible 
services,  a  review  of  the  most  frequently  encountered  problems  and  propose  possible 
improvements in the area of joint management. 

3.4. 

External aid, development and enlargement 

There are several important management-related events to be highlighted in this Chapter. The 
Director-General for Enlargement was able to lift the reservation on the management of EU 
funds in Bulgaria, on the basis of progress made in the implementation of the action plan by 
the competent authorities. Also, in February 2009 the European Development Fund (EDF) 
accounts were successfully transferred into the Commission's central (accruals) accounting 
system  ABAC,  a  change  which  had  been  recommended  by  the  Court  of  Auditors  and  the 
Discharge Authority. Significant improvements were introduced in the planning methodology 

12 
13 

COM(2010) 187, 29.4.2010. 
COM(2010) 261. 

EN 

10 

   EN 

                                                 
of  EuropeAid's  external  audits  and  terms  of  reference  for  verification  missions  were  agreed 
with the United Nations family. Finally, with the entry into force of the Lisbon Treaty, work 
began  towards  the  creation  of  the  European  External  Action  Service  (EEAS).  The  new 
structure will have a major impact in terms of reporting for this chapter as of the AAR 2010.  

In  the  AAR  2009,  the  Director-General  for  External  Relations  entered  a  reservation  on  the 
management  of  the  Common  Foreign  and  Security  Policy  (CFSP)  and  the  Stability 
Instrument. The underlying problem relates to the difficulty in implementing appropriate ex-
post  controls  and  obtaining  adequate  quantified  data  on  transactions  as  a  result  of  these 
controls.  The  reservation  is  issued  on  reputational  grounds,  in  view  of  serious  weaknesses 
identified by the ECA, the IAS, and the IAC audits, and the possibility that, once quantified, 
they might reveal error rates exceeding the 2% materiality threshold. 

The Commission's control activities for the management of enlargement/post-accession funds, 
which in financial terms constitute a significant part of this Chapter, have led to the successful 
remedying of the potential impact of the weaknesses previously found, allowing the lifting of 
a major reservation.  

The  issues  identified  by  the  Director-General  for  External  Relations  affect  much  smaller 
amounts, but  need  to be tackled just as effectively. On  matters  related to its  responsibilities 
and  within  its  capability,  DG  RELEX  is  preparing  an  overall  action  plan  as  a  result  of  this 
reservation, consolidating and building on existing specific action plans being implemented as 
a  result  of  audit  findings.  Issues  to  be  addressed  include  a  review  of  financial  management 
capacity  (including  resources)  in  the  context  of  growing  budgets  and  the  need  to  support 
CFSP  missions  in  achieving  compliance  with  the  rules;  organisation  of  ex-post  controls  to 
obtain  quantified  results;  clarification  of  ex-post  control  methodologies;  and  the  design  of 
external audits and exploitation of their findings.  

The Commission has instructed the Director-General for External Relations to closely monitor 
the  development  and  implementation  of  the  action  plan.  It  envisages  setting  up  a  dedicated 
service  within  the  Commission,  reporting  directly  to  the  Vice-President  and  High 
Representative  of  the  Union  for  Foreign  Affairs  and  Security  Policy,  for  ensuring  financial 
control  of  instruments  including  the  CFSP  budget  and  the  successor  to  the  Stability 
Instrument.  

A proposal for a tolerable level of error in the area of external relations will be presented by 
the Commission by the end of 2010. 

3.5. 

Education and citizenship 

In  view  of  the  successful  implementation  of  all  the  actions  foreseen  in  the  action  plan,  the 
Director-General for Communication was able to lift the reservation made in 2008 on quality 
failings  revealed  by  ex-post  controls  in  direct  centralized  management.  However,  the 
Director-General  maintained  the  reservation  on  the  possible  violation  of  copyright  by 
Commission services, introduced in 2008, on reputational grounds. 

Implementation of  the corrective actions foreseen by the Action Plan is on track: all claims 
brought forward by collecting societies have been solved and an internal examination of the 
copyright situation in different areas of the Commission has been concluded. Agreements and 
legal  notices  are  being  updated,  and  copyright  agreements  are  being  signed  with  collecting 
societies  and  other  right  holders.  Guidelines  on  copyright  for  Commission  staff  were 

EN 

11 

   EN 

completed and a  dedicated Helpdesk on copyright set up in DG COMM in early 2010. The 
Commission expects the action plan to be fully implemented by the end of 2010. 

The  Director-General  for  Education  and  Culture  issued  a  reservation  regarding  the  too  high 
error rate in centralised direct management, in view of the significant occurrence of errors in 
the underlying transactions found through ex-post controls. The untargeted audits finalised in 
2009  showed  an  error  rate  of  2.3%.  The  observed  errors  mostly  concern  the  inability  by 
beneficiaries to produce justifying documents or documents of sufficient quality. 

The Director-General for Justice, Freedom and Security issued three reservations in the AAR 
2009. The first was a carry-over from 2008, a reservation on reputational grounds concerning 
the delays in the completion of the SIS II project. The second one is similar and concerns the 
delays in the implementation of another large-scale IT system, VIS. The third reservation was 
made on the basis of material error rates: a 2,15% residual error rate was found in auditable 
population of grants under programmes for fundamental rights and citizenship. 

The Commission recognizes that the development and management of large-scale IT systems 
such  as  SIS  II  and  VIS  present  particular  challenges.  It  will  pursue  its  efforts  to  enhance 
governance  and  improve  cooperation  with  stakeholders  while  closely  monitoring  the 
contractor, assisted by a quality assurance contractor. It will enforce the available contractual 
and  financial  corrective  measures  –  including  financial  sanctions  and  recovery  orders  -  in 
cases  where  contractors  fail  to  honour  contractual  obligations  in  a  timely  and  effective 
manner.  

The Commission has invited all DGs and Services concerned with developing and managing 
large-scale  IT  systems  to  ensure  they  have  the  necessary  project  management  expertise  in 
order to develop appropriate risk management and contingency plans. 

The Commission is aware that complex eligibility requirements for grant beneficiaries are one 
of  the  main  causes  of  the  errors  found  in  the  Chapter  "Education  and  Citizenship".  It 
welcomes efforts by the concerned departments to mitigate the problem – such as increasing 
the number of monitoring visits and the rate of projects audited, especially for the population 
at risk, and speeding up the closure of older files. The Commission recalls the need to analyze 
the costs of control and will make proposals for tolerable risk levels in 2011. The Commission 
will  also  make  proposals  to  simplify  and  improve  the  management  of  grants  (see  section  4 
below, "Cross-cutting issues"). 

Finally,  the  Commission  is  satisfied  with  the  work  conducted  as  a  response  to  the  potential 
violation of copyright rules by its Services, which was the cause of the reservation issued by 
the Director-General for Communication in the AAR 2008. The Commission takes note of the 
fact  that  no  new  claims  have  been  presented  and  that  the  action  plan  should  be  fully 
implemented by the end of this year, with a view to allowing the AOD to lift the reservation 
in the AAR 2010. 

3.6. 

Economic and financial affairs 

The  Director-General  for  Economic  and  Financial  Affairs  was  able  to  lift  the  reservation 
entered  in  2008  regarding  the  weaknesses  identified  in  the  control  systems  of  an 
implementing  body.  It  concerned  the  possibility  that  new  mitigating  controls  put  in  place 
following the results of the ex-post control report might not be effective for the new program. 

EN 

12 

   EN 

The  mitigating  measures  implemented  during  2009  were  sufficient  to  solve  the  underlying 
problem, allowing the AOD to lift the reservation.  

4. 

CROSS-CUTTING ISSUES 

4.1. 

Rules on grants and public procurement 

The  complexity  of  eligibility  rules  for  beneficiaries  of  grant  schemes,  including  the 
requirement to reimburse actual costs incurred, was one of the reasons underlying 9 of the 20 
reservations issued by AODs in the AAR 2009. It has been the cause of recurring reservations 
in the Chapter "Research, Energy and Transport" for several years, and has been recognized in 
2009  as  affecting  some  areas  of  expenditure  in  the  Chapters  "Agriculture  and  Natural 
Resources"  and  "Education  and  Citizenship".  Errors  in  the  application  of  laws  governing 
public  procurement  are  among  the  most  frequent  problems  underlying  errors  in  the  Chapter 
"Cohesion". 

Simple rules reduce the risk of erroneous claims by beneficiaries. However, a certain level of 
complexity  is  necessary  to  target  specific  policy  objectives  and  an  appropriate  balance 
therefore needs to be achieved14.  

In the context of the triennial revision of the Financial Regulation, the Commission has put 
forward  proposals  for  further  simplification  of  grant  schemes  without  harming  the 
achievement  of  policy  objectives.  Initiatives  for  simplification  aim  at  shifting  EU  grants 
towards a performance-based system with more frequent use of lump sums, standard scales of 
unit costs and flat rates. However the scope for further simplification of the detailed sectoral 
legislation  for  the  2007-2013  period  is  limited  given  the  time  necessary  to  complete  the 
adoption procedure. 

The  Commission  invites  the  other  Institutions  to  consider  the  proposals  it  made  in  its 
Communication, "Simplifying the Implementation of the Research Framework Programmes" 
and  reiterates  its  will  to  facilitate  the  inter-institutional  debate.  Furthermore,  it  will  be 
important to agree on appropriate tolerable risk levels, on the basis of Commission proposals, 
for all areas of expenditure.  

The  Commission  will  also  conduct  an  in-depth  reflection  on  how  public  procurement  rules 
could be simplified. It has called on the Secretariat-General and the Directorate-General for 
Budget  to  coordinate  the  necessary  contacts  among  the  Services  responsible  for  developing 
and monitoring the application of public-procurement instruments at the level of both the EU 
and the Member States.  

Nevertheless,  profound  changes  to  the  legislative  framework  are  a  long-term  enterprise  and 
the main scope for further progress will be in post-2013 legislation. In the shorter term, there 
needs  to  be  a  shared  view  among  the  Institutions  on  the  extent  to  which  it  is  reasonable  to 
expect  the  Commission  to  limit  the  level  of  undetected  error  on  an  annual  basis.  The 
Commission is committed to a continued improvement of its control systems, including those 
of  its  implementation  partners.  Nevertheless,  it  recognises  the  varying  risk  profiles  of  its 
activities  and  considers  it  important  that  reasonable  and  challenging  benchmarks  are  set 

14 

Under  all  circumstances,  the  Commission  will  maintain  proper  conditions  to  ensure  sound  financial 
management, including appropriate fraud-prevention measures. 

EN 

13 

   EN 

                                                 
(using a "TRE approach"), against which its management of risk can be objectively assessed, 
taking into account available control resources. 

The  Commission  has  on  26  May  adopted  concrete  proposals  for  tolerable  risk  for  research, 
energy and transport, and rural development. It will develop further proposals, for all chapters 
of the Court of Auditors' Annual Report, and actively promote the idea of tolerable risk during 
the inter-Institutional discussions. 

4.2. 

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  European  Parliament  and  two  updates  were  presented  in 
2008  and  2009.  A  follow-up  report  was  prepared  in  early  2010,  which  shows  that  the 
downward  trend  in  the  number  of  staff  working  in  administrative  and  support  functions  is 
continuing, especially at departmental level. 

The yearly screening exercise has become a useful tool to base re-allocation decisions in order 
to better respond to political priorities. In 2009, it was possible to pool an array of different 
expertise  for  specific  time-bound  tasks  linked  to  the  financial  and  economic  crisis.  A 
voluntary scheme allows temporary secondment of officials to the departments responsible for 
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).  More  generally,  the  Commission  continued  to 
temporarily allocate staff to serve time-limited activities, a dynamic and flexible way to allow 
adequate  staffing  to  face  peaks  in  workload,  contributing  to  dynamic  human  resources 
management over time. 

In  order  to  serve  priorities  under  limited  constant  resources,  the  Commission  services  are 
being  re-organized;  adjusting  to  political  priorities  has  meant  the  creation  of  new  DGs, 
transfer of responsibilities, and redesign of portfolios. Economies of scale are further derived 
from  the  pooling  of  support  infrastructures  between  DGs  and  the  creation  of  shared 
resource directorates: 2009 saw the innovation of a shared Resources Directorate serving DG 
Mobility  and  Transport  and  DG  Energy  and  a  shared  Resources  Directorate  serving  DG 
Environment and DG Climate Action. 

With  regard  to  externalization  of  program  management  to  executive  agencies,  the 
Commission  respected  its  commitment  not  to  create  new  executive  agencies  beyond  those 
foreseen to cope with a doubling of the Research budget. 

As  regards  the  recruitment  of  nationals  from  the  new  Member  States,  the  target  for  EU-10 
recruitments had been globally surpassed at the end of 2008, two years before the end of the 
"transition  period"  set  for  201015.  The  target  for  EU-2  recruitments  was  reached16  and  the 

15 

By November 2009, 3 814 EU-10 nationals had been recruited, which represents 109% of the overall 
indicative recruitment target for 2004-2010. More details on the state of play of EU-10 recruitments are 
available in the last Commission report on EU-12 recruitments transmitted to the Budget Committees of 
the Parliament and Council on 15 April 2010. 

EN 

14 

   EN 

                                                 
overall  recruitment  was  reported as  "on  track".  However,  difficulty  in  recruiting  specialized 
staff remains a concern for some services that need appropriate specialist/technical profiles 
in  very  different  domains  but  do  not  always  find  suitable  candidates  on  reserve  lists.  For 
certain profiles the career prospects and the remuneration that can be offered fail to attract the 
required talent. An oversight mechanism was put in place by the Central Services, in order to 
identify the specific issues and their potential solutions. 

In  2009,  EPSO  prepared  for  the  launch  of  the  "EPSO  Development  Programme"  (EDP), 
intended to fundamentally overhaul the EU's staff selection methods to select the right staff at 
the right time, to improve the quality of the selection process and to establish a positive and 
modern image for the Institutions. An entirely new specialist competition structure has been 
put  in  place,  with  a  view  to  allow  the  Institutions  to  recruit  the  best  candidates  with  the 
required skills. As to non-permanent staff, a number of services indicated an over-reliance on 
these and some Directorates-General continued to face significant issues in this area due to 
a high staff turnover at headquarters and a persistently high vacancy rates in delegations (for 
delegations  in  some  countries,  the  contract  agent  vacancy  rate  reached  20%  at  the  end  of 
2009).  

The  Commission  reiterates  its  commitment  to  pursuing  efforts  to  reduce  overheads  and  re-
allocate  savings  to  front-line  activities.  It  will  continue  conducting  sectoral  screenings  and, 
whenever necessary, specific actions such as the creation of the Research Task Force, in order 
to tackle sector-specific management issues.  

4.3. 

Business Continuity Planning 

In  2009  the  Commission  progressed  further  in  its  efforts  to  embed  a  Business  Continuity 
Management  (BCM)  throughout  the  Institution.  Events  such  as  the  Berlaymont  fire  and  the 
threat of a flu pandemic highlighted the importance of being prepared to cope with potential 
disruptions. Notable achievements over the past year included the successful continuation of 
the Commission's activities during the fire incident and the launch of a new communication 
tool  for  BCM  ('NOAH').  A  3-year  Action  Plan  addressing  the  recommendations  of  a  recent 
IAS Audit was adopted in late 2009 and is being implemented.  

The College calls on all Services to give this subject the necessary priority, in particular those 
which  reported  partial  compliance  with  this  Internal  Control  Standard.  All  DGs  have  been 
asked  to  reassess  their  critical  functions  by  conducting  a  Business  Impact  Analysis  (BIA) 
based  on  the  new  Guidance  issued  by  the  Secretariat-General,  design  more  action-oriented 
Business  Continuity  Plans,  and  manage  dependencies  better.  Existing  arrangements  will  be 
tested with a view to improving them, and awareness-raising efforts should continue.  

5. 

CONCLUSIONS 

•  The  Commission  reiterates  its  commitment  to  continue  to  give  priority  to  achieving  an 
unqualified Statement of Assurance (DAS) by the European Court of Auditors (ECA). It is 
convinced  that  significant  progress  has  been  achieved  in  the  management  of  EU  funds 

16 

By November 2009, 878 EU-2 nationals had been recruited, representing 103% of the recruitment target 
for  2007-2009.  More  details  on  the  state  of  play  of  EU-10  recruitments  are  available  in  the  last 
Commission report on EU-12 recruitments transmitted to the Budget Committees of the Parliament and 
Council on 15 April 2010. 

EN 

15 

   EN 

                                                                                                                                                         
thanks to changes to management and control systems, working methods, and culture, and 
is satisfied that the DAS for 2008 was the best so far.  

•  The Commission acknowledges that there are still areas for improvement, in particular in 
some  areas  of  shared  management.  It  will  further  engage  with  the  Member  States  in  the 
light  of  their  increased  responsibilities  under  the  Treaty  on  the  Functioning  of  the 
European  Union.  It  invites  them  to  continue  improving  the  management  and  control 
systems for all open programmes in the Cohesion area.  

•  The Commission calls on the other Institutions to react positively to its proposal on annual 
management  declarations  for  all  expenditure  under  indirect/shared  management  in  the 
context of the revision of the Financial Regulation, and on the Member States to anticipate 
the entry into force of these provisions.  

•  The  Commission  acknowledges  the  difficulties  posed  by  complex  rules  for  grant 
beneficiaries and public procurement. It has already put forward proposals to simplify the 
rules for grant schemes in the context of the triennial revision of the Financial Regulation. 
It  calls  on  the  other  Institutions  to  react  positively  to  its  proposals  for  concrete  tolerable 
levels of risk. 

•  The  Commission  is  satisfied  that  the  action  plans  designed  by  AODs  are  adequate  to 
address  weaknesses  and  mitigate  the  risks  identified,  and  has  called  on  all  responsible 
Directors-General and Heads of Service to implement them attentively. 

•  The Commission invites the other Institutions and the Member States to engage in an in-
depth reflection on how to further improve the design of funding schemes, as well as their 
delivery,  management  and  control  mechanisms,  in  order  to  both  enhance  their 
effectiveness  on  the  ground  and  ensure  that  the  control  of  EU  expenditure  is  efficient, 
proportional and cost-effective.  

EN 

16 

   EN 

DG 

AGRI 

REGIO 

Reservations 2009 

Reservations 2008 

Reservations 2007 

Reservations 2006 

Reservations 2005 

Annex 1: Reservations 2005 – 200917 

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

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

2 

2 

2. Serious deficiencies in 
IACS in Bulgaria and 
Romania 

1) Reservation on ERDF 
management and control 
systems for certain 
programmes in the period 
2007-2013 in Germany, 
Italy, Spain, Bulgaria, 15 
European Territorial 
Cooperation programmes 

2 

2 

2) Reservation on ERDF 
management and control 
systems for certain 
programmes in the period 
2000-2006 in Bulgaria, Italy, 
Germany, and UK and 
concerning 15 Interreg 
programmes 

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

1) Reservation on ERDF 
management and control 
systems for the period 
2000-2006 in certain 
programmes in: 
BELGIUM, GERMANY, 
ITALY, SPAIN, + 21 
INTERREG programmes  

2) Management and 
control system for the road 
sector in BULGARIA in 
2008 

1. Insufficient 
implementation of IACS in 
Greece 

1. Insufficient 
implementation of IACS 
in Greece 

1 

2 

2 

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

2 

1. Reservation concerning 
the ERDF management 
and control systems for 
certain programmes in the 
period 2000-2006 in: 
CZECH REPUBLIC, 
FINLAND, GERMANY, 
GREECE, IRELAND, 
ITALY, LUXEMBOURG, 
POLAND, SLOVAKIA, 
SPAIN + 51 INTERREG 
programmes.  

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

1. Reservation 
concerning the 
management and control 
systems for ERDF in 
United Kingdom - 

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

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. Management and 
control systems for ERDF 
in UK-England;  
2. Management and 
control systems for ERDF 
in Spain; 

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

3 

17 

EN 

This table presents a summary of reservations; it is not intended to offer an exhaustive description of them. For details of the reservations, please consult the Annual Activity 
Report of the relevant Commission department on http://ec.europa.eu/atwork/synthesis/aar/index_en.htm  

17 

EN 

 
  
 
 
 
 
 
                                                 
- Bulgaria, Czech 
Republic, Slovakia, 
Hungary and Poland. 

Management and control 
systems for identified ESF 
Operational Programmes 
in - Spain,  

- United Kingdom,  

1 

- France,  

- Italy,  

- Slovakia, 

- Portugal,  

- Belgium and  

- Luxembourg. 

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

1. 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 

1 

0 

0 

0 

0 

EMPL 

1) Management and control 
systems for identified 
operational programmes 
under ESF 2000-2006 in BE, 
DE, FR, IT, and ES. 

2 

2) Management and control 
systems in ESF in BE, DE, 
IT, LUX, RO and ES for 
certain programmes in the 
period 2007-2013 

1 

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

MARE 

(former 

FISH) 

1) Management and control 
systems for FIFG 
operational programmes in 
two Member States and 
specific measures in another 
three Member States. 

2 

2) Eligibility of payments 
made to Member States to 
compensate additional costs 
in the marketing of certain 
fishery products from the 
Outermost Regions. 

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 
programmes and on a 
multiannual basis 
represents more than 2% 
of sample payments. 

EN 

18 

EN 

 
  
 
 
JRC 

RTD 

INFSO 

0 

1 

1 

Accuracy of cost claims 
under FP6 (error rates above 
materiality threshold of 2%) 

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

0 

1 

Accuracy of cost claims 
under FP6 (error rates above 
materiality threshold of 2%) 

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

1 

1. Status and correctness of 
the closing balance 

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

1 

1 

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

2. Allocation of research 
personnel 

2 

Reservation concerning 
errors relating to the 
accuracy of the cost claims 

and their conformity with 
the provisions of the Fifth 
Research Framework 

Programme (FP5). 

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

0 

1 

1 

0 

0 

2 

3 

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

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

 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 

ENTR 

1) Accuracy of cost claims 
under FP6 (error rates above 
materiality threshold of 2%) 

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

Unsatisfactory functioning 
of the financing of 
European Standardisation 

1 

1 

2 

2 

1. Errors relating to 
accuracy and eligibility 
of costs claims and their 
compliance with the 

2 

1. Errors relating to 
accuracy and eligibility of 
costs claims and their 
compliance with the 

EN 

19 

EN 

 
  
 
 
 
2) Reservation concerning 
the reliability of the financial 
reporting by the delegated 
body about the 
implementation of the joint 
programme. 

TREN 

Accuracy of cost claims 
under FP6 (error rates above 
materiality threshold of 2%) 

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

1 

1 

EAC 

Too high error rate in 
centralised direct 
management, due to lack of 
justifying documents for 
cost claims, concerning 
projects from the previous 
generation of programmes 

ENV 

Eligibility of expenditures 
declared by beneficiaries of 
grants 

1 

1 

0 

0 

provisions of the 
research contracts under 
FP 5 

2. Unsatisfactory 
functioning of the 
financing of European 
Standardisation  

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

1. Faiblesse des systèmes 
de contrôle constatées 
dans certaines Agences 
Nationales 

2 

2 

1 

1 

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 

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

2. Sûreté nucléaire 

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 

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

1 

0 

Eligibility of expenditures 
declared by beneficiaries 
of non-LIFE grants 

1 

0 

0 

0 

0 

EN 

20 

EN 

 
  
 
 
 
 
1) Reputational damage due 
to delays in the completion 
of the SIS II project. 

2) Reputational damage due 
to a delay in the completion 
of the VIS project. 

3) Residual error rate in non-
audited population of grants 
under programmes for 
fundamental rights and 
citizenship. 

SANCO 

JLS 

ESTAT 

ECFIN 

0 

3 

0 

0 

0 

1 

0 

1 

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

Possibility that new 
mitigating controls put in 
place following an ex-post 
control report on funds 
managed by an external 
body entrusted with 

0 

0 

1 

1. Insufficient assurance 
of business continuity of 
a critical activity 

1. Health crisis 
management 

1 

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. 

Possibility that 
additionality requirements 
are not sufficiently met. 

2 

0 

1 

1 

1 

1 

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. 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 

1. Possibility that 
additionality 
requirements are not 
sufficiently met 

0 

0 

0 

0 

EN 

21 

EN 

 
  
 
 
 
 
 
 
 
TRADE 

AIDCO 

ELARG 

ECHO 

0 

0 

0 

0 

DEV 

0 

indirect centralized 
management are not 
effective. 

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

0 

0 

1 

0 

0 

0 

0 

1 

0 

0 

0 

0 

0 

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 

0 

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

1 

0 

0 

0 

0 

0 

0 

0 

0 

EN 

22 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
RELEX 

Lack of capacity to carry out 
adequate ex-post controls for 
CFSP and Stability 
Instrument 

TAXUD 

MARKT 

COMP 

COMM 

1 

0 

0 

0 

1 

ADMIN 

0 

EN 

Possible infringement of 
intellectual property rights 

1. Insuffisances du 
contrôle et de 
l’information de gestion; 

2. Insuffisances de la 
gestion administrative en 
délégations, et 
principalement au niveau 
de la mise en place et du 
respect des circuits 
financiers 

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

2 

1 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

Ex-post control system 

1. Ex-post control system 

1. Supervision (ex-post 
controls on grants) 

1 

1 

0 

0 

0 

0 

0 

0 

0 

0 

2 

0 

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. 

0 

0 

0 

0 

1 

0 

23 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DIGIT 

PMO 

OIB 

OIL 

EPSO 

OPOCE 

BUDG 

0 

0 

0 

0 

0 

0 

0 

SG 

0 

EN 

0 

0 

0 

0 

0 

0 

0 

0 

Inadequacy of the Data 
Centre building 
infrastructure in 
Luxembourg. 

1. Significant weakness in 
the management of the 
non-buildings procurement 
procedures (evaluation of 
offers (e.g.: methodology 
used …), delays (e.g.: no 
contractual basis, 
establishment of a 4-year 
reliable planning & 
respect, legal delays for 
submission…) 

1 

0 

0 

0 

0 

0 

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

0 

0 

0 

0 

0 

0 

1 

1 

1 

0 

0 

0 

2 

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

1. Council's antenna for 
sickness insurance 

1. Deficiency in OIB's 
contracts & procurement 
management 

0 

0 

0 

1. Accrual accounting for 
the European Development 
Fund; 

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

0 

0 

0 

0 

1 

0 

1 

0 

0 

0 

0 

0 

24 

EN 

 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BEPA 

SJ 

SCIC 

DGT 

IAS 

OLAF 

0 

0 

0 

0 

0 

0 

TOTAL 

20 

0 

0 

0 

0 

0 

0 

15 

0 

0 

0 

0 

0 

0 

18 

0 

0 

0 

0 

1 

0 

0 

0 

0 

1. Audit of community 
bodies (regulatory 
agencies) 

1 

0 

0 

0 

1 

1. Weak general internal 
control environment 

0 

0 

0 

1. Audit of community 
bodies (traditional 
agencies) 

0 

0 

20 

0 

0 

31 

EN 

25 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 2: Synthesis 2009 multi-annual objectives 

This Annex reports on the progress achieved in 2009 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 2009 Synthesis report are indicated in bold italics.  

(Initiatives stemming from previous years' Synthesis Reports, which were completed in 2008 or before, have been deleted from this table.) 

Internal control systems and performance management 

Subject 

Objective 

Initiative(s) to meet the objective 

Internal control 

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

the 

for 

and 

Standards 

standards 

In October 2007 the Commission adopted a 
Internal 
Communication 
revising 
Control 
underlying 
framework18,  setting  out  16  new  internal 
effective 
control 
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 
compliance 
reporting  was  simplified;  moving  from  full 
reporting  to  exception  based  reporting  on 
non-compliance.  

the 

Responsible service(s) 
and timetable 

for 
BUDG 
DG 
guidance  and  training, 
monitoring 
and 
reporting 

All 
services 
implementation 

Commission 
for 

Ongoing action 

Progress made in 2009 

In  2009,  the  Commission  adopted  the  Impact 
Report  on  the  Commission  Action  Plan  towards 
an  Integrated  Internal  Control  Framework19.  It 
concluded that significant progress had been made in 
strengthening  internal  control  systems  during  the 
mandate  period  of  the  previous  Commission,  and 
that  there  was  enough  evidence  that  progress  was 
significantly accelerated by the launch of the Action 
Plan in 2006. 

Effective  implementation  of  the  Internal  Control 
Framework  will  continue  to  be  an  objective  of  the 
Commission;  however,  as  it  is  now  an  integral  part 
of  management  in  the  Commission,  it  will  be 
considered  an  ongoing  action  and  no  longer  appear 
in this table as of the Synthesis Report 2010.  

18 
19 

EN 

Communication to the Commission: Revision of the Internal Control Standards and the Underlying Framework: Strengthening Control Effectiveness - SEC(2007) 1341. 
COM(2009) 43, 4.2.2009. 

26 

EN 

 
  
 
 
 
 
                                                 
Annual 
reports 
Synthesis 

activity 
and 

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

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

in 
improvement 

DG BUDG and SG 

By September 2009 

Done 

to 

the 

success 

identify 

In 2009 the Secretariat-General and the Directorate-
General  for  Budget  carried  out  a  survey  across  the 
Commission, 
factors 
influencing  the  quality  of  AARs.  As  a  result, 
Standing Instructions for the AARs were subject to a 
major  overhaul;  a  new,  specific  conclusion  on  the 
overall  effectiveness  of 
the 
Internal Control Standards is now required in part 2 
of  the  AAR;  a  dedicated  helpdesk  was  set  up, 
training  courses  were  offered,  and  an  interactive 
presentation  of  the  Standing  Instructions  was  made 
available  on  the  intranet,  facilitating  navigation  and 
enabling  services  to  find  the  answers  to  specific 
questions.  

implementation  of 

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

implementing 

All DGs 

By April 2010 

Done 

The Peer Review of AARs was further enhanced by 
early  interventions  by  Central  Services  (pre-peer 
review)  and  systematic  feedback  to  services  on  the 
quality of their draft AAR. The AARs 2009 show a 
noticeable  improvement  across  the  Commission, 
both in terms of the quality of the evidence presented 
in support of the assurance and in the readability of 
the reports. 

EN 

27 

EN 

 
  
Risk management 

Residual risk 

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

to 

4. Taking further the 
concept  of  residual 
risk 

Implementation  of  the  Action  Plan  agreed 
by  SG  and  BUDG  following  the  IAS  audit 
implementation 
of 
the 
the 
Commission's 
management 
risk 
framework will further improve the quality 
of  risk  management  in  the  Commission, 
especially  as  regards  the  monitoring  of 
follow-up of critical cross-cutting risks. 

of 

SG and BUDG 

By December 2010 

the 

in  2009,  concluded 

that 
the  Commission 

The  IAS  audit  of  the  implementation  of  the 
framework, 
Commission's  risk  management 
risk 
conducted 
management  framework  of 
is 
consistent  with  international  standards  and  that  it 
provides  a  solid  basis  to  support  risk  management. 
The  IAS  identified  some  areas  for  improvement, 
mainly  as  regards  the  roles  and  responsibilities  for 
risk  management  within  DGs,  a  need  for  further 
guidelines and clarification on certain issues and the 
treatment of cross-cutting risks. These issues will be 
addressed  by  the  central  services  in  the  course  of 
2010. 

Present to the discharge authorities concrete 
proposals  for  tolerable  risk  levels  for  the 
policy areas: Research, energy and transport 
and Rural development. 

DG  BUDG 
with 
services 

together 
concerned 

The Commission has announced that it will continue 
to  work  on  concrete  proposals  for  tolerable  risk 
levels  for  selected  policy  areas  during  2010  as 
requested by the Discharge Authority. 

By June 2010 

Actively  promote  the  idea  of  tolerable  risk 
during the inter-Institutional discussions on 
the  proposal  for 
the 
Financial Regulation (FR) 

the  revision  of 

DG BUDG with SG 

for 

Ongoing 
the 
process  of  reviewing 
the FR 

EN 

28 

EN 

 
  
 
 
 
 
Governance 

Subject 

Objective 

Initiative(s) to meet the objective 

Internal 
recommendations 

audit 

5. Ensuring a smooth 
implementation of 
accepted internal 
audit 
recommendations 

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

should  be 

Responsible service(s) 
and timetable 

All services  

Progress made in 2009 

the 

that 

level  of  acceptance  of 

Between  March  and  December  2009  the  Audit 
Progress  Committee  (APC)  met  five  times  and  sent 
four  information  notes  to  the  College.  The  APC 
notes 
IAS 
recommendations remains high (close to 100%), and 
that  the  number  of  critical  recommendations  still 
open six months after the original delivery date was 
zero. There has also been a reduction in the number 
of  IAS  audits  issued  with  an  unsatisfactory  opinion 
(4 in 2008 to3 in 2009). 

Nevertheless,  the  APC  notes  that  follow-up  of  very 
important  recommendations  continued 
to  be  a 
challenge  (68 remaining  open  six  months  after  their 
due date), and that in 2009 there was an increase in 
the number of critical recommendations issued (from 
0 in 2008 to 2 in 2009).  

The APC  continued  to hold DG  accountable  for  the 
implementation  of  their  own  action  plans;  it  sent 
reminders  to  Services  wherever  relevant.  These 
reminders  proved  effective  in  strengthening  follow-
up.  The  APC  also  equipped  itself  with  an  APC 
Scoreboard to support its work. 

EN 

29 

EN 

 
  
 
Regulatory agencies 

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

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.  

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

End 2009 

Done 

In  a  Communication  of  March  200820, 
the 
Commission  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. 

in 

agencies, 

announced 

In  January  2009  the  Commission  launched  an 
independent  horizontal  evaluation  of  the  system  of 
regulatory 
its 
as 
Communication  of  March  2008.  The  evaluation 
report,  delivered  in  December  2009,  concludes 
positively  on  several  aspects  of  the  agency  system, 
such  as  their generally  timely  and  adequate input  to 
EU  policies,  coherence  of  the  agencies'  activities 
the  mandates  and  key  policy  priorities, 
with 
synergies  with  actors 
the  same  area  and 
in 
transparency  vis-à-vis  the  general  public.  At  the 
same  time,  it  points  at  weaknesses  of  the  agency 
system,  including  governance  arrangements,  and 
monitoring 
performance.  The 
conclusions of this evaluation are meant to feed into 
the  ongoing  inter-institutional  dialogue  on  agencies 
launched in March 2009. 

agencies' 

of 

a 

to 

the 

follow-up 

above  mentioned 
As 
Communication, the Commission also issued several 
guideline  documents  with  a  view  to  optimising  its 
relations  with  agencies:  a  tentative  roadmap  for 
setting  up  new  agencies;  guidelines  for  concluding 
memoranda  of  understanding  between  agencies  and 
the  Commission;  and  mapping  of  the  assistance 
delivered to agencies by Commission services.  

20 

EN 

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

30 

EN 

 
  
 
                                                 
Reservations 

7.  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 
remedial  actions  that  delegated  authorising 
officers have committed to carry out in their 
annual activity reports. 

implementation  of 

the 

follow-up 

Closely 
of 
implementation 
Information System II and the VIS system. 

the  delays 
the 

the 
Schengen 

in 

SG and DG BUDG for 
monitoring 
and 
coordinating reporting 

concerned 

DGs 
implementation 

for 

Continuous action 

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.  

the  review  of 

An  outcome  of 
the  Standing 
Instructions for AARs is that two distinct parts of the 
report  now  build  the  argumentation  towards  the 
assurance.  Part  2  deals  with  internal  control  in 
general  and  part  3  contains  the  building  blocks 
towards the assurance on financial management. The 
AAR  must  include  a  conclusion  drawn  by  the 
Authorising  Officer  by  Delegation  (AOD)  on  the 
basis of all evidence presented in part 3.  

JLS, SG – by end 2010 

The issue continued to be the subject of a reservation 
in  the  AAR  2009  of  DG  JLS.  The  two  issues  are 
being closely monitored by the Commission. 

Financial risk corresponding to the residual 
error  rate  in  the  non-audited  population  of 
grants 
the  programmes  under  ABB 
activity  1804  –  Fundamental  rights  and 
citizenship 

in 

Progress made in 2009 concerns the increased rate of 
projects  audited  in  the  population  at  risk  and 
improvements 
for  direct 
management of grants. 

the  procedures 

in 

For  a  detailed  list  of  actions  to  be  implemented, 
please  consult  DG  JLS's  AAR  2009  on  Europa 
(http://ec.europa.eu/atwork/synthesis/aar/index_en.ht
m) 

EN 

31 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
Financial management 

Subject 

Objective 

Initiative(s) to meet the objective 

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 

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

systems 

the 

Integrated  internal 
control framework 

Accounts 

Enhancing 
by 
a 

8. 
accountability 
establishing 
comprehensive 
integrated 
internal 
control  framework  in 
line 
the 
with 
requirements  set  out 
in the ECA’s opinions 
on ‘single audit’. 

as 

Increasing 
9. 
responsibility 
and 
accountability  at  the 
the 
level 
of 
Commission 
a 
whole  by  the  signing-
off of the accounts by 
Accounting 
the 
Officer 
by 
and 
improved  quality  of 
financial information. 

Responsible 
service(s) and 
timetable 

AGRI, 
MARE, REGIO, JLS 

EMPL, 

By July 2010 

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

of 

Continuous action 

Progress made in 2008 

in 

involved 

shared 
The  Directorates-General 
management of EU funds have continued their efforts 
at  coordination, 
including  by  developing  and 
implementing  joint  audit  strategies.  As  part  of  their 
work 
to  analyze  annual 
summaries submitted by Member States, updating the 
guidance  and  holding 
regular  meetings  with 
competent authorities. 

they  have  continued 

The  European  Court  of  Auditors  expressed  in  2009 
for  the  second  time  an  unqualified  opinion  on  the 
2008 accounting data of the Commission.  

The  accounting  quality  project  continued  in  2009. 
Services identified their main accounting risks and set 
up  detailed  action  plans  to  address  these  as  part  of 
their annual accounting control programmes.  

The  Accountant's  report  on  the  validation  of  local 
systems for 2009 confirmed that these in general are 
steadily  improving.  Most  local  systems  have  been 
validated  but  further  improvements  are  needed  in 
DGs  JLS  and  RELEX,  whose  systems  have  not  yet 
been 
although  progress  on 
outstanding issues is being recorded.  

fully  validated, 

The  average  payment  time  has  fallen  significantly; 
from 34 days in 2008 to 26 days in 2009. 

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32 

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Annex 3: Executive and Regulatory Agencies 

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 within a clear institutional framework, governed by a single legal 
base21. 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  Commission's  responsibility  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 of 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 exist:  

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

known as IEEA); 

•  the Executive Agency for Health and Consumers (EAHC – formerly known as PHEA); 

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

•  the European Research Council Executive Agency (ERCEA); 

•  the Research Executive Agency (REA); 

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

All these executive agencies were operational in 2009. Their Annual Activity Reports, which 
were  attached  to  those  of  their  parent  DG22,  did  not  indicate  any  particular  control  issues. 
ERCEA  and  REA  reported  a  need  to  continue  building  up  their  internal  control  system  in 
2010, which is natural considering that these two agencies became operational only in 2009. 

The breakdown of staff employed at 31/12/2009 by the executive agencies was as follows:  

21 

22 

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). 
EACI (parent DGs: ENTR, ENV, TREN); EAHC (parent DG: SANCO); EACEA (parent DGs: EAC, 
INFSO,  AIDCO);  ERCEA  (parent  DG:  RTD);  REA  (parent  DGs:  RTD,  ENTR);  TEN-TEA  (parent 
DG: TREN). 

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33 

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Contractual 
agents 

Seconded 
national 
experts 

Total 

Temporary 
agents (officials 
seconded by the 
Commission and 
agents recruited 
by the agency) 

EACI 

EAHC 

EACEA 

ERCEA 

REA 

TEN-TEA 

28 

11 

91 

93 

72 

31 

Total  

326 

113 

37 

304 

162 

238 

60 

914 

0 

0 

0 

7 

0 

0 

7 

141 

48 

395 

262 

310 

91 

1247 

The Commission's "screening" of human resources of April 2007 suggested that there were no 
strong candidates for a new executive agency23. If new needs appear, the starting point would 
be to explore the option of extending the scope of an existing executive agency to cover a new 
programme.  Under  the  current  circumstances,  it  is  however  unlikely  that  new  executive 
agencies  will  be  needed  during  the  period  of  the  current  financial  framework  to  2013.  The 
2009 follow-up report indicated that in 2009 the Commission respected its 2007 commitment 
not  to  create  new  executive  agencies  beyond  those  foreseen  to  cope  with  a  doubling  of  the 
Research budget and some limited extensions of the mandate of existing executive agencies. 

A 2009 special report24 by the European Court of Auditors examined the executive agencies. 
The  report  concludes  that  agencies  provide  better  service  delivery  than  the  Commission 
(reduced contracting time, more rapid approval procedures, shorter payment times) and also 
offer the advantages of simplified processes and increased external visibility for EU actions. 
Less  positively,  it  suggests  that,  despite  these  achievements  the  initiative  to  set  up  the 
executive agencies was mainly driven by constraints on employment within the Commission 
and  the  will  to  save  costs  for  the  management  of  the  programmes  concerned.  The  report 
confirms  that  externalisation  to  Executive  Agencies  has  effectively  resulted  in  cost  savings, 
which, however, are difficult to quantify due to a lack of reliable data for the ex-ante situation.  

The 30 regulatory agencies are independent legal entities. 25 of these agencies receive funds 
from  the  European  Union  budget  and  are  therefore  granted  discharge  by  the  European 
Parliament in individual discharge decisions. The remaining five agencies do not receive EU 
funding  and  thus  do  not  receive  discharge  by  the  European  Parliament  (two  of  these 

23 
24 

SEC(2007) 530 "Planning & optimising Commission human resources to serve EU priorities". 
Special report 13/2009: "Delegating implementing tasks to Executive Agencies: a successful option?" 

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34 

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agencies25  are  fully  self-financed,  and  three26  are  funded  on  an  intergovernmental  basis  and 
financed directly by the participating Member States).  

In  a  Communication  of  March  2008  entitled  "EU  agencies:  the  way  forward"27  the 
Commission  drew  attention  to  the  lack  of  a  common  vision  on  the  role  and  functioning  of 
regulatory  agencies.  It  announced  a  moratorium  on  creating  new  agencies  and  a  horizontal 
evaluation of regulatory agencies.  

The  evaluation  was  finalised  in  December  2009.  It  reported  that  there  is  no  single  legal 
framework  governing  the  establishment  and  closure  of  EU  de-centralised  agencies,  and  that 
alternatives  to  creating  agencies  were  paid  limited  attention  until  impact  assessments  came 
into practice. Furthermore, a number of chosen location sites for the agencies were assessed 
as inefficient. As regards agencies' effectiveness, the report concluded that the activities of the 
majority  of  agencies  are  coherent  with  their  mandate,  and  that  in  general  there  was  clear 
evidence that agencies have achieved the planned outputs. The evaluation further considered 
that in order to operate efficiently with regards to the administrative tasks, an agency needs to 
reach a certain critical size, somewhere between 50 and 100 staff. Finally, it was found that 
monitoring  was  not  very  well  developed  in  terms  of  the  use  of  quantifiable  objectives  and 
indicators. 

The  2008  Communication  also  proposed  to  establish  an  inter-institutional  working  group  to 
set  ground  rules  to  apply  to  all  regulatory  agencies.  The  inter-institutional  Working  Group 
was  set  up  in  March  2009  between  the  European  Parliament,  the  Council  of  the  European 
Union and the Commission with a view to assessing the existing situation and in particular the 
coherence,  effectiveness,  accountability  and  transparency  of  these  Agencies,  and  finding  a 
common ground on how to improve their work. The group was called to address a number of 
key issues put forward by the participating Institutions, including the role and position of the 
agencies in the EU's institutional landscape, their creation, structure and operation, as well as 
funding, budgetary, supervision and management issues.  

Further  to  the  kick-off  meeting  at  political  level  held  in  Strasbourg  on  10  March  2009, 
technical work started in spring 2009 and will continue during 2010. The reports produced so 
far are expected to be endorsed by the political meeting in 2010. 

In  March  2010,  the  European  Parliament's  Committee  on  Budgetary  Control28  adopted  a 
decision to grant all agencies discharge for 2008, with the exception of the European Police 
College (CEPOL) whose discharge decision was postponed. 

CEPOL's  2008  accounts  received  a  qualified  opinion  in  2009  from  the  European  Court  of 
Auditors,  for  the  second  year.  The  DG  responsible  for  the  grant  contribution  to  CEPOL's 
running costs (DG JLS) reported that the situation of CEPOL in 2009, where only 43.6 % of 
the payment appropriations were used due to an unstable organisational environment, required 
particular attention. In accordance with the applicable financial regulations and with a view to 

25 

26 

27 

28 

The Office for Harmonisation in the Internal Market (OHIM) and the Community Plant Variety Office 
(CPVO). 
The European Institute for Security Studies (ISS), the European Union Satellite Centre (EUSC) and the 
European Defence Agency (EDA). 
Communication from the Commission to the European Parliament and the Council: European Agencies 
– the way forward - COM(2008) 135. 
At its meeting of 22-23 March 2010. 

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35 

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obtain  a  better  estimate  of  the  cash  requirements,  a  Memorandum  of  Understanding  was 
signed  in  2009  between  DG  JLS  and  CEPOL.  New  management  took  up  posts  in  CEPOL 
during 2009, with a view to address the situation. Nevertheless, considering the residual risks 
while awaiting that the new arrangements would become effective, JLS maintained CEPOL as 
a "reputational event" in its 2009 AAR. 

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36 

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Annex 4: Report on negotiated procedures 2009 

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 (AAR) referred to in Article 60.7 of the Financial Regulation. 

2. 

METHODOLOGY 

A  distinction  has  been  made  between  the  43  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  (different  legal  basis:  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 
(decentralised services, …), the total number of contracts concluded, thresholds to be applied 
for  the  recording  of  negotiated  procedures  (€10 000),  as  well  as  th e  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 three Directorates-general. 

3. 

OVERALL RESULTS OF NEGOTIATED PROCEDURES RECORDED 

3.1. 

The  43  Directorates-general,  services  or  offices,  excluding  the  three  "external 
relations" Directorates-general 

On  the  basis  of  the  data  received,  the  following  statistics  were  registered:  143 negotiated 
procedures  with  a  total  value  of  €  577  m illion  were  processed  out  of  a  total  of  1196 
procedures (negotiated, restricted or open) for contracts over 60,000€ with  a total value of € 
2370 million.  

For  the  Commission,  the  average  proportion  of  negotiated  procedures  in  relation  to  all 
procedures amounts to 12.0% in number, which represents some 24.4% of all procedures in 
value. 

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  2009  was  fixed  at  17.9%  (12.8%  in 
2008). 

Some  11  Directorates-general  or  services  out  of  the  43  exceeded  the  reference  threshold  in 
2009. Among those, it should be noted that 3 Directorates-general concluded only one to three 
negotiated procedures, but because of the low number of contracts awarded by each of them, 
the average was exceeded. In addition, 18 out of 43 Directorates-general have not  used any 
negotiated procedure, including 5 DG that awarded no contracts at all. Furthermore, 11 DG 

EN 

37 

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have  recorded  a  substantially  lower  percentage  (less  than  5%)  of  negotiated  procedures  in 
terms of value than the Commission average (24.4%). 

The assessment of  negotiated  procedures compared with the previous year (2008) shows an 
increase in the order of 3.4 percentage points in number and 19.3 percentage points in terms 
of value. This follows a continuous decrease in 2007 and 2008.  

3.2. 

The three "external relations" Directorates-general 

On  the  basis  of  the  data  received,  the  following  statistics  were  registered:  298 negotiated 
procedures for a total value of contracts €290 m illion were processed out of a total of 1096 
procedures for contracts over 10 000€ with  a total value of about € 1161 million.  

For  the  three  "external  relations"  Directorates-general,  the  average  proportion  of  negotiated 
procedures in relation to all procedures amounts to 27.2% in number, which represents some 
25.0%  of  all  procedures  in  value  terms.  Only  one  Directorate-general  exceeds  the  reference 
threshold of 40.8% (average + 50%).  

If compared with previous years, these Directorates-general have registered a clear increase of 
20.2 points 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. 

The increase in number (and in value) of negotiated procedures in 2009 compared to 2008 is 
partly  explained  by  the  high  number  of  renewals  of  framework  contracts,  which  happen 
periodically  (normally  every  4  years).  This  is  particularly  true  for  IT,  nuclear  energy,  the 
space  programme  and  the  financial  sector.  The  latter  was  also  exposed  to  emergency 
procedures due to the financial crisis.  

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

•  Regular update of standard model documents and guidance documents.  

•  Training  and  improved  inter-service  communication.  The  Central  Financial  Service 

provided regular practical training sessions on procurement.  

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38 

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

•  permanent exchange of information; 

•  ad-hoc surveys prior to the initiation of procurement procedures for the evaluation 

of needs; 

•  where necessary, attribution of separate quotas for framework contracts within the 
Commission’s  overall  ceiling  to  entities  with  specific  needs  or  with  a  specific 
budgetary environment (e.g. JRC or some Offices). 

•  Phase-out  from  situations  of  technical  captivity.  The  "captivity  mitigation  study"  has 
been delivered in 2009. Its conclusions should enable the application of a methodological 
framework for assessing technical captivity in specific cases. 

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39 

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Annex 5: Summary of Waivers of recoveries of established amounts receivable in 2009  

(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 2009.  

EC budget: 

Directorate-General/Service  

Amount of waivers in € 

Number of waivers 

AGRI 
AIDCO 
COMP 
EAC 
EACEA 
ECHO 
ELARG 
EMPL 
ESTAT 
INFSO 
REA 
REGIO 
RELEX 
RTD 
TREN 

European Development Fund: 

Total: 

1.239.974
7.711.454
13.878.857
614.518
948.294
240.000
176.996
139.479
787.549
370.476
1.539.329
229.667
1.600.000
1.411.573
205.043
31.093.209

2 
8 
4 
5 
6 
1 
1 
1 
1 
3 
1 
1 
2 
5 
1 
42 

Directorate-General/Service 

Amount of waivers in €

Number of waivers 

EDF 

443.254

2 

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Annex 6: 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 
Regulation29 (hereinafter IR), and exceptionally in sector-specific regulations. Under Article 
106  IR,  payments  must  be  made  within  45  calendar  days  from  the  date  on  which  an 
admissible payment request is registered or 30 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 (i.e. the interim and/or final payment), the time limit does not start until the report 
or  certificate  in  question  has  been  approved30.  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 months31.  

Following  the  revised  Implementing  Rules,  which  entered  into  application  on  1  May  2007, 
compliance  with  payment  time  limits  was  reported  for  the  first  time  by  the  Services  in  the 
2007 Annual Activity Reports32.  

The table below  shows  the  evolution of payments made after expiration  of the statutory 
time limit (i.e. late payments) during the three last years, based on statistics extracted from 
the ABAC accounting system: 

2007 

payments 

Late 
number 

in 

22,6 % 

2008 

22,7 % 

2009 

14,0 % 

payments 

in 

11,5 % 

14,0 % 

6,8 % 

Late 
value 

Average  number  of 
overdue days33 

48,0 days 

47,5 days 

39,2 days 

The table shows that in 2008 the late payments stabilised in number, but the average number 
of  overdue  days  remained  essentially  unchanged.  2009  however  saw  a  significant  drop  in 

29 

30 

31 

32 
33 

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. 
i.e. above the statutory time-limit. 

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41 

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late  payments,  both  as  regards  their  number  and  their  value.  Also,  the  average  number  of 
overdue days was reduced from 48 days in 2008 to 39 days in 2009. 

As regards interest paid for late payments (see statistics in the table below) the total amount 
paid  by  the  Commission  rose  significantly  in  2008,  due  to  the  fact  that  as  from  01/01/2008 
payment  of  interest  for  late  payments  became  automatic  and,  in  principle34,  no  longer 
conditional  upon  the  presentation  of  a  request  for  payment.  This  trend  continued  in  2009, 
despite the reduction in late payments. 

2007 

2008 

2009 

378 000 € 

576 000 € 

808 000 € 

Interest  paid  for  late 
(rounded 
payments 
amounts) 

The  causes  of  late  payments  include  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.  

In  its  April  2009  Communication35,  the  Commission  announced  its  intention  to  reduce  its 
payment times further beyond the statutory time limits, aiming 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).  

•  all other payments within 30 days, compared with the statutory time limit of 45 days. 

The Communication has provided a clear incentive to services to reduce their payment 
times,  as  can  be  seen  by  the  fact  that  in  2009,  the  global  average  payment  time  fell 
significantly (from 34 days to 26 days) as well as the number of late payments (from 23 % to 
14 % of all payments). 

34 
35 

With the exception of small amounts (below 200 euros in total). 
Communication  from  Mrs  Grybauskaite:  "Streamlining  financial  rules  and  accelerating  budget 
implementation to help economic recovery" - SEC(2009) 477, 8.4.2009. 

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