COMMISSION STAFF WORKING PAPER accompanying the REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT and THE COUNCIL on the follow-up to 2008 discharge – Replies to requests from the Council  {COM(2010) 650}
Date: 2010-11-18
Institutions: European Commission
Subjects: budgetary discharge, financial year, general budget, implementation of the budget

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EUROPEAN COMMISSION 

Brussels, 18.11.2010 
SEC(2010)1437 final 

COMMISSION STAFF WORKING PAPER 

accompanying the REPORT FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT and THE COUNCIL on the follow-up to 2008 discharge – Replies to 
requests from the Council 

{COM(2010) 650} 

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TABLE OF CONTENTS 

INTRODUCTION...................................................................................................................... 1 

COMMISSION  STAFF  WORKING  PAPER  accompanying  the  REPORT  FROM  THE 
COMMISSION TO THE EUROPEAN PARLIAMENT and THE COUNCIL on the 
follow-up to 2008 discharge – Replies to requests from the Council .......................... 2 

Introduction....................................................................................................................... 3 

Chapter 1 - The Statement of Assurance (DAS) and supporting information.................. 6 

Chapter 2 - Commission internal control system.............................................................. 8 

Chapter 3 - Budgetary Management............................................................................... 10 

Chapter 4 - Revenue ....................................................................................................... 12 

Chapter 5 - Agriculture and Natural Resources.............................................................. 13 

Chapter 6 - Cohesion ...................................................................................................... 18 

Chapter 7 - Research, Energy and Transport.................................................................. 22 

Chapter 8 - External aid, Development and Enlargement .............................................. 25 

Chapter 9 - Education and Citizenship ........................................................................... 27 

Chapter 10 - Economic and Financial Affairs ................................................................ 28 

Chapter 11 - Administrative and other expenditure........................................................ 30 

Special Report No. 8/2008 "Is cross compliance an effective policy?" ......................... 32 

Special Report No. 9/2008 "The effectiveness of EU support in the area of freedom, 

security and justice for Belarus, Moldova and Ukraine".................................. 33 

Special Report No. 10/2008 "EC development assistance to health services in Sub 

Saharan Africa"................................................................................................. 34 

Special Report No. 11/2008 "The management of the European Union support for the 

public storage operations of cereals" ................................................................ 40 

Special Report No. 12/2008 "Instrument for Structural Policies for Pre-accession 

(ISPA), 2000-2006" .......................................................................................... 41 

Special Report No. 1/2009 "Banking measures in the Mediterranean area in the context 

of the MEDA programme and the previous protocols".................................... 42 

Special Report No. 2/2009 "The European Union's Public Health Programme (2003-

2007): an effective way to improve health?".................................................... 43 

Special Report No. 3/2009 "The effectiveness of Structural measures spending on waste 
water treatment for the 1994 1999 and 2000-2006 programme periods"......... 46 

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Special Report No. 4/2009 "The Commission's management of non-state actors' 

involvement in EC development cooperation"................................................. 48 

Special Report No. 5/2009 "The Commission's Treasury Management"....................... 51 

Special Report No. 6/2009 "European Union food aid for deprived persons: an 

assessment of the objectives, the means and the methods employed" ............. 53 

Special Report No. 7/2009 "The management of the Galileo programme's development 

and validation phase"........................................................................................ 54 

Special Report No. 9/2009 "The efficiency and effectiveness of the personnel selection 

activities carried out by the European Personnel Selection Office"................. 55 

Special Report No. 10/2009 "Information provision and promotion measures for 

agricultural products" ....................................................................................... 58 

Special Report No. 11/2009 "The sustainability and the Commission's management of 

the LIFE-Nature projects" ................................................................................ 59 

Special Report No. 12/2009 "The effectiveness of the Commission's projects in the area 
of Justice and Home Affairs for the Western Balkans".................................... 60 

Special Report No. 13/2009 "Delegating implementing tasks to executive agencies: a 

successful option?" ........................................................................................... 62 

Special Report No. 14/2009 "Have the management instruments applied to the market in 
milk and milk products achieved their main objectives?"................................ 65 

European Development Funds........................................................................................ 66 

Requests concerning individual agencies ....................................................................... 67 

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INTRODUCTION 

This  Commission  Staff  Working  Paper  completes  the  Report  from  the  Commission  to  the 
European  Parliament  and  the  Council  on  the  Follow-up  to  2008  Discharge  {COM(2010) 
650}. It presents in detail the answers to the 126 specific requests made by the Council in the 
comments accompanying its Recommendations on the 2008 Discharges.1 

1 

For  each  specific  recommendation  a  reference  is  given  to  the  relevant  Council  document.  The 
references for recommendations 1 to 50 are all for Council document 5826/10 "Discharge to be given to 
the Commission in respect of the implementation of the budget for the financial year 2008" 

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COMMISSION STAFF WORKING PAPER accompanying the REPORT 
FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT and 
THE COUNCIL on the follow-up to 2008 discharge – Replies to requests 
from the Council 

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Introduction 

1. 

(Council Doc. 5826/10 ADD 1, § 1, 2nd paragraph, page 5, § 3, page 6, §§ 5 and 8, 
page  7  (and  chapter  2,  §  3,  pages  13-15))  -  The  Council  welcomes  the  notable 
improvements  in  the  management  and  control  of  funds,  showing  evidence  of  the 
progress  made  towards  the  principal  objective  of  achieving  a  positive  DAS.  It 
acknowledges that it would be unrealistic to obtain immediate effects of the remedial 
actions  taken  by  the  Commission  and  the  Member  States.  The  Council  urges  all 
responsible actors to continue to improve the financial management of EU funds. 

The Council stresses the continuing need for simplification of expenditure schemes. 
It  continues  to  encourage  the  Commission  to  propose  clear  and  simple  rules  and 
regulations  whenever  possible,  both  at  the  moment  of  setting  up  new  programmes 
and  when  revising  existing  regulations  and  programmes.  Taking  note  of  the 
improvements already achieved and expected through the streamlined legislation for 
the  current  programming  period,  it  calls  for  further  efforts  in  the  preparation  of 
programmes for the next multiannual financial framework. 

However,  the  Council  draws  attention  to  the  necessity  to  maintain  an  appropriate 
balance  between  simplifying  eligibility  rules  and  targeting  expenditure  towards 
intended  objectives,  while  not  undermining  the  level  of  assurance  provided  by 
improved controls. 

The  Council  insists  on  the  importance  of  further  improving  the  efficiency, 
effectiveness and consistency of controls, in order to provide reasonable assurance of 
the sound financial management of funds by all parties involved. 

Moreover,  the  Council  is  of  the  opinion  that  the  control  burden  must  remain 
proportionate to the benefits derived from controls undertaken at different levels. It 
asks  the  Commission  to  cooperate  as  closely  as  possible  with  the  Member  States' 
authorities so that best use is made of all available information. 

The  Council  encourages  the  Commission  to  continue  its  work  on  the  concept  of 
tolerable  risk  of  error,  taking  into  consideration  the  balance  between  effectiveness 
and cost of controls, and looks forward to examining the Commission's proposals on 
this issue. 

Commission's response: 

The Commission fully supports and is vigorously pursuing the objectives sought by 
the  Council,  while  recognising  that  simplifying  rules,  targeting  expenditure  and 
maintaining  a  high  level  of  assurance  are  sometimes  conflicting  objectives  that 
must be carefully balanced. The Commission has already laid the groundwork in 
its  proposal  for  the  triennial  revision  of  the  Financial  regulation,  which  should 
enable rules to be better adapted to the needs of beneficiaries, and emphasise the 
importance of the output of programmes as well as the inputs through a wider use 
of  simplified  costs.  By  the  end  of  2010,  the  Commission  will  adopt  a 
Communication  examining  possible  ways  forward  in  lightening  the  burden  on 
small  beneficiaries  and  assisting  large  beneficiaries  in  achieving  a  high  level  of 
legality and regularity and sound financial management. 

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The  Commission  Communication  on  tolerable  risk  on  error  (TRE)  for  Research, 
energy and transport and Rural development was adopted on 26 May 2010 ("More 
or less controls?: Striking the right balance between administrative costs of control 
and  the  risk  of  error"(COM(2010)261).  The  Commission  will  present  TRE 
proposals  for  each  major  policy  area:  for  Administrative  expenditure  before  the 
end of 2010; for External aid, Development and Enlargement in the beginning of 
2011  and  progressively  for  the  remaining  sectors,  including  Cohesion,  later  in 
2011. 

Finally,  the  Commission  is  committed  to  continuing  its  continuous  effort  of 
improving its internal control systems, as it has already proven through the Action 
Plans of the past years. 

2. 

(Council Doc. 5826/10 ADD 1, §6, page 7) - The Commission and the Court should 
promote  better  coordination  between  them  on  audits  in  order  not  to  duplicate  audit 
efforts.  Moreover,  they  should  continue  to  cooperate,  in  full  respect  of  their 
individual competences and independence, towards a common understanding of the 
legislation. 

Commission's response: 

The  Commission  has  taken  the  recommended  action.  It  works  closely  with  the 
Member  States  and  the  Court  of  Auditors  on  the  guidance  it  issues  on  the  rules 
and procedures governing the use of Cohesion policy funding. It routinely consults 
Member  States  on  guidance  documents  through  the  various  management  and 
technical  committees.  The  Court  is  invited  to  and  does  attend  such  meetings  as 
well.  On  important  issues  or  new  procedures  the  Commission  seeks  the  Court’s 
opinion specifically, as it is doing for example on the new provisions for simplified 
cost options such as flat rates or on the evaluation of the audit enquiry performed 
on 2007-2013 expenditure by the Commission.  

The  Commission  also  organises  training  events  for  Member  States  to  help 
disseminate guidance  and spread good  practices. An example was the “Train the 
trainers”  seminar,  with  various  specialised  workshops  in  June  2009  or  the 
technical meeting on closure requirements for the 2000-2006 period in December 
2009  which  was  attended  by  representatives  of  winding-up  bodies  of  all  Member 
States.  

The  Commission  and  the  Court  of  Auditors  have  put  their  cooperation  on  a 
permanent  footing  with  so-called  ”inter-institutional  colloquia”  at  which  they 
discuss  questions  of  mutual  concern  such  as  audit  methodology  and  assessment 
and  interpretation  issues.  Such  colloquia  are  held  on  average  twice  a  year.  The 
most recent one took place on 14 January 2010. Some of the issues discussed are 
prepared by joint working groups. Such a working group developed a harmonised 
systems  assessment  methodology,  which  lays  down  the  criteria  to  be  applied  in 
arriving  at  opinions  on  the  quality  of  systems  in  system  audits.  Member  States' 
audit  authorities  have  been  encouraged  to  apply  the  same  methodology.  There  is 
also a standing working group on interpretation questions. This attempts to resolve 
differences  of  interpretation  that  arise  in  the  discussion  of  the  audit  findings 
underlying the Court’s annual report. Topics currently being discussed include the 
provisions on simplified cost options, the results of the closure audits for the 1994-

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1999 period and public procurement issues. Since 2008 the DAS findings reported 
in the Court's annual report have been discussed beforehand in tripartite meetings 
involving the Court, the Commission and the Member States. 

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

3. 

(Council  Doc.  5826/10  ADD  1,  §1,  1st  and  2nd  paragraph,  page  8)  -  The  Council 
encourages  the  Commission  to  assure  that  this  high  quality  of  EU  accounts  is 
maintained.  

While  valuing  the  Commission's  efforts  to  improve  the  accounting  control 
environment  at  the  level  of  its  Directorates-General  which  have  contributed  to  a 
strengthening  of  the  financial  reporting  framework  and  accounting  systems,  the 
Council asks the Commission to take further steps towards the closing of outstanding 
cross-cutting  issues  relating  to  interfaces  between  local  financial  management 
applications and the central accounting system, in order to minimise the risk to the 
reliability of the accounts, as well as towards the improvement of the quality of basic 
accounting  data,  notably  regarding  the  correct  application  of  "cut-off"  principles 
during the closure procedure. 

Commission's response: 

The  quality  of  the  accounting  data  is  being  closely  followed-up  within  the 
Commission.  The  existing  local  financial  management  applications  are  already 
subject  to  a  validation  process  with  a  view  to  ensuring  their  consistency  with  the 
central  accounting  system.  Also,  the  services  of  the  Accounting  Officer  are 
continuously  monitoring  the  application  of  "cut-off"  principles  throughout  the 
Directorates General. 

4. 

(Council  Doc.  5826/10  ADD  1,  §1,  3rd  paragraph,  page  8)  -  The  Commission 
should improve the completeness and accuracy of the basic accounting data, notably 
on  pre-financings  and  the  recovery  of  undue  payments.  Furthermore,  the  Council 
stresses  the  need  for  a  timely  transfer  of  the  assets  of  the  EGNOS  and  Galileo 
programmes to the Commission's accounts. 

Commission's response: 

The  Commission  has  continued  with  its  accounting  quality  project  which  has 
improved  the  underlying  accounting  data  used  in  preparing  the  2009  accounts. 
More detailed information on the recovery of undue payments was also included in 
the 2009 accounts. The EGNOS assets were transferred to the Commission during 
2009  and  have  therefore  been  included  on  the  Commission's  balance  sheet  at 
31/12/2009. The transfer of the Galileo assets is not foreseen until 2012. 

5. 

(Council  Doc.  5826/10  ADD  1,  §2,  5th  paragraph,  page  10)  -  The  Commission 
should indicate in the annual accounts the volume of recoveries from previous years, 
including recoveries relating to funds under shared management.  

Commission's response: 

Extensive information on the recovery of undue expenses has been included in the 
2009 annual accounts. 

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6. 

(Council Doc. 5826/10 ADD 1, §3, 4th paragraph, page 11) - The Court of Auditors 
and  the  Commission  should  intensify  their  coordination  and  cooperate  closer  with 
national  authorities,  with  the  aim  of  making  best  possible  use  of  the  results  of 
controls  and  audits  carried  out  at  national  level,  while  respecting  the  individual 
competences and independence. 

Commission's response: 

While  fully  respecting  independence  and  national  sovereignty,  an  enhanced 
cooperation  with  national  authorities  on  audit  and  control  of  EU  funds  could 
further  the  single  audit  concept  and  the  awareness  at  national  level  of  the 
importance  of  sound  financial  management  of  EU  funds.  To  promote  the 
cooperation  the  Commission  provides  annual  payment  data  to  the  national 
Supreme Audit Institutions (SAIs) and Finance Ministries and examine with these 
recipients, as well as other national audit bodies, how to further "add value" to the 
information  provided  and  to  the  audit  process  more  generally.  The  Commission 
furthermore encourages developing cooperation between Commission services and 
SAI or other national audit bodies to make best use of existing audit evidence and 
resources.  The  Commission  proposal  for  the  triennial  revision  of  the  Financial 
Regulation  also  lays  down  strengthened  provisions  on  control  and  audit 
obligations of the Member States, as required by Article 317 of the Treaty on the 
functioning  of  the  EU,  which  also  includes  a  proposal  for  an  involvement  of 
national audit bodies. 

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Chapter 2 - Commission internal control system 

7. 

(Council  Doc. 5826/10 ADD 1, §2, 2nd paragraph,  page 13) - The Council recalls 
the  Court's  suggestion  to  the  Commission  to  add  value  to  the  process  of  annual 
summaries by identifying common problems, possible solutions or best practices and 
using this information in its supervisory role. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  It  considers  that  annual 
summaries can be a means for improving accountability in shared management if 
its guidelines are followed by Member States. 

The  Commission  has  provided  information  on  the  annual  summaries  in  its  2009 
Report  on  the  implementation  of  the  Action  Plan  towards  an  integrated  internal 
control  framework  (COM(2009)42)  and  in  the  Annual  Activity  Reports  of  the 
Directorates General.  

The  Commission  revised  its  guidance  on  annual  summaries  and  presented  it  to 
Member  States 
into  account 
recommendations of the study commissioned by the European Parliament, such as 
emphasizing the value-added elements and reducing redundant information. 

in  October  and  December  2009, 

taking 

Finally, while significant progress has been made, the Commission considers that 
the current added value of annual summaries is limited and that a stronger legal 
base is necessary to make further progress. The triennial revision of the Financial 
Regulation in 2010 could provide an opportunity for this. 

For  Agriculture  the  guideline  regarding  the  establishment  of  the  annual 
summaries is revised (for clarification purposes) on an annual basis in the light of 
the  experiences  of  the  previous  exercise.  Moreover,  the  guideline  is  further 
explained on the occasion of an annual conference with the directors of the paying 
agencies  and  the  coordinating  bodies.  Since  2008  reporting  year,  Coordination 
Bodies in the Member States are required, in their annual summaries, to address 
cross cutting issues. 

8. 

(Council Doc. 5826/10 ADD 1, §3, 5th paragraph, page 14) - The Council welcomes 
the  measures  taken  by  the  Commission  to  provide  training  for  staff  involved  in 
controls for the managing and certifying authorities of the Member States, enabling 
participants to give guidance and disseminate best practices. It believes that this work 
contributes  to  strengthening  the  capacities  of  the  staff  at  all  levels  of  control  and 
invites the Commission to continue these efforts. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  It  considers  appropriate  training 
for national authorities of utmost importance in the context of shared management 
of  the  structural  funds.  It,  therefore,  welcomes  the  positive  reference  of  the 
Council. Since the beginning of the current programming period the Commission 
has provided regular and early training and guidance to the competent authorities 

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in  the  Member  States.  Specific  training  actions  were  also  foreseen  in  the 
Commission Action Plan adopted in February 2008 (COM(2008)97) in that regard 
and are carried out on a regular basis. 

9. 

(Council  Doc.  5826/10  ADD  1,  §3,  9th  paragraph,  page  15)  -  The  Council 
underlines  the  importance  of  ensuring  that  the  supervisory  and  control  systems 
address  the  risks  effectively  at  all  implementation  levels  and  that  in  this  regard  the 
attention is primarily directed to those expenditure areas where a high level of errors 
is reported. 

Commission's response: 

The  Commission  agrees  that  increasing  the  effectiveness  of  supervisory  and 
control systems at all levels is a key prerequisite for further reducing error rates. 
The  Commission  has  already  taken  determined  action  to  improve  its  internal 
control  systems  over  the  last  few  years,  notably  through  the  Action  Plan  towards 
an integrated internal control framework (COM (2006) 9) and the Action Plan for 
structural actions (COM (2008) 97), which both have contributed to a significant 
overall  strengthening  of  the  supervisory  and  control  systems  (see  the  "impact 
reports" on the action plans; COM (2009) 43 and COM (2010) 52, respectively). 

As a result of the action plans, Commission services have been motivated to look 
critically  at  their  controls  and  supervision  and  to  engage  in  a  process  of 
continuous improvement with a view to mitigating the risks better. This attitude is 
further  reinforced  by  the  two  compulsory  annual  exercises,  where  each  service 
identifies  its  main  risks  (within  the  framework  of  the  Management  Plan)  and 
where it justifies the reasons underlying the financial assurance it provides (in the 
Annual Activity Report). 

The Commission will continue to drive this improvement process, in particular in 
the expenditure areas still affected by a high error level. In fact, in response to a 
European Parliament request, it has committed to increase by 20% the expenditure 
share  assessed  as  "green"  by  the  Court  of  Auditors  by  2014.  To  reach  this 
ambitious  objective,  Commissioners  Šemeta  and  Lewandowski  have  outlined  the 
following  priority  actions  (see  their  note  of  2  March  2010),  all  of  which  should 
have an impact on the areas with high error rates; requiring annual management 
declarations  of  assurance  from  the  managing  bodies  in  Member  States, 
introducing  further  simplification  for  grants  by  allowing  simplified  costs, 
providing  better  information  on  financial  corrections  and  recoveries,  and 
presenting concrete proposals for a tolerable level of error in all expenditure areas. 
The Commission is looking forward to a fruitful cooperation with the Legislative 
Authority in order to achieve progress on these proposals. 

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Chapter 3 - Budgetary Management 

10. 

(Council  Doc.  5826/10  ADD  1,  1st  and  2nd  paragraphs,  page  16)  -  The  Council 
notes  that  the  implementation  level  of  the  2008  budget  is  similar  to  the  spending 
rates in 2007. However, the Council expects the impact of amending budgets in the 
implementation rate to appear more clearly in order to give a more accurate picture. 
Moreover,  transparency,  consistency  and  comparability  of  the  information  on 
implementation  and  surplus  should  be  improved  by  reconciling  the  figures 
mentioned  in  the  different  documents.  The  Council  considers  it  appropriate  to 
present all information needed to calculate different implementation rates throughout 
the whole budgetary procedure, from the draft budget presented by the Commission 
to the final authorised appropriations. 

The  Council  reiterates  that  over-budgeting  has  to  be  avoided  and  insists  that  a 
realistic budgeting from the stage of the draft budget presented by the Commission 
onwards remains an essential element of good budgetary management. However, it 
shares  the  Court's  statement  that  reducing  appropriations  for  payments  through 
amending  budgets  represents  good  financial  management  by  adjusting  to  changes 
and reducing the budgetary surplus. 

Commission's response: 

The Commission has taken the recommended action. 

The  comparison  of  implementation  rates  calculated  from  initial  budget  and  from 
the  final  budget  per  Financial  Framework  Chapter  has  been  transparently 
presented in the Report on budgetary and financial management 2009, pp. 23-24. 

The  end-year  cut  of  payment  appropriations  in  2009  did  not  concern  Cohesion 
contrary to previous years, which shows realistic budgeting in this important field. 

As to the consistency and comparability of implementation reports and the surplus, 
it has to be noted that the surplus calculation cannot be read as a report on actual 
implementation. It is an accounting exercise with the sole objective of calculating 
the  amount  to  be  returned  to  the  Member  States  (budget  outturn)  from 
appropriations  which  include  all  revenue  and  all  expenditure,  even  third  party 
appropriations.  Therefore  the  calculation  remains  very  technical  requiring 
complicated  explanations  which  the  Commission  already  gives  to  the  Budget 
authority in the context of the relevant amending budget. 

11. 

(Council Doc. 5826/10 ADD 1, 4th paragraph, page 16) - The Council calls on the 
Commission  to  encourage  Member  States  to  transmit  the  remaining  compliance 
assessment documents of the Management and Control Systems as soon as possible, 
as  well  as  to  pursue  its  efforts  to  achieve  progress  in  the  compliance  assessment 
procedure. 

Commission's response: 

The  Commission  is  taking  the  recommended  action.  As  of  01/10/2010,  it  had 
accepted compliance assessment reports for 98,4% of the ERDF and 99,1% of the 

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ESF  programmes.  It  had  also  accepted  99,7% of  ERDF  and  100%  of  ESF  audit 
strategies. The exercise is therefore moving to its end and the Commission expects 
it to be concluded before the end of 2010. 

12. 

(Council Doc. 5826/10 ADD 1, 5th paragraph, page 17) - The Council welcomes the 
improvement of the accuracy of Member States' expenditure forecasts in the area of 
Structural  Funds,  notably  for  the  2000-2006  period.  It  encourages  the  Commission 
and the Member States to continue their efforts concerning the 2007-2013 period, in 
order to reduce the over-estimation rate. 

Commission's response: 

The Commission is taking the requested action. For 2009, the overall forecasting 
overestimation was 12% for the 2007-2013 period. The situation varies widely from 
one  Member  State  to  another.  The  12%  overestimation  is  to  be  considered  as  an 
improvement as compared to the 2008 figure (27%). The Commission will continue 
its efforts to improve Member States' expenditure forecasts. 

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Chapter 4 - Revenue 

13. 

(Council  Doc.  5826/10  ADD  1,  §1,  2nd  paragraph,  page  18)  -  Considering  the 
complexity of most cases of post-clearance recovery of customs duties, as well as the 
fact that many B-accounts are often kept by local customs offices, the examinations 
regularly performed by the Commission and the guidelines issued in December 2007 
are a useful response to the need to increase the awareness of using these accounts 
appropriately.  Therefore,  the  Commission  should  continue  its  surveillance  and 
guidance activities in order to ensure the correct establishment and recovery of duties 
taking into due consideration this complexity. 

Commission's response: 

Then  Commission  will  continue  to  verify  that  Member  States  correctly  maintain 
these accounts. Any weaknesses found will be addressed with the relevant Member 
States  and  any  necessary  guidance  given.  Where  appropriate  measures  will  be 
taken to recover any amounts of own resources or interest due. 

14. 

(Council  Doc.  5826/10  ADD  1,  §2,  2nd  paragraph,  page  19)  -  The  Commission 
should  continue 
long-standing 
reservations, which should result in significant progress in 2009, in order to speed up 
the lifting of VAT reservations. 

its  pro-active  approach  aiming  at  managing 

Commission's response: 

By the end of 2009 twelve of the thirty four long outstanding reservations had been 
lifted and action was underway to resolve at least a further four. Action was also 
taken  to  reduce  the  overall  age  of  the  reservation  population:  at  the  end  of  2009 
over 70% of the reservations in place had been set in either 2009 itself or during 
the preceding two years. 

15. 

(Council  Doc.  5826/10  ADD  1,  §3,  1st  paragraph,  page  19)  -  The  Council, 
welcoming  the  fact  that  a  very  considerable  number  of  reservations  related  to  GNI 
data were lifted in 2008 and 2009, encourages the Commission to continue its efforts 
to  further  improve  the  documentation  of  the  checks  that  it  performs  on  the 
reservations. 

Commission's response: 

The Commission is taking the requested action. The Commission is continuing its 
efforts  to  improve  the  documentation  of  the  checks  that  it  performs  on  the  GNI 
reservations. 

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Chapter 5 - Agriculture and Natural Resources 

16. 

(Council Doc. 5826/10 ADD 1, 4th paragraph, page 20) - The Council encourages 
the Commission and the Member States to continue addressing the weaknesses of the 
systems, most of which the Court assessed as partially effective, so that the positive 
trend observed persists in the present and in future years. 

Commission's response: 

The Commission is taking the requested action. 

The  constant  improvement  of  the  IACS  is  confirmed  by  the  results  of  the 
conformity audits which the Commission has carried out over the past years in all 
Member  States  but  Luxembourg  as  well  as  by  the  low  error  rate  indicated  in  the 
control statistics which it receives from Member States and which to a large extent 
are verified and validated by the certification bodies. 

The Commission found that for claim year 2008, significant deficiencies existed in 
the  IACS  in  Bulgaria  and  Romania.  As  a  result  these  two  Member  States 
established  action  plans  in  2009  which  have  been  closely  followed  by  the 
Commission. Since, however, the completion of these action plans is only foreseen 
for 2011 and there are already some delays in the implementation of the individual 
actions,  the  Director-General  of  DG  AGRI  made  a  reservation  for  the  IACS  in 
Bulgaria  and  Romania  in  his  2009  annual  activity  report,  based  on  the 
reputational risk for the Commission. 

Other Member States have deficiencies of a lesser nature in their IACS which do 
not  render  their  systems  ineffective  but,  rather,  perfectible.  Also  these  Member 
States have taken or are taking action to resolve their deficiencies. 

All  these  deficiencies  are  followed  up  through  conformity  clearance  procedures 
which ensure that the risk to the EU budget is adequately covered. 

With regard to rural development supervisory and control systems, the weaknesses 
in  Bulgaria  and  Romania  are  due  to  the  deficiencies  in  the  IACS,  for  which  a 
reservation  is  included  in  the  Directorate-General  for  Agriculture  and  Rural 
Development's Annual Activity Report for 2009. 

The control systems for the other six Member States audited by the Commission in 
2009 was found to be effective. 

However, there is scope for improvement for the following items: 

-  Respect  of  general  guidelines  set  out  in  the  working  document  regarding  agri-
environment  commitments  and  their  verifiability,  which  notably  provides  that 
several control tools need to be used in combination. 

- Continued efforts are required to provide simple and clear eligibility criteria and 
to inform beneficiaries about their obligations in a clear and unequivocal manner. 

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- Application  of  exhaustive administrative controls,  in particular as  regards agri-
environmental measures. 

- Improvement of quality of control reports to permit better traceability and clear 
conclusions of the controls carried out. 

17. 

(Council Doc. 5826/10 ADD 1, § 1, 2nd & 3rd paragraphs, page 21) - With a view 
to  addressing  specific  deficiencies, particularly within  the  SPS  and  SAPS  schemes, 
the  Council  considers  that  close  cooperation  between  the  Commission  and  the 
Member  States  is  crucial.  The  reliability  of  databases  and  the  correctness  of 
administrative  procedures  will  be  enhanced  mainly  by  providing  implementing 
entities and beneficiaries with clear and simple guidelines, particularly in relation to 
eligibility conditions. 

Moreover, the Council is of the opinion that a consistent interpretation of the rules in 
force  and  a  coordinated  approach  between  the  Commission  and  the  Court  are  key 
tools  for  improving  the  controls'  effectiveness  and,  at  the  same  time,  maximising 
their efficiency. 

Commission's response: 

The requested action has been taken. 

The Commission is on a continuing basis cooperating with the Member States to 
improve  the  SPS  and  SAPS  schemes.  In  relation  to  eligibility  of  areas  for  the 
schemes  in  question  an  extensive  round  of  exchange  of  views  between  Member 
States  and  the  Commission  services  has  taken  place  during  4  meetings  of  the 
Management Committee for direct payments from December 2009 to March 2010. 
These  exchanges  of  views  based  on  current  experiences  covered  and  clarified 
various  aspects  related  to  the  rules  governing  eligibility  of  areas  for  payment. 
Furthermore, the documents prepared by the Commission services in this context 
gave  an  overview  of  the  legislation  in  force  and  provided  in  particular  a  state  of 
play of the implementation in the Member States. This covered good practices and 
showed  that  the  scope  of  the  elements  of  the  implementation  which  in  some 
Member  States  are  more  challenging  is  limited.  Possible  remedies  to  more 
challenging elements were also discussed. 

The Commission is in constant contact with both the Court and the Member States 
and,  in  this  context,  puts  great  emphasis  on  the  need  for  a  harmonised 
interpretation  and  application  of  the  EU  rules  regarding  the  management  and 
control of agricultural expenditure. 

18. 

(Council  Doc.  5826/10  ADD  1,  §2,  3rd  paragraph,  page  22)  -  With  respect  to  the 
method of calculating conformity adjustments, the Council asks the Commission to 
base  the  recoveries,  to  the  maximum  possible  extent,  on  the  actual  amounts  of  the 
irregular  payments  subject  to  appropriate  information  being  provided  by  Member 
States, reserving the application of flat-rate corrections to exceptional cases. 

Commission's response: 

The requested action has been taken. 

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Financial corrections are determined on the basis of the nature and gravity of the 
infringement  and  the  financial  damage  caused  to  the  EU.  The  amount  is 
calculated  on  the  basis  of  the  loss  actually  caused  or  on  the  basis  of  an 
extrapolation. Where this is not possible, flat-rates are used which take account of 
the severity of the deficiencies in the national control systems in order to reflect the 
financial risk for the EU. As agricultural expenditure is implemented under shared 
management, the Member States are better placed than the Commission to assess 
and provide evidence of the real financial loss or risk for the EU budget. A more 
precise  calculation  of  the  financial  loss  for  the  EU  budget  therefore requires  the 
active co-operation of the Member State concerned at all levels of the conformity 
clearance  procedure  because  only  the  Member  State  has  all  the  necessary 
information to make such a calculation. This is also reflected in the wording of the 
request itself. 

It should be noted in this context that in December 2009, the Commission has set 
out to Member States the conditions under which it is prepared to limit the amount 
of  any  financial  correction  to  the  error  rate  found  by  the  Member  States  in  the 
transactions  at  final  beneficiary  level  and  reported  in  its  control  statistics  for  the 
aid  scheme  concerned.  These  conditions  are  part  of  a  system  by  which  Member 
States  can,  from  2010,  reinforce  the  overall  framework  for  gaining  reasonable 
assurance  on  the  legality  and  regularity  of  transactions  at  the  level  of  final 
beneficiaries. To this end, the certification bodies should extend their work beyond 
the  present  requirements  by  fully  reperforming,  for  a  given  expenditure 
population,  a  representative  sample  of  transactions  which  the  paying  agency  in 
question has checked on the spot. The work would cover the entire handling of the 
file, from receipt of the aid application to the calculation and execution of the final 
payment. 

Since  the  reform  of  the  system  in  1996,  a  flat-rate  was  used  in  only  45%  of  all 
cases with a financial correction. If the last ten conformity decisions are taken, this 
percentage drops further to 37%. This demonstrates the Commission's continuous 
effort to limit the use of flat-rates as much as possible. 

19. 

(Council  Doc.  5826/10  ADD  1,  §  3,  4th  paragraph,  page  22)  -  Further  efforts  still 
need to be made and simplification remains a priority. 

Therefore,  the  Council  welcomes  the  additional  guidance  that  the  Commission  has 
been providing to Member States on how to implement agri-environmental measures, 
but keeps on calling for concrete, streamlined and practical tools to be supplied at the 
beneficiaries' level, such as user-friendly standard forms and timetables, in order to 
improve  the  common  interpretation  of  rules,  prevent  errors  and  improve  the 
effectiveness of the financial aid. 

Commission's response: 

The Commission is taking the requested action. 

Rural  development  measures,  and  notably  agri-environmental  ones,  are 
characterised  by  more  demanding  eligibility  criteria  compared  to  direct  payment 
schemes. The resulting complexity is known and accepted as a condition to achieve 

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the overall objective of providing environmental benefits and public goods through 
these aid schemes. 

Nevertheless,  there  is  scope  for  some  simplification  of  the  agri-environmental 
measures.  The  Commission  has  taken  several  measures  to  simplify  existing  rules 
and  to  ensure  effective  and  efficient  implementation  of  the  control  rules  in  rural 
development.  In  particular  Commission  Regulation  (EC)  1975/2006  has  for  the 
first time established a comprehensive and transparent legal control framework for 
rural development. Furthermore, the Commission has established in 2007 a final 
version  of  a  guidance  note  providing  guidelines  and  additional  explanations  for 
the 
implementation  of  agri-environmental  measures.  Best  practices  of 
controllability of agri-environmental measures are regularly discussed in the Rural 
Development Committee. Finally, the Commission has enhanced its audit activities 
in this area. 

Commission  Regulation  (EC)  1975/2006  will  be  recast  during  2010  in  order  to 
simplify  and  clarify  certain  rules.  In  addition,  as  part  of  DG  AGRI  2010  annual 
audit  work  programme,  a  task  force  has  been  set  up  to  follow  up  the  high  error 
rate  reported  by  certain  Member  States  in  2009  for  rural  development  measures 
under axis 2. 

However, it should be noted that rural development programmes are implemented 
under  shared  management  and  that  the  Community  legislation  only  provides  the 
general  legal  framework.  It  is  up  to  the  Member  States  to  define  the  application 
procedures and tools to be used. 

20. 

(Council Doc. 5826/10 ADD 1, § 4, 1st & 2nd paragraphs, page 23) - The Council 
emphasises  the  importance  of  continuing  to  improve  the  functioning  of  the  control 
strategy of Environment, Fisheries, Health and Consumer protection. 

Thorough ex-post audits are essential for detecting errors and to provide a basis for 
all  necessary  financial  corrections,  but  also  to  determine  the  origin  of  the  most 
recurrent errors in order to tailor preventive measures. 

Commission's response: 

DG ENV expects to reach its objective of more than 30 ex-post audit reports issued 
in  2010.  On  30  June  2010  23  reports  have  already  been  issued.  The  ex-post 
methodology  and  audit  plan  will  also  be  revised  for  2011  in  order  to  optimise 
controls. 

DG MARE, given the various management modes it has to operate, has established 
a  framework  audit  strategy  for  the  programmes  under  shared  management.  This 
strategy  reflects  the  overall  objective  to  be  achieved  through  a  specific  annual 
audit plan. The audit plan for 2010 foresees 14 audit assignments on the effective 
functioning  of  the  management  and  control  systems  and  the  quality  of  the 
Compliance exercise. The result of this audit activity with the consolidation of the 
information  obtained  from  other  sources  such  as  national  audit  reports,  annual 
control reports and opinion, results from other Structural Funds DGs on common 
authorities,  are  forming  a  solid  audit  environment  for  preventing  and  detecting 
errors. As regards the expenditure under direct management, an annual audit plan 

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is  established  based  on  a  risk  analysis  to  adequately  cover  risks  identified  from 
previous years' audit activity. The audit plan for 2010 foresees 7 audit assignments 
covering the four main activities under direct management. Audit results of 2008 
and  2009  allowed  the  DG  to  determine  the  origin  of  errors  and  to  tackle  them 
through  specific  actions  plans  with  preventing  and  correcting  measures 
implemented or being implemented. 

As for DG SANCO, in 2010 27 projects should be audited representing more than 
20%  of  the  concerned  operational  expenditure  and  5%  of  the  number  of 
transactions. These audits will be carried out partly by staff of DG SANCO and by 
an external audit company. 

In addition, whenever necessary, DG SANCO will also organise ex ante controls. 

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Chapter 6 - Cohesion 

21. 

(Council  Doc.  5826/10  ADD  1,  1st  &  3rd  paragraphs  of  page  24)  -  The  Council, 
being aware that again in 2008 at least 11% of the total amount reimbursed to 2000-
2006  Cohesion  policy  projects  should  not  have  been  reimbursed,  urges  the 
Commission  and  the  Member  States  to  remedy  this  situation  without  delay.  The 
Council urges the Commission and the Member States to make quick adjustments as 
soon as problems become apparent, notably following on-the-spot audits. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  The  error  rate  provided  by  the 
Court  of  Auditors  on  a  yearly  basis  is  the  result  of  an  extrapolation  based  on  its 
audit work conducted on a sample of transactions covering all Member States and 
all the funds under the Cohesion policy chapter. It may not be directly translated in 
a financial amount to be reimbursed. 

The  Impact  Report  to  the  2008  Action  Plan  (COM(2010)52)  shows  that  the 
Commission has improved its supervisory role, focusing on a series of actions that 
will bring the error rate down in the middle and long term. The Commission knows 
the main types and concentration of errors and it is taking action to address them. 
The Commission's supervisory work is concentrated on areas and countries which 
present  the  most  significant  weaknesses.  It  is  focusing  its  efforts  on  correcting 
errors  from  the  2000-2006  period  as  soon  as  they  arise  and  in  any  event  before 
closure.  For  the  2007-2013  period  the  Commission  has  focused  on  preventive 
action, such as the approval of the compliance assessments and the national audits 
strategies  of  the  Member  States.  Audit  results  on  the  implementation  2007-2013 
programmes show a clear decrease of the estimated error rate. The audit work of 
the  Structural  Funds  DGs  is  outlined  in  the  Joint  Audit  Strategy  for  structural 
actions. 

22. 

(Council Doc. 5826/10 ADD 1, §1, 1st paragraph, page 24) - The Council notes the 
Court's  findings  that  a major  part of the  estimated error rate is related to eligibility 
errors, such as conditions not met, failure to respect procurement rules and inclusion 
of non-reimbursable costs. The Council shares the Court's recommendation that the 
Commission  should  focus  the  guidance  given  to  the  Member  States  on  this  most 
frequent type of errors. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  It  considers  appropriate  training 
for national authorities of utmost importance in the context of shared management 
of the structural funds. Since the beginning of the current programming period the 
Commission  has  provided  regular  and  early  training  and  guidance  to  the 
competent  authorities  in  the  Member  States.  Specific  training  actions  were  also 
foreseen 
in  February  2008 
(COM(2008)97) in that regard and are carried out on a regular basis. 

the  Commission  Action  Plan  adopted 

in 

23. 

(Council  Doc.  5826/10  ADD  1,  §1,  2nd  paragraph,  page  25)  -  The  Council 
welcomes  the  fact  that  the  Commission  performs  its  supervisory  role  not  only 

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through  its  audit  activity,  but  also  through  programme  negotiations,  monitoring 
committees, meetings with managing and audit authorities, guidance and seminars. It 
encourages  the  Commission  to  continue  its  efforts.  Exchange  of  best  practices  and 
spreading of information have to be developed or further improved, and single points 
of contact could be created to promote the uniform interpretation of the procedures. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  It  considers  appropriate  training 
for national authorities of utmost importance in the context of shared management 
of the structural funds. Since the beginning of the current programming period the 
Commission  has  provided  regular  and  early  training  and  guidance  to  the 
competent  authorities  in  the  Member  States.  Specific  training  actions  were  also 
foreseen 
in  February  2008 
(COM(2008)97) in that regard and are carried out on a regular basis. 

the  Commission  Action  Plan  adopted 

in 

24. 

(Council  Doc.  5826/10  ADD  1,  §  1,  2nd  paragraph  of  page  25)  -  The  Council 
encourages  the  Commission,  in  cooperation  with  the  Member  States,  to  make 
concrete proposals aiming at further simplification of procedures, and to continue its 
efforts notably concerning simplified cost calculations. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  It  fully  agrees  and  has  already 
taken steps in order to translate in concrete action this recommendation. In 2008, 
the Commission set up a Task Force at Commission level between DG REGIO and 
DG EMPL, with the aim to identify specific measures to be adopted at legislative 
and  non-legislative  level  in  order  to  facilitate  the  financial  flows  to  beneficiaries 
and simplify the implementation of interventions, while ensuring the EU financial 
interests. This Task Force had several reflections and discussions with an Expert 
Group  on  Simplification,  composed  by  national  experts  from  managing 
authorities,  certifying  authorities  and  audit  authorities  in  the  Member  States. 
Several of the proposals discussed within the Task Force and the Expert Group are 
reflected  in  the  three  modifications  of  the  General  regulation,  the  amendment  of 
ESF  and  ERDF  regulations  as  well  as  the  amendment  of  the  Commission's 
implementing regulation. For simplified costs, which have a clear added-value in 
terms of implementation and controls, the adoption of the Commission guidelines 
on 28 January 2010 is expected to facilitate Member States' use of these options. 
In  parallel,  the  Commission  services  are  providing  their  ex-ante  assessment  on 
national  proposals  for  the  calculation  of  indirect  costs  on  a  flat-rate  basis, 
trainings and, if needed, assistance to national authorities. 

Simplification  of  the  regulatory  framework  comes  to  an  end  but  the  Commission 
will pursue this objective. After the last set of simplifying legislative measures was 
adopted  by  the  Parliament  in  2010,  the  Commission  intends  to  pursue  its 
simplification  efforts  by  discussing  with  Member  States  on  further  simplification 
through practical working arrangements. 

25. 

(Council Doc. 5826/10 ADD 1, §2, 2nd paragraph, page 25) - The Council stresses 
the key role of Member States and Commission in improving financial management 
of EU funds under shared management and under the relevant legislation. 

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Commission's response: 

The  Commission  agrees  to  the  statement  of  the  Council  and  is  taking  the 
recommended  action.  Annual  summaries  can  be  a  means  for  improving 
accountability  in  shared  management  if  its  guidelines  are  followed  by  Member 
States. The Commission revised its guidance on annual summaries and presented 
it  to  Member  States  in  October  and  December  2009,  taking  into  account 
recommendations of the study commissioned by the European Parliament, such as 
emphasizing  the  value-added  elements  and  reducing  redundant  information.  The 
triennial revision of the Financial Regulation in 2010 – on which the Parliament 
will be involved by Co-decision procedure - could provide an opportunity for this. 
Moreover,  in  accordance  with  the  single  audit  model  (in  which  each  level  of 
control  builds  on  the  preceding  one),  article  73  of  the  Regulation  n°1083/2006 
foresees  an  enhanced  cooperation  between  the  Commission  and  the  audit 
authorities of the Member States. 

The  Commission  is  also  taking  steps  to  provide  appropriate  training  for  national 
authorities in the context of shared management of the structural funds. Since the 
beginning  of  the  current  programming  period  the  Commission  has  provided 
regular  and  early  training  and  guidance  to  the  competent  authorities  in  the 
Member States and will continue doing so. 

26. 

(Council Doc. 5826/10 ADD 1, §2, 3rd paragraph, page 26) - The Council notes that 
the system for reporting has been clarified and strengthened for the period 2007-2013 
and that the Commission is maintaining its efforts to improve the reporting. It urges 
the  Member  States  to  continue  their  action  and  encourages  the  Commission  to 
maintain its efforts in order to obtain reliable and complete information. 

Commission's response: 

The  Commission  is  taking  the  requested  action.  It  considers  that  the  data  on 
financial corrections for 2009 submitted by the Member States to the Commission 
in the 1st half of 2010 are of better quality than in previous years. These data are 
published in the Commission's final annual accounts. In the framework of its 2008 
Action Plan the Commission has carried out audits of Member States' systems for 
withdrawals  and  recoveries  in  19  Member  States.  The  remaining  Member  States 
will be audited in 2010. 

For  the  2007-2013  period,  there  is  a  standardised  procedure  for  submission  of 
recovery statements through the IT system SFC2007. The Commission expects that 
this  reporting  procedure  will  improve  the  quality  of  information  at  its  disposal. 
Member States are also required to distinguish corrections deriving from their own 
controls and those from EU audits. 

27. 

(Council Doc. 5826/10 ADD 1, §3, 2nd paragraph, page 26) - The Council expects 
the Commission to maintain its efforts, in cooperation with Member States to further 
improve  recovery  procedures  and  reporting  relating  to  the  2000-2006  programmes. 
However, the Council recalls that the final objective is not to increase the amount of 
corrections but to maximise the correct use of the funds. 

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Commission's response: 

The  Commission  is  taking  the  requested  action.  It  considers  that  the  data  on 
financial corrections for 2009 submitted by the Member States to the Commission 
in  the  1st  half  of  2010  are  of  much  better  quality  than  in  previous  years.  These 
data are published in the Commission's final annual accounts. In the framework 
of its 2008 Action Plan the Commission has carried out audits of Member States' 
systems  for  withdrawals  and  recoveries  in  19  Member  States.  The  remaining 
Member States will be audited in 2010. 

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Chapter 7 - Research, Energy and Transport 

28. 

(Council Doc. 5826/10 ADD 1, 2nd paragraph, page 27) -  The Council invites the 
Commission to pursue its efforts to reduce complexity and to ensure a rigorous and 
cost-effective application of controls, in particular aiming at improving the reliability 
of  audit  certificates,  and  through  effective  implementation  of  its  ex-post  audit 
strategy,  imposing  penalties  where  appropriate,  and  making  timely  recoveries  or 
adjustments in cases of undue reimbursement of claimed costs. 

Commission's response: 

The  Commission  has  launched  the  Communication  on  simplifying  the  research 
framework  programme  (COM(2010)0187)  to  open  a  debate  on  a  concrete  set  of 
proposals  in  order  to  reduce  the  complexity  of  rules  as  this  is  a  major  source  of 
errors and ineligible costs claims. However, many of these proposals can only be 
implemented within the next framework programme. 

The  Commission  adopted  on  26  May  2010  a  Communication  to  the  other 
Institutions proposing a level of tolerable risk of error in research of between 2% 
and 5% (COM(2010)0261). This level is established taking into account the cost-
effectiveness of the controls and an acceptable level of residual error justifiable in 
the light of these costs. 

In order to improve the quality of the audit certificates in FP7 the Commission has 
taken  remedial  action.  FP7  audit  certification  is  based  on  "agreed  upon 
procedures",  which  require  the  certifying  auditor  to  perform  pre-defined 
procedures and report on that basis factual findings. This approach should lead to 
a reduction in errors of interpretation of the eligibility rules by the auditors. 

The  coverage  of  expenditure  by  ex-post  audits  has  continued  to  increase  and  the 
research DGs achieved the targeted number of audits for the year. The number of 
completed  audits  increased  from  1  090  at  the  end  of  2008  to  1  911  at  the  end  of 
2009. 

The  Commission  considerably  increased  the  recoveries  of  amounts  due  during 
2009.  Nevertheless,  additional  efforts  will  be  undertaken  in  order  to  improve  the 
timely implementation of audit results. The Communication on the simplification 
of the recovery process adopted on 15 December  2009 (SEC(2009)1720)  provides 
measures in that sense in particular for cases of extrapolation. 

The Commission took action during 2009 as regards imposing financial penalties. 
In  this  respect,  by  the  end  of  2009,  the  Commission  had  imposed  penalties  in  34 
cases, amounting to € 514 330. 

29. 

(Council Doc. 5826/10 ADD 1, §2, 1st paragraph, page 28) - The Council invites the 
Commission  to  continue  to  provide  support  and  guidance  to  beneficiaries  and 
certifying auditors in the context of FP7. 

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Commission's response: 

To  further  simplify  the  audit  certification  procedures,  the  Commission  has 
reformed the audit certification system under FP7 with the introduction of : 

(1)  audit  certification  based  on  "agreed  upon  procedures"  which  consist  of  a 
compulsory  set  of  procedures  to  be  used  by  certifying  auditors;  auditors  are  no 
longer  requested  to  provide  an  assurance  opinion  but  to  perform  a  set  of 
procedures  in  order  to  provide  an  independent  report  on  factual  findings,  which 
will  be  the  basis  tor  the  Commission  to  assess  the  eligibility  of  costs  and/or  the 
methodology. 

(2)  optional  cost  calculation  methodology  certification  for  beneficiaries  with 
multiple  participations  in  order  to  prevent  typical  methodological  errors.  These 
measures  are  expected 
that,  before  payments  are  authorised, 
beneficiaries' costing methodologies better comply with the contractual provisions. 

to  ensure 

The Commission has implemented measures to reinforce the effectiveness of audit 
certificates  by  improving  support  to  certifying  entities  participating  in  workshops 
the 
training  courses,  beneficiaries  and  operational  services  within 
and 
Commission.  Exhaustive  Guidance  Notes  for  Auditors  and  Beneficiaries  on 
certificates  issued  by  external  auditors  are  available  on  CORDIS  and  regularly 
updated with the feedback from users. 

Finally, the Commission's information approach is largely based on publication of 
guidance  and  information  through  CORDIS,  the  functioning  of  the  "Research 
Enquiry Service" and the role of National Contact points. 

30. 

(Council Doc. 5826/10 ADD 1, §2, 2nd paragraph, page 28) - In the context of the 
preparation  of  the  Eight  Framework  Programme  for  research  and  technological 
development  (FP8),  special  attention  should  also  be  paid  to  work  concerning  the 
simplification  of  the  funding  rules,  while  securing  the  effectiveness  of  control 
systems. 

Commission's response: 

In particular in view of the next Research framework programme, the Commission 
has  recently  issued  two  Communications  "Simplifying  the  Implementation  of  the 
Research  Framework  Programmes"  (COM(2010)0187)  and  "More  or  less 
controls? Striking the right balance between the administrative costs of control and 
the risk of error" (COM(2010)0261). 

In the first Communication, the Commission addresses (and open a debate on) the 
problems caused by complex eligibility and funding rules for grant beneficiaries. 

In  the  later,  the  Commission  proposes  a  level  of  tolerable  risk  of  error  in  the 
research area between 2% and 5%. This level is established taking into account the 
cost-effectiveness of controls and an acceptable level of residual error justifiable in 
the light of these costs. 

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Detailed  discussions  will  take  place  during  the  establishment  of  the  legislative 
framework for FP8. 

31. 

(Council Doc. 5826/10 ADD 1, §2, 3rd paragraph, page 28) - The Council stresses 
the  need  to  ensure  sufficient  coordination  within  the  Commission,  especially 
concerning the follow-up of audit results. 

Commission's response: 

The  audit  reports'  findings  (issued  either  by  the  Commission  services  or  by  the 
Court  of  Auditors)  are  followed  up  by  each  DG.  Their  implementation  from  the 
audit report till the offsetting in the next payment to the same beneficiary (or till 
their recovery through a recovery order) is constantly monitored and reported. 

Moreover,  in  case  the  beneficiary  is  re-selected  for  audit,  the  respective  external 
auditors prepare the audit taking into account the results of previous audit reports. 

The  research  family  DGs  have  regular  meetings  on  these  issues  co-ordinating 
questions  of  eligibility.  A  Wiki  site  where  audit  reports  from  all  DG's  of  the 
Research  family  are  up-loaded  has  been  established  to  exchange  information  on 
individual audit results. 

32. 

(Council Doc. 5826/10 ADD 1, §2, 4th paragraph, page 28) - The Council wishes to 
recall the content of its recommendation on the discharge for 2007 where it called for 
a more effective use of the available sanction mechanisms, which should be used as 
an incentive for beneficiaries to improve the quality of their cost statements.  

Commission's response: 

Further to the observations from the Court and the Council, the Commission took 
further  action  during  2009  and  applied  liquidated  damages.  By  the  end  of  2009, 
the Commission had imposed penalties in 34 cases, amounting to € 514 330.  

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Chapter 8 - External aid, Development and Enlargement 

33. 

(Council  Doc.  5826/10  ADD  1,  5th  paragraph,  page  29)  -  The  Council  notes  with 
concern  the  Court's  statement  that  audit  reports  and  supporting  documents  on 
projects  implemented  by  UN  agencies  are  difficult  to  receive  and  invites  the 
Commission to continue to improve the relations between UN agencies and the EU 
in this respect. 

Commission's response: 

The Commission fully supports the Court’s requests to obtain necessary supporting 
evidence  from  UN  organisations,  and  this  principle  is  clearly  stipulated  in  the 
FAFA. As soon as the Court informs it of difficulties encountered in this respect, 
the  Commission  does  its  best  to  ensure  that  its  counterparts  at  the  UN  find  a 
solution,  and  that  the  Court  receives  the  information  it  needs.  The  adoption,  in 
April 2009, of standard terms of reference for verification missions has improved 
the cooperation between UN agencies and the EU, and has helped to ensure that 
the UN co-operates more efficiently with the Court. The Commission continues to 
work  to  improve  the  system,  and  it  agreed  with  the  UN  in  April  2010  that 
additional information, including extracts from internal and external audit reports, 
could be made available on request. 

34. 

(Council Doc. 5826/10 ADD 1, §1, 1st paragraph, page 30) - The Council invites the 
Commission  to  continue  adopting  measures  to  improve  the  effectiveness  of  the 
Commission's ex-ante control system for payments and contracts in DG AIDCO and 
DG RELEX. 

Commission's response: 

Both  EuropeAid  and  DG  RELEX  will  continue  to  improve  their  supervisory  and 
control  systems  with  regard 
the  Court's 
recommendations. 

the  Council's  request  and 

to 

35. 

(Council Doc. 5826/10 ADD 1, §1, 1st paragraph, page 30) - The Council asks the 
Commission  to  continue  to  strengthen  the  support  provided  to  the  organisations 
implementing EU-funded projects and to monitor them more closely. 

Commission's response: 

The Commission is finalising a 'Financial Management Toolkit' for organisations 
implementing EU funded projects under EuropeAid's portfolio. 

36. 

to  ex-post  controls  and  weaknesses 

(Council Doc. 5826/10 ADD 1, §1, 2nd paragraph, page 30) - The Council notes the 
shortcomings  relating 
the  financial 
management and supervision of financial information of the projects in DG RELEX 
and  invites  the  Commission  to  ensure  that  audits  and  ex-post  controls  are  planned 
realistically and are followed up closely. The Council also recalls the importance of 
proper documentation and systematic analyses of the results of the audits and ex-post 
controls. 

in 

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Commission's response: 

The  Commission already took measures in  2009 to  address the recommendations 
of the Court of Auditors regarding ex post controls in DG Relex and the Court has 
recognised progress made in 2009. DG Relex has continued with a revision of its 
ex  post  control  working  methods  and  is  fully  aware  of  the  needs  for  proper 
documentation, systematic analyses of results and for a follow-up of the respective 
reports. 

37. 

(Council Doc. 5826/10 ADD 1, §2, 2nd paragraph, page 30) - As regards the budget 
support payments, the Council recalls the weaknesses in the process of verifying the 
fulfilment  of  the  payment  conditions  and  counts  on  the  Commission  to  continue 
promoting  awareness  of  the  need  for  a  more  structured  and  formal  approach  in  the 
assessment of budget support payments and strengthening verification in this area. 

38. 

39. 

Commission's response: 

The Commission has already taken some concrete steps in order to improve such 
an  approach  and  is  constantly  engaging  in  improvements  of  its  Budget  Support 
modus  operandi  and  will  continue  to  do  so.  In  particular,  the  Commission  is 
updating and improving its Guidelines on Budget Support taking particular care in 
the issues pointed by Council. 

(Council Doc. 5826/10 ADD 1, §3, 1st paragraph, page 31) - The Council welcomes 
the  improvements  in  the  use  of  external  audits  in  DG  AIDCO's  internal  control 
framework  and  invites  the  Commission  to  pay  special  attention  to  its  risk 
management process as a complement to the improvements already made in the audit 
methodology and other recent reforms. 

Commission's response: 

EuropeAid's  risk  management  methodology  has  been  completely  checked  and 
reinitialised in 2010. 

(Council  Doc.  5826/10  ADD  1,  §3,  2nd  paragraph,  page  31)  -  The  Council  points 
out  that  weaknesses  persist  in  the  audit  planning,  in  the  audit  module  Common 
RELEX  Information  System  (CRIS)  and  in  the  monitoring  of  the  audit  results.  It 
notes that the Commission has engaged itself to improve audit planning in a realistic 
way. The Council welcomes the work already done to substantially revise the audit 
methodology, making use of audit planning, and the increase in the number of audits 
completed. It invites the Commission to pursue its efforts and expects that the recent 
compulsory  use  of  CRIS,  together  with  the  system  created  to  analyse  the  audit 
results, contribute efficiently to reducing the weaknesses. 

Commission's response: 

EuropeAid has in the meantime implemented further significant improvements to 
the audit methodology and IT tools and welcomes the recognition of the Court of 
Auditors  on  the  substantial  progress  made  in  particular  in  relation  to  audit 
planning for 2010. 

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Chapter 9 - Education and Citizenship 

40. 

(Council  Doc.  5826/10  ADD  1,  3rd  paragraph,  page  32)  -  The  Council  notes  with 
satisfaction the measures taken by the Commission to simplify the rules including the 
vast  introduction  of  lump  sum  payments,  which  corresponds  to  the  Council's 
recommendation on the discharge for 2007, and invites the Commission to pursue all 
possible actions of simplification. 

Commission's response: 

The Commission actively explores and implements possible simplification  actions 
and activities. 

For  instance,  new  electronic  forms  have  been  introduced  in  2009/2010  for  the 
Lifelong 
simplification  and  precision 
enhancements. 

learning  Programme  with  great 

As far as the Youth in Action programme is concerned, 82% of the funds allocated 
to Youth in Action will be managed on the basis of lumps sums and scales of unit 
cost  in  2011;  only  a  limited  share  of  the  programme  will  remain  outside  this 
funding  approach,  due  to  the  very  nature  of  the  activities  concerned  (more 
experimental projects, partnerships...). It is estimated that all activities likely to be 
supported  through  lumps  sums  and  scales  of  unit  cost  are  now  managed  in  this 
way. 

41. 

(Council Doc. 5826/10 ADD 1, §1, 2nd paragraph, page 33) - While welcoming the 
fact that the Commission has refined the control  objectives by setting those for the 
primary  controls  in  a  specific  guide  constituting  an  integral  part  of  the  single 
agreement  between  the  Commission  and  the  national  agencies  and  by  updating  the 
guidelines relating to secondary controls for national authorities, the Council invites 
the  Commission  to  complete  the  latter  by  developing  the  guidance  further  and 
making it more prescriptive as recommended by the Court. 

Commission's response: 

The  Commission  has  taken  the  requested  action.  As  a  follow-up  to  the  Court's 
recommendations,  updated  guidance  was  sent  to  the  National  Authorities  on  18 
December 2009. 

42. 

(Council  Doc.  5826/10  ADD  1,  §1,  5th  paragraph,  page  33)  -  The  Council 
recommends the Commission to involve itself in a closer supervision of the annual 
ex  post  declarations  process,  with  more  thorough  monitoring  visits  and  direct 
verification if the controls described are adequate and fully applied. 

Commission's response: 

In  line with its  Strategic  Supervision Policy, DG EAC has already reinforced the 
on-the-spot visits that focus on the existence and implementation of management 
procedures  and  checks  as  described  by  Member  States.  The  2010  audit  plan  will 
continue in this perspective. 

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Chapter 10 - Economic and Financial Affairs 

43. 

(Council Doc. 5826/10 ADD 1, 3rd paragraph, page 35) - The Council encourages 
the  Commission  to  continue  its  approach,  more  particularly  for  the  research 
programmes, by intensifying actions aimed at informing beneficiaries and certifying 
auditors  about  recurrent  errors,  as  well  as  guiding  their  correct  application  of  the 
rules governing the eligibility of costs. 

Commission's response: 

To  further  simplify  the  audit  certification  procedures,  the  Commission  has 
reformed the audit certification system under FP7 with the introduction of : 

(1)  audit  certification  based  on  "agreed  upon  procedures"  which  consist  of  a 
compulsory  set  of  procedures  to  be  used  by  certifying  auditors;  auditors  are  no 
longer  requested  to  provide  an  assurance  opinion  but  to  perform  a  set  of 
procedures  in  order  to  provide  an  independent  report  on  factual  findings,  which 
will  be  the  basis  for  the  Commission  to  assess  the  eligibility  of  costs  and/or  the 
methodology. 

(2)  optional  cost  calculation  methodology  certification  for  beneficiaries  with 
multiple  participations  in  order  to  prevent  typical  methodological  errors.  These 
that,  before  payments  are  authorised, 
measures  are  expected 
beneficiaries' costing methodologies better comply with the contractual provisions. 

to  ensure 

The Commission has implemented measures to reinforce the effectiveness of audit 
certificates  by  improving  support  to  certifying  entities  participating  in  workshops 
and 
the 
training  courses,  beneficiaries  and  operational  services  within 
Commission.  Exhaustive  Guidance  Notes  for  Auditors  and  Beneficiaries  on 
certificates  issued  by  external  auditors  are  available  on  CORDIS  and  regularly 
updated  with  the  feedback  from  users.  Finally,  the  Commission's  information 
approach  is  largely  based  on  publication  of  guidance  and  information  through 
CORDIS,  the  functioning  of  the  "Research  Enquiry  Service"  and  the  role  of 
National Contact points. 

44. 

(Council Doc. 5826/10 ADD 1, 5th paragraph, page 35) - While noting that actions 
have been taken to improve the quality of audit certificates for FP7, it insists on the 
importance of this instrument as a contribution to prevention and early correction of 
errors  and  encourages  the  Commission  to  increase  its  efforts  for  upgrading  the 
certifying auditors' know-how and actively monitoring their performance. 

Commission's response: 

The Commission established in close collaboration with the European Federation 
of  Accountants  FAQ  and  FP7  guidance  notes  for  the  beneficiaries  and  auditors 
involved  in  the  audit  certification.  While  participating  in  conferences  and 
workshops  to  raise  awareness  on  the  FP7  certification  process,  the  Commission 
also launched in 2007 specific pages dedicated to audit and certification policy on 
CORDIS. These services focus notably on lessons learnt from FP6 as well as FP7 
certification  policy.  FP7  prospective  beneficiaries  and  certifying  auditors  can 

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28 

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easily  retrieve  audit  supporting  documents  and  can  get  support  through  the 
enquiry service established to deal with requests on FP7 issues. 

The  Commission's  information-approach  is  largely  based  on  publication  of 
guidance  and  information  through  CORDIS,  the  functioning  of  the  "Research 
Enquiry Service" and the role of the National Contact Points. 

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Chapter 11 - Administrative and other expenditure 

45. 

46. 

(Council  Doc.  5826/10  ADD  1,  §2,  2nd  paragraph,  page  36)  -  The  Council  is 
concerned with the various problems identified by the Court in the functioning of the 
new Individual Rights Information System (IRIS) used to manage staff entitlements, 
including  the  calculation  of  salaries,  implemented  by  the  PMO.  The  PMO  should 
take  all  measures  necessary  to  remedy  these  shortcomings,  in  order  to  avoid  in  the 
future the problems identified by the Court. 

Commission's response: 

The Office for Administration and Payment of Individual Entitlements (PMO) has 
already  started  the  tests  of  the  redeveloped  modules  for  the  management  of 
individual  entitlements.  The  extensive  test  programme  elaborated  takes  into 
account the lessons drawn from past experience. 

(Council Doc. 5826/10 ADD 1, §2, 3rd paragraph, page 36) - The Council urges the 
PMO to correct the weaknesses identified by the Court in the controls implemented 
to  ensure  that  calculations  concerning  the  transfer  of  acquired  pension  rights  are 
performed correctly, and that reimbursements are correctly recovered in the event of 
erroneous calculations. The PMO is requested to reinforce its internal controls in this 
field. 

Commission's response: 

The requested action has been taken. The Office for Administration and Payment 
of Individual Entitlements (PMO) has reinforced its internal control procedures to 
address the identified weaknesses. 

47. 

(Council  Doc.  5826/10  ADD  1,  §2,  4th  paragraph,  page  37)  -  The  Commission 
should  take  duly  into  account  the  remarks  made  by  the  Court  of  Auditors  when 
assessing the workings of the pension scheme and fund for local staff at Commission 
delegations. 

Commission's response: 

The  recommendation  has  been 
into  consideration.  The  necessary 
modification  of  the  Staff  Regulation  is  part  of  the  European  External  Action 
Service (EEAS) package and will be decided by the legislative authority. 

taken 

48. 

(Council  Doc.  5826/10  ADD  1,  §3,  4th  paragraph,  page  38)  -  The  Council  recalls 
that  the  Court  also  identified  weaknesses  in  a  large  number  of  other  agencies, 
relating in particular to their procurement and recruitment procedures. Being aware 
that such weaknesses are most frequently observed during the start-up phase of new 
agencies, the Council calls on the Commission to intensify its assistance and support 
provided to agencies and to share its expertise with them to a larger extent. 

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30 

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Commission's response: 

The  Commission  continuously  provides  wide-range  assistance  to  agencies  in 
several  domains  and  particularly  on  budgetary,  accounting,  human  resources, 
financial management, general management, and procurement, be it under a legal 
requirement  or  on  a  voluntary  basis.  Moreover,  the  agencies  are  encouraged  to 
sign service level agreements with the Commission services for support services. 

49. 

(Council Doc. 5826/10 ADD 1, §3, 5th paragraph, page 38) - The Commission and 
the  agencies  should  apply  activity-based  budgeting  and  management  systems 
wherever possible, and to extend multiannual programming concepts. 

Commission's response: 

The Commission and the executive agencies have already fully implemented those 
management systems' concepts. 

Concerning  the  regulatory  agencies,  due  to  their  legal  acts,  the  Commission  can 
not  impose  the  implementation  of  any  management  systems.  Nevertheless,  this 
issue is being discussed within the interinstitutional working group on regulatory 
agencies that will finalise its works by the end of 2011. 

50. 

(Council  Doc.  5826/10  ADD  1,  §3,  6th  paragraph,  page  38)  -  The  Commission 
should  continue  to  take  the  agencies'  unused  appropriations  into  account  when 
establishing the draft budget for 2011, with the aim of bringing down the agencies' 
annual  surpluses.  The  Commission  should  also  carefully  check,  and  if  necessary 
revise, the agencies requests for funds and posts with the aim of presenting a realistic 
budget proposal corresponding to the agencies' real needs. 

Commission's response: 

The Commission has taken the recommended action. 

Agency  surpluses  2009  will  be  recovered  as  assigned  revenue  in  2010  and  have 
been taken into account when calculating the EU contribution for 2011. 

The  draft  budget  2011  has  been  established  after  a  careful  examination  of 
agencies'  requests  for  funds  and  human  resources  based  on  the  analysis  of  the 
implementation in 2009 and the evolution of establishment plans. 

This  analysis  is  presented  in  the  working  document  of  the  Draft  Budget  2011 
"Bodies set up by the Union and having legal personality [COM (2010) 300 – May 
2010]. 

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Special Report No. 8/2008 "Is cross compliance an effective policy?" 

51. 

(Council  Doc.  5826/10  ADD  2,  Annex  1,  4th  paragraph,  page  3)  -  The  Council 
invites both the Commission and the Member States to pursue their efforts towards 
this objective, bearing in mind the cost-benefit ratio, and in this context agrees that 
the effectiveness of cross compliance could be further improved. 

Commission's response: 

The Commission has taken the requested action. 

After  its  introduction  in  the  CAP,  significant  efforts  have  been  made  to  simplify 
cross-compliance and to ease the functioning of the system. Three clear examples 
are  the  Commission  Report  on  cross  compliance  in  2007,  the  Health  Check  in 
2008 and the Simplification of the CAP in 2009. Each of these simplification steps 
led  to  amendments  in  the  regulation  on  the  implementation  of  the  control  and 
sanction  system.  The  Health  Check  also  led  to  the  netting-out  of  non  pertinent 
requirements. Moreover, working documents have been spread in order to clarify 
and facilitate the implementation of cross compliance in Member States, including 
in  particular  a  guidance  document  on  the  clarification  of  on-farm  requirements 
issued  in  2009.  Furthermore,  later  in  2010  the  Commission  has  adopted  on  30 
September  2010  a  legislative  proposal  modifying  Regulation  (EC)  n°  73/2009  for 
further  simplification  of  cross  compliance  by  modifying  the  rules  applicable  to 
follow-up checks. 

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Special Report No. 9/2008 "The effectiveness of EU support in the area of freedom, 
security and justice for Belarus, Moldova and Ukraine" 

52. 

(Council Doc. 5826/10 ADD 2, Annex 2, 4th paragraph, page 4) - The Council calls 
upon the Commission to continue to further improve the effectiveness of EU support 
in  the  area  of  freedom,  security  and  justice,  with  a  special  focus  on  coherence 
between  the  available  financial  instruments  and  initiatives,  and  on  coordination 
between donors. 

Commission's response: 

The Commission considers that this recommendation was implemented. 

Co-operation  in  the  area  of  freedom  security  and  justice  is  of  paramount 
importance  in  neighbouring  countries.  The  Commission  is  paying  particular 
attention  to  improve  its  effectiveness  by  strengthening  the  links  between  policy 
dialogue  and  co-operation,  by  more 
focused  programming  and  better 
implementation.  At  policy  level  a  wide  network  of  sub-committees  has  been 
established and this allows continuous policy dialogue. At programming level, the 
recently  concluded  mid-term  review  had  indentified  the  broad  scope  of  co-
operation, the specific objectives and the expected results. At implementation level 
new  instruments  (Comprehensive  institution  building  programmes,  twinning) 
allow mobilising the right type of expertise to support co-operation in this area. 

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Special Report No. 10/2008 "EC development assistance to health services in Sub 
Saharan Africa" 

53. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  2nd  paragraph,  page  8)  -  The 
Commission  is  invited  to  consider  increasing  its  aid  to  the  health  sector  during  the 
tenth EDF mid-term review to support its commitment to the health MDGs; 

Commission's response: 

During  the  ongoing  10th  EDF  Mid-term  review  exercise,  the  Commission  has 
given  particular  attention  to  the  MDGs  and  to  its  support  in  this  respect.  It  is 
considering  how  to  best  invite  countries  to  give  more  attention  to  their  record  in 
terms of MDGs, starting with a reinforced attention to policy dialogue and quality 
of policies. Through direct increase of focal sector support (where health is a focal 
sector) or through general budget support, the Commission is working toward an 
increase  of  its  assistance  to  the  health  sector,  while  fully  respecting  and 
strengthening  ownership  by  partner  countries  and  division  of  labour  with  other 
donors. In the health sector, such support will be guided by the policy framework 
adopted during 2010 on "the EU role in Global Health (Communication and Staff 
Working  Documents  31/03,  Council  conclusions  10/05)  which  commits  the 
Commission  and  also  EU  Member  States  to  enhance  the  strengthening  of  health 
systems  by  adhering  to  the  aid  effectiveness  commitments,  and  committing  to  the 
specific targets of two thirds of EU health aid through national programme-based 
approach, and 50% by using country systems. 

54. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  3rd  paragraph,  page  8)  -  The 
Commission  is  invited  to  continue  improving  the  predictability  of  its  funding 
provided  through  various  instruments  to  enable  countries  to  better  secure  the 
resources needed for their health sectors. 

Commission's response: 

The Commission launched MDG-Contracts in 8 countries (Burkina Faso, Ghana, 
Mali, Mozambique, Rwanda, Tanzania, Uganda, Zambia) during 2009, with total 
commitments amounting to €1,8bn or 50%  of all GBS programmed during EDF10. 

MDG-Contracts  provide  longer  term  (6  year),  more  predictable  commitments  of 
budget  support  that  enable  governments  to  plan  their  strategies  and  budgets  to 
achieve the MDGs with greater certainty about future resource inflows. 

Indicators  for  the  monitoring  of  the  MDG  contracts  are  health  and  education 
related. 

55. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  4th  paragraph,  page  8)  -  The 
Commission  is  invited  to  take  into  account  the  Aid  Effectiveness  principles 
enshrined  in  the  Paris  Declaration  and  the  AAA  while  respecting  the  EU  Code  of 
Conduct on Complementarity and Division of Labour. 

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Commission's response: 

The  Commission  has  been  at  the  forefront  of  the  aid  effectiveness  agenda  since 
2005  and  has  actively  contributed  with  the  Member  States  to  the  adoption  of  the 
Paris Declaration (2005) and the Accra Agenda for Action (2008). Since 2006, the 
EC  has  been  applying  the  aid  effectiveness  principles  to  all  its  development 
assistance  programmes  with  a  specific  emphasis  on  promoting  division  of  labour 
among donors in order to reduce aid fragmentation. 

56. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  5th  paragraph,  page  8)  -  The 
Commission  is  invited  to  monitor  the  EU  collective  increased  support  to  health, 
based where possible on existing mechanisms. 

Commission's response: 

Concerning  specifically  the  EC  assistance  to  the  health  services  in  Sub-Saharan 
Africa, the Commission has jointly designed the new health programmes with the 
partner  countries  with 
the 
implementation of the national health policies, promoting national ownership. The 
Commission  will  monitor  the  EU  collective  increased  support  to  health;  in  its 
effort, the Commission will depend on the cooperation with EU Member States. 

the  main  objectives  of  closely  supporting 

57. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  6th  paragraph,  page  8)  -  The 
Commission is invited to review how its assistance to the health sector is distributed 
to ensure it is primarily directed to its policy priority of health systems support. 

Commission's response: 

The  Commission  and  the  Member  States  have  committed  in  the  recently  adopted 
Communication  and  Council  Conclusions  on  the  EU  role  in  global  health,  to  a 
greater  support  to  health  systems,  as  the  basis  of  all  its  support  to  health  and 
development. The main approach is by applying the aid effectiveness principles to 
the  health  sector  (with  clear  commitments  on  2/3  of  support  through  national 
programme based approaches and 50% using country systems), and to refer to the 
global  compact  principles  of  the  International  Health  Partnership  (IHP).  An 
evaluation which is being defined at present, and a project in monitoring EC/EU 
health support, will look at this distribution. Through its direct support to health as 
a  focal  or  non  sector  (in  33  countries),  indirect  through  the  budget  and  MDG 
contracts, and through its dialogue at the IHP, the Global Fund and GAVI, the EC 
will continue to enhance the attention to health system support; the EC continues 
to  widen  its  health  support  to  comprehensive  health  plans.  This  will  also  require 
additional  capacity  in  the  assessment  and  in-depth  dialogue  at  country  level  and 
provisions are being made towards that end. 

58. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  7th  paragraph,  page  8)  -  The 
Commission  is  invited  to  ensure  that  each  delegation  has  adequate  health  expertise 
either  in  the  delegation  or  through  relying  on  the  resources  of  other  in-country 
partners (particularly the Member States), building on further consultations with the 
Member States and other global partners on a division of labour. 

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Commission's response: 

In  March  2009  the  Commission  took  stock  of  the  public  health  expertise  at  its 
delegations  in  Sub-Saharan  Africa.  At  that  time  there  were  13  public  health 
specialists at 11 delegations. 

1/ Of the ten delegations with health as a focal sector or with significant activities 
in the health sector nine had health expertise. Eleven of the 30 delegations which 
did  not  have  health  expertise  drew,  where  necessary,  on  the  expertise  of  the 
Member States and two of them drew on the UN agencies (WHO, Unicef). 

2/  Of  the  24  delegations  providing  General  Budgetary  Support  (GBS),  seven  of 
them  under  "MDG  contracts",  five  had  public  health  expertise.  The  other 
delegations draw on the expertise of the Member States (e.g. the Memorandum of 
Understanding  signed  in  December  2009  by  the  Delegation  and  the  German 
Embassy in Tanzania) or collaborate with the national offices of the World Health 
Organisation  (WHO)  (11  EU  delegations  associated  the  WHO  in  the  mid-term 
review of the 10th EDF). 

The Commission, as part of its work on implementing the Communication on the 
EU  role  in  Global  Health,  will  continue  working  with  EU  Member  States  to 
progress on the division of labour and a shared use of the EU expertise in health. 

59. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  8th  paragraph,  page  8)  -  The 
Commission  is  invited  to  make  more  use  of  Sector  Budget  Support  in  the  health 
sector and focus its General Budget Support more on improving health services; SBS 
should be aligned with national sector policies. 

Commission's response: 

The  Sector  Policy  Support  Programmes  (SPSPs)  are  the  tool  used  by  the 
Commission  to  support  implementation  of  a  sectoral  policy.  As  far  as  possible, 
Sector Budget Support (SBS) is the preferred means of implementing a SPSP. In 
order to maximise the impact of General Budget Support (GBS) on social sectors, 
including health systems, the Commission's aim is to strengthen the capacity of its 
services  and  coordinate  policy  discussions  so  that  they  can  contribute  more 
effectively to following up the implementation of these sectoral policies. It does this 
in line with the Code of Conduct on the complementarity and division of labour in 
the  field  of  development.  As  is  known,  the  financial  assistance  provided  by  a 
Budget  Support  cannot  be  assigned  to  a  specific  sector.  It  helps  boost  the  tax 
revenue of the beneficiary country and thus its capacity to finance activities that it 
could  not  otherwise  have  undertaken  without  this  support.  The  Commission 
establishes  the  procedures  and  objectives  through  dialogue  and  a  performance 
framework. Disbursement of the variable tranches is in part linked to achievement 
of  the  objectives.  The  current  updating  of  the  "Guidelines  on  the  Programming, 
Design and Management of General Budget Support" provides an opportunity to 
extend  to  sectoral  policies  a  dialogue  that  is  undoubtedly  too  much  focused  on 
indicators alone. 

60. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  9th  paragraph,  page  9)  -  The 
Commission  is  invited  to  continue  to  use  projects,  especially  for  support  to  policy 

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development  and  capacity  building,  pilot  interventions  and  assistance  to  poorer 
regions,  while  ensuring  they  contribute  to  development  of  sustainable  financing 
mechanisms for the whole health system. 

Commission's response: 

Projects (as approaches or means of implementing a SPSP) are often used by the 
Commission  to  deliver  its  development  aid  (Declaration  of  Paris,  Accra  agenda, 
International Health Partnership). 

In addition, sectoral policies and the institutional capacity of the health sector can 
be  developed  by  specific  projects,  or  as  part  of  sectoral  approaches  supported  by 
the  Commission  through  a  SPSP  (Sector  Policy  Support  Programme)  and 
implemented  by  a  project,  a  common  fund  or  Sector  Budget  Support.  The 
Commission will continue to use projects where relevant with a specific attention 
to sustainability. 

61. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  10th  paragraph,  page  9)  -  The 
Commission  is  invited  to  seek  to  clarify  its  comparative  advantages,  inter  alia 
increase health-related assistance to fragile states and post-crisis countries. 

Commission's response: 

The  EC  has  programmed  support  to  health  in  34  Developing  Countries  in  the 
present  programming  cycle:  Afghanistan,  Algeria,  Angola,  Burundi,  Central 
African  Republic,  Chad,  Congo-Brazzaville,  DRC,  East  Timor,  Ecuador,  Egypt, 
Georgia,  Guatemala,  Haiti,  Honduras,  India,  Ivory  Coast,  Lesotho,  Liberia, 
Malawi,  Morocco,  Moldova,  Myanmar,  Nigeria,  Mozambique,  Philippines,  South 
Africa, Swaziland, Syria, Ukraine, Vietnam , Yemen, Zambia and Zimbabwe. Out 
of  these  34  Developing  Countries,  16  are  among  the  LDCs  (Least  Developed 
Countries). 

62. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  11th  paragraph,  page  9)  -  The 
Commission is invited to continue and strengthen, together with the Member States, 
efforts to support and build the institutional and technical capacity of the beneficiary 
countries  in  the  preparation  of  Global  Fund  grant  applications  and  in  the 
implementation of Global Fund grant contracts, as well as to contribute to improved 
disbursement  rates  from  the  Global  Fund  and  to  ensure  that  it  also  effectively 
supports national health systems. 

Commission's response: 

In  2009  the  Commission  signed  an  Agreement  with  the  WHO  to  contribute 
€2 million for the implementation by UNAID S of the programme "Strengthening 
Country Capacity to Scale up towards Universal Access for HIV/AIDS Prevention, 
Care  and  Treatment  through  Enhanced  Implementation  of  National  AIDS 
Responses  including  Global  Fund  Grants".  The  Commission  also  prepared 
guidelines for the European Union delegations called "For a strengthening of the 
partnership  on  a  local  scale  between  the  European  Commission  and  the  Global 
Fund to fight AIDS, Tuberculosis and Malaria." These guidelines were sent to all 
the delegations in June 2009. 

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63. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  12th  paragraph,  page  9)  -  The 
Commission is invited to establish clearer guidance on when each instrument should 
be utilised and how they can best be used in combination. 

Commission's response: 

The  guidelines  on  using  the  instruments  to  implement  the  Commission's 
development  aid  are  currently  being  updated.  The  Budget  Support  guidelines  are 
being revised for both general and sectoral budget support. DG Aidco is currently 
preparing  PPCM  (Programme  and  Project  Cycle  Management)  guidelines  which 
revise, update and reorganise all the guidelines in a single document. One of the 
aims of this exercise is to strengthen the links between programming and aspects 
relating to implementation. 

64. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  13th  paragraph,  page  9)  -  The 
Commission  is  invited  to  pursue  its  efforts  jointly  with  partner  counties  and  the 
donor  community  to  contribute  to  the  formulation  of  well  defined  health  sector 
policies  and  common  development  oriented  results  frameworks  in  beneficiary 
countries. 

Commission's response: 

In most of the countries in which health is a focal sector of our cooperation and in 
those receiving General Budget Support (GBS), the delegations are involved in the 
periodical reviews which bring together the Government, national players and the 
donor  community.  These  joint  reviews  are  normally  carried  out  annually  in  the 
various  sectors,  including  health.  They  provide  an  opportunity  for  a  political 
dialogue  with  the  partner  country,  allow  all  the  stakeholders  to  judge  the 
performance of the sector and advance the sectoral policy framework. In countries 
receiving GBS the results of these joint reviews entered in the more general annual 
review on GBS. 

65. 

(Council  Doc.  5826/10  ADD  2,  Annex  3,  §III,  14th  paragraph,  page  9)  -  The 
Commission  is  invited  to  pay  more  attention  to  sexual  and  reproductive  health  and 
rights, while respecting the established EU positions and to achieve the goals and the 
objectives of and taking into account the Programme of action of ICPD, the Beijing 
Platform  for  action  and  internationally-agreed  development  goals  including  the 
MDGs.  The  Council  notes  the  importance  of  increased  accessibility  to  maternal 
health services, including in the fight against HIV/AIDS. 

Commission's response: 

The Commission has been very active on sexual and reproductive health and rights 
in international fora and in the development of the Communication on EU role in 
Global Health. On the financing issue, there is a persistent dilemma of combating 
fragmentation of funds for all the good reasons and ensuring that enough funding 
is  flowing  to  sexual  and  reproductive  health  and  rights.  By  having  a  systematic 
focus  on  health  systems  strengthening  these  limitations  are  increasingly  being 
tackled. 

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38 

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Under the Investing in People Programme and the Global fund to fight AIDS, TB 
and  Malaria  more  funds  have  become  available  to  the  linking/integration  of 
maternal  health  and  HIV/AIDS  services.  In  2009  the  Commission  has  organised 
an international workshop in cooperation with the ACP Secretariat, UNFPA and 
IPPF  to  disseminate  the  results  of  a  multi-year  reproductive  health  and  rights 
project implemented in 22 countries. As member of the Executive Committee of the 
Reproductive  Health  Supplies  Coalition  the  Commission  is  supporting  the 
universal availability of reproductive health supplies, especially contraceptives. 

Under the human rights umbrella the Commission is speaking with a strong and 
consistent  voice  to  promote  the  human  rights  of  LGTB  persons  and  to  combat 
discrimination  based  on  sexual  orientation  by  combining  political  dialogue  and 
cooperation programme supporting human rights and democracy. 

Within  the  recently  adopted  Gender  Action  Plan  the  rights  and  protection  of 
women  and  girls  are  an  important  component,  including  combating  sexual  and 
gender-based violence. 

66. 

(Council Doc. 5826/10 ADD 2, Annex 3, §III, 16th paragraph, page 9) - The Council 
encourages the Commission to work on the answers to the conclusions of the report. 
It  welcomes  the  fact  that  the  Commission  accepts  the  Court's  recommendations  in 
general  and  that  it  has  already  begun  to  take  some  measures  to  act  on  them,  in 
particular the Council is pleased to see in the Commission responses that it will look 
at  the  sectoral  allocations  as  part  of  the  mid  term  review  of  the  10th  EDF.  The 
Council asks the Commission to provide the Council in 2010 with an update of the 
concrete steps that have been taken on the recommendations and conclusions of the 
report. 

Commission's response: 

The  Commission  has  taken  note  of  the  recommendations  made  in  the  Court  of 
Auditors' Special Report No 10/2008 (EC development assistance to health services 
in Sub-Saharan Africa). It recognises the utility of these recommendations and is 
implementing them as far as it is able. 

The  impact  of  the  Mid-Term  Review  (MTR)  of  the  10th  EDF  on  the  allocations 
granted  to  the  health  sector  will  soon  be  known,  once  the  MTR  is  completed. 
However, it must be pointed out that the MTR is not a new programming exercise, 
but  an  opportunity  to  make  sure  that  the  choices  made  when  drawing  up  the 
Country Strategy Papers are still appropriate. It should also be pointed out that the 
use  of  EDF  resources  is  determined  on  the  basis  of  priorities  established  by  the 
partner countries. It is not just the Commission that decides how  these resources 
are to be allocated. 

The Commission will submit to the Council, by the end of 2010, a report reviewing 
the  implementation  of  the  recommendations  and  conclusions  in  the  Court  of 
Auditors'  Special  Report  No  10/2008  on  EC  development  assistance  to  health 
services in Sub-Saharan Africa. 

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39 

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Special Report No. 11/2008 "The management of the European Union support for the 
public storage operations of cereals" 

The Council has made no specific request to the Commission. 

Commission's response: 

No reply necessary. 

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40 

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Special Report No. 12/2008 "Instrument for Structural Policies for Pre-accession 
(ISPA), 2000-2006" 

67. 

(Council  Doc.  5826/10  ADD  2,  Annex  5,  5th  paragraph,  page  13)  -  The  Council 
recalls the great importance it attaches to the efficiency and effectiveness of the pre-
accession  aid.  In  this  context,  the  Council  takes  note  with  particular  interest  of  the 
recommendations made by the Court in order to avoid shortcomings in the future. It 
encourages the Commission to follow the recommendations of the Court and to take 
stock  of  the  experience  gained,  not  only  with  a  view  to  the  monitoring  of  the 
remaining ex-ISPA projects, but also to the implementation of the new pre-accession 
instrument IPA. 

Commission's response: 

The  requested  action  has  been  taken.  The  satisfactory  functioning  of  the 
decentralised  implementation  system  is  constantly  monitored,  in  particular  in 
relation  to  public  procurement  and  implementation  of  projects.  With  regard  to 
public procurement, the entire process is reviewed by the Commission Delegations. 
Audits  and  evaluations  are  carried  out  on  a  regular  basis.  On  the  spot  visits  are 
frequently  organised  to  verify  adequate  progress  of  the  projects.  Roadmaps  to 
waive  ex-ante  controls  by  Commission  Delegations  on  public  procurement  have 
also been prepared. The achievement of the benchmarks included in the roadmaps 
will confirm the preparedness of the national institutions to assume full ownership 
for preparation and implementation of programmes and projects. This is relevant 
for both ISPA and IPA. 

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41 

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Special Report No. 1/2009 "Banking measures in the Mediterranean area in the context 
of the MEDA programme and the previous protocols" 

68. 

(Council  Doc.  5826/10  ADD  2,  Annex  6,  5th  paragraph,  page  14)  -  The  Council 
notes  with  satisfaction  that  several  of  the  issues  raised,  were  addressed  in  an 
adequate  manner  through  the  establishment  of  the  ENPI.  It  nevertheless  calls  upon 
the Commission to continue to take due account of the recommendations contained 
in the report. 

Commission's response: 

The  Commission  continues  indeed  to  take  due  account  of  the  recommendations 
contained  in  the  report.  In  particular,  it  has  enhanced  its  monitoring  of  EIB’s 
operations  and  has  improved  the  information  flow  with  EU  delegations.  A  new 
Framework Agreement is currently being finalised with the EIB. 

The  level  of  coordination  between  the  European  Union,  the  EIB  and  other 
European multilateral and bilateral finance institutions has significantly increased 
since the creation of the Neighbourhood Investment Facility (NIF). 

The  Commission  has  led  the  way  by  encouraging  co-operation  among  European 
Public  Finance  Institutions  and  promoting  a  harmonised  approach  towards  the 
partner  countries  (e.g.  in  terms  of  procurement  rules,  single  reporting,  etc.).  The 
NIF paves the way for the concrete implementation of donor coordination, division 
of labour and harmonisation of procedures. 

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42 

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Special Report No. 2/2009 "The European Union's Public Health Programme (2003-
2007): an effective way to improve health?" 

69. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  8th  paragraph,  page  16)  -  The  Council 
invites the Member States and the Commission to assign clear targeted programme 
objectives that will be in proportion with budgetary means available. 

Commission's response: 

Results of the final evaluation of the first Health Programme and of the mid-term 
evaluation of the second Health Programme as well as recommendations following 
the  ECA's  Special  report  will  be  taken  into  account  for  the  design  and  impact 
assessment of any successor Health Programme. 

70. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  9th  paragraph,  page  16)  -  The  Council 
invites  the  Member  States  and  the  Commission  to  ensure  greater  clarity  in  the 
intervention logic in the conception and implementation of the Health Programme, in 
particular  at  programme  and  project  level,  setting  out  coherent  and  better  defined 
objectives  which  should  be  SMART,  illustrating  links  between  them  and  define 
process and performance indicators to measure their achievement. 

Commission's response: 

An  explicit  intervention  logic,  using  coherent  and  better  defined  SMART 
objectives,  illustrating  links  between  them  and  defining  process  and  performance 
indicators to measure their achievement, will be to set out for any successor Health 
programme. 

71. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  10th  paragraph,  page  16)  -  The  Council 
invites  the  Member  States  and  the  Commission  to  ensure  that  there  is  a  limited 
number of annual priorities focused on strategic topics and activities with European 
added value. 

Commission's response: 

The  Commission  is  currently  preparing  the  Annual  Work  Programme  2011  for 
Public Health with a view to concentrating action on a limited number of priorities 
and to focusing on their European Added Value. 

72. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  11th  paragraph,  page  16)  -  The  Council 
invites  the  Member  States  and  the  Commission  to  ensure  participation  of  the 
Member  States  through  the  Health  Programme  Committee  in  setting  the  priorities 
and preparation of work plans as well as their implementation. 

Commission's response: 

Annual  Work  Programmes  and  Award  decisions  are  systematically  submitted  to 
the Programme Committee. 

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43 

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73. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  12th  paragraph,  page  16)  -  The  Council 
invites  the  Member  States  and  the  Commission  to  consider  complementary 
cooperation mechanisms as a means of facilitating collaboration and the exchange of 
information throughout Europe with a view to complementing national programmes 
and activities. 

Commission's response: 

The  mid-term  evaluation  of  the  Health  Strategy  2008-2013  will  (a.o.)  focus  on 
assessing  how  to  improve  and  develop  use  of  Open  Method  of  Coordination  in 
Health. 

74. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  14th  paragraph,  page  16)  -  The  Council 
invites  the  Commission  to  avoid  any  overlaps  in  projects  portfolio  and  results  of 
those projects and improve coordination between the different financial programmes 
managed by the different Commission's Directorate Generals. 

Commission's response: 

Inter  Services  Consultation  has  been  reinforced  in  order  to  avoid  overlaps  in 
projects  and  improve  coordination  between  the  different  financial  programmes 
managed by the different Commission DG's. 

75. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  15th  paragraph,  page  16)  -  The  Council 
invites  the  Commission  to  keep  projects  objectives  in  line  with  programme 
objectives  and  "annual  priorities"  agreed  in  Annual  Work  Programme  and  set, 
wherever possible, quantified targets and process and performance indicators in order 
to facilitate monitoring of progress towards set objectives. 

Commission's response: 

The EAHC (Executive Agency for Health and Consumers) defines deliverables of 
projects and performance indicators when negotiating project contracts. 

76. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  16th  paragraph,  page  16)  -  The  Council 
invites  the  Commission  to  inform  regularly  the  Council's  Working  Party  on  Public 
Health on the implementation of the programme. 

Commission's response: 

As  provided  for  in  the  Health  Programme  decision,  an  annual  implementation 
report of the Health Programme is sent to Council and Parliament. 

77. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  17th  paragraph,  page  16)  -  The  Council 
invites  the  Commission  to  facilitate  the  transition  between  the  successive  Health 
programmes and projects financed by those programmes, while taking into account 
evaluations made of the outcome of previous programmes. 

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44 

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Commission's response: 

Results of the final evaluation of the first Health Programme and of the mid-term 
evaluation of the second Health Programme as well as recommendations following 
the  ECA's  Special  report  will  be  taken  into  account  for  the  design  and  impact 
assessment of any successor Health Programme. 

78. 

(Council  Doc.  5826/10  ADD  2,  Annex  7,  18th  paragraph,  page  16)  -  The  Council 
invites  the  Commission  to  make  sure  that  results  of  projects  are  widely  publicly 
available  and  improve  dissemination  and  use  of  those  result  among  concerned 
stakeholders. 

Commission's response: 

Commission  services  and  the  EAHC  (Executive  Agency  for  Health  and 
Consumers)  are  constantly  improving  their  communication  strategies  in  order  to 
improve dissemination and use of results among stakeholders. 

79. 

(Council Doc. 5826/10 ADD 2, Annex 7, 19th paragraph, page 16) - On the basis of 
this audit and its recommendation the Commission, in consultation with the Member 
States 
the  Health  Programme  Committee,  should  propose  further 
improvement of the management of the current programme and its implementation. 

through 

Commission's response: 

The  Commission  is  currently  preparing  the  Annual  Work  Programme  2011  for 
Public Health with a view to concentrating action on a limited number of priorities 
and to focusing on their European Added Value. This should be submitted to the 
Programme Committee in the third quarter of 2010. 

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45 

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Special Report No. 3/2009 "The effectiveness of Structural measures spending on waste 
water treatment for the 1994 1999 and 2000-2006 programme periods" 

80. 

(Council  Doc.  5826/10  ADD  2,  Annex  8,  13th  paragraph,  page  20)  -  The  Council 
invites  the  Commission  to  require  that  information  allowing  the  setting  of 
performance targets, in line with Community legislation, in such key areas as quality 
of water discharged, quality of receiving water bodies, volume of water to be treated 
and intended method of sludge disposal should be included in grant applications and 
systematically checked as part of the project appraisal process. 

Commission's response: 

With respect to quality of water discharged there are limit values clearly set out in 
Directive 91/271/EC which need to be respected. 

With respect to quality of receiving water, plans and programmes under Directive 
2000/60/EC,  notified  to  the  Commission  by  22/3/2010,  should  include  inter  alia 
information on this, as the Commission has to assess them. 

With respect to volume of waters to be treated, this is a standard precondition for 
every project. 

Finally  the  method  of  sludge  disposal  is  checked  during  the  project  appraisal 
process. 

However the Commission would like to recall that, in line with Article 192 (4) of 
TFEU, it is the right and responsibility of Member States to finance and implement 
correctly the EU environmental legislation and policy. 

81. 

(Council  Doc.  5826/10  ADD  2,  Annex  8,  14th  paragraph,  page  20)  -  The  Council 
invites the Commission to encourage Member States to assess the achievement of the 
anticipated results at project level as set out in application for assistance. 

Commission's response: 

The Commission is taking the requested action. It intends to include this issue for 
information  and  discussion  in  the  next  meeting  of  the  European  Network  of 
Environment  Authorities  (ENEA  -the  network  of  environmental  and  managing 
authorities  of  the  EU  27  Member  States)  so  that  member  States  take  the 
appropriate measures. 

82. 

(Council  Doc.  5826/10  ADD  2,  Annex  8,  15th  paragraph,  page  20)  -  The  Council 
invites the Commission to finalise the impact assessment on the need for a possible 
legislative initiative on phosphates content in detergents within the EU. 

Commission's response: 

The Commission has completed a comprehensive impact assessment of options and 
their  costs  and  benefits  of  restricting  the  use  of  phosphates  in  detergents.  A 

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46 

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revision of the detergents legislation is indicated. A legislative proposal is foreseen 
for the third quarter of 2010. 

83. 

(Council  Doc.  5826/10  ADD  2,  Annex  8,  16th  paragraph,  page  20)  -  The  Council 
invites  the  Commission  to  ensure  that  the  financial  sustainability  of  waste  water 
collection and treatment projects is considered at the application approval stage and 
pertinent information such as proposed tariffs is given due consideration, taking also 
into account equity considerations. 

Commission's response: 

The Commission will not be taking the requested action. The reason for this is that 
Directive  2000/60/EC  (Water  Framework  Directive)  obliges  Member  States  to 
ensure  that,  from  2010  on,  the  costs  of  water  services  are  based  on  the  cost 
recovery  principle,  thus  ensuring  financial  sustainability.  The  Commission  will 
scrutinise implementation by Member States. 

84. 

(Council  Doc.  5826/10  ADD  2,  Annex  8,  17th  paragraph,  page  20)  -  The  Council 
invites  the  Commission  to  inform  the  Council  and  the  European  Parliament  on  the 
steps taken with regard to the recommendations of the report by June 2010. 

Commission's response: 

The  Commission  will  inform  the  Council  and  the  European  Parliament  on  the 
steps  taken  with  regard  to  the  recommendation  on  the  framework  of  discharge 
follow-up report. 

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47 

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Special Report No. 4/2009 "The Commission's management of non-state actors' 
involvement in EC development cooperation" 

85. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 1st paragraph, page 24) - The Council 
invites  the  Commission  to  take  further  measures  to  strengthen  the  genuine 
involvement of NSAs in EC development cooperation and policy making processes 
and  especially  partner  countries'  NSAs,  in  line  with  existing  instruments  and 
guidelines. 

Commission's response: 

The Commission is taking the requested action and agrees with the principle that 
NSAs must be involved in the development cooperation process. However, this level 
of  involvement  varies  according  to  the  various  legal  bases  considered.  In  the 
framework  of  the  Cotonou  Agreement,  the  need  for  consultations  is  agreed  and 
legally  binding  both  for  the  Commission  and  Partner-States.  For  DCI  countries, 
the  Commission  applies  an  EU  regulation:  EU  efforts  to  hold  effective 
consultations  with  NSAs  have  to  be  matched  by  the  willingness  of  national 
authorities to do the same. 

Furthermore,  in  the  Commission's  view  this  should  also  be  framed  within  new 
realities such as alignment to partner governments, and ownership. EC action in 
support of NSAs takes indeed into account the dual reality of supporting the right 
of  initiative  of  Civil  society  organizations  and  the  growing  need  for  ensuring 
"alignment" with partner governments priorities. 

The EC is currently discussing these issues with all relevant stakeholders in one of 
the  working  group  of  the  "Structured  Dialogue  for  an  efficient  partnership  in 
development". More information is available on CISOCH: 

https://webgate.ec.europa.eu/fpfis/mwikis/aidco/index.php/Structured_dialogue 

86. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 2nd paragraph, page 24) - The Council 
invites  the  Commission  to  provide  more  guidance  to  NSAs  on  its  procedures, 
emphasising  the  need  for  predictable  Calls  for  Proposals  procedures  or  criteria  to 
award "targeted projects", especially with regard to the financial rules. 

Commission's response: 

On  guidance  to  NSAs  on  its  procedure:  Both  at  the  level  of  HQ  and  EU 
Delegations,  the  European  Commission  organizes  informative  sessions  for  NSA 
upon specific request and/or in the framework of a Call for Proposal. Moreover a 
Civil Society Helpdesk (CISOCH) is centralizing all relevant information for NSA. 
An e-learning product tailor-made for NSA has been produced and is available on 
CISOCH. 

On  predictability  of  Call  for  Proposals:  the  EC  is  committed  to  improve  the 
predictability and transparency related to the consultation process by elaborating, 
as  often  as  possible,  specific  calendars  and  communication  material  to  facilitate 

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the  interaction  with  NSAs.  Annual  Work  Programmes  are  available  on  Internet 
(including on CISOCH) but further improvement of predictability will be done. 

On  criteria  to  award  "targeted  projects":  The  Commission  applies  article  168  of 
the implementing modalities of the financial regulations. 

87. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 3rd paragraph, page 24) - The Council 
invites  the  Commission  to  take  into  account  the  experiences  of  the  current  project 
selection process and possible improvements resulting from the Mid-Term Review of 
the financial instruments for external actions when putting forward proposals on the 
review of the EC financial regulation. 

Commission's response: 

The  European  Commission  has  proposed  a  number  of  measures  within  the 
framework  of  the  Financial  Regulation  triennial  revision,  namely  in  the  area  of 
grants management, aiming at rendering it simpler and easier to handle for both 
grant beneficiaries and contracting authorities alike. 

88. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 4th paragraph, page 24) - The Council 
invites  the  Commission  to  ensure,  within  the  existing  budgetary  framework,  that 
sufficient resources, guidance and expertise are available to EC delegations so as to 
be able to better manage the NSAs involvement in EC development cooperation. 

Commission's response: 

The Commission stresses that as far as NSAs are concerned, there is no one size 
fits all for training as the NSAs ‘architecture’ varies immensely between countries. 
Since 2004/05, EuropeAid has provided tailor-made upstream guidance during the 
instruction phase of NSAs programmes, and downstream during implementation. 
Delegations  are  also  provided  with  operational  guidance:  (i)  through  its  intranet 
where  guidelines  and  good  practices  are  posted;  (ii)  through  regional  seminars 
where knowledge about commitment in dialoguing with NSAs and exchanges with 
colleagues are enhanced and finally (iii) through studies. 

In 2010 and 2011, in the framework of the 4 regional seminars of the Structured 
Dialogue,  one  specific  day,  addressing  NSA  involvement  in  EC  cooperation,  is 
devoted  to  interactions  between  EC  Headquarters  and  EU  Delegations.  In  total 
and  by  mid-2011,  around  80  EUD  staff  (from  60  Delegations)  will  participate  in 
these internal training & information sessions. 

89. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 5th paragraph, page 24) - The Council 
invites the Commission to develop a consistent strategy for capacity development of 
NSAs  in  all  partner  countries,  in  line  with  the  Court's  findings  in  Asian  and  Latin 
American countries. 

Commission's response: 

The Commission is taking the requested action. Regional and national strategies to 
support NSAs are carried out. Despite the fact that former ALA regulation did not 

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formally  envisage  capacity  building  support  to  NSAs,  various  studies  and 
programmes are being carried out on this issue in both Latin America and Asia. 

For  example,  several  projects/programmes  in  Asia  and  Central  Asia  which  are/ 
and  will  be  implemented  through  non-governmental  organisation  have  been 
adopted in 2007 and 2008. While their primary objective is to contribute to poverty 
eradication,  improvement  of  access  to  social  services  and  improvement  of 
governance  and  rule  of  law,  they  support  non-state  actors  in  pursuance  of  these 
goals.  This  is  the  case  notably  in  Afghanistan,  China,  Pakistan,  Kyrgyzstan  and 
Tajikistan. 

90. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 6th paragraph, page 25) - The Council 
invites the Commission to sustain its dialogue with NSAs on the implementation of 
cooperation programmes, including in the framework of the "Palermo Process". 

Commission's response: 

The "Structured Dialogue for an efficient partnership in development" (initiative 
following the "Palermo Process" but with a much wider scope) has been launched 
in  March  2010  by  Commissioner  Piebalgs  and  is  currently  on-going.  The  final 
conference is due to take place in April/May 2011. 

91. 

(Council Doc. 5826/10 ADD 2, Annex 9, §V, 7th paragraph, page 25) - The Council 
invites  the  Commission  to  report  back  to  the  Council  on  progress  in  meeting  these 
recommendations by the end of 2010. 

Commission's response: 

The Commission is taking the requested action and will report back to the Council 
by  the  end  of  2010.  It  will  be  an  appropriate  occasion  to  take-stock  of  the 
Structured Dialogue process. 

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Special Report No. 5/2009 "The Commission's Treasury Management" 

92. 

(Council  Doc.  5826/10  ADD  2,  Annex  10,  11th  paragraph,  page  27)  -  The 
Commission  should  improve  the  documentation  of  its  cash  flow  forecasting  and 
reporting procedures. 

Commission's response: 

The requested action has been taken. A revised procedural document concerning 
the  preparation  of  the  cash  flow  reporting  and  forecast  is  available  since  March 
2009. 

93. 

(Council  Doc.  5826/10  ADD  2,  Annex  10,  12th  paragraph,  page  27)  -  The 
Commission should analyse the functioning of the present system of own resources 
accounts with the aim of reducing balances on these accounts during the second half 
of the year. 

Commission's response: 

The present system of own resources accounts, primarily designated to receive the 
own resources payments, is linked to the own resources system, as established by 
Council decision 2000/597/EC, Euratom and its implementing Council Regulation 
1150/2000,  that  the  Commission  is  bound  to  implement.  The  Council  adopted  in 
2007 the new own resources decision 2007/436/EC, Euratom, and very recently a 
revision of Council Regulation 1150/2000, which do not introduce any significant 
changes in the system of own resources accounts and payments. 

94. 

(Council  Doc.  5826/10  ADD  2,  Annex  10,  13th  paragraph,  page  27  and  14th 
paragraph,  p.  28)  -  The  Commission  should  put  in  place  procedures  which  ensure 
coordination of its treasury management activities. This coordination should entail an 
exchange  of  information  on  risks  and  best  practices  regarding  treasury  and  asset 
management  activities,  in  particular  to  maximise  efficiencies  and  minimise 
inadvertent exposure to risk. 

Commission's response: 

The  requested  action  has  been  taken.  Meetings  are  regularly  held  between  their 
Directorates  General  for  Economic  and  Financial  Affairs  (DG  ECFIN)  and  for 
Budget (DG BUDG) with a view to sharing information on risks and exchanging 
experiences and best practices regarding treasury and asset management activities 
on a Commission-wide level. 

95. 

(Council  Doc.  5826/10  ADD  2,  Annex  10,  14th  paragraph,  page  27)  -  DG BUDG 
should  improve  the  documentation  of  its  risk  management  and  the  scope  of  its 
performance measurement. 

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Commission's response: 

The requested action has been taken. A consolidated risk management document 
for  the  Directorate-General  for  Budget  treasury  operations  is  available  since 
September 2009. 

The  Commission  considers  that  its  system  for  performance  measurement  is 
adequate. 

96. 

(Council  Doc.  5826/10  ADD  2,  Annex  10,  15th  paragraph,  page  27)  -  The 
Commission  should  as  a  matter  of  priority  reach  a  conclusion  in  its  search  for  an 
optimum solution for the treatment of provisionally collected fines. 

Commission's response: 

The  requested  action  has  been  taken.  A  new  system  for  the  management  of 
provisionally  cashed  fines,  which  addresses  all  concerns  raised  by  the  European 
Court  of  Auditors  in  its  special  report  No  5/2009  on  the  Commission's  treasury 
management, is in place since the beginning of 2010. 

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Special Report No. 6/2009 "European Union food aid for deprived persons: an 
assessment of the objectives, the means and the methods employed" 

97. 

(Council  Doc.  5826/10  ADD  2,  Annex  11,  4th  paragraph,  page  29)  -  The  Council 
appreciates the Commission's intention to examine the recommendation of the Court 
as regards the adaptation of the bartering arrangement and invites the Commission to 
take the actions it deems appropriate in this respect. 

Commission's response: 

The Commission is taking the requested action. 

The  Commission  will  examine  the  proposition  of  the  Court  as  regards  the 
adaptation  of  the  bartering  arrangements  without  nevertheless  preventing  the 
possibility  to  mobilise  intervention  stocks  as  this  practice  is  at  the  core  of  the 
scheme. This will be done via the new implementing rules that the Commission will 
be able to adopt once the new EP and Council regulation is in place. 

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Special Report No. 7/2009 "The management of the Galileo programme's development 
and validation phase" 

98. 

(Council Doc. 5826/10 ADD 2, Annex 12, 3rd paragraph, page 30) - Council notes 
the  Commission's  thorough  and  constructive  response  to  the  conclusions  of  the 
special report and notes that part of the measures suggested by the Court has already 
been taken by the Commission. The Council encourages the Commission to continue 
in this path in order to ensure a smooth and successful development of the European 
satellite navigation system. 

Commission's response: 

The Commission  will continue ensuring a smooth  and successful  development of 
the European satellite navigation system. 

The European Commission took over responsibility for managing the EGNOS and 
Galileo  programmes  on  25  July  2008  when  Regulation  683/2008  entered  into 
force.  In  December  2008 
the  Commission's  services  delegated  budget 
implementation tasks for the Galileo satellite radio-navigation programme and the 
deployment  of  Galileo  infrastructure  to  the  European  Space  Agency  (ESA).  This 
was done through a delegation agreement. 

This instrument, which is provided for in the Financial Regulation, was considered 
the  best  way  to  establish  a  framework  for  optimising  cooperation  between  the 
Commission  and  the  ESA,  thereby  contributing  to  the  successful  outcome  of  the 
project. It delegates budgetary implementation – while still requiring the Financial 
Regulation to be respected - and enables the ESA to manage the technical part of 
the  two  programmes  effectively,  while  allowing  the  Commission  to  exercise  its 
policy and control powers fully. 

More  specifically,  the  agreement  covers  procurement,  project  and  technical 
management linked to the implementation of Galileo's Full Operational Capability 
(FOC).  In  particular  it  covers  the  deployment  of  Galileo  infrastructure,  which  is 
based  on  the  procurement  of  six  main  work  packages  (system  support,  ground 
mission segment, ground control segment, satellites, launch services and operation 
services) and the integration of the relevant deliverables into a single system. The 
estimated appropriations for these delegated tasks are €2.408 billion. 

As part of the delegation agreement, three of the six contracts procuring Galileo’s 
initial operational capability were awarded in early January 2010. This will allow 
the initial deployment and service provision of Europe’s satellite navigation system 
in early 2014. 

Moreover,  the  Commission  will  be  in  a  position  to  inform  Member  States  and 
Parliament  of  an  update  of  the  cost  figures  concerning  the  Galileo  program 
through the mid term review to be adopted before end 2010. 

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Special Report No. 9/2009 "The efficiency and effectiveness of the personnel selection 
activities carried out by the European Personnel Selection Office" 

99. 

(Council  Doc.  5826/10  ADD  2,  Annex  13,  5th  paragraph,  page  32)  -  The  Council 
underlines the necessity to reduce substantially the duration of the selection process 
and takes note of EPSO's ongoing efforts on this issue. The Council underlines the 
need to strengthen cooperation between the Community institutions and EPSO. It is 
essential that the Institutions identify and communicate their strategic staffing needs 
to  EPSO  in  a  timely  and  consistent  manner,  in  order  to  help  the  EU  Institutions 
achieve their recruitment targets. 

Commission's response: 

This recommendation is accepted and is already being implemented. As part of the 
EPSO development programme approved by the Management Board in September 
2008, it was decided to introduce 3-year strategic planning and, in this context, to 
draw  up  common  rules  for  the  institutions  to  present  their  needs,  and  the  2009-
2011 strategic planning is currently being implemented (recommendation No 1 of 
the EDP). The institutions' needs for the next three years were actually received in 
March  2009.  Focusing  planning  on  strategic  management  of  human  resources 
needs is one of the pillars of the EDP. 

100. 

(Council  Doc.  5826/10  ADD  2,  Annex  13,  6th  paragraph,  page  32)  -  The  Council 
agrees  that  there  is  a  need  to  professionalize  Selection  Boards  and  to  use  qualified 
assessors.  The  Council  stresses  the  importance  of  Selection  Boards  not  only  being 
competent in the field but also having expertise in human resource management. 

Commission's response: 

This recommendation is accepted and is already being implemented by two actions 
included  in  EPSO's  EDP  (recommendations  14  and  15):  as  part  of  the 
introduction  of  assessment  centres,  the  professionalism  of  the  selection  board 
members based on the concept of secondment of officials from the Institutions to 
the  Office  for  a  fixed  period  of  up  to  4  years,  and  the  setting  up  of  a  pool  of 
markers. 

101. 

(Council  Doc.  5826/10  ADD  2,  Annex  13,  7th  paragraph,  page  32)  -  The  Council 
acknowledges that EPSO's decision to make the pre-selection test available in all the 
EU  languages  will  contribute  towards  securing  for  the  institutions  the  services  of 
officials of the highest standard of ability, efficiency and integrity, recruited on the 
broadest possible geographical basis from among nationals of Member States. 

Commission's response: 

This  recommendation  is  accepted.  At  its  meeting  on  13  November  2008  the 
Management  Board  approved  the  Office’s  proposals  for  implementation  in  two 
stages: (1) the introduction from 2010 of tests in the candidates’ main language, in 
specific monolingual competitions only, in order to test the database containing the 
new  language  versions  of  the  questions,  and  (2)  from  2011,  general  use  of  23 
languages for most admission tests (in particular verbal and numerical reasoning). 

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102. 

(Council  Doc.  5826/10  ADD  2,  Annex  13,  8th  paragraph,  page  33)  -  The  Council 
underlines  the  need  for  an  effective  communication  strategy  in  order  to  attract  a 
sufficient  number  of  qualified  candidates.  The  measures 
for 
implementation  should  focus  on  relevant  target  groups  and  address  the  specific 
situation in each Member State. Attractiveness is also dependent on transparency in 
procedures,  where  accurate  and  clear  notices  of  competition  published  in  all  the 
official languages play an important role. 

identified 

Commission's response: 

This  recommendation  is  accepted  and  is  already  being  implemented.  Under  the 
EDP and the new communication strategy, a revamped website has been in place 
since the beginning of March 2009. In addition, regular meetings and contacts are 
held on EPSO’s initiative with the network of experts on selection and recruitment 
in  the  Member  States,  and  the  subject  of  making  EU  careers  appealing  to 
candidates is regularly discussed. 

103. 

(Council  Doc.  5826/10  ADD  2,  Annex  13,  9th  paragraph,  page  33)  -  The  Council 
stresses the need for transparency in relation to the financial implications of the new 
selection procedure to guarantee cost-effectiveness both now and in the longer term, 
and  underlines  that  EPSO  must  have  adequate  funding  in  order  to  continue  to 
implement the EDP successfully. It takes note of EPSO's commitment to carry out a 
benchmarking  exercise  of  costs  per  successful  candidate  against  other  international 
organisations, and in that context to analyse the costs and benefits of the new system 
once introduced. 

Commission's response: 

This recommendation is accepted and is already being implemented. An analysis of 
the reference costs in order to compare the costs determined with those of national 
administrations will be carried out and the results should be available by the end of 
2010. 

The EDP is intended to impart added value to the selection process. As explained 
in  the  proposed  budget  for  2010,  an  even  more  highly  professional  selection 
service, which is the principal goal of the EDP, will yield a  substantial  return by 
attracting  and  selecting  the  right  candidates  to  enable  the  institutions  to  achieve 
their major strategic objectives. 

104. 

(Council Doc. 5826/10 ADD 2, Annex 13, 10th paragraph, page 33) - The Council 
highlights  that  successful  candidates  must  furthermore  be  given  clear,  precise  and 
practical  information  on  the  steps  to  follow  between  selection  and  potential 
recruitment. 

Commission's response: 

EPSO considers that the current system for handling reserve lists works well and 
that  it  has  been  considerably  improved,  in  particular  since  the  successful 
candidates have been able to verify their situation in real time. 

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In  addition,  EPSO  is  assisting  the  Institutions  in  giving  successful  candidates 
access  to  certain  vacancy  notices  published.  This  will  allow  greater  transparency 
and more equal treatment between successful candidates who are in Brussels and 
may have access to these notices and the other candidates. 

105. 

(Council Doc. 5826/10 ADD 2, Annex 13, 11th paragraph, page 33) - The Council 
invites EPSO to periodically inform the Council about the further implementation of 
this Programme (EDP). 

Commission's response: 

EPSO is part of the Commission for administrative purposes and its Director, Mr 
Bearfield,  reports  on  the  progress  made  in  the  EDP  to  EPSO's  Management 
Board, on which all the Institutions are represented. 

If  the  Management  Board  agrees,  the  Director  would  be  willing  to  inform  the 
Council at its request. 

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Special Report No. 10/2009 "Information provision and promotion measures for 
agricultural products" 

106. 

(Council Doc. 5826/10 ADD 2, annex 14, 3rd paragraph of page 34) - The Council 
appreciates  the  Commission's  efforts  to  support  Member  States  in  their  evaluation 
and  selection  of  programme  proposals  in  order  to  deliver  measures  that  facilitate 
reaching the objectives of the policy; stresses the importance of improving ways to 
measure the effectiveness and impact of projects. 

Commission's response: 

The requested action has been taken. 

Since 1999, the European Union has pursued an overall and coherent information 
and  promotion  policy  for  agricultural  products  and  production  methods  and 
agricultural  based  food  products.  The  information  and  promotion  campaigns 
which it co-finances may take place either in the EU internal market or in non-EU 
countries.  With  a  view  to  sound  management  and  in  an  attempt  to  improve 
implementation of this policy, the Commission requested eight external evaluation 
reports between 2006 and 2008, the conclusions of which highlighted the positive 
impact  of  the  promotion  programmes  for  the  four  specific  strategy  objectives  set 
out in the regulations. 

107. 

(Council  Doc.  5826/10  ADD  2,  Annex  14,  5th  paragraph,  page  34)  -  The  Council 
acknowledges  that  the  improvements  currently  being  made  to  the  Commission's 
selection procedure should be continued and that the Member States should continue 
to increase their selectivity. The Council considers that this should be done without 
increasing  the  administrative  burden  and  bearing  in  mind  the  ongoing  objective  of 
simplification of the CAP. 

Commission's response: 

The requested action has been taken. 

The Commission has continued to improve the selection procedure by putting the 
emphasis on good evaluation methodology in each programme. A revised version 
of document AGRI/63454/2007 has been prepared by the Commission services and 
is for the sake of clarity and precision subdivided in two parts specifically intended 
for the preparation of programmes and their posterior evaluation. 

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Special Report No. 11/2009 "The sustainability and the Commission's management of 
the LIFE-Nature projects" 

108. 

(Council Doc. 5826/10 ADD 2, Annex 15, 18th paragraph, page 37) - The Council 
calls  upon  the  Commission  to  have  regard  to  the  recommendations  of  the  special 
report in its forthcoming mid-term review evaluating the implementation of LIFE+, 
to  be  submitted  before  30  September  2010  as  required  by  Article  15  of  Regulation 
(EC) No. 614/2007, including the complementarity of LIFE+ with other Community 
funds. 

Commission's response: 

The  Commission  is  taking  into  account  the  Court's  recommendations  in  its 
forthcoming  mid-term  review  and  in  the  related  Commission  Communication, 
including complementarity. The publication of the review is on schedule. 

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Special Report No. 12/2009 "The effectiveness of the Commission's projects in the area 
of Justice and Home Affairs for the Western Balkans" 

109. 

(Council  Doc.  5826/10  ADD  2,  Annex  16,  8th  paragraph,  page  39)  -  The  Council 
asks the Commission to improve sustainability by conducting, more systematically, a 
thorough  needs  analysis  before  investment  projects  are  approved,  including  long 
term maintenance plans within project fiches. 

Commission's response: 

The  Commission  is  addressing  the  issue  of  sustainability  through  project 
conditionalities  and  co-financing  by  the  beneficiaries.  Moreover,  the  needs  are 
generally  identified  in  the  framework  of  the  progress  reports  which  include  an 
assessment of the state of play in the area of JHA. 

In order to enhance sustainability of projects, project fiches now  include specific 
conditionality on infrastructure maintenance. 

110. 

(Council  Doc.  5826/10  ADD  2  Annex  16,  9th  paragraph,  page  39)  -  The  Council 
asks  the  Commission  to  improve  sustainability  by  complementing  the  delivery  of 
assistance with commitments from the authorities in the recipient countries to ensure 
sustainable institutional change. 

Commission's response: 

In order to enhance sustainability and ownership of projects under IPA 2007 and 
2008  programmes,  project  fiches  include  specific  conditionality  on  infrastructure 
maintenance.  Furthermore,  the  Commission  embarked  on  a  regional  financial 
assistance  project  to  improve  monitoring  in  the  JHA  area  of  performance  of 
authorities and financial assistance in March 2009. 

111. 

(Council Doc. 5826/10 ADD 2, Annex 16, 10th paragraph, page 40) - The Council 
invites the Commission to better set objectives and use impact indicators to measure 
results of projects. 

Commission's response: 

The  Commission  now  sets  impact  indicators  which  are  part  of  the  activity-based 
management  cycle.  They  include  the  degree  to  which  values  related  to  freedom, 
security  and  justice  are  now  respected  in  key  third  countries,  including  the 
countries in which the audit has been conducted; the values include the rule of law 
and respect for fundamental rights. 

More generally, the Commission has learned from past experiences and now acts 
according to a formalised approach which sees the beneficiary in the driving seat 
of  the  assistance  process,  taking  full  responsibility  for  the  anticipated  objectives, 
methodologies and results. 

112. 

(Council  Doc.  5826/10  ADD  2,  Annex  16,11th  paragraph,  page  40)  -  The  Council 
invites the Commission to actively contribute to improve donor coordination. 

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Commission's response: 

In endeavouring to coordinate donors, the Commission maintains regular contacts 
for  policy  and  financial  assistance  coordination  with  the  Council  of  Europe,  the 
Venice Commission, UN High Commissioner for Refugees, International Office of 
Migration,  International  Criminal  Tribunal  for  the  former  Yugoslavia,  and 
bilateral donors. Meetings are held regularly between the EC delegations and the 
Member  States'  Embassies  for  coordinating  their  bilateral  financial  assistance 
with  that  of  the  Community.  The  Commission  organised  conferences  in  autumn 
2008  and  in  April  2009  with  the  main  donors,  aimed  at  improving  donor 
coordination  methodologies.  The  latest  conference,  has  mainly  focused  on  the 
practical aspects of coordination on the ground, and was held in October 2009. 

On the ground, the Regional Cooperation Council took over during the first half of 
2008  the  role  of  the  former  Stability  Pact  as  facilitator  of  regional  donor 
cooperation  in  the  JHA  area  and  is  organising  conferences  to  this  end.  Donor 
cooperation meetings are also organised through regional initiatives. 

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Special Report No. 13/2009 "Delegating implementing tasks to executive agencies: a 
successful option?" 

113. 

(Council  Doc.  5826/10  ADD  2,  Annex  17,  2nd  paragraph,  page  42)  -  The  Council 
stresses the importance for the Commission to be able to delegate some of its tasks 
relating  to  the  management  of  EU  programmes  to  third  parties,  while  fully 
complying  with  the  principle  of  sound  financial  management  and  transparency,  in 
order  to  contribute  to  a  more  efficient  implementation  of  EU  programmes  and 
thereby decreasing administrative costs. 

Commission's response: 

The  Commission  already  announced  its  intention  not  to  create  new  executive 
agencies till the end of the current financial framework period. Moreover, it also 
intends  to  examine  the  possibility  of  extending  to  the  existing  agencies  any 
eventual  new  responsibility  for  a  new  programme  allocated  to  the  Commission 
during the same period. 

114. 

(Council  Doc.  5826/10  ADD  2,  Annex  17,  5th  paragraph,  page  42)  -  The  Council 
regrets  that  the  Commission's  underestimation  of  the  time  needed  to  set-up  a  new 
agency  and  to  recruit  staff  has  led  to  recurrent  over-budgeting  and  asks  the 
Commission to put forward more accurate estimates in the future. 

Commission's response: 

The  Commission  takes  every  care  to  ensure  the  budget  estimates  it  prepares  are 
robust  and  reasonable  taking  full  account  of  the  expected  start-up  date  of  the 
agency,  the  probable  pace  of  recruitment  and  the  duration  of  the  budgetary 
procedure. A delay in the satisfactory conclusion of the budget process may result 
in a delay in the start-up of the agency and, therefore, in the timing and pace of 
recruitment.  A  key  step  in  this  regard  is  the  appointment  of  the  Director  of  the 
agency, only after which the recruitment of agency personnel can start. 

It appears that the improvements made in this area have led to the time needed to 
set-up a new agency having decreased between the first and last executive agencies 
in the research area. 

115. 

(Council  Doc.  5826/10  ADD  2,  Annex  17,  6th  paragraph,  page  43)  -  The  Council 
calls on the Commission to reconsider its procedures for identifying the potential for 
externalisation  and  for  considering  the  establishment  or  the  extension  of  executive 
agencies in order to ensure an efficient and effective management of EU programmes 
at lower costs in comparison to management by Commission's services. 

Commission's response: 

The Commission considers that the establishment of executive agencies has to be 
motivated  by  a  favourable  cost  benefit  analysis  and  by  the  added  value  they  can 
bring to the implementation of EU programmes, when a clear separation between 
policy and implementing tasks can be made. 

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Moreover, the Commission already announced its intention not to set up additional 
executive agencies unless there are new Commission competencies up to 2013, and 
instead  to  make  use  of  the  possibility  of  extending  the  mandate  of  existing 
agencies. 

116. 

to  continue 

the  Commission 

(Council  Doc.  5826/10  ADD  2,  Annex  17,  7th  paragraph,  page  43)  -  The  Council 
requests 
the  cost-benefit  analyses 
accompanying the decisions to create executives agencies in order to allow them to 
contribute  fully  and  effectively  to  the  decision-making  process  and  to  take  into 
account all relevant costs and benefits based on appropriate indicators and asks the 
Commission to put forward comprehensive comparative cost estimations between in-
house  management  and  externalisation,  including  those  related  to  freed  and  frozen 
posts. 

improving 

Commission's response: 

The  Commission  has  set  up  6  executive  agencies  and  has  permanently  enriched 
the  analysis  carried  out  with  previous  experiences.  It  has  always  focused  on 
quantitative  aspects,  since  these  were  the  aspects  the  European  Parliament  and 
Member  States  have  mostly  focused  on.  However,  also  qualitative  aspects  were 
looked at as the CBAs have gradually become more comprehensive. 

The  Commission  believes  that  the  CBAs  have  continuously  been  improved  and 
now include relevant and measurable costs. This will of course only be possible to 
verify the next time a new executive agency is established. 

The  cost-benefit  analyses  have  informed  the  inter-institutional  decision  making 
process,  as  foreseen  in  Council  Regulation  58/2003,  Art.  3,  and  brought  added 
value in order to form an opinion about different alternatives. 

117. 

(Council  Doc.  5826/10  ADD  2,  Annex  17,  8th  paragraph,  page  43)  -  The  Council 
calls  on  the  Commission  to  guarantee  that  it  avails  itself  of  relevant,  reliable 
workload and productivity data related to the implementation of the delegated tasks, 
both before and after externalisation, in order to be able to fully evaluate the benefits 
produced by the executive agencies. 

Commission's response: 

The Commission acknowledges that initial CBAs and financial statements did not 
always  provide  all  possible  workload  and  productivity 
indicators  before 
externalisation and for the triennial evaluation pursuant to Article 25 of Council 
Regulation 58/2003. Improvements have been made in the more recent CBAs, and 
the Commission will in the future go deeper into the assessment of workload and 
productivity.  This  will  of  course  only  be  possible  to  verify  the  next  time  a  task  is 
delegated to an executive agency. 

118. 

(Council Doc. 5826/10 ADD 2, Annex 17, 10th paragraph, page 43) - The Council 
invites  the  Commission  to  make  better  use  of  the  annual  work  programmes  and  to 
develop focused indicators. 

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Commission's response: 

As  regards  timing,  the  adoption  of  the  Executive  Agencies'  Annual  Work 
Programmes should be speeded up through earlier adoption of the DGs' Financing 
Decisions.  Instructions  to  this  effect,  as  well  as  on  the  content  of  agency  Work 
Programmes, were given to parent DGs and agencies in March 2010. At the same 
time, instructions were also given on performance indicators and a number of key 
performance indicators were defined for further use by parent DGs and agencies. 
The  Commission  expects  these  guidelines  to  be  applied  in  the  2011  work 
programmes of the agencies. 

119. 

(Council Doc. 5826/10 ADD 2, Annex 17, 11th paragraph, page 43) - While taking 
note  of  the  progress  made  by  the  Commission  to  recruit  extensively  contractual 
agents,  the  Council  invites  it  to  continue  reflecting  upon  measures  to  simplify  the 
recruitment  of  executives  agencies'  staff  adapted  to  tasks  originating  from  results-
oriented and targeted objectives. 

Commission's response: 

The simplification of the recruitment process introduced in the framework of the 
EPSO Development Programme will apply to institutions and agencies alike. 

120. 

(Council Doc. 5826/10 ADD 2, Annex 17, 13th paragraph, page 43) - The Council 
invites  the  Commission  to  apply  the  success  factors  identified,  e.g.  simplified 
procedures,  as  elements  for  leading  to  better  results  in  the  executive  agencies,  to 
those programmes that continue to be managed by the Commission itself. 

Commission's response: 

The success of the executive agencies lies in: their capacity to recruit extensively 
contractual agents (up to 75%) with contracts of much longer duration than in the 
Commission;  to  target  their  recruitment  to  specific  skills;  and  to  specialise  on 
recurrent  executive  tasks.  These  advantages  are  inherent  to  the  concept  of  the 
executive  agencies  and  can  therefore  not  be  reproduced  within  the  Commission. 
Firstly, the Commission has to maintain the overall current balance of staff which 
includes  predominantly  permanent  officials  and  may  only  employ  contractual 
agents for maximum of 3 years. Secondly, in order for the Commission to focus on 
its  strategic  and  policy  tasks  as  an  institution,  the  recruitment  profile  (more 
"generalist") has to be different from that of the executive agencies.  

121. 

(Council Doc. 5826/10 ADD 2, Annex 17, 14th paragraph, page 43) - The Council 
asks the Commission to inform in good time about forthcoming external evaluations 
of executive agencies. 

Commission's response: 

The  ex-post  evaluations  of  executive  agencies  are  included  in  the  Commission's 
Forward Evaluation Plan, available on the following link: 

http://ec.europa.eu/dgs/secretariat_general/evaluation/documents_en.htm 

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Special Report No. 14/2009 "Have the management instruments applied to the market in 
milk and milk products achieved their main objectives?" 

The Council has made no specific request to the Commission. 

Commission's response: 

No reply necessary. 

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European Development Funds 

122. 

(Council Doc. 5873/10, Annex, §3, 10th paragraph, page 5) - The Council invites the 
Commission  to  continue  with  its  reform  efforts  and  to  remedy  the  shortcomings 
identified by the Court as regards the reliability of the accounts and regularity of the 
transactions underlying the accounts. 

Commission's response: 

The  Commission  received  an  unqualified  opinion  from  the  Court  of  Auditors  on 
the reliability of the EDF accounts. The Commission will endeavour to remedy any 
shortcomings identified, both for the reliability of the accounts and the legality and 
regularity of the underlying transactions. 

123. 

(Council Doc. 5873/10, Annex, §3, 11th paragraph, page 5) - The Council reiterates 
the importance of the fact that, in the procedures for granting budgetary support and 
before making transfers of funds, the Commission should ensure that the conditions 
of the Cotonou Agreement and of the financing agreements are met. In this respect, 
the Council notes that the Commission intends to continue promoting a more intense 
dialogue with Members States on budgetary support. 

Commission's response: 

All  budget support operations are discussed  at  the EDF  committee  which  gives a 
formal opinion on each proposal. In all ACP countries in which budget support is 
provided  discussions  on  budget  support  operations  take  place  between  the 
Commission  and  EU  Member  States  represented  and  significant  issues  related  to 
budget  support  are  discussed  in  a  Commission/Member  State  working  group  on 
budget  support.  The  Commission  provides  an  annual  report  on  budget  support 
operations to Member States for discussion in the EDF committee. 

124. 

(Council Doc. 5873/10, Annex, §3, 12th paragraph, page 6) - The Council stresses 
the  importance  of  being  regularly  informed  on  the  Commission's  evaluation  of  the 
effects  of  such  measures,  particularly  as  regards  risk  management,  analysis  of  the 
internal control system, the audit of transactions and budget support. 

Commission's response: 

EuropeAid provides an in-depth analysis of the performance of its assurance and 
internal control system in its Annual Activity Report which is publicly available. In 
addition  an  EDF  specific  Financial  Management  Report  is  submitted  to 
Parliament and Council every year as required by the EDF Financial Regulation. 

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Requests concerning individual agencies 

125. 

(Council  Doc.  5827/10  ADD  1,  Annex  to  Annex  9,  4th  paragraph,  page  29)  -  As 
regards  the  European  Agency  for  Reconstruction,  the  Council  takes  note  with 
dissatisfaction  of  the  questionable  financial  management  regarding  five  projects  on 
cross-border  cooperation  for  which  the  Evaluation  Committee  disagreed  on  several 
points  with  the  assessors  designated  specifically  for  this  task  and  invites  the 
Commission to ensure that a similar mismanagement is avoided in the future. 

Commission's response: 

The  Commission  has  taken  note  of  this  observation  as  the  current  structures  for 
financial assistance ensure sound financial management. 

Concerning  the  European  Agency  for  Reconstruction,  the  Commission  wishes  to 
stress  that  it  has  been  an  efficient  tool  for  the  area  it  was  designed  for,  thanks 
among  others  to  its  speed  in  delivery  which  was  essential  in  the  reconstruction 
phase in the region. 

126. 

(Council  Doc.  5828/10  ADD  1,  Annex  to  Annex  2,  2nd  paragraph,  page  7)  -  As 
regards the Executive Agency for Competitiveness and Innovation, the Council notes 
that the Executive Agency's initial budget for 2008 was reduced by more than 22% 
later in the year following delays in the recruitment of staff and lower than expected 
forecasts for mission and building costs. It invites both the Executive Agency and the 
Commission  to  adopt  a  more  realistic  and  effective  approach  when  planning  tasks, 
recruitment activities and expenditure. 

Commission's response: 

The  year  2008  was  the  first  full  year  following  the  extension  of  the  tasks  of  the 
Agency. The initial budget was based on estimates of staff number and operating 
costs for 2008, and was in correspondence with the budgeted amount indicated in 
the  financial  statement  (fiche  financière)  prepared  at  the  time  of  the  Agency's 
extension in May 2007.  

During 2008, the Agency did not spend the full amount of the initial budget mainly 
due  to  the  fact  that  it  recruited  staff  according  to  the  successive  handover  of  the 
new  tasks  by  the  parent  DGs.  In  order  to  allow  the  parent  DGs  to  address  the 
unspent  funds  to  other  operational  activities,  the  Agency  amended  its  budget  in 
October 2008. 

Meanwhile  the  Executive  Agency  has  improved  its  budget  planning  and 
implementation monitoring. As for the 2010, the Agency plans to fully consume its 
budget appropriations. 

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