Report on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2010, together with the replies of the Joint Undertaking
Date: 2011-10-25
Institutions: European Court of Auditors
Subjects: administration of the Institutions, auditing, budgetary control, financial control, joint venture, powers of the institutions (EU)








C_2011368EN.01000801.xml










16.12.2011   


EN


Official Journal of the European Union


C 368/8





REPORT
on the annual accounts of the Clean Sky Joint Undertaking for the financial year 2010, together with the replies of the Joint Undertaking
2011/C 368/02

INTRODUCTION







1.


The Clean Sky Joint Undertaking, located in Brussels, was set up in December 2007 (1) for a period of 10 years.










2.


The objective of the Clean Sky Joint Undertaking is to accelerate the development, validation and demonstration of clean air-transport technologies in the EU for earliest possible deployment (2). The research activities coordinated by the Joint Undertaking are divided into six technological areas or ‘Integrated Technology Demonstrators’ (ITDs).










3.


The Founding Members of the Joint Undertaking are the European Union, represented by the Commission, and industrial partners as the leaders of the ITDs, together with the associate members of the ITDs.










4.


The maximum EU contribution to the Clean Sky Joint Undertaking to cover running costs and research activities is 800 million euro to be paid from the budget of the Seventh Research Framework Programme (3). Other Members of the Joint Undertaking are to contribute resources at least equal to the EU contribution, including in-kind contributions.










5.


The Joint Undertaking started working autonomously on 16 November 2009.





STATEMENT OF ASSURANCE







6.


Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (4) of the Clean Sky Joint Undertaking, which comprise the ‘financial statements’ (5) and the ‘reports on the implementation of the budget’ (6) for the financial year ended 31 December 2010, and the legality and regularity of the transactions underlying those accounts.










7.


This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7).





The Director’s responsibility







8.


As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s financial rules, under his own responsibility and within the limits of the authorised appropriations (8). The Director is responsible for putting in place (9) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) that are free from material misstatement, whether due to fraud or error and for ensuring that the transactions underlying those accounts are legal and regular.





The Court’s responsibility







9.


The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the annual accounts of the Joint Undertaking and the legality and regularity of the transactions underlying them.










10.


The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free of material misstatement and whether the underlying transactions are legal and regular.










11.


The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and the regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts.










12.


The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below.






Opinion on the reliability of the accounts








13.


In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, in all material respects, its financial position as of 31 December 2010 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules.






Opinion on the legality and the regularity of the transactions underlying the accounts








14.


In the Court’s opinion, the transactions underlying the annual accounts of the Joint Undertaking for the financial year ended 31 December 2010 are, in all material respects, legal and regular.










15.


The comments which follow in paragraphs 16-25 do not call the Court’s opinions into question.





COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT



Implementation of the budget








16.


The structure and presentation of the 2010 budget were not in line with the requirements of the Council Regulation setting up the Joint Undertaking nor with its financial rules (12).










17.


The final budget included commitment appropriations of 168 million euro and payment appropriations of 129 million euro. While the utilisation rate for commitment appropriations was 96 %, the rate for payment appropriations was only 58 %. This reflects the significant delays in the implementation of the activities as compared with the initial plan (13). The low implementation of the budget is also reflected in the cash balance, which stood at 53 million euro at the end of the year (41 % of the available payment appropriations in 2010).






Internal control systems








18.


The Joint Undertaking has not completely implemented its internal controls and financial information systems during 2010. In particular, further work is needed on the ex-ante control procedures applied for the validation of cost claims. These are important elements of the Joint Undertaking’s system of internal control.










19.


The Court noted that in those cases where a Member or an associate did not submit the required audit certificate (14), the Joint Undertaking correctly did not accept the cost claims. However, in four cases the Joint Undertaking, when validating the cost claims, did not take into account exceptions included in the audit certificates.










20.


The limited review of the IT controls showed that the Joint Undertaking has an adequate level of IT governance and practice for its size and mission, but the formalisation of policies and procedures, however, is lagging behind in certain areas (15).










21.


The Accounting Officer of the Clean Sky Joint Undertaking validated the financial and accounting systems (ABAC and SAP). However, the underlying business processes which provide financial information were not validated, in particular the system providing financial information about the validation of the cost claims.










22.


In October 2010, the Joint Undertaking adopted a comprehensive strategic internal audit plan for the period 2010-2012. It is noted, however, that some of the key processes, such as the ex-ante validation of the cost claims, are scheduled to be examined in 2011 and that the ex-post audits, a key control which aims to assess the legality and regularity of the underlying transactions, are not planned to start until 2011.





OTHER MATTERS



Protection of Intellectual Property








23.


As at the end of 2010, the Joint Undertaking had not yet completed the internal procedures to supervise the application of the provisions included in the consortium and grant agreements regarding the protection, use and dissemination of research results.






Internal audit function and the Commission’s Internal Audit Service








24.


In its previous report, the Court pointed out the need to clarify the provision in the Statutes of the Joint Undertaking on the role of the Commission’s internal auditor. Although the Joint Undertaking’s financial rules have not yet been amended to include the provision referring to the powers of the Commission’s internal auditor, the Commission and the Joint Undertaking have taken action to ensure that the respective operational roles of the Commission’s Internal Audit Service and the Joint Undertaking’s internal auditing function are clearly defined.






Lack of host State agreement








25.


As previously reported by the Court, according to the Council Regulation setting up the Joint Undertaking, a host agreement should be concluded between the Joint Undertaking and Belgium concerning office accommodation, privileges and immunities and other support to be provided by Belgium. However, as at the end of 2010, no such agreement had been signed.





This Report was adopted by Chamber IV, headed by Mr Igors LUDBORŽS, Member of the Court of Auditors, in Luxembourg at its meeting of 25 October 2011.


For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President





(1)  Council Regulation (EC) No 71/2008 of 20 December 2007 setting up the Clean Sky Joint Undertaking (OJ L 30, 4.2.2008, p. 1).

(2)  The Annex summarises the Joint Undertaking’s competences, activities and available resources. It is presented for information purposes.

(3)  The Seventh Framework Programme, adopted by Decision No 1982/2006/EC of the European Parliament and of the Council, brings all the research-related EU initiatives together under one roof and plays a crucial role in achieving the goals of growth, competitiveness and employment. It is also a key pillar for the European Research Area.

(4)  These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations with summary information on the transfers of appropriations among the various budget items.

(5)  The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information.

(6)  The budget implementation reports comprise the budget outturn account and its annex.

(7)  OJ L 248, 16.9.2002, p. 1.

(8)  Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

(9)  Article 38 of Regulation (EC, Euratom) No 2343/2002.

(10)  The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapter 1 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23), and are integrated as such in the financial rules of the Joint Undertaking.

(11)  International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

(12)  The budget was not presented as a single document but as part of the annual implementation plan and did not include all the required elements (for instance, the staff establishment plan).

(13)  The 2008 and 2009 planned activities were not fully implemented at the end of 2009 and this led to recoveries amounting to 4,9 million euro during 2010. At the end of 2010, the Joint Undertaking had not received the cost claims for its 2010 activities. These are due to be sent by beneficiaries after 1 March 2011.

(14)  Cost claims have to be accompanied by an independent report, issued by a certified auditor, under the terms of reference of the grant agreements.

(15)  (a) incomplete strategic IT planning and monitoring cycle, (b) lack of formal security policies and rules, (c) incomplete IT Risk management and (d) lack of formal Business Continuity Plan (BCP) and complete and tested Disaster Recovery Plan (DRP).


ANNEX

Clean Sky Joint Undertaking (Brussels)


Competences and activities








Areas of Union competence deriving from the Treaty


(Extracts from Articles 171 and 172 of the Treaty on the Functioning of the European Union)



Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme provides for a Community contribution to the establishment of long-term public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 171 of the Treaty.
Council Regulation (EC) No 71/2008 of 20 December 2007 setting up the Clean Sky Joint Undertaking (OJ L 30, 4.2.2008, p. 1).





Competences of the Joint Undertaking


(Council Regulation (EC) No 71/2008)




Objectives







—


The Clean Sky Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular Theme 7, Transport (including Aeronautics) of the Specific Programme Cooperation,










—


accelerating in the EU the development, validation and demonstration of clean Air Transport technologies for earliest possible deployment,










—


ensuring coherent implementation of European research efforts aiming at environmental improvements in the field of Air Transport,










—


creating a radically innovative Air Transport System based on the integration of advanced technologies and full scale demonstrators, with the target of reducing the environmental impact of air transport through significant reduction of noise and gaseous emissions, and improvement of the fuel economy of aircrafts,










—


accelerating the generation of new knowledge, innovation and the uptake of research proving the relevant technologies and fully integrated system of systems, in the appropriate operational environment, leading to strengthened industrial competitiveness.





Tasks







—


Bringing together a range of ITDs with the emphasis on innovative technologies and development of full scale demonstrators,










—


focusing efforts within ITDs on key deliverables that can help meet Europe's environmental and competitiveness goals,










—


enhancing the technology verification process in order to identify and remove obstacles to future market penetration,










—


pooling user requirements to guide investment in research and development towards operational and marketable solutions,










—


implementing the research and development activities needed, where appropriate by awarding grants following calls for proposals,










—


awarding grants to support research performed by its Members and by other entities selected following calls for proposals in accordance with open criteria agreed by the Governing Board,










—


publishing information on the projects, including the name of the recipients and the amount of the financial contribution of the Clean Sky Joint Undertaking per recipient,










—


ensuring the provision of services and supply contracts, where appropriate, through calls for tender,










—


mobilising the public and private sector funds needed,










—


liaising with national and international activities in the Joint Undertaking technical domain, in particular with the SESAR Joint Undertaking,










—


informing, by way of periodic meetings, the National States Representative Group and involving ACARE,










—


notifying legal entities that have concluded a grant agreement with the Clean Sky Joint Undertaking of the potential borrowing opportunities from the European Investment Bank, in particular the Risk Sharing Finance Facility set up under the Seventh Framework Programme.









Governance




1 —   The Governing Board

The Governing Board is the governing body of the Clean Sky Joint Undertaking.

2 —   The Director

The Executive Director shall be responsible for the day-to-day management of the Clean Sky Joint Undertaking and is its legal representative. He shall be accountable to the Governing Board.

3 —   The ITD Steering Committees

ITD Steering Committees shall be established by the Governing Board for each of the six ITDs. The following ITDs shall be established:






—


Smart Fixed Wing










—


Green Regional Aircraft










—


Green Rotorcraft










—


Systems for Green operations










—


Green and Sustainable Engine










—


Eco-Design




An independent Technology Evaluator shall be established for the entire duration of Clean Sky.

4 —   National States Representative Group

The National States Representative Group shall consist of one representative of each Member State and of each other country associated with the Framework Programme. It shall elect a chairman from among its members.

5 —   The General Forum

The General Forum is a consultative body to the Clean Sky Joint Undertaking. The General Forum shall be composed of one representative from:






—


each Member of the Clean Sky Joint Undertaking,










—


each Partner.





6 —   The STAB

The Scientific and Technological Advisory Board is an advisory body to the Governing Board. Composed of high-level scientists and engineers, its purpose is to focus on the scientific and technical analysis of the Clean Sky Joint Undertaking from different perspectives: environmental impact; technology and scientific forecast; societal aspects; economics.

7 —   External audit

European Court of Auditors.

8 —   Discharge authority

European Parliament, acting on a recommendation from the Council.





Resources available to the Joint Undertaking in 2010




Budget

168 553 053 euro

Staff at 31 December 2010

24 posts provided for in the establishment plan (temporary staff and contract staff) of which 20 posts were occupied
Other staff:






—


Seconded National Experts: 0










—


Contract staff: 3










—


Local staff: 0










—


Total staff employed: 20




Allocated to:






—


Operational activities: 8










—


Administrative tasks: 9










—


Mixed tasks: 3









Activities and services provided in 2010




Smart Fixed-Wing Aircraft

The aerodynamic definition of the laminar wing design. The feasibility phase for the CROR-engine integration and CROR demo-FTB including numerical simulation, and subscale ground testing, has been performed. The gate to launch the design and manufacturing of the High Speed Demonstrator Passive flight test articles has been passed positively. The first laminar wing ground demonstrator (the upper wing panel) has been successfully manufactured.

Green Regional Aircraft

Three domains of activity, LWC, LNC and AEA, reached significant milestones in 2010, including preliminary definition of the 3D model of the Natural Laminar Flow wing, architecture of the All Electrical Aircraft concept, intelligent Structural Health Monitoring (SHM) demonstration in the scale of the wing panel, improvement of composite materials characteristics (positive laboratory test on hail impact). These domains are the contributors to Flight Test that is currently planned using an ATR aircraft.

Green Rotorcraft

(highlights only …) The active twist concept from Friendcopter has been explored and evaluated. Development of methods necessary for the optimisation of blade design, actuation system integration, sensory data transmission, and power transfer and control algorithms has been performed. The definition of both modelling and wind tunnel testing has been made. The launch of the partner activity on the electrical tail rotor took place in November, which is a major milestone for GRC3. The study of the Diesel engine and the optimisation of the helicopter to be powered have been launched. The integration of the flying helicopter demonstrator roadmap has been set, with the adaptation of helicopter specifications to an aeronautical Diesel engine and transformation of a turbine powered light helicopter. The specification for Environment-Friendly Flight Paths and Low Noise Procedures, following a review of the existing requirements applicable to the H/C flight, has been performed. A significant effort was dedicated to the implementation of the platform of simulation called Phoenix (standing for Platform Hosting Operational & Environmental Investigations for Rotorcraft).

Sustainable and Green Engines (among others …)
The analysis of open rotor wind tunnel test data has progressed and the noise modelling tools have been revised to reflect new learning from the rig tests. A trade-off study between the direct drive and geared Open rotor has been performed.






—


Annulus filler design concept selection review,










—


Annulus filler material and manufacture process review,










—


Composite casing material and manufacture process review,










—


Initial Modules and Engine Modifications Concept Design Review,










—


Initial High Pressure Compressor Concept Design Review,










—


Initial High-Speed Low Pressure Turbine Concept Design Review.




The Design Review for the Core Study and the Whole engine study was performed. Many technologies were passed into review, and selection was done for the demonstrator.

Systems for Green operations

Requirement for both Large aircraft and Regional aircraft types have been analysed. Further development of the modelling tools to assess various architectures at aircraft level; further specification of the architecture of the electrical architecture.
Further maturation of the technologies of the various components, like ice protection systems, power generators/converters, electrical environmental control system, electrical engine nacelle systems.
Promising functions for MTM have been further investigated and the following ones have been retained:






—


Green take-off and climb function










—


Green Cruise function (stepped climb as well as continuous climb)










—


Green approach function.





Eco-Design

Deployment of the Modelling Computer Platform (MCP): system requirements and validation plan issued in November 2010.
Choice of simulation tool for Electrical Network Analysis Model (ENAM) (SABER) and the corresponding specification / documentation documents have been issued in October 2010.
Development of a SABER conversion software tool: CfP ‘SMART’ project kicked off in September 2010.

Technology Evaluator

The analysis of results of External related projects (including Sourdine II, Optimal, and ERAT), and related Networks of Excellence. The scope was to investigate the experiences with the used models, data, and assessment procedures, in order to verify potential for synergies and collaborations.
Exchanges with SESAR have also been initiated, together with SGO, with some dedicated workshops. In 2011 the implementation of more detailed collaboration will be possible, thanks to the MoU signed between Clean Sky and SESAR.





Source: Information supplied by the Clean Sky Joint Undertaking.







REPLIES OF THE CLEAN SKY JOINT UNDERTAKING

Paragraph 16

The Joint Undertaking has taken steps to improve the structure and presentation of the 2011 budget so that the requirements of the legal framework are met.

Paragraph 17

While the Court is aware of the reason for the delay in implementation, the JU has taken steps during 2010 to ensure, as far as possible, that further delays and therefore lower budget implementation do not continue during the programme. Having received the cost claims relating to 2010, the JU has noticed an improvement in the rate of activity and budget implementation. The JU endeavours to continue this improvement with its Members and Partners.

Paragraph 18

The Joint Undertaking took note of the lessons learned from the first exercise and has implemented improvements in its ex-ante controls in 2011. A more consistent and comprehensive check was undertaken in 2011 including a revision of the cost claims from 2008 and 2009.

Paragraph 19

As stated above, through the revision of the ex-ante controls on the 2008 and 2009 cost claims, the cases highlighted by the Court have been revisited and follow-up actions are underway to resolve the situation before the end of 2011 with the concerned beneficiaries.

Paragraph 20

The Joint Undertaking is working closely with the other JTIs in order to put the necessary documentation in place. Actions have started on all issues mentioned by the Court and will be finalised within 2011.

Paragraph 21

The Accounting Officer has taken note of various guidance on this issue and during August 2011 has begun this exercise in the JU.

Paragraph 22

Following the remarks of the Court and based on a dedicated risk assessment of the JU's Internal Control system, the Internal Audit Officer of the JU provided professional advice and consultancy services related to the ex-ante validation of cost claims in the year 2010 and 2011. She also coordinated and managed the ex-post audit process of the JU in 2011. It is envisaged, that for objectivity reasons, the Internal Audit Service of the Commission (IAS) will perform an audit of the financial implementation of the JU's Grant Management in the year 2012.

Paragraph 23

The JU is taking action to fully complete the internal procedures to supervise the application of the provisions already included in the grant agreements and consortium agreements regarding the protection, use and dissemination of research results.

Paragraph 24

In the context of the revision of the Commission's Framework Financial Regulation applicable for the Joint Undertakings, the JU will assess the need for an amendment of the Clean Sky Financial Rules with a view to the role of the Commission's internal auditor.

Paragraph 25

A draft of the host State agreement has been submitted to the Belgian Government for approval. It has been informally confirmed but official confirmation is expected. The signature of both the JU and the Belgian State will follow a related adoption of the document by the Governing Board.