COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND TO THE COUNCIL on the follow-up to 2012 discharge - Replies to requests from the Council
Date: 2014-09-26
Institutions: European Commission
Subjects: EU control, EU expenditure, audit, budgetary control, financial control, general budget (EU), management audit













EUR-Lex - 52014SC0285 - EN











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52014SC0285

COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND TO THE COUNCIL on the follow-up to 2012 discharge - Replies to requests from the Council /* SWD/2014/0285 final */









TABLE OF CONTENTS
INTRODUCTION..................................................................................................................... 3
Council Recommendation on the 2012 discharge...................................................................... 4
Introduction....................................................................................................................... 5
Chapter 1 - The Statement of Assurance and
Supporting Information........................... 14
Chapter 2 - Revenue........................................................................................................ 17
Chapter 3 - Agriculture: Market and Direct
Support...................................................... 19
Chapter 4 - Rural Development, Environment,
Fisheries and Health............................. 22
Chapter 5 - Regional Policy, Energy and
Transport........................................................ 25
Chapter 6 - Employment and Social Affairs................................................................... 31
Chapter 7 - External Relations, Aid and
Enlargement.................................................... 35
Chapter 8 - Research and Other Internal
Policies........................................................... 36
Chapter 9 - Administrative and Other
Expenditure........................................................ 39
Chapter 10 - Getting Results from the EU
Budget......................................................... 41
SR 17/2012 The European Development Fund
(EDF) contribution to a sustainable road network in sub-Saharan Africa................................................................................................... 42
SR 18/2012 European Union Assistance to
Kosovo related to the rule of law.............. 44
SR 20/2012 Is Structural measures funding for
municipal waste management infrastructure projects effective in helping Member
States achieve EU waste policy objectives?....................... 45
SR 21/2012 Cost-effectiveness of Cohesion
Policy Investments in Energy Efficiency. 46
SR 23/2012 Have EU Structural Measures
successfully supported the regeneration of industrial and military brownfield
sites?............................................................................................... 48
SR 24/2012 The European Union Solidarity
Fund’s response to the 2009 Abruzzi earthquake: The relevance and cost of
operations....................................................................................... 49
SR 2/2013 Has the Commission ensured
efficient implementation of the Seventh Framework Programme for Research?........................................................................................................... 50
SR 3/2013 Have the Marco Polo programmes been
effective in shifting traffic off the road?            51
SR 4/2013 EU Cooperation with Egypt in the Field of Governance.............................. 52
SR 5/2013 Are EU Cohesion Policy funds well
spent on roads?................................... 53
SR 8/2013 Support for the Improvement of the
economic value of forests from the European Agricultural Fund for Rural
Development............................................................................ 54
Eighth, ninth and tenth European Development
Funds.................................................. 55
Bodies set up under the TFEU and the Euratom
Treaty................................................. 58
INTRODUCTION
This Commission Staff Working Paper
completes the Report from the Commission to the European Parliament and the
Council on the Follow-up to the 2012 Discharge. It presents in detail the
answers to 79 specific requests made by the Council in the comments
accompanying its Recommendation on the 2012 Discharge[1].
Council
Recommendation on the 2012 discharge
Introduction
1.           (§6 - 2012/COU/0219) The
Council calls upon the Commission to further strengthen the control systems and
to make them more efficient, to put more emphasis on measures preventing
errors, on timely interruption and suspension of payments, to target the most
risk prone programmes and to apply financial corrections and recoveries,
rigorously in line with the relevant rules, in order to protect the EU budget.
Commission's
response:
The
Commission has taken the recommended actions. As a result of the Commission
supervisory role, the Commission has continued in 2013 to apply a strict policy
on interruption and suspension of payments in order to safeguard the EU funds.
This policy, in force for the 2007-2013 period, operates on a preventive basis,
triggering the interruption of interim payments - or the sending of a warning
letter if no payment claim is outstanding - as soon as there is evidence to
suggest a significant deficiency in the management and control system of all or
part of an operational programme, thus avoiding to reimburse amounts which
might be affected by serious irregularities. 
Both
procedures provide a mechanism for rapid agreement with the Member State on the
complementary verifications to be carried out and, if need be, implementation
of appropriate remedial actions, including improvements in the system for
future expenditure and timely financial corrections for past expenditure.
Whenever necessary, in case of serious weaknesses and where the Commission
services consider that no or insufficient action has been taken by the
concerned authorities within the regulatory time frame of the interruption
(maximum period of 6 months), a formal suspension procedure starting with a
pre-suspension letter addressed to the Member State is launched. 
In 2013,
in the area of the regional and urban policy, the number of warning letters,
interruptions and pre-suspensions for ERDF/CF programmes has further increased
compared to previous years: 61 warning letters have been sent and 130 new interruptions
were decided and communicated to Member States in the year, and 78 suspension
procedures were initiated. Two thirds of these interruptions and
pre-suspensions are based on audit results reported to the Commission by audit
authorities and analysed by the Commission services. In the majority of the
cases, the interruption and suspension procedures have worked as an impetus to
improve the management and control systems. The authorities rapidly took the
remedial actions needed. 104 of the 191 cases that were on-going in 2013 were
resolved by end of January 2014 and around 2/3 of cases were solved in 9 months
or less. However, at the end of the year outstanding cases affect 71
operational programmes (ERDF, CF and IPA) in 12 Member States.
In 2013,
in the area of Employment and social affairs, the strict policy of
interruptions and suspensions continued as in previous years: 12 warning
letters were sent, 25 interruptions of payment deadlines decided and 11
suspension decisions adopted. Interruptions and suspensions are discontinued
only after due consideration of the commitment made by the Member State. This requires providing reasonable assurance, in particular on the basis of audit
evidence by the national audit authority or by a DG EMPL (follow-up) audit, on
the progress in the implementation of an action plan with corrective measures,
and/or the implementation of financial corrections at Commission level, i.e.
financial corrections included in a payment claim submitted to the Commission
or agreed with DG EMPL. To ensure consistency, transparency and equal
treatment, each case is examined by the Senior Management of DG EMPL. 
As regards
the targeting of the most risk-prone programmes, DG Regional and Urban Policy
carried out targeted audits to high risks programmes where it identifies that
certain deficiencies could remain undetected or not timely detected by audit
authorities, which could jeopardise the assurance process (assurance gap). The
scope of this complementary audit enquiry is therefore to cover (part of)
operational programmes or particular areas still considered at high risk after
the review of the work of audit authorities considered as most at risk. Such
risk-based audits focused mainly on the reliability of management verifications
at the level of the managing authorities/intermediary bodies (59% of all audits
carried out), and to a lesser extent on selection of operations, corrective
capacity of the managing authority, certification of expenditure by the
certifying authority and high risk operations not yet audited by the national
audit authority. A total of 77 audit missions (including 22 in 2013) have been
carried out since 2010 covering 15 Members States and 70 operational
programmes, including on-the-spot at the level of beneficiaries. These
risk-based audits thus contributed to the implementation of preventive and
corrective measures such as remedial actions plans imposed to Member States,
interruptions and financial corrections, and to improvements in the management
and control systems for programmes put under reservation, ensuring that past
and future expenditure declared to the Commission is legal and regular. The
same approach will be implemented to address and follow-up the reservations in
the 2013 annual activity report of the Directorate General.
A
synthesis report on the results of these risk-based audits was provided to the
European Parliament Discharge Rapporteur in December 2013 and concludes that
the audit enquiry "Bridging the assurance gap" has proven to be a
pro-active response by the Directorate-General to increase its assurance. 
DG EMPL's
audit strategy aims to provide reasonable assurance that the management and
control systems established by Member States comply with the requirements of
the regulations and are functioning effectively.
In 2013,
70 missions have been performed by EMPL auditors for the ESF 2007-2013
programming period focusing on three main issues:
- the
enquiry related to the ACR re-performance, which is the key element to give the
assurance to DG EMPL that the results of the ACRs from the AAs are reliable;
- audit of
programmes put in reservation in the 2012 AAR; In 2013, for 24 out 27,
programmes in reservation an audit mission was planned; Depending on the issues
linked to each programme, the missions were a fact-finding, a follow-up, a
system and projects audit or a review of the AA;
- a
thematic audit on management verifications, following the European Court of
Auditors annual report’s findings that in the area of Employment and Social
Affairs 76 % and 67 % of the errors detected in 2011 and in 2012 respectively,
should have been detected by the Managing Authorities, through their first
level checks ; DG EMPL audit plan in 2013 included 8 missions for this specific
thematic audit on Management Verifications; A report on the results of these
audits including recommendations addressed to Member States to improve their
management verifications, was sent to the EP in November 2013.
In the
case of the Common Agricultural Policy, the Commission, in the new CAP reform
legislation which was adopted at the end of 2013, has strengthened the
provisions on interruption and suspension of payments. The Commission also
continues to pursue its clearance of accounts procedure in respect of all cases
of non-compliance of EU legislation (resulting from around 120 audit missions
each year) in the field of agriculture and in 2013 adopted decisions to claw
back over 1.1 billion EUR of undue expenditure to the EU budget by way of net
financial corrections.
2.           (§6 - 2012/COU/0220) The
Council calls upon the Commission to continue fully executing its supervisory
role in order to ensure the full protection of the EU budget and to provide
guidance to Member States with a view to strengthening the efficiency of their
administrative and control structures, and enhancing the quality of the
different levels of controls, in particular the first level checks.
Commission's
response:
The
Commission is taking the recommended action. For the continuous execution of
its supervisory role, see reply to the request No 2012/COU/0219. 
The Common
Provisions Regulation for the 2014-2020 programming period contains reinforced
control provisions compared to 2007-2013 and requirements that improve the
Member States’ accountability so as to better address errors and ensure
legality and regularity of co-financed expenditure. Two major aspects need to
be underlined:
- The
introduction of compulsory net financial corrections to be adopted by the
Commission when EU audits detect irregularities indicating a serious deficiency
not detected / reported by the programme authorities in relation to the
programme accounts submitted by 15 February each year (see the Communication
from the Commission on “Methods of application of net financial corrections
impacting at the level of Member States” adopted on 13 December and transmitted
to the European Parliament and the Budgetary control Committee). Net financial
corrections reducing the Member States’ allocations in case of undetected/non reported
serious deficiencies will provide increased incentives for national robust and
timely controls, including by the managing authorities, before certifying
programme accounts to the Commission. For Agriculture and Rural Development,
the clearance of accounts procedure has been in place for over 40 years in
order to claw back net financial corrections to the EU budget where undue
expenditure has been incurred and this procedure has been strengthened in the
CAP reform legislation adopted at the end of 2013.
- The
increased use of simplified cost options and their positive results in bringing
down the error rate.
Other
reinforced financial management and control provisions compared to the
2007-2013 programming period includes in particular:
- A new
financial management framework with a programme accounting year running from
1st July to 30 June each year. The certifying authority certifies to the
Commission the expenditure in the programme accounts drawn up for each
accounting year, containing only legal and regular expenditure cumulatively
declared during the accounting year and cleared from all irregularities
detected following national verifications and audits.
- A 10%
retention mechanism on all Commission interim payments during the accounting
year meaning that the Commission reimburses the entirety of claimed expenditure
only once all national controls including the audits by the audit authority
have been carried out and their results fully analysed and taken into account
by the managing and certifying authorities.
- The
submission by the programme managing authority of a management declaration
confirming information contained in the accounts and that the control system in
place gives the necessary guarantees concerning the legality and regularity of
the operations and declared expenditure. This declaration will be accompanied
by a report of the managing authority containing a summary of all management
verification, control and audit results carried out up to certification of the
accounts, an analysis of the nature and extent of errors and system weaknesses
identified, as well as of corrective actions taken or planned.
-
Independent audit work and audit opinion on the accounts, in addition to audits
on the proper functioning of systems and on representative samples of
operations and expenditure as in the current period, by the programme audit
authority. This will include assurance that all detected irregular expenditure
has been appropriately and correctly decertified and excluded from interim
payment claims or from the annual accounts and that when serious deficiencies
were detected, corrective actions were implemented.
These
improved 2014-2020 financial control procedures imply that the Member States
will have strong incentives to carry out timely, effective and robust control
procedures, including management verifications, before certification of the
accounts. When drawing up the accounts, the management declaration and the
audit opinion, the programme authorities should have obtained reasonable
assurance through such control procedures that all material irregularities have
been corrected and that possible serious deficiency, at any level of the
management and control system, have been detected and addressed, or are being
addressed to avoid the risk of net financial corrections. 
The
Commission is also working closely with both the audit authorities and the
managing authorities. On the audit side, regular meetings on methodological
issues are organised: the regulatory annual bilateral control meetings where the
Commission meets individually the audit authorities on general and specific
audit issues and methodologies; multilateral technical meetings with
representatives from all 28 Member States' audit authorities; and the annual
meeting with the "Homologues group" where audit issues of common
interest are debated extensively. On the implementation side, in the area of
Regional and Urban Policy, the Commission services also organised and will
continue to organise specific technical trainings targeted for some Member
States on management verification, public procurement procedures and fraud
prevention measures. It holds also annual technical meetings to develop and
share best practices and guidance.
The
Commission has therefore provided extensive guidance to programme managing and
audit authorities throughout the 2007-2013 programming period.
Furthermore,
DG Regional and Urban Policy has established a dedicated competence centre
(unit) for addressing the significant weaknesses in administrative and
institutional capacities of some Member States and removing bottlenecks in the
management of the Funds. A new instrument to learn from each other will make it
possible for programme authorities to exchange experts and practices. The role
of the Commission will be to promote the mechanism, collect requests and offers
and provide quality control.
A training
programme for the implementation of the 2014-2020 programming period is being
developed and will be implemented in 2014-2015 for programming authorities.
3.           (§6 - 2012/COU/0221) The
Council calls upon the Commission, in the context of future measures taken to
strengthen control systems, to fully respect the need to achieve simplification
in the management of EU funds and to evaluate the potential additional burden
of the measures on Member States before significant changes are introduced.
Commission's
response:
The
Commission has taken the recommended action. Key elements of the 2014-2020
reform emphasize on simplification, particularly for Member States.
The
2014-2020 framework contributes to cutting red tape and simplifying the use of
EU Funds. A common set of rules for all European Structural and Investment
Funds simplifies management particularly for beneficiaries who implement operations
under more than one Fund. Synergies with other EU policies rules (e.g.
research) are also foreseen.
From 2014
onwards, audit and control in the ERDF, ESF and the Cohesion Fund will be more
proportionate to both the amount of funds that are actually received and also
to the possible level of risk that investment could be misused or incorrectly
spent. Commission audit work will be focused on the more risk-prone areas. In
the case of well performing audit authorities, the Commission will limit its audits
where national delivery systems work well. Proportional control rules will
exclude repetition of audits by EU and national audit bodies to the same
operations, except for the purpose of commission re-performance to test the
work of audit authorities.
The wider
use of simplified costs is encouraged, which enables to simplify financial
management of operations while shifting the focus of beneficiaries on the
delivery of quality outputs and results.
With
simpler and clearer rules, legal certainly for beneficiaries will be
reinforced, and with increased proportionality for small programmes and
operations, their administrative burden will be adjusted to a lower level of
risk. More targeted reporting requirements are defined, as reporting is focused
on key indicators and hard data on progress made on the ground, and a
requirement for electronic information exchange with beneficiaries by the end
of 2015 under cohesion policy (“e-cohesion”) has been set.
Furthermore,
proportionality and reduction of the administrative burden are amongst the
general principles regulating the intervention of the funds under the 2014-2020
programming period as set out in Article 4 of the Common Provisions Regulation.
The main
tool to simplify and to streamline national eligibility rules is the use of
Simplified Cost options (SCOs). In November 2013 the Commission produced a
report on "Simplification and gold-plating in the ESF" identifying
the main sources of error due to unnecessary complicated national eligibility
rules and addressing some recommendations to the Member States, based in
particular on the use of SCOs. 
The use of
SCOs is particularly suitable for the type of expenditures reimbursed in ESF
projects. The Commission actively promoted their use through seminars which
were held by DG EMPL in all MS and also by introducing provisions in the
2014-2020 Structural Funds Regulation which will strengthen and encourage their
use. This will enable simplifying financial management of operations while
shifting the focus of beneficiaries to the delivery of quality outputs and
results. The Commission also regularly invites the managing authorities to
address guidance to beneficiaries on eligibility issues. The Commission fixed
as a target the use of SCOs to go up to +- 50% of ESF transactions by 2017.
4.           (§7 - 2012/COU/0222) The
Council urges the Commission to continue improving its control systems, in
particular the desk checks, while keeping the right balance between costs of
controls and achieving the policy objectives.
Commission's
response:
The
Commission is engaged in improving its internal control systems. In this
respect, as an example in DG RTD, the Director General has issued a guidance
note to all the staff related to ex-ante controls – desk checks - and
checklists for payments have been updated recently. 
The aim of
the guidance note is to establish the context where ex-ante controls have to be
performed. In this respect, the ex-ante controls have to be rigorous and be
sufficient to give reasonable assurance about the legality and regularity of
commitments and expenditure, but without creating undue burdens on our
beneficiaries. In order to keep the balance between policy and control
objectives, further requirements to beneficiaries (on additional information to
be supplied to the Commission, as example) will depend on the judgment of the
Commission’s official about the risk involved in the particular circumstances
of the project. 
Another
example is the implementation of a knowledge base system in DG CNECT which
provides all relevant guidelines to ex-ante controls and checklists.
5.           (§8 - 2012/COU/0223) The
Council invites the Commission and Member States to take full advantage of this
opportunity in the implementation of the new multiannual financial framework
and to use more extensively the variety of simplification measures, such as the
simplified cost options, that were given a clearly positive assessment by the
Court and in finding the right balance between risks and cost of controls. To
this end, the Council reiterates the need for an appropriate guidance and
training to be provided to Member States and to beneficiaries to encourage them
in applying such measures and to help them fulfilling their role in pursuing
the policy objectives while further bringing down the level of errors.
Commission's
response:
In its
replies to the Court's observations in the Annual Report for the year 2012, the
Commission already confirmed that it will continue to actively promote and
support Member States to put in place simplification measures such as the
simplified cost option as foreseen in the regulations of the 2014-2020
programmes.
The draft
Guidance on simplified cost options for Managing Authorities has been discussed
during 2014 in the relevant committees (i.e. Expert Group ESIF (European
Structural and Investment Funds), Rural Development Committee, etc.) and is
expected to be adopted during Q3 2014.
6.           (§9 - 2012/COU/0224) In
the light of the newly revised public procurement rules and procedures, the
Council invites the Commission to ensure through its technical assistance that
the recently updated guidelines for determining financial corrections for
non-compliance with the rules on public procurement are disseminated and
understood by all relevant actors.
Commission's
response:
The
Commission is taking the recommended actions. In response to the request
concerning dissemination and training measures on the new guidelines on
financial corrections for non-compliance with rules on public procurement, DG
Regional and Urban Policy developed together with European Structural and
Investments Funds (ESIF) DG's and jointly with DG Internal Market and Services
a Public Procurement Action Plan. This includes regular exchanges in a working
group to ensure coherent approaches to common problems and to identify gaps
where common actions are required. The Action Plan covers i.a.:
SHORT TERM
PRIORITY
•        the
preparation of practical guidance for practitioners on avoiding of common
errors linked to Public procurement in ESI Funded projects, 
•        country
specific Action Plans in Member States with weaker administrative capacity, 
•        Pilot
Integrity Pacts for public procurement and contract management 
•        Stock
taking and analyses of Member States' lessons learnt, dissemination of tools
and good practices in order to improve public procurement capacity
•        Compilation
and analysis of public procurement evidence/ indicators on performance for
assessment of ex ante conditionality on public procurement for negotiations
2014-2020 programmes. This covers as well training/guidance on how to prepare
and follow-up on Action Plans to address weaknesses in case the ex ante
conditionality is not/partially fulfilled by a MS.
MID TERM
PRIORITY
•        Preparation
for new PP Directives (by 2016) – training, dissemination of guidance
•        A
new transparency initiative against corruption in Public Procurement (e.g.
integrity pacts, use of "red-flags") 
•        Assessment
of current practices and scope to improve further public procurement
professionalization linked to funds
•        Training
on public procurement as a strategic tool for Cohesion Policy (e.g.
e-procurement, Green public procurement, Innovation)
7.           (§10 - 2012/COU/0225) The
Council calls on the Commission to continue, where appropriate, the
implementation of all available corrective measures.
Commission's
response:
The
Commission has taken the recommended action. In the Communication on the
“Protection of the European union budget to end 2012” , the Commission has
presented financial corrections implemented in 2012 from all budget areas under
shared management and also indicated that in addition to making financial
corrections and recoveries, it also implements a strict policy of interruptions
and suspensions as soon as significant weaknesses are identified. This strict
policy has contributed to reinforcing the Commission’s supervision over Member
States and speeding-up the adoption of the necessary corrective measures at Member State level, including implementation of financial correction, when necessary.
In 2013,
as a result of its supervisory role, the Commission has continued to apply a
strict policy on interruption and suspension of payments in order to safeguard
the EU funds. This policy, in force for the 2007-2013 period, operates on a
preventive basis, triggering the interruption of interim payments -or the
sending of a warning letter if no payment claim is outstanding - as soon as there
is evidence to suggest a significant deficiency in the management and control
system of all or part of an operational programme, thus avoiding to reimburse
amounts which might be affected by serious irregularities. 
Both
procedures provide a mechanism for rapid agreement with the Member State on the
complementary verifications to be carried out and, if need be, implementation
of appropriate remedial actions, including improvements in the system for
future expenditure and timely financial corrections for past expenditure.
Whenever necessary, in case of serious weaknesses and where the Commission
services consider that no or insufficient action has been taken by the
concerned authorities within the regulatory time frame of the interruption
(maximum period of 6 months), a formal suspension procedure starting with a
pre-suspension letter addressed to the Member State is launched. 
In 2013,
in the area of the regional and urban policy, the number of warning letters,
interruptions and pre-suspensions for ERDF/CF programmes has further increased
compared to previous years: 61 warning letters have been sent and 130 new
interruptions were decided and communicated to Member States in the year, and
78 suspension procedures were initiated. Two thirds of these interruptions and
pre-suspensions are based on audit results reported to the Commission by audit
authorities and analysed by the Commission services.
In the
majority of the cases, the interruption and suspension procedures have worked
as an impetus to improve the management and control systems. The authorities
took the remedial actions needed. 104 of the 191 cases that were on-going in
2013 were resolved by end of January 2014 and around 2/3 of cases were solved
in 9 months or less.
8.           (§11 - 2012/COU/0226) The
Council calls on the Commission to continue to harmonise the presentation and
content of the annual activity reports between Directorates-General in order to
improve their comparability across policy areas.
Commission's
response:
The
structure of the 2013 annual activity reports was revised significantly to help
the DGs to comply with the reporting requirements under the new Financial
Regulation and to respond to a number of audit recommendations. Much effort has
been devoted to ensuring that the reports include only what is relevant and to
improve clarity and consistency across DGs. The aim is to ensure compliance,
conciseness, clarity and consistency while at the same time reducing the
reporting burden.
9.           (§12 - 2012/COU/0227) The
Council calls on the Commission to continue monitoring the evolution of the
amounts of outstanding commitments (RAL), and to settle or decommit them in a
timely manner and in line with the relevant rules.
Commission's
response:
The
Commission has taken the recommended action. 
Results of
the monitoring of outstanding budgetary commitments are presented yearly in a
progress report on RAL, a working document of the Draft General Budget of the
Commission. For cohesion, an analysis of outstanding commitments is published
yearly in the Commission staff working paper (DG Budget) "Analysis of the
budgetary implementation of the Structural and Cohesion Funds". 
The yearly
exercise for Potentially Abnormal RAL (PAR) provides a classification by the
services of old and dormant outstanding commitments, the focus being in old
cases. The services can classify open cases to following broad categories:
normal/still ongoing/dispute cases/to be de-committed. This last category is
considered as unjustified RAL (contracts can be closed and open amounts should
be de-committed and possible recoveries made). All those cases were monitored
in a follow-up exercise six months later. 
These
reports are sent to European Parliament (Committee on Budgets) and Council
(Budget Committee), as are regular reports on implementation, which also show
the level of decommitments.
10.         (§12 - 2012/COU/0228) The
Council invites the Commission to prepare and publish a long term cash flow
forecast, projecting future payment requirements, to assist identifying future
needs, planning budgetary priorities and ensure that necessary payments can be
met from approved annual budgets.
Commission's
response:
The
Commission considers cashflow forecast as a useful tool of financial management
and will analyse how this request can be best implemented.
Chapter 1 - The
Statement of Assurance and Supporting Information
11.         (No1, §2 - 2012/COU/0229) The
Council encourages the Commission to continue to ensure that the high quality
of the accounts is maintained in the coming years.
Commission's
response:
The
Council request has been implemented through the implementation of the
accounting quality project and continued training of accounting correspondents
of DGs. Evidence of this quality of the accounts can be seen in the fact that a
fully clean, i.e. unqualified audit opinion, on the accounts has been received
for many years. The Commission has a priority every year of maintaining the
quality of the accounts and the clean opinion.
12.         (No2, §1 - 2012/COU/0230) The
Council reiterates its wish to see improvements in financial management systems
and lower error rates.
Commission's
response:
The EC
notes the Council’s request for further improving the financial management,
especially regarding the necessity of a close follow-up of the RAL, which has
lately further increased, and a limitation of the period covered by
pre-financing. A new long-range cash flow forecast will help to alleviate the
identified problem and the Commission is committed to use this accounting tool
more thoroughly. However, the problem of RALs might be exacerbated by the fact
that for 2014-20, the allocated commitment appropriations exceed by far the
payment appropriations.
Furthermore,
the EC wants to point to the new protective instruments foreseen during the
coming 2014-2020 programming period:
The
Commission is actively promoting the use of simplified cost options:
-         Simplified
cost options reduce the administrative burden for the public administration and
for beneficiaries.
-         The
European Court of Auditors did not for the DAS 2012 find any error in the 26%
of ESF operations using these simplified options, whilst for the rest, the
frequency of errors (big or small) was about 40%.
-         Projects
using simplified cost options place a greater focus on results and performance,
as opposed to inputs.
In the
area of Agriculture, the Commission disposes of several instruments for
improving the financial management, both ex-ante through interruptions and
suspensions/reductions, and ex-post through net financial corrections and
recoveries. Moreover, in order to comply with the standards of sound financial
management, DG AGRI continued its efforts to identify the root causes of errors
(ad-hoc task force were set-up), and to propose and encourage the widest use of
the simplified payment schemes that are less prone to errors.
In
addition to the above, the Commission's supervisory role is strengthened aiming
to improve the Member States (MS) management and control systems and to reduce
the error rates. For these purposes, the Common Agricultural Policy (CAP)
regulatory tools were reinforced for the financial period 2014-2020, like:
single system of monitoring and evaluation for both pillars,
streamlining/speeding up of the conformity clearance procedure, better defining
the criteria and methodology for applying net financial corrections,
introducing a new model for assurance by the Certifying Body (CB) on the
legality and regularity of declared expenditure based on a representative
sample.
Net
financial corrections make the corrections imposed on Member States even more
effective.
The formal
certification of annual accounts once all national controls have been done,
combined with the 10% retention mechanism on interim payments, net corrections
when serious irregularities are detected once accounts have been accepted and
the requirement of annual management declarations by managing authorities are
meant to offset the risk that expenditure claimed is not legal and regular and
to improve accountability at national level.
13.         (No2, §4 - 2012/COU/0231) The
Council encourages the Commission to further reinforce supervision and control
structures, to further strengthen its cooperation with Member States and to
continue to provide guidance to national managing authorities, in order to
bring down the level of error in Union spending in the forthcoming years.
Commission's
response:
The
Commission will continue to rigorously exercise its supervisory role by
ensuring that Member States address the weakest points in their management and
control systems. In particular in the area of Cohesion funds, the Commission
will address this by
- updating
its audit risk assessment jointly with Structural actions services taking into
account all available cumulative audit results and information;
-
targeting its joint audit plan for 2014-2015 on the main risks identified;
-
completing the review of the quality of the audits undertaken by the audit
authorities and monitoring the single audit status granted so far and by
- applying
payment interruptions and proposing to the Commission to decide on suspensions
of payments and financial corrections whenever necessary.
In
addition to the above and to the specific actions defined for each programme
under reservation in AAR 2013, DG Regional and Urban Policy will continue to
apply the three initiatives to mitigate the main risks and weaknesses
identified: administrative capacity initiative, public procurement initiative
and audit capacity initiative (AAR 2013 of DG Regional and Urban Policy pages
80-81).
A major
reform of the Common Agricultural Policy was concluded in 2013. The financial
management of the CAP was also reviewed as part of the reform, e.g. aligning
the rules with the new Financial Regulation for the general EU budget,
introducing a new model for assurance on the legality and regularity of
payments to final beneficiaries, and enhancing the possibility for the
Commission to suspend and interrupt payments to Member States. In order to
comply with the standards of sound financial management, DG AGRI increased its
efforts to further reinforce assurance for expenditures of the CAP by e.g.: 
‒ creating
working groups which identified the main causes of error in the areas of direct
payments, rural development and market expenditures and laid down preventive
and corrective actions. The more advanced works in rural development showed an
increasingly good cooperation with the Member States and understanding of the
root causes of the errors and the importance of controlling and rectifying
them. 
‒
establishing an additional unit that became effective in 2014, giving support
to Member States in implementing the Integrated Administration and Control
System (IACS) and Land Parcel Identification Systems (LPIS). 
The
control systems have also been improved to the greatest extent practically
achievable. DG AGRI is determined to use all means at its disposal to ensure a
sound management of the CAP on this basis. Yet, taking into account the need to
balance legality and regularity with the achievement of policy objectives while
bearing in mind the current control requirements and costs, the question cannot
be eluded as to whether it will be possible, in the foreseeable future, to
allow the error rate to descend below 2% on a sustainable basis.
Chapter 2 -
Revenue
14.         (No1, §1 - 2012/COU/0232) The
Council calls on the Commission to continue to follow up the deficiencies
identified concerning the Member States' custom supervision, to improve the
estimates of tradition own resources (TOR) and to assist Member States in
enhancing appropriate control frameworks in order to collect the maximum amount
of TOR due to the Union.
Commission's
response:
The
Commission will continue to follow up the deficiencies identified concerning
the Member States' customs supervision, and to assist Member States in
enhancing appropriate control frameworks in order to collect the maximum amount
of traditional own resources due to the Union.
15.         (No2, §1 - 2012/COU/0233) The
Council encourages the Commission, in close collaboration with Member States,
to endeavour to resolve the outstanding issues [long-outstanding reservations
regarding VAT-based own resources] as soon as possible.
Commission's
response:
The
request is accepted. Active collaboration is continuing with Member States to
resolve those long-outstanding reservations not dependent upon action in the
Court.
16.         (No3, §1 - 2012/COU/0234) The
Council calls on the Commission to examine the Court's findings on weaknesses
in the Commission's verification of GNI data and to enhance its efforts in
implementing the Court's recommendations, as well as to further improve the
management of reservations.
Commission's
response:
In
preparation of the next verification cycle, starting in 2015, the Commission
will review its control framework. In that process it will take into
consideration the points raised by the Court.
The
Commission will further develop its strategy for GNI verification to
incorporate a structured and formalized programme. This will include a risk
analysis and take full account of cost-effectiveness. Eurostat is committed to
increase the focus on quantitative checks while still maintaining the mainly
qualitative verification approach. 
The
Commission considers that the qualitative assessments are of the utmost importance
since the methodology used has to be reliable, comparable and exhaustive. This
is the only way of establishing the risks involved in an objective manner.
However, as the verification model develops, there will be more quantitative
assessments, within the constraints of existing resources.
The
Commission agrees with the objective of limiting the use of general
reservations. A new annex to the Memorandum of Understanding between DG Budget
and Eurostat, “Good practice covering GNI reservations” was signed in April
2013; this will reduce significantly the number of general reservations. 
The
Commission agrees that it is desirable that reservations only cover material
findings. However, since reliable quantitative information is rarely available
at the time a reservation is being set, the Commission’s prerogative to set
reservations to protect the EU’s financial interests cannot be restricted.
Eurostat agreed with BUDG in the spring of 2013 on the typology for different
types of reservations. Eurostat will look into the possibility of, where
possible, quantifying the criteria for setting a reservation.
Chapter 3 -
Agriculture: Market and Direct Support
17.         (§2 - 2012/COU/0235) The
Council calls on the Commission and Member States to continue their efforts and
to improve their supervisory and control systems.
Commission's
response:
When the
Commission services detect problems during the course of their audits, they
request the Member State to take remedial actions. Where the problem is
particularly acute, the Member State is required to implement a remedial action
plan which is closely followed by the services. So far such plans have been
found to be very effective. The Commission also ensures that the financial risk
to the EU budget arising from such deficiencies is covered via financial
corrections imposed via the conformity clearance procedure.
The
Commission continues its efforts in supervising the control systems in the
Member States (MS).
For the
financial period up to 2014, the Commission made use of several supervisory
instruments as regards the control systems in the MS: 
- a
conformity clearance procedure leading to financial corrections in case of
deficiencies;
-
insistence on remedial action plans to be put in place by the MS in case of
serious deficiencies and the close monitoring and follow-up of those plans.
In
addition, the CAP legal framework for post-2014 enables the Commission to use
some additional supervisory instruments, like: 
- a
streamlined conformity procedure in terms of deadlines;
-
application of suspension of payments in case of failure to address
deficiencies;
- opinions
from the Certification Bodies (CB) on the legality and regularity of declared
expenditure.
The
Commission is also committed to strengthen its supervisory and monitoring role
vis-à-vis the MS and provide more assistance, guidance and support in the
implementation of direct payments (refer also to the requests 2012/COU/0236 and
2012/COU/0239).
18.         (No1, §2 - 2012/COU/0236) The
Council calls on the Commission to further engage with Member States to address
the shortcomings identified in the Land Parcel Identification System (LPIS).
Commission's
response:
To enable
maintenance of agriculture in specific areas, the Member States can implement a
procedure which ensures that the eligible area within these parcels is
considered for payment, in so far that overall the parcel can still be
considered as "agricultural". Guidelines including examples on how to
assess the area to be taken into account have been discussed with and
distributed to the Member States over the recent years.
Where it
is found that the Member State fails to correctly record eligible area the case
is subject to a clearance procedure.
The
Commission has been continuing its efforts with MS in addressing the
shortcomings identified in LPIS. Guidance notes and examples have been issued
and extensively discussed with the MS over the recent years.
Further to
the above, a new Unit "Implementation support, monitoring, IACS and
LPIS" has been created within DG AGRI, whose mission is to ensure,
inter-alia, the follow-up of the IACS legislative framework, including the
provision of its interpretation to Member States and its eventual review and
amendment, where necessary; to ensure that action is taken if implementation is
lacking, including action plans by MS and Commission monitoring of
implementation, including quality assessment of the LPIS.
19.         (No1, §4 - 2012/COU/0237) The
Council invites the Court, in consultation with the Commission, to consider the
most appropriate way of reflecting the impact of cross-compliance on the error
rate.
Commission's
response:
The
respect of cross-compliance obligations does not constitute an eligibility
criterion for CAP payments and, therefore, the controls of these requirements
do not pertain to the legality and regularity of the underlying transactions.
Cross-compliance is a mechanism by which farmers are penalised when they do not
respect a series of rules which stem in general from other policies than the
CAP and apply to EU citizens independently of the CAP. The Commission maintains
its position that violations of cross-compliance requirements should not be taken
into account for calculation of the error rates for the CAP. 
The
Commission welcomes the request made by the Council and remains open for
further collaboration with the Court so as to find the most appropriate way of
tackling this issue.
20.         (No1, §5 - 2012/COU/0238) The
Council urges the Commission to ensure an appropriate follow-up of the
systematic errors detected by the Court, and either to put in place, when
necessary, the appropriate action plans or to proceed with clearance of
accounts.
Commission's
response:
The
Commission underlines that it safeguards the financial interest of EU budget
via financial corrections in the framework of the conformity clearance
procedure. In addition, shortcomings in Member States' management and control
systems are addressed through targeted and comprehensive action plans where
necessary.
The
Commission follows-up the Court's findings on a continuous basis. The
systematic errors identified by the Court are pursued through financial
corrections within the framework of conformity clearance procedure,
comprehensive action plans, and/or guidance to the MS. 
To respond
to the Court's previous recommendations, starting with AAR 2012, the basis for
calculating the residual error rate for ABB03 (decoupled area aids) has been
developed to take into account all relevant information in assessing the
reliability of the MS statistics, including adjustments based on ECA's
findings.
In view of
further improving the monitoring of the systematic deficiencies identified by
the Court, several actions are taken:
- A
thorough analysis will be carried out in DG AGRI, with a view to identifying
the main patterns of deficiencies or the areas more prone to errors at Paying
Agency level; the outcome of this process is to be followed-up in the strategic
and annual audit programme in DG AGRI.
- The
Certification Bodies are clearly requested through guidelines to duly consider
within their work the weaknesses reported by the Court, and to report upon the
corrective measures taken by the MS.
21.         (No2, §1 - 2012/COU/0239) The
Council urges all actors to continue their efforts to ensure that the
Integrated Administration and Control System (IACS) remains an effective and
functioning system.
Commission's
response:
The
Commission has been continuing its efforts to ensure that IACS remains an
effective and functioning system. The risk for the fund is covered under the
conformity clearance procedure.
Further to
the above, a new Unit "Implementation support, monitoring, IACS and
LPIS" has been created within DG AGRI, whose mission is to ensure,
inter-alia, the follow-up of the IACS legislative framework, including the
provision of its interpretation to Member States and its eventual review and
amendment, where necessary; to support the MS in their implementation of the
direct payments schemes, in particular as regards IACS, including dissemination
of best practices.
Chapter 4 -
Rural Development, Environment, Fisheries and Health
22.         (No1, §2 - 2012/COU/0240) The
Council invites the Court, in consultation with the Commission, to consider the
most appropriate way of reflecting the impact of cross-compliance on the error
rate.
Commission's
response:
The
respect of cross-compliance obligations does not constitute an eligibility
criterion for CAP payments and, therefore, the controls of these requirements
do not pertain to the legality and regularity of the underlying transactions.
Cross-compliance is a mechanism by which farmers are penalised when they do not
respect a series of rules which stem in general from other policies than the
CAP and apply to EU citizens independently of the CAP. The Commission maintains
its position that violations of cross-compliance requirements should not be
taken into account for calculation of the error rates for the CAP. 
The
Commission welcomes the request made by the Council and remains open for
further collaboration with the Court so as to find the most appropriate way of
tackling this issue.
23.         (No1, §3 - 2012/COU/0241) The
Council encourages the Commission to ensure an appropriate follow-up of the
systematic errors detected by the Court.
Commission's
response:
The
Commission follows-up the Court's findings on a continuous basis. The
systematic errors identified by the Court are pursued through financial
corrections within the framework of conformity clearance procedures,
comprehensive action plans, and/or guidance to the MS. 
To respond
to the Court's previous requests, in the context of AAR 2013, the Court's
findings were included as a parameter for adjusting the residual error rate in
relation to all expenditure (ABB02, ABB03 and ABB04,).
With a
view to further improving the monitoring of the systematic deficiencies
identified by the Court, several actions are taken:
- A
thorough analysis will be carried out by DG AGRI with a view to identifying the
main patterns of deficiencies or the areas more prone to errors at Paying Agency
level; the outcome of this process is to be followed-up in the strategic and
annual audit programme in DG AGRI.
- The
Certification Bodies are clearly requested through guidelines to duly consider
within their work the weaknesses reported by the Court, and to report upon the
corrective measures taken by the MS.
24.         (No2, §1 - 2012/COU/0242) The
Council calls on the Commission to pursue its efforts in providing targeted
guidance and in increasing the mutual understanding between the administrations
involved.
Commission's
response:
Indeed, it
is the responsibility of the Member States' authorities to ensure that the
administrative and control system in place meets the legal requirements and
ensures that there is no financial risk to the EAGF and EAFRD funds.
The shared
management system of the EAGF and EAFRD funds is such that if weaknesses are
present which lead to financial risks to the funds the Commission shall impose
net financial corrections on the Member States concerned.
The
Commission is aware of weaknesses in the Member States' control system for
EAFRD, especially for non-IACS measures. The certification bodies (CB) report
on these weaknesses in their annual certification reports. The CBs make
recommendations to improve the control systems and follow up their
recommendations. The Commission takes the findings of the CBs into account, as
well as other available information, when performing its risk analysis and
establishing its own audit program in the framework of the conformity clearance
procedure
The
Commission promotes periodic meetings of national experts –'Expert Group
Meetings', to share best practices and improve overall understanding of the
control systems for both EAGF and EAFRD. 
Member
States have themselves initiated an extra forum –the 'Learning Network', among
the national administrations across EU; the Commission is periodically invited
for providing guidance and interpretation on different subjects.
25.         (No2, §2 - 2012/COU/0243) The
Council encourages the Commission to use the conformity clearance procedure, in
accordance with the relevant rules.
Commission's
response:
Whenever
in the framework of its audits the Commission identifies weaknesses in
administrative checks, it pursues them through the conformity clearance
procedure to protect the EU’s financial interests.
The
Commission will continue to improve its audit methodology and procedures.
Moreover, it will continue to make efforts, notably in the framework of the
preparation for the implementation of the CAP reform, to improve and speed up
the process bearing in mind the need to maintain quality standards and the Member State’s right of reply.
The
Commission continues to use the conformity procedure in accordance with the
relevant rules. The issues of the length of the conformity procedures and the
coverage in its conformity audits are considered a very high priority in DG
AGRI.
In the
context of the drafting of the implementing act for the horizontal regulation,
DG AGRI is proposing to introduce time-limits for each step of the procedure,
whilst still safeguarding its capacity to appropriately protect the EU
financial interest. A streamlining of the procedure is being proposed so that,
in standards cases, the average length of the conformity procedure would be
around 2 years. Regarding the audit coverage, the paying agencies audited are
selected following the Central Risk Analysis, and in order to visit those which
had not yet been audited during the programming period. The coverage of
conformity audits is detailed in the annual activity reports. These enquiries
help to detect the root causes for the error rate and identify possible
remedial actions.
26.         (No2, §4 - 2012/COU/0244) The
Council invites the Commission to further develop and to fine-tune the
procedures and guidelines required following the CAP reform, including the
reinforcement of assurance procedures at the level of the final beneficiaries.
Commission's
response:
The
reinforcement of assurance exercise was conceived as a first step in a
development process towards greater assurance with regard to the control work
carried out by the Member States. It has proven, in this preparatory phase, to
be a useful joint learning exercise with its voluntary participants with a view
to developing and fine- tuning the procedures and guidelines for the legality
and regularity work required in the new CAP reform legislation.
Such a
possible capping, under certain conditions, of the level of financial
corrections to the said error rate relates to conformity clearance of accounts
procedures. Indeed, if a Member State implements the proposal set out above and
if the certification body confirms the reliability of the control statistics
for a given population, any financial corrections for deficiencies in the
Member State’s management and control of an aid scheme within that population
would be limited to the error rate derived from the control statistic
concerned. Where the certification body does not confirm the error rate derived
from the control statistics of the paying agency, the conditions for capping
financial corrections at the level of the error rate are not fulfilled.
The core
guideline for the Certification Bodies (CB) covering the audit methodology in
relation to the requirements enshrined in the new CAP legal framework for the
CBs (opinion on legality and regularity of expenditure, control system and
annual accounts), has been finalised and communicated to the MS.
A working
group of experts from CBs and DG AGRI continue the work on additional
guidelines for the CBs (e.g. reporting requirements and management declaration)
Chapter 5 -
Regional Policy, Energy and Transport
27.         (No1, §2 - 2012/COU/0245) The
Council calls on Member States and the Commission to take their respective
responsibilities for enhanced guidance and supervision, to provide targeted
training and guidelines, and to ensure a better dissemination of information
and of best practices while, at the same time, ensuring a greater stability of
rules and procedures over time.
Commission's
response:
The
Commission is taking the recommended actions. In order to better prepare bodies
managing European Structural and Investment Funds (ESIF) in EU Member States
for the new programming period, the Commission is launching a series of
training seminars which will focus on the key new elements and changes
introduced by the legislative framework for 2014-2020. Training will consist of
2 modules: one dedicated to the programming and management of ESIF and the
other focusing on financial and audit issues. While training will be delivered
by the external service providers (EIPA, Ecorys and PWC), the Commission
officials will be closely involved in the process and will be ready to provide
explanations and answer questions. This training is seen as a pilot which will
be implemented, assessed and, based on demand, could be organised at the Member State level for countries most in need of reinforcement of their administrative
capacity.
The
European Commission and in particular the DG Regional and Urban Policy is keen
to look for ways in which potential difficulties can be overcome, primarily by
promoting the "peer-to-peer exchanges" between Member State's
administrations responsible for the implementation of ERDF and the Cohesion
Fund. It is foreseen that one of these instruments will be a comprehensive
exchange of experts system by which administrations involved in the management
and implementation of the ESIF will have access to colleagues from similar
administrative bodies in other Member States/regions. A demand analysis has
been launched to test the interest of Member States in such an initiative. This
analysis will build the basis for the design of a Common Expert Exchange System
and the launch of the first pilot projects to match demand and supply between
Member States.
Better
exchange of available know-how and experiences in managing the Funds should
lead to better networking and overall increase of governance in managing the
Funds. The Commission wishes to take the initiative for setting up an exchange
platform for managing authorities and intermediate bodies which should be
supported and finally taken over by the Member States.
28.         (No1, §3 - 2012/COU/0246) The
Council encourages the Commission to continue concentrating its available audit
resources on the most risk-prone areas and to focussing in particular on
preventive measures, in order to better protect the Union budget.
Commission's
response:
The
Commission has taken the recommended action. In the area of Regional and urban
policy, in addition to the enquiry to review the audit authorities’ work, in
some cases the Commission may identify that certain deficiencies could remain
undetected or not timely detected, which could jeopardise the assurance process
(assurance gap). The scope of such audits is to "Bridge the assurance
gap" and to cover high risk operational programmes and part of operational
programmes. Audits are mainly focused on the reliability of management
verifications at the level of the managing authorities/intermediary bodies (59%
of these risk-based audits), and to a lesser extent on selection of operations,
corrective capacity of the managing authority, certification of expenditure by
the certifying authority, and on the audit of high risk operations not yet
audited by the national audit authority. A total of 77 audit missions have been
carried out since 2010 covering 15 Members States and 70 operational
programmes, including at the level of beneficiaries (see DG REGIO Annual
Activity Report 2013, page 41 and Annex 8). 
As a
result of the 77 audits carried out, the impact on payments has been that for
58 programmes, payments have been interrupted or (pre)suspended or warning
letters have been sent to prevent declaration of irregular expenditure. This
demonstrates that the enquiry has enabled DG REGIO to effectively address
previous years' discharge request that it should systematically interrupt and
suspend payments to the programmes when serious deficiencies are identified in
management verifications. In such cases, as recommended by the Discharge
authority, payments have been resumed in 2013 only where there was sufficient
and reliable evidence that weaknesses had been remedied. The audit enquiry
"Bridging the assurance gap" has proven to be a pro-active response
to increase the assurance.
The
implementation of preventive and corrective measures such as remedial actions
plans, interruptions and financial corrections has led to improvements in the
systems of programmes put under reservation, ensuring that past and future
expenditure declared to the Commission is legal and regular. The same approach
will be implemented to address and follow-up the reservations in the 2013
Annual Activity report of the Directorate General for Regional and Urban
Policy.
 In the
area of Employment and Social affairs DG EMPL's audit strategy aims to provide
reasonable assurance that the management and control systems established by
Member States comply with the requirements of the regulations and are
functioning effectively.
In 2013,
70 missions have been performed by EMPL auditors for the ESF 2007-2013
programming period focusing on three main issues:
- the enquiry
related to the ACR re-performance, which is the key element to give the
assurance to DG EMPL that the results of the ACRs from the AAs are reliable;
- audit of
programmes put in reservation in the 2012 AAR; In 2013, for 24 out 27,
programmes in reservation an audit mission was planned; Depending on the issues
linked to each programme, the missions were a fact-finding, a follow-up, a
system and projects audit or a review of the AA;
- a
thematic audit on management verifications, following the European Court of
Auditors annual report’s findings that in the area of Employment and Social
Affairs 76 % and 67 % of the errors detected in 2011 and in 2012 respectively,
should have been detected by the Managing Authorities, through their first
level checks ; DG EMPL audit plan in 2013 included 8 missions for this specific
thematic audit on Management Verifications; A report on the results of these
audits including recommendations addressed to Member States to improve their
management verifications, was sent to the EP in November 2013.
On the
preventive side, as recognized by the ECA in its 2012 Annual report, the main
tool to simplify and to streamline national eligibility rules is the use of
Simplified Cost options (SCOs). In its audits on ESF the Court did not detect
any error related to the use of SCOs (6.23) and concluded that more extensive
use of SCOs would have a positive impact on the error rate.
In
November 2013 the Commission produced a report on "Simplification and
gold-plating in the ESF" identifying the main sources of error due to
unnecessary complicated national eligibility rules and addressing some
recommendations to the Member States, based in particular on the use of SCOs. 
The use of
SCOs is particularly suitable for the type of expenditures reimbursed in ESF
projects. The Commission actively promoted their use through seminars which
were held by DG EMPL in all MS and also by introducing provisions in the
2014-2020 Structural Funds Regulation which will strengthen and encourage their
use. This will enable simplifying financial management of operations while
shifting the focus of beneficiaries on the delivery of quality outputs and
results. The Commission also regularly invites the managing authorities to
address guidance to beneficiaries on eligibility issues. The Commission fixed
as a target the use of SCOs to go up to +-50% of ESF transactions by 2017.
29.         (No1, §5 - 2012/COU/0247) The
Council calls on the Commission, in cooperation with Member States, to timely
design the new rules and to agree on the guidelines for their implementation.
Commission's
response:
The
Commission is taking the recommended action. Following intensive negotiations,
the co-legislators adopted the legislative package on 17/12/2013, i.e. less
than one month after the adoption of the MFF (on 02/12/2013). 
Preparatory
work for delegated and implementing acts started in early 2013 and 24 meetings
with Member State experts were held in 2013. 25 fiches outlining the contents
of the acts have been presented and first draft legal texts were finalised and
presented to the Member States' experts. Work has progressed according to plans
and adoption of all relevant delegated and implementing acts necessary for the
start-up of programmes is foreseen within 6 months of the adoption of the
legislative package.
Close to
70 draft guidance notes on ESI Funds, which are needed by desk officers for
programming, were prepared. Following the adoption of the legislative package
at the end of the year, the content of the guidance is being updated and
finalised so that it is in line with the adopted legislative package. This
includes guidance for implementing the management and control systems,
currently being discussed with Member States' experts, guidance on management
verifications, on the implementation of Simplified Cost Options, on risk
assessment, sampling methods and audit strategy as well as guidance in relation
to financial instruments, the Youth Employment Initiative and FEAD.
30.         (No1, §5 - 2012/COU/0248) The
Council calls on the Commission, in cooperation with Member States, to avoid
delays in the execution of programmes relating to the new programming period.
Commission's
response:
The
Commission is taking the recommended action. The eligibility period of
2014-2020 programmes started on January 1, 2014. Commission aims to adopt all
programmes as fast as possible, if the programmes are submitted early by the
member States and are of sufficient quality. Where they are not, the Commission
will make observations and request the Member State to take these into account
before being able to adopt the programmes.
As of
April 22, 2014, 81 Operational Programmes had been submitted by Member States
to DG Regional and Urban Policy.
As of 5
May 2014, 63 Operational Programmes had been submitted by Member States to DG
Employment and Social Affairs.
31.         (No1, §6 - 2012/COU/0249) The
Council encourages the Commission to continue applying the policy of suspension
and interruption of payments, in accordance with the relevant rules, whenever
significant deficiencies in the functioning of management and control systems
are identified, until corrective action is fully implemented.
Commission's
response:
See reply
to requests No 2012/COU/0219 and 2012/COU/0225.
32.         (No2, §2 - 2012/COU/0250) The
Council encourages the Commission to continue providing guidance to the
national audit authorities, with particular attention to the audit sampling
methodology used, the reporting of audit findings and the treatment of errors.
Commission's
response:
The
Commission has taken the recommended action. A structured cooperation with
audit authorities on methodology and reported audit results through
multilateral and bilateral meetings has been set up. Multilateral meetings
included in 2012-2013 technical meetings in Brussels in June and November 2012
(main issue: feedback on the use of sampling techniques) and in June 2013 (main
issue: feedback on the assessment of Annual Control Reports) and the Homologue
Group meeting in Bucharest in October 2013 (main issues: preparation of audit
authorities for the 2014-2020 period, audit of public procurement and quality
of management verifications and antifraud issues). The annual bilateral audit
coordination meetings with each Member State are an opportunity to review the
specific issues raised in the assessment of Annual Control Reports and Annual
Opinions, implementation of the audit authorities' audit strategy as well as
national audit results and to exchange information on planned audit work and
respective updated risk assessments. 
Guidance
on various audit issues is continuously improved and discussed with audit
authorities. In particular guidance on sampling methods for audit authorities
was updated in April 2013 and accompanied by detailed sampling training
sessions/workshops with most audit authorities in order to clarify any
implementation difficulties encountered (practical workshops in November 2012
in Brussels for audit authorities from 22 Member States; on-the-spot seminars
in Italy (end 2012), Germany, Spain, Ireland, Slovakia, Nordic and Baltic
countries in 2013). Further written clarifications to the guidance notes on annual
control reports, audit opinions and the treatment of errors, as a result of the
June 2013 technical meeting, were also provided to audit authorities in
December 2013. Guidelines laying down common rules on determining financial
corrections to be applied for financial instruments were discussed with the
Member States in 2013 and will be issued in 2014. This will help audit
authorities quantify errors detected in the samples of operation they audit in
a harmonised way, and thus further reinforce the reliability of reported error
rates in this area.
As a
follow-up to its audit work and assessment of Member States’ reports on
withdrawals and recoveries, DG Regional and Urban Policy issued additional
horizontal recommendations to all certifying authorities to ensure an improved
reporting exercise for 2013, to be received by end March 2014.
The Audit
Directorate of DG REGIO also contributes to many capacity building actions for
the benefit of managing and certifying authorities, to help address
deficiencies found in Commission and national audits or to prevent such
deficiencies. In this framework, several initiatives took place in 2013,
including dedicated meetings, workshops or targeted actions related to various
areas: public procurement (BG, RO, IT, ES, CZ and HR), quality of management
verifications (BG, RO and CZ), retrospective projects (RO) or implementation of
financial instruments (IT, ES) (see DG REGIO Annual Activity Report 2013, page
42 and Annexe 8).
33.         (No3, §2 - 2012/COU/0251) The
Council is concerned about the Commission's limited information as to whether
the systems put in place by Member States for imposing financial corrections
are effective. It invites the Commission to improve this situation in order to limit
the resulting risk to the robustness of its own management assessment.
Commission's
response:
The
Commission is taking the recommended action. The joint audit enquiry on Member
States' recoveries, carried out by DG Regional and Urban policy, DG Employment,
Social Affairs and Inclusion and DG Maritime Affairs and Fisheries, is a
response to a request from the Discharge Authority to obtain reasonable
assurance that Member States' reporting to the Commission by 31 March each year
in respect of recoveries and withdrawals is complete and reliable. These audits
are covering, on a risk basis, a sample of certifying authorities' arrangements
in place for keeping an account of amounts recoverable and for recovery of
undue payments, following an analysis and risk-assessment made each year on the
reports on withdrawals and recoveries transmitted by Member States by end
March. This information reported by Member States is important since it
contributes to the calculation of the cumulative residual risk (CRR) and therefore
to the Directorate-General’s assurance, and reflects the appropriate corrective
actions taken by Member States as a result and follow-up of deficiencies
detected by national or EU audits.
Pending
the results of contradictory procedures on the four audits carried out in 2013,
the preliminary conclusions of the audits on recoveries reported by Member
States show that arrangements for keeping an account of amounts recovered or
withdrawn are acceptable in the majority of programmes audited, and provide reliable
information regarding recoveries and withdrawals. Exceptions concern programmes
in the Czech Republic (request for correction of previous years’
over-reporting, implemented by end 2013), the Italian programmes which
under-report withdrawals and recoveries due to administrative delays, and Greece (ESF) for which additional corrections were implemented following the audit mission.
The finding from the Czech programmes led the Commission services to issue
additional horizontal recommendations to all certifying authorities to ensure
an improved reporting exercise for 2013 by end March 2014 and to request
correction of past reporting where necessary. The Commission services intend to
continue and adjust the enquiry in 2014 and beyond to focus on the completeness
and reliability of reported data for an increasing number of Member States and programmes. Obtaining assurance on recoveries implemented at Member State level is of increasing importance for the purpose of calculating accurate
cumulative residual risks at programme level, and in particular in view of the
assurance at closure of programmes.
These
audits will continue and increase in 2014-2015, with a more targeted scope in
order to reach conclusion as to the reliability and completeness of data on withdrawals,
recoveries and pending recoveries reported by Member States considered most at
risk.
Chapter 6 -
Employment and Social Affairs
34.         (No1, §2 - 2012/COU/0252) The
Council calls on the Commission and Member States to continue addressing the
weaknesses in first-level checks carried out by national managing authorities
and intermediate bodies, (…) in particular through preventive actions such as
guidance and training.
Commission's
response:
As a
result of a thematic audit carried out on first level checks in various Member
states DG EMPL published in November 2013 a report on this issue
("Overview report on the results of the thematic audit on management
verifications conducted by Member States") which provides a detailed
description of the audit findings and of the recommendations addressed by the
Commission to MS in this area. The report was also presented to the MS during
the ESF Technical Working group.
In the
area of Regional and Urban policy, DG Regional and Urban Policy carried out
targeted audits to high risks programmes where it identifies that certain
deficiencies could remain undetected or not timely detected by audit
authorities, which could jeopardise the assurance process (assurance gap). A
synthesis report on the results of these risk-based audits was provided to the
European Parliament Discharge Rapporteur in December 2013 and concludes that
the audit enquiry "Bridging the assurance gap" has proven to be a
pro-active response by the Directorate-General to increase its assurance.
On the
preventive side, the Commission will continue to provide guidance and to
organise capacity building seminars and address the issue at the Technical
Working Groups with MS. It will also continue issuing targeted action plans for
the riskiest MS and OPs, as explained in the DG EMPL 2012 AAR. 
The
Commission is also working closely with both the audit authorities and the
managing authorities. On the audit side, regular meetings on methodological
issues are organised: the regulatory annual bilateral control meetings where
the Commission meets individually the audit authorities on general and specific
audit issues and methodologies; multilateral technical meetings with
representatives from all 28 Member States' audit authorities; and the annual
meeting with the "Homologues group" where audit issues of common
interest are debated extensively. On the implementation side, in the area of
Regional and Urban Policy, the Commission services also organised and will
continue to organise specific technical trainings targeted for some Member
States on management verification, public procurement procedures and fraud
prevention measures. It holds also annual technical meetings to develop and
share best practices and guidance.
The
Commission has therefore provided extensive guidance to programme managing and
audit authorities throughout the 2007-2013 programming period.
Furthermore,
DG Regional and Urban Policy has established a dedicated competence centre
(unit) for addressing the significant weaknesses in administrative and
institutional capacities of some Member States and removing bottlenecks in the
management of the Funds. A new instrument to learn from each other will make it
possible for programme authorities to exchange experts and practices. The role
of the Commission will be to promote the mechanism, collect requests and offers
and provide quality control.
A training
programme for the implementation of the 2014-2020 programming period is being
developed and will be implemented in 2014-2015 for programming authorities.
Furthermore,
the set of regulations adopted for the programming period 2014-2020 contains
some improvements compared to the current programming period, which should lead
to enhancing the effectiveness of control checks at national level, and to
improving the Member States accountability so as to better address errors and
ensure legality and regularity of co-financed expenditure. These include, in
particular, the introduction of net financial correction that should create an
incentive for MS to implement effective management and control systems, and the
strengthened use of simplification, in particular concerning simplified cost
options, which should result in a reduction of errors.
35.         (No1, §3 - 2012/COU/0253) The
Council invites the Commission and Member States to seek possible ways to
further simplify and streamline national eligibility criteria, in line with the
Commission's recommendations, for the benefit of all stakeholders.
Commission's
response:
The main
tool to simplify and to streamline national eligibility rules is the use of
Simplified Cost Options (SCOs). In November 2013 the Commission also produced a
report on "Simplification and gold-plating in the ESF" identifying
the main sources of error due to unnecessary complicated national eligibility
rules and addressing some recommendations to the Member States, based in
particular on the use of SCOs. 
The
Commission actively promoted them through seminars and also by introducing
provisions in the 2014-2020 Structural Funds Regulation which will strengthen
and encourage their use: it will enable to simplify financial management of
operations while shifting the focus of beneficiaries on the delivery of quality
outputs and results. The Commission also regularly invites the managing
authorities to address guidance to beneficiaries on eligibility issues.
36.         (No1, §4 - 2012/COU/0254) The
Council encourages the Commission to enable a more extensive use of simplified
cost options such as the declaration and payment of lump sums and flat rate
costs instead of reimbursing real costs.
Commission's
response:
The
Commission has actively promoted the introduction of Simplified Cost Options in
particular for ESF related programmes. In 2013 and 2014, seminars were held in
17 MS in order to explain the usefulness and modalities of the introduction of
these features. The Structural Funds Regulations 2014-2020 also contain
provisions to strengthen and encourage the use of SCOs, in line with ECA's
views that they are an effective tool for reducing the risk of errors. It will
enable to simplify financial management of operations while shifting the focus
of beneficiaries on the delivery of quality outputs and results. ESF has set
the target for the 2014-2020 period of 50% of expenditures reimbursed through
SCOs.
37.         (No2, §2 - 2012/COU/0255) The
Council invites the Commission and Member States to seek improvement in the
quality and reliability of the information provided by national audit
authorities, through better guidance on the audit sampling methodology to be
applied.
Commission's
response:
The
Commission has taken the recommended action. Through the results of its audit enquiry
“review of the work of audit authorities”, DG Regional and Urban Policy
assesses if it can rely principally on the audit authorities' audit opinion and
error rates for its annual assurance and implement Article 73 of Regulation
(EC) No 1083/2006 (through the latter, DG Regional and Urban Policy relies on
the audit authority in a formal manner and does not carry its own audits any
longer). DG Regional and Urban Policy carried out a total of 232 missions on
the spot cumulatively since 2009, including 48 fact-finding missions to
validate the Annual Control Reports' error rates. Audits covered cumulatively
the main 47 ERDF/CF audit authorities - out of 73 - responsible for more than
96% in total of the ERDF/CF total allocation.
Audit work
included the on-the-spot re-performance of audits at the level of individual
beneficiaries in order to test the reliance which can be placed on the audit
work carried out by the audit authorities (in 2013, this was the case for 24
out of 28 audit missions carried out on the spot). As a result, and based on
the audit reports issued so far, the Directorate-General concluded that the
work of 40 audit authorities in charge of auditing around 90% of ERDF/CF
allocations for the 2007-2013 period can in general be relied upon. 
The
extensive audit work under this enquiry, which represents half of the
on-the-spot audit work on average since 2009, has considerably contributed to
DG Regional and Urban Policy's overall assurance for the programmes covered by
the reviewed audit authorities through many aspects, such as increased
assurance that the annual control reports and reported audit opinions and error
rates are reliable; reduction of errors; concrete remedial action plans and
significant capacity-building for audit authorities. This extensive audit work
has also contributed to interruptions / pre-suspensions during the year and to
the necessary reservations expressed in the annual activity report when
deficiencies had not been remedied (for example in the case of the Slovakian audit
authority). 
In
accordance with Article 73 of Regulation (EC) No 1083/2006 and as a direct
result of its audits to review the work of audit authorities, the
Directorate-General has concluded that it could formally rely on the work of 17
reviewed audit authorities presenting satisfactory audit results and covering
56 programmes, taking also into account the effective functioning of the
management and control system of these concerned programmes (second condition
under article 73).
At end
2013, DG EMPL had audited 85 AAs out of 91, covering 99% of the ESF total
allocation. The Commission selected most audit authorities to be audited on the
basis of an annually updated risk assessment which includes, among several risk
criteria reviewed over time, programmes allocations. 
Using also
other sources of assurance, DG EMPL concluded that for the year 2013 the work
of 106 audit authorities out of 117 can be relied upon.
The
results of the audit work are used by the Commission to assess whether it can
rely principally on the opinion of the Audit Authority with regards to the
effective functioning of the systems. In this case, the Commission carries its
own on-the-spot audits only if there is evidence to suggest shortcomings in the
system affecting the expenditure certified to the Commission. In application of
article 73 of the Regulation 1083/2006, DG EMPL has informed in 2013 one
additional Audit Authority (DE-Hessen) that it will mainly rely on their
opinion. In total, 10 Audit Authorities fulfil the conditions for article 73
(BE (2 AAs), DE (4), ES (1), IT (2) and NL (1)). In addition, 1 Audit Authority
(IT-PON GAS) has been granted the same reliance on the basis of the article 74
of the Regulation 1083/2006.
Guidance
is continuously improved and discussed with audit authorities. In particular
guidance on sampling methods for audit authorities was updated in April 2013
and accompanied by detailed sampling training sessions/workshops with most
audit authorities in order to clarify any implementation difficulties encountered
(practical workshops in November 2012 in Brussels for audit authorities from 22
Member States; on-the-spot seminars in Italy (end 2012), Germany, Spain,
Ireland, Slovakia, Nordic and Baltic countries in 2013). Further written
clarifications to the guidance notes on annual control reports, audit opinions
and the treatment of errors, as a result of the June technical meeting, were
also provided to audit authorities in December 2013. Guidelines laying down
common rules on determining financial corrections to be applied for financial
instruments were discussed with the Member States in 2013 and will be issued in
2014. This will help audit authorities quantify errors detected in the samples
of operation they audit in a harmonised way, and thus further reinforce the
reliability of reported error rates in this area.
Chapter 7 -
External Relations, Aid and Enlargement
38.         (§4 - 2012/COU/0256) The
Council urges the Commission to take the necessary measures to correct the weaknesses
identified in its control mechanism, namely in relation to the ex-ante checks,
the clearing procedure, the management of documentation and contract awarding
procedures, and the quality checks carried out by external auditors.
Commission's
response:
An Action
Plan aiming to correct the weaknesses in the implementation of DG DEVCO
internal control system and to mitigate the related risks has been elaborated,
following the reservation raised in its 2012 Annual Activity Report, and
endorsed by its Management in May 2013. This Action Plan addresses all these
issues through specific short-term and permanent measures agreed on with the
relevant services. DG DEVCO is committed to monitoring and reporting regularly
on the implementation of the different actions taken, notably through a
comprehensive and detailed follow-up report at the end of each year.
Chapter 8 -
Research and Other Internal Policies
39.         (No1, §1 - 2012/COU/0257) The
Council calls on the Commission to systematically remind beneficiaries of the
eligibility rules and of the applicable calculation methods, as well as of the
requirement to substantiate all declared costs.
Commission's
response:
The
Commission prepared a note with a list of the ten most common financial errors
detected in cost claims by the FP7 beneficiaries. This note titled “How to
avoid common errors identified in cost claims” was communicated to all
registered FP7 beneficiaries.
The note
addressed and summarized the most frequently recurring errors including some
explanations. Also, the beneficiaries were reminded that more information could
be found in the Guide to Financial Issues relating to FP7 Indirect Actions.
As
example, the said note refers that “all costs claimed, with the exception of
applicable lump sums and flat rates, should be based on the real costs
incurred. They must be supported by evidence that they are real (recorded in
the accounts of the beneficiary and supported by invoices for example), paid
(supported by bank statements for example), and linked to the funded project…”.
Furthermore,
it covers also other aspects as third parties and sub-contracting,
depreciation, indirect cost models and personnel costs.
40.         (No1, §2 - 2012/COU/0258) The
Council reiterates its earlier call for simplification, for the Commission to
continue the efforts to simplify the EU instruments aimed at fostering
Research, Development and Innovation in order to facilitate their take up by
the best scientists and the most innovative companies, and to find a right
balance between risk taking and risk avoidance.
Commission's
response:
It is
noted that changes in the legal basis are no longer possible for FP7. However,
Horizon 2020 which is already in place since January 2014, incorporates many
steps forward in relation to the legal basis. It contains a number of
simplifications for participants and a considerable speeding up of the
processes. The documents accompanying the legislative proposal prepared by the
Commission set out the Commission’s view on the correct balance between
risk-acceptance and risk-avoidance.
In
addition, any improvements in the Commission’s internal control systems are
being implemented without increasing the administrative burden on participants.
41.         (No1, §3 - 2012/COU/0259) The
Council encourages the Commission to continue reinforcing its internal
supervisory and control systems.
Commission's
response:
See answer
to 2012/COU/0222
42.         (No2.1, §1 -
2012/COU/0260) The Council encourages the Commission to further improve
its methods and procedures which the Court still considered to be only
partially effective, while maintaining an appropriate balance between trust and
control and without increasing the administrative burden for project promoters
and beneficiaries.
Commission's
response:
The
Commission considers that the revision of the ex-ante checks is an on-going
process. Some of the weaknesses identified by the Court lead the Commission to
amend the rules for Horizon 2020 in order to avoid errors in the future. This
was the case particularly in the area of sub-contracting, where more
flexibility has been introduced in the rules with the aim to allow participants
to adapt more quickly to any changing circumstances. 
The above
action has been implemented without imposing any additional administrative
burdens to the participants.
43.         (No2.1, §2 -
2012/COU/0261) The Council encourages the Commission to further
increase awareness on this issue with the aim of improving the reliability of
the external audit certificates.
Commission's
response:
The
Commission has undertaken several steps in order to address this request.
Firstly,
the Commission has been running a communication campaign to remind
beneficiaries and external auditors of the FP7 eligibility rules. In total,
there have been organized 22 events covering 22 Member States and associated
countries. These seminars have been attended by 3500 participants, including at
least 300 certifying auditors, and this number will increase since this
campaign will continue in 2014.
Secondly,
the Commission services contact the certifying external auditors when the
Commission's ex-post audits identify material differences between the certified
cost statements and the ex-post audits' findings.
Finally,
the "Research Enquiry Service" replies to any questions raised by the
auditors.
44.         (No2.1, §3 - 2012/COU/0262)
The Council supports the Court's recommendations to monitor more
closely the timely completion of ex-post audits, and to ensure a timely
application of extrapolated corrections.
Commission's
response:
The
Commission is monitoring the implementation of the Commission ex-post audit
reports on a permanent basis. Furthermore, the Annual Activity Reports (AAR) of the Commission’s DGs provide detailed information on the progress of the ex-post
audit strategy. 
Substantial
progress has been made by the Commission against the observations reported by
the Court; as example, in DG RTD the percentage of extrapolation achieved from
external audit findings at the end of 2013 is 78.2 % compared to 68.2% for the
year 2012 (the implementation ratio represents the number of implemented
recommendations divided by total number of recommendations with expected
systematic errors).Furthermore, DG RTD has already implemented (accumulated
figures) in 2013, 2407 recommendations which stem from ex post audits and 3414
recommendations from extrapolation compared to 2051 and 1975 respectively, for
the year 2012.
45.         (No2.1, §4 -
2012/COU/0263) The Council calls on the Commission to monitor the
lengthy delays incurred by several project coordinators in distributing the
received funds to other project partners and to take appropriate action if
necessary.
Commission's
response:
The
distribution of funds is the responsibility of the Coordinator. According to
the provisions of the FP7 model grant agreement, annex II (general conditions)
the coordinator shall administer the financial contribution of the Union regarding its allocation between beneficiaries and activities, in accordance with the
grant agreement and the decisions taken by the consortium. In addition, the
coordinator shall ensure that all the appropriate payments are made to the
other beneficiaries without unjustified delay. 
Therefore,
the distribution of funds is a matter subject to the provisions of the
consortium agreement concluded by the beneficiaries, to which the Commission is
not a party.
When a
case of delayed distribution of funds is detected, the Commission's standard
practice is to follow up with the project coordinator on the reasons of this
delay.
In
addition, the Commission has reminded coordinators of their obligation to
promptly transfer funds.
46.         (No2.2, §2 -
2012/COU/0264) The Council invites the Commission to further strengthen
its audit strategy for non-research funded projects and to ensure its full
implementation.
Commission's
response:
The
Commission (DG CONNECT) has adopted a dedicated audit strategy covering the
non-research strand of the DG's spending aiming at providing assurance to the
DG's Director-General as to the management of the non-research funding. 
The launch
of 35 audits per year is foreseen in the timeframe 2012-2017 (a total of 215
audits). The strategy is in practice effectively in place starting from the
second half of 2012 in order to provide the necessary input for AAR2013. In
2013 and 2014, 38 and 23 audits on non-research projects have been launched
respectively. A second audit batch on non-research projects will be launched
later in 2014. In total, 38 audits have been closed since 2013.
Chapter 9 - Administrative
and Other Expenditure
47.         (No2, §2 - 2012/COU/0265) The
Council welcomes the measures already taken and encourages the institutions
concerned to address the remaining weaknesses identified by the Court (i.e. a
limited number of errors in the procurement procedures and the management of
social allowances).
Commission's
response:
1)
Following the recommendations issued by the Court of Auditors in its 2011
annual report pertaining to procurement procedures carried out by OIL, several
simplification measures have been consistently implemented since mid-2011 with
a view to enhancing the qualitative review of tender files (amongst others,
reduction of the number of selection criteria, clear distinction between selection
and award criteria and tender specifications simplified to the largest possible
extent). In parallel, awareness raising actions (training courses, internal
workshops) have also been held. The main objectives are to ensure full
compliance with the Financial Regulation whilst applying common sense, hereby
fostering the participation of more tenderers.
2) The
automatic update of the amounts of allowances of like nature has been
implemented and is fully operational. The automatic update already covers Belgium, Luxembourg,  Ireland, Germany, France, The Netherlands, Finland, Sweden and Romania. Further extensions to Hungary, Austria and Latvia are currently being developed.
Hence, the vast majority of staff concerned (working mainly in Brussels, Luxembourg and Strasbourg and the Joint Research Centres) are covered. The files of those agents who
receive national family allowances of like nature from other Member States than
the ones quoted are updated manually given their low number. The agents
concerned by this already have the possibility to declare any indexations via
the SYSPER2 module "declaration of allowances of like nature. Furthermore,
checks are performed in the framework of existing procedures (entry into
service, a posteriori-checks, and end of service). 
Concerning
the declaration of allowances of like nature: in 2013, a module allowing the
declaration of such allowances has been implemented. Moreover, another module
permitting each staff member to declare the change of his/her spouse's
professional activity will be launched by the end of 2014. The entitlement to
the household allowance will only be given on condition of submitting – on an
annual basis - a declaration of the spouse's income. Entitlement to allowances
for dependent children over the age of 18 will be automatically cut when no
annual education declaration is introduced. The family situation and
declaration of allowances of like nature for pensioners is checked regularly.
48.         (No3, §3 - 2012/COU/0266) The
Council invites the Commission, when making budget proposals, to strictly
scrutinise the level of carry-overs of agencies at the end of the financial
year.
Commission's
response:
The
Commission has taken the recommended action. 
When
preparing the Draft Budget, the Commission makes a rigorous assessment of each
agency's needs, in terms of EU contribution and staffing levels. As a result,
in the Draft Budget DB the Commission proposes a stabilisation of the overall
level of EU contributions to the agencies, whereas a large number of individual
agencies see their budgets frozen at the level of the previous year, or even
reduced. 
The
Commission performs its role of guidance and supervision in particular through
the Commission representative(s) in the agency Steering committees.
Chapter 10 -
Getting Results from the EU Budget
49.         (§2 - 2012/COU/0267) The
Council calls on all actors in the Commission, the Court and Member States to take advantage of the new legal framework agreed for the new multiannual
programming period 2014-2020 and to pursue efforts towards developing a
performance framework as to ensure that expected results and impacts laid down
in the sector-specific regulations are achieved. This includes, among others, a
consistent application of SMART objectives, using milestones and suitable
indicators to evaluate on an annual basis the performance of multiannual
programmes, focussing on timely and high quality performance data, and
strengthening the link between goals, indicators and allocation of resources.
Commission's
response:
The
Commission has been working for several years to strengthen its performance
framework. The Commission has taken a step-by-step approach. First, it has
ensured that the legal bases of the 2014-2020 spending programmes include a
more coherent framework for monitoring, evaluation and reporting on their
performance. Secondly, the frameworks have been incorporated into the
Directorates-General (DGs’) 2014 management plans and, starting with the 2014
annual activity reports and the next edition of the Article 318 evaluation
report, will serve as a basis for reporting on achievements.
All
performance frameworks for the 2014-2020 programmes and funds comply with the
performance-related principles enshrined in the Financial Regulation. They
include accurate and detailed information on the added value of the 2014-2020
financial interventions and their relevance to the Commission’s strategic
objectives and the EU’s sectorial policy objectives, and specific objectives,
along with quantitative and qualitative indicators measuring their achievement.
It is important to remember that the co-legislators were closely involved in
the setting of the programme objectives and performance indicators.
50.         (§2 - 2012/COU/0268) The
Council urges the Commission to work further in developing a
performance-focused approach.
Commission's
response:
Please see
the Commission reply to the previous request.
SR 17/2012 The
European Development Fund (EDF) contribution to a sustainable road network in
sub-Saharan Africa
51.         (Annex, No10.a -
2012/COU/0269) The Council requests the Commission to ensure that, in
assessing what steps are needed to strengthen partner Governments’ efforts in
relation to road maintenance and vehicle overload control, including through
policy dialogue and EDF support geared to output-based performance assessment
frameworks, the appropriate level of attention is given to the need for
regionally-coordinated, national-level action to harmonise and enforce
appropriate axle load control regulations, including fighting against the root
causes of vehicle overloading.
Commission's
response:
Under the
upcoming 11th EDF, the Commission will strengthen its support to transport
sector governance at regional level in order to enhance the sustainability of Africa strategic transport networks. Axle overload control will constitute a prominent
point of EC support to Regional Economic Communities (RECs), using the regional
programmes (RIPs) as means to develop and advocate harmonised standard
regulatory frameworks across all regions. Translating such frameworks into
national legislation and enforcing them at local level will be a further
challenge to be addressed and supported also at national level. 
Axle load
conferences are foreseen in 2014-2015, organised by the respective RECs with
the Commission's support in Western and Southern/Eastern Africa. The expected
result will be the adoption of road-maps of activities focused on axle load
control. Other governance measures in addition and complement to axle load
control activities (which could also be financed under the EDF RIP) will be
related to the establishment of corridor observatories, one stop border posts,
traffic management, etc. Maintenance management and funding for the development
of affordable and sustainable networks will continue receiving support and will
be prominently taken into account as criteria for prioritisation and
decision-making on corridor investments.
52.         (Annex, No10.b -
2012/COU/0270) The Council requests the Commission to provide, when
required, support to partner countries to improve their technical capacity in
managing executive projects designs, with tender specifications in order to
avoid deficient works management which often causes lack of sustainability in
the infrastructures performance.
Commission's
response:
Within the
9th and 10th EDF, the Commission financed more than 350 technical studies
(identification and formulation) supporting Sub-Saharan African third-countries
in the preparation of technical specification for the execution of works
contracts in the transport sector. Since 2007, the EC-AU Infrastructure Trust
Fund provided a support to the development banks to finance (via grants)
technical preparatory studies. The Commission will continue providing such
facilities within future scope of 11th EDF and other sources of financing
(PanAfrican Program). In particular concerning works contracts, the Commission
is carrying out a study to introduce other forms of procurement in addition to
those based on unit price contracts traditionally used. These forms of
procurement include Design and Build (DB) and Design, Build and Operate (DBO)
and should enhance the maintenance capacity of the national administrations.
53.         (Annex, No10.c -
2012/COU/0271) The Council requests the Commission to conduct an
evaluation on the results and development impact of EU support to a sustainable
road network in Sub-Saharan Africa. Furthermore the Commission should evaluate
the capacity of the Sub-Saharan Africa Transport Policy Program. The Council
recommends also to analyse whether the Commission can strengthen its own
capacities to guide and monitor sector reform approaches in the context of
EDF-funded interventions. The Council invites the Commission to launch this
evaluation within the next twelve months.
Commission's
response:
Following
the Court of Auditor 2012 Special Report's recommendation, a global evaluation
of the EU support to transport sector in Africa from 2005 to 2013 has started
in January 2014. The duration of the evaluation is 18 months. It aims at
providing an assessment of the EU performance, approaches and strategies to
support transport sector in Africa. In parallel, as foreseen in its financing
decision, the Commission will implement an end-term review of the Sub-Saharan Africa Transport Program (SSATP) beginning of 2015, following completion of the program.
SR 18/2012
European Union Assistance to Kosovo related to the rule of law
54.         (No5 - 2012/COU/0272) The
Council encourages the EEAS and the Commission to further enhance their efforts
to ensure full coordination on rule of law activities.
EEAS's response:
Completed
following renewed exchange of letters with Kosovo over EULEX Kosovo mandate and
adoption of IPA II
SR 20/2012 Is
Structural measures funding for municipal waste management infrastructure
projects effective in helping Member States achieve EU waste policy objectives?
55.         (Annex, No16 -
2012/COU/0273) The Council encourages the Commission and Member States to continue and improve management and control systems in the current
programming period with a view to optimising the implementation in the next
programming period, starting in 2014.
Commission's
response:
The
Commission, together with the Member States for those Funding programmes under
shared management, are closely working together to improve the management of
the Funds and the cost effectiveness of the actions and projects financed by
them. Furthermore, efficient controls and audits are aiming to verify the
actions on the ground and the actual costs incurred prior to making payments or
for demanding any due return of unused resources or non-compliant spending.
SR 21/2012
Cost-effectiveness of Cohesion Policy Investments in Energy Efficiency
56.         (Annex, No10 -
2012/COU/0274) The Council encourages the Commission and Member States to continue and improve management and control systems in the current
programming period with a view to optimising the implementation in the next
programming period, starting in 2014.
Commission's
response:
The
Commission is taking the recommended action.
The
Commission is working closely with both the audit authorities and the managing
authorities. On the audit side, regular meetings on methodological issues are
organised: the regulatory annual bilateral control meetings where the
Commission meets individually the audit authorities on general and specific
audit issues and methodologies; multilateral technical meetings with
representatives from all 28 Member States' audit authorities; and the annual
meeting with the "Homologues group" where audit issues of common
interest are debated extensively. On the implementation side, DG Regional and
Urban Policy also organised and will continue to organise specific technical
trainings targeted for some Member States on management verification, public
procurement procedures and fraud prevention measures. It holds also annual
technical meetings to develop and share best practices and guidance.
Furthermore,
DG REGIO has established a dedicated competence centre (unit) for addressing
the significant weaknesses in administrative and institutional capacities of
some Member States and removing bottlenecks in the management of the Funds. A
new instrument to learn from each other will make it possible for programme
authorities to exchange experts and practices. The role of the Commission will
be to promote the mechanism, collect requests and offers and provide quality
control.
The Common
Provisions Regulation for the 2014-2020 programming period contains reinforced
control provisions compared to 2007-2013 and requirements that improve the
Member States’ accountability so as to better address errors and ensure
legality and regularity of co-financed expenditure. Two major aspects need to
be underlined:
- The
introduction of compulsory net financial corrections to be adopted by the
Commission when EU audits detect irregularities indicating a serious deficiency
not detected / reported by the programme authorities in relation to the
programme accounts submitted by 15 February each year (see the Communication
from the Commission on “Methods of application of net financial corrections
impacting at the level of Member States” adopted on 13 December and transmitted
to the European Parliament and the Budgetary Control Committee). Net financial
corrections reducing the Member States’ allocations in case of undetected/non
reported serious deficiencies will provide increased incentives for national
robust and timely controls, including by the managing authorities, before
certifying programme accounts to the Commission. 
- The
increased use of simplified cost options and their positive results in bringing
down the error rate.
Other
reinforced financial management and control provisions compared to the
2007-2013 programming period includes in particular:
- A new
financial management framework with a programme accounting year running from
1st July to 30 June each year. The certifying authority certifies to the
Commission the expenditure in the programme accounts drawn up for each
accounting year, containing only legal and regular expenditure cumulatively
declared during the accounting year and cleared from all irregularities
detected following national verifications and audits.
- A 10%
retention mechanism on all Commission interim payments during the accounting
year meaning that the Commission reimburses the entirety of claimed expenditure
only once all national controls including the audits by the audit authority
have been carried out and their results fully analysed and taken into account
by the managing and certifying authorities.
- The
submission by the programme managing authority of a management declaration
confirming information contained in the accounts and that the control system in
place gives the necessary guarantees concerning the legality and regularity of
the operations and declared expenditure. This declaration will be accompanied
by a report containing a summary of all control and audit results carried out
up to certification of the accounts, an analysis of the nature and extent of
errors and system weaknesses identified, as well as of corrective actions taken
or planned.
-
Independent audit work and audit opinion on the accounts, in addition to audits
on the proper functioning of systems and representative samples of operations
and expenditure as in the current period, by the programme audit authority.
This will include assurance that all detected irregular expenditure has been
appropriately and correctly decertified and excluded from interim payment claims
or from the annual accounts and that when serious deficiencies were detected,
corrective actions were implemented.
These
improved 2014-2020 financial control procedures imply that the Member States
will have strong incentives to carry out timely, effective and robust control
procedures, including management verifications, before certification of the
accounts. When drawing up the accounts, the management declaration and the
audit opinion, the programme authorities should have obtained reasonable
assurance through such control procedures that all material irregularities have
been corrected and that possible serious deficiency, at any level of the
management and control system, have been detected and addressed, or are being
addressed to avoid the risk of net financial corrections.
SR 23/2012 Have
EU Structural Measures successfully supported the regeneration of industrial
and military brownfield sites?
57.         (Annex, No11 -
2012/COU/0275) The Council encourages the Commission and Member States to continue improving the management of Structural Funds in the current
programming period with a view to optimising the implementation in the next
programming period, starting in 2014.
Commission's
response:
See reply
to request 2012/COU/0274
SR 24/2012 The
European Union Solidarity Fund’s response to the 2009 Abruzzi earthquake: The relevance and cost of
operations
58.         (Annex, No7 -
2012/COU/0276) The Council invites the Commission to promote Member
States' preparedness to act rapidly and effectively in emergencies, as
reflected in the Commission's reply to the Court's recommendation.
Commission's
response:
The
Commission is taking the recommended action. The new Solidarity Fund
Regulation, proposed by the Commission and currently under adoption by the
legislative authorities, makes the Fund more responsive and simpler to use with
clearer criteria as to who can benefit. The proposed legislation simplifies the
existing rules so that:
• Aid can
be paid out more rapidly, merging two stages of approval and implementation
agreement into one decision. 
• Advance
payments of up to 10% of the anticipated grant, with a maximum pay out of €30
million will be available for the first time. 
• The
scope of the Solidarity Fund is clarified, limiting it to natural disasters and
extending it to drought.
•
Eligibility, particularly for regional disasters, is clearer with 1.5% of
regional GDP being set as a threshold for the activation of the Fund. This
ceiling is lowered to 1% for the EU’s Outermost Regions.
•
Beneficiary countries have more time to carry out recovery operations and use
the Fund through the extension of the implementation period from 12 to 18
months.
• Member
States must implement legislative measures that are designed to prevent and
mitigate the effects of natural disasters, as well as making use of available
EU funding for such investments.
For
2014-2020, in the framework of building climate resilience, a specific
objective of cohesion policy has been set on adaptation to climate change, risk
prevention and management: One of the 11 thematic objectives defined for the
new 2014-2020 programming period, Thematic Objective 5, is specifically
dedicated to Adaptation to climate change, risk prevention and management. It
underlines the support that will be offered to regions and cities in order to
develop their climate resilience. An ex-ante conditionality on "Risk
prevention and risk management: the existence of national or regional risk
assessments for disaster management, taking into account climate change
adaptation" has also been set out in the Common Provision Regulation of
the 2014-2020 programming period.
SR 2/2013 Has
the Commission ensured efficient implementation of the Seventh Framework
Programme for Research?
59.         (Annex, No5 -
2012/COU/0277) The Council encourages the Commission to continue its
efforts to carry out in-depth analysis of the procedures to ensure better
implementation of the framework programmes and, where appropriate, their
consistency with other European programmes.
Commission's
response:
The
Commission has undertaken the commitment to introduce further simplification in
the implementation of the research framework programmes.
Horizon
2020 represents a step forward in this direction.
Among
other aspects, the following ones can be highlighted: single IT platform for
all EU research and innovation funding, overhaul of practical processes and
requirements for proposal submission, negotiation, reporting etc. and a review
of guidance documents, support services.
Furthermore,
efforts have been made to ensure synergies between the different funds, in the
legislation and in the detailed rules. 
As an
example, the eligibility rules for Horizon 2020 and Structural Funds have been
harmonised with the rules of the Financial Regulation.
SR 3/2013 Have
the Marco Polo programmes been effective in shifting traffic off the road?
60.         (Annex, No5 -
2012/COU/0278) The Council invites the Commission, when taking a
decision on a new scheme replacing the Marco Polo programme and considering new
actions in the area of freight transport services within the framework of the
trans-European transport network, to take the Court's recommendations into
account.
Commission's
response:
The
Commission has taken the requested action. The Council request is considered
implemented for the recommendations accepted by the Commission as they are
being analysed in the context of the ex-ante analysis launched in September
last year. 
For
information, the implementation of the Court of Auditors recommendations is
planned for the second semester of 2014 (once the ex-ante analysis will be
finalised) for all accepted recommendations, except for one (related to
adequate data to demonstrate the performance achieved by the funded actions),
which is planned by 2020 after the completion of a first set of funded projects
and under the condition that a follow-up of Marco Polo is launched.
SR 4/2013 EU
Cooperation with Egypt in
the Field of Governance
61.         (Annex, No3 -
2012/COU/0279) The Council encourages the EEAS and the Commission to
further develop the political dialogue in order to ensure the implementation of
jointly agreed reform objectives.
Commission's
response:
The
Commission will not be taking the requested action.
After the
2011 revolution, efforts have been constantly made in order to maintain the
level of policy and political dialogue and to further develop it. However, the
lack of stability in the country and of a lasting government has made it
impossible for Egypt to embark on reform programmes. Therefore, at the current
stage, the Commission and the EEAS cannot commit to implementing the request
but stand ready to relaunch and step up the process as soon as conditions in
the country allow for it.
62.         (Annex, No6(a) -
2012/COU/0280) The Council encourages the EEAS and the Commission to
continue their efforts in applying the incentive-based approach, with countries
making greater efforts towards democratic reforms receiving more support.
Commission's
response:
The
requested action has been taken.
The new
European Neighbourhood Policy (ENP) approach has emphasised the conditionality
of deepening democracy and commitment to fundamental values for those countries
willing to strengthen their partnership with the EU. The design of the new
European Neighbourhood Instrument (ENI) gives more space to the "incentive
based approach" which will be applied strictly. In relation to this, the
proposed average allocation for Egypt for the next Multi-Annual Financial
Framework (MFF) is lower than in the previous one. Moreover, Egypt was not a beneficiary of the SPRING allocation in 2013, and is not foreseen to be a
recipient of additional incentive-based "Umbrella" funding for 2014.
63.         (Annex, No6(b) -
2012/COU/0281) The Council underlines the importance for the EEAS and
the Commission to place more emphasis on Public Finance Management and the
fight against corruption in the negotiations for a new Action Plan, in
particular in relation to guaranteeing budgetary transparency and fully
independent external auditing.
EEAS's response:
Negotiations
on the new Action Plan with Egypt have not yet started, the old Action Plan has
been extended until March 2015. Once negotiations begin, due emphasis will be
placed on the fight against corruption, in particular in relation to
guaranteeing budgetary transparency and fully independent external auditing.
SR 5/2013 Are
EU Cohesion Policy funds well spent on roads?
64.         (Annex, No10 -
2012/COU/0282) The Council encourages the Commission to consider the
establishment of European Union-wide unit cost information for engineers
preparing estimates for new projects, in order to help the beneficiaries lower
the procurement prices, in the update of the Commission’s Guide to Cost-Benefit
Analysis for the next programming period.
Commission's
response:
The
Commission is taking the recommended action. The Commission acknowledges the
need for making available more detailed unit costs information.
As regards
the methodology for carrying out the cost-benefits analysis, the Commission
regulation laying down the relevant rules is currently being drawn up and
should enter into force during the second semester 2014.
65.         (Annex, No11 -
2012/COU/0283) The Council encourages the Commission and Member States to continue improving the management of Structural Funds and Cohesion Fund in
the current programming period with a view to optimising the implementation in
the next programming period.
Commission's
response:
See
replies to request 2012/COU/0274 and 2012/COU/0275.
SR 8/2013
Support for the Improvement of the economic value of forests from the European
Agricultural Fund for Rural Development
66.         (Annex, No5 -
2012/COU/0284) The Council considers that the Court's recommendation
could be taken into account during the development of the new measure
(replacement of the measure audited by the Court entitled "Improvement of
economic value of forests" by a sub-measure entitled "Investments in
forestry technologies and in the processing and marketing of forest
products", which would be integrated in a single measure, covering all
types of forestry support) in the next Rural Development programmes and its
subsequent implementation.
Commission's
response:
The
Court's recommendations have been taken into account during the formulation of
the new Rural Development Regulation No 1305/2013. Integrated in one single
measure, Article 21 introduces the general requirement for the presentation of
forest management plan or equivalent instrument for forests above a certain
size, to be determined by MS. As a specific sub-measure Article 26 was
introduced to support actions in connection with investments in forestry
technologies and in processing, in mobilising and in the marketing of forest
products (e.g. as it has been requested in recommendation 3.
67.         (Annex, No6 -
2012/COU/0285) The Council invites the Commission to provide further
guidance to Member States on the implementation of the measure (replacement of
the measure audited by the Court entitled "Improvement of economic value
of forests" by a sub-measure entitled "Investments in forestry
technologies and in the processing and marketing of forest products",
which would be integrated in a single measure, covering all types of forestry
support).
Commission's
response:
The
Commission has provided substantial guidance on all forestry related support in
the form of guidance documents for the measures established by the rural
development regulation. These "Measure fiches" not only provide the
rationale and cross-cutting objectives of the measure, but they also cater
guidance on the types of operations, the details of eligible costs and
conditions, as well as the description of beneficiaries, etc. for the measures
and sub-measures. Concerning the ECA recommendations, these will be covered by
several Measure fiches, covering analysis of the needs, providing support for
the required forest management plans, requesting justification and monitoring
of the expected investments and increase of the economic value of forest.
Eighth, ninth
and tenth European Development Funds
68.         (Annex, No4.1 -
2012/COU/0286) The Council considers that the Commission should
demonstrate that improvements have been made in the context of the Annual
Report of the Court of Auditors with regards to reviewing the residual error
rate (RER) methodology.
Commission's
response:
The
Commission has already taken measures in order to refine the RER methodology on
the basis of the lessons learnt from the first exercise in 2012: at the start
of the 2013 exercise, the contractor has been requested the elaboration of a
revised methodology and a manual which takes into account the lessons learnt.
This refined methodology has then been applied during the 2013 RER exercise.
The refinements mainly concerned improved guidance in the manual on how to deal
with previous control work, how to calculate individual error rates and when
and how to estimate errors in cases where documentation is missing. The
sampling process has also been approved and reporting templates introduced.
69.         (Annex, No4.2 -
2012/COU/0287) The Council considers that the Commission should
demonstrate that improvements have been made in the context of the Annual
Report of the Court of Auditors with regards to the timely clearance of
expenditure.
Commission's response:
- Un suivi des vieux
préfinancements est inclus dans le programme de travail. Il n'existe pas de
note ARES officielle à ce sujet (correspondance par email avec les
correspondants comptables des délégations). Cependant, la note de pré-clôture
inclut un rappel concernant l'apurement de vieux prefinancements avant la fin
de l'année 2013 suite au travail effectué en cours d'année – ARES
(2013)3471570; le même exercise sera effectué également pendant l'année 2014;
- Un update des checklists
a été publié dans le "DEVCO Companion" pour améliorer la performance
de la DG concernant les délais de paiement (apurement des préfinancements y
compris);
- Un rapport DataWare House
est désormais disponible, le N° INVL04A (follow-up of the Payment Delays), ce
qui permettra de faire des suivis réguliers concernant les délais de paiement à
partir de l'année 2014, y compris pour les factures d'apurement des
préfinancements.
70.         (Annex, No4.3 -
2012/COU/0288) The Council considers that the Commission should
demonstrate that improvements have been made in the context of the Annual
Report of the Court of Auditors with regards to promoting better document
management by implementing partners and beneficiaries.
Commission's
response:
Concrete
measures were put in place in 2013 aiming at better document management and
storage by implementing partners and beneficiaries, apart from the training
intended for the delegations staff. 
As grant
contracts are most exposed to risks in terms of document management, the
following actions have been taken:
-
Obligation to declare the precise location of the supporting documents
introduced in art.16.7 of the 2013 version of the General Conditions;
- Specific
section introduced in the 2013 version of the narrative report where to declare
the location of the supporting documents (Annex IV template);
- Link in
the newly developed implementation manual for grant contracts to the financial
toolkit, where additional information on document management is available;
- The
template for Guidelines to be used in Call for Proposals now includes a link to
the implementation manual and to the toolkit as well. 
Concerning
Programme Estimates, where the risk of document management is also significant,
the 2013 version of the Practical Guide on Programmes Estimates already
contains clear instructions (Chapter 4.1.9) on this subject.
71.         (Annex, No4.4 -
2012/COU/0289) The Council considers that the Commission should
demonstrate that improvements have been made in the context of the Annual
Report of the Court of Auditors with regards to enhancing the quality of
expenditure verifications carried out by external auditors.
Commission's
response:
The issue
of the low quality of expenditure verifications carried out by external
auditors is addressed through the Action Plan to correct the weaknesses in the
implementation of DG DEVCO internal control system. Implementation began in
September 2013. The quality of all the audit/expenditure verification reports
has already been assessed and the main weaknesses analysed. Furthermore, DG
DEVCO will develop quality review grids in order to allow the EU Delegations’
staff to assess the reliability of the verification reports and provide
guidance in case of non-compliance. Following a testing phase in EU Delegations
and their final approval, the grids shall be available for implementation in
early 2015.
72.         (Annex, No4.5 -
2012/COU/0290) The Council considers that the Commission should
demonstrate that improvements have been made in the context of the Annual
Report of the Court of Auditors with regards to ensuring the correct
application of specific conditions for budget support payments.
Commission's
response:
In the
framework of the new approach to Budget Support, new guidelines with
strengthened assessments of the four eligibility criteria have been developed
and entered fully in force on 1st January 2013. The internal governance of
Budget Support was further boosted by the establishment of the Budget Support
Steering Group, chaired by DG DEVCO and composed of Management from DG DEVCO,
EEAS and ECFIN and which reviews all new proposed operations as well as all
proposed disbursements. Furthermore, in March 2014, DEVCO Management endorsed
an internal analysis of the main causes of errors in Budget Support operations
with recommendations to reduce the number and magnitude of these errors
wherever possible.
73.         (Annex, No4.6 -
2012/COU/0291) The Council considers that the Commission should
demonstrate that improvements have been made in the context of the Annual
Report of the Court of Auditors with regards to making sure that recovery
orders in respect of interest on pre-financing over 750 000 euro are issued
annually.
Commission's
response:
The
Commission will remind sub-delegated Authorising Officers of the rules
concerning annual recovery of interest for pre-financing above 750.000 euro.
Additionally, in order to raise awareness, a full review of eventual interest
received on these pre-financings will be made so as to ensure compliance with the
financial regulation.
74.         (Annex, No4 last par. -
2012/COU/0292) The Council requests that the Commission fully
implements all of the recommendations of Court of Auditors Special Report (No
5/2012) on CRIS.
Commission's
response:
DG DEVCO
is committed to implementing the action plan defined for the four
recommendations of the Court of Auditors Special Report No 5/2012 on CRIS.
Implementation is still in progress and expected for the end of 2014.
75.         (Annex, No5 -
2012/COU/0293) The Council requests that the Commission informs the ACP
Working Party at regular intervals on the implementation of the action plan
aimed at addressing the weaknesses of the control system, including data
quality, starting with an update on its state of implementation as of 30 June
2014.
Commission's
response:
DG DEVCO
is committed to providing the Council with an update on the progress with
regard to the implementation of the Action Plan (aimed at addressing the
weaknesses of the control system) as of end of June 2014, and a comprehensive
report on its state of implementation at the end of the year 2014.
76.         (Annex, No7 -
2012/COU/0294) The Council invites the Commission to fully implement
the outstanding recommendations (the Court's previous recommendations which are
detailed in Annex 3 to the Annual Report) at the earliest opportunity.
Commission's
response:
According
to Annex 3 of the Court of Auditors 2012 Annual Report (Follow-up of previous
recommendations), the only recommendation which falls under DG DEVCO's remit -
i.e. the Commission should establish a coherent methodology for the external
relations directorate to calculate the residual error rate - has been fully
implemented by the Commission.
Bodies set up
under the TFEU and the Euratom Treaty
77.         (Euratom Supply Agency,
Annex, §2 - 2012/COU/0295) The Council urges the Commission and the
Euratom Supply Agency to ensure the Agency's full financial autonomy.
Commission's
response:
The
Commission will not be taking the requested action. 
It is
convinced that the present situation, whereby the Euratom Supply Agency is
partially autonomous (i.e., for the operational costs) and the Commission uses
its own budget to pay directly the major part of the expenses (i.e. the general
administrative expenses - staff, offices, and other minor expenses, i.e.
telephone, computers), should be maintained for cost-benefit reasons, while it
does not jeopardize the Agency's independence. Indeed, the fact that the
Commission bears the major part of the Agency's expenses enables economies of
scale. Should the full financial autonomy be granted, this would no longer be
the case. This in turn would negatively affect the Commission's budget because
the subsidy it would have to pay to the Agency would be higher than the costs
borne through its own budget.
For the
sake of transparency, the Council will be informed about the costs borne by the
Commission.
78.         (European Monitoring
Centre for Drugs, Annex, §3 - 2012/COU/0296) The Council is concerned
about the annual costs borne by the European Monitoring Centre for Drugs and
Drug Addiction for unused office space available in its former building and in
its new headquarters. It invites the Centre to address this issue in
cooperation with the European Commission and National Authorities.
Commission's
response:
The EMCDDA
continues actively to look for an adequate solution to the problem of selling
or leasing the premises concerned, namely requesting agencies specialised in
the Lisbon real estate market to promote the building to potential buyers,
preferably, or tenants. As a result of these efforts, the EMCDDA consulted the
EU Budget Authority twice in 2013 (in April, following the interest expressed
by a company to lease the former headquarters’ building of the agency – the
Mascarenhas building – to install a university, and in July, following the
interest of an entrepreneur to buy the building with a view to installing a
home for the elderly). In both of these cases no objections were raised by
either branch of the Budget Authority. However, for reasons related to each of
the actors/projects behind the offers, neither of these proposals has yet been
concluded. Furthermore, following a request from the Maritime Analysis and
Operational Centre - Narcotics (MAOC-N), another European inter-governmental
organisation with headquarters in Lisbon, which expressed recently an interest
to be headquartered in the Mascarenhas building, the EMCDDA approached formally
the Portuguese Government – which is responsible for providing headquarters to
MAOC-N – seeking support to sell or rent the building in this
context. In line with the requests of the European Parliament and of the Court
of Auditors, the EMCDDA has kept the European Commission informed of the
relevant developments on this matter. Meanwhile, the EMCDDA has further
rationalised and reduced the running costs of the Mascarenhas building, namely
by revising the security settings (-23 364.89 EUR), maintenance services (-4
267.27 EUR), cleaning (-3 575.39 EUR) and reducing energy consumption (-11
650.51 EUR) in comparison to 2012. This was facilitated by the reduction of
services and development of further synergies with EMSA, including the joint
procurement of some of the services in question. Total savings of 42 858.06 EUR
for the Mascarenhas building were achieved in 2013.
79.         (European Asylum Support
Office, Annex, §5 - 2012/COU/0297) The Council invites the European
Asylum Support Office in cooperation with the Commission and the host Member State to clarify the situation relating to the financing of the renovation of the
building offered to the Office.
Commission's
response:
The
Commission handed over the files regarding the renovation of the seat to EASO
therefore it is for EASO to follow up the request. Nevertheless, to the extent
possible, the Commission will support the agency in providing all the necessary
information.
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