Summary of results from the Court’s 2015 annual audit of the European Research Joint Undertakings
Date: 2016-12-16
Institutions: European Court of Auditors
Subjects: European Joint Undertaking, administration of the Institutions, auditing, budgetary control, financial control, research








C_2016473EN.01000101.xml










16.12.2016   


EN


Official Journal of the European Union


C 473/1





Summary of results from the Court’s 2015 annual audit of the European Research Joint Undertakings
(2016/C 473/01)

CONTENTS








 



Paragraph




Page





INTRODUCTION


1–7


2




INFORMATION IN SUPPORT OF THE COURT’S OPINIONS


8–9


2




AUDIT RESULTS


10–22


3




Opinions on the reliability of the accounts


10


3




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


11–12


3




Emphasis of matter on the EU contribution to the ITER project costs


13


3




Comments made in the Court’s audit reports


14–20


3




Follow-up of previous years’ comments


21–22


4




CONCLUSIONS


23–25


4










ANNEX I —


Joint Undertakings’ activities, budget and staff






5










ANNEX II —


Comments made by the Court in 2015






6





INTRODUCTION









1.


Pursuant to Article 287 of the Treaty on the Functioning of the European Union, the Court audited and issued opinions on the reliability of the accounts and on the legality and regularity of the underlying transactions for the financial year ended 31 December 2015 for seven European research Joint Undertakings (JUs):






—


F4E (ITER) — Development of Fusion Energy,










—


BBI — Bio-based Industries,










—


Clean Sky — Clean Air Transport Technologies,










—


IMI — Innovative Medicines Initiative,










—


FCH — Fuel Cells and Hydrogen,










—


SESAR — Single European Sky Air Traffic Management Research,










—


ECSEL — Electronic components and Systems.
















2.


This summary provides an overview of the results of these audits. It aims to facilitate the analysis and comparison of the Court’s 2015 audit reports on each of the Joint Undertakings. The Court’s complete opinions and comments, together with the Joint Undertakings’ replies, can be found in the published audit reports. This summary is not an audit report or opinion.












3.


Apart from the European Union (EU), which is represented by the Commission, members of the Joint Undertakings may include various public and private partners who make contributions to the funding of the activities performed by the Joint Undertakings. The Joint Undertakings either follow a bipartite model with the participation of the European Commission and Industry partners, or a tripartite model with the participation also of the Member States. Joint Undertakings play an important role in implementing specific aspects of EU research policy.












4.


The EU funding for the Joint Undertakings is provided by the EU research budget through the seventh research framework programme (FP7) and Horizon 2020 (H2020) (1). The other partners provide cash and in-kind contributions to the activities of the Joint Undertakings.












5.


The Joint Undertakings’ total 2015 budget amounted to 1,3 billion euro (2014: 1,1 billion euro) or almost 1 % of the 2015 EU general budget (2014: 1,6 %).












6.


The Joint Undertakings employed 455 (2014: 432) permanent and temporary officials at the end of 2015.












7.


Information on the activities, budget and staff numbers of the Joint Undertakings is provided in Annex I.






INFORMATION IN SUPPORT OF THE COURT’S OPINIONS









8.


For the audit of the reliability of the accounts, 2015 was the second year in which the annual accounts of two Joint Undertakings (F4E and SESAR) were verified by independent external auditors (audit firms) according to Article 208(4) of the EU Financial Regulation (2) and Article 107(1) of the new framework Financial Regulation for agencies and other bodies (3). In accordance with international auditing standards, the Court reviewed the work of the audit firms and obtained sufficient assurance that it could rely on the work of the audit firms as the basis for its audit opinions on the reliability of the accounts of the Joint Undertakings. For the other Joint Undertakings, the Court carried out its own audit work on the annual accounts.












9.


As in previous years, the Court audited the legality and regularity of the underlying transactions under its own responsibility. The Court’s audit approach comprises analytical audit procedures, testing of a sample of transactions at the level of each Joint Undertaking and an assessment of key controls of the supervisory and control systems, including a quality control review of the ex post audits carried out by the Joint Undertakings at beneficiaries. This is supplemented by evidence provided by the relevant work of other auditors and an analysis of management representations.





AUDIT RESULTS



Opinions on the reliability of the accounts










10.


The final accounts of all Joint Undertakings present fairly, in all material respects, their financial position as at 31 December 2015 and the results of their operations and their cash flows for the year then ended, in accordance with the provisions of the applicable Financial Regulations and the accounting rules adopted by the Commission’s Accounting Officer.






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










11.


In the Court’s opinion, the transactions underlying the annual accounts for the year ended 31 December 2015 were legal and regular in all material respects for six Joint Undertakings (F4E, BBI, Clean Sky, IMI, FCH and SESAR).












12.


The Court issued a qualified opinion on the legality and regularity of the transactions underlying the accounts of the ECSEL Joint Undertaking. The arrangements in place for the implementation of ex post audits at the ECSEL Joint Undertaking do not allow the Joint Undertaking to calculate s single reliable weighted error rate or a residual error rate. Therefore, the Court was not in a position to conclude whether this key control provides sufficient assurance as to the legality and regularity of the underlying transactions for FP7 projects managed by the Joint Undertaking.






Emphasis of matter on the EU contribution to the ITER project costs










13.


The Court’s statement of assurance for the F4E Joint Undertaking includes an emphasis of matter (4) related to the EU contribution to the ITER project costs. In 2010, the Council approved 6,6 billion euro as the expected total amount of EU contribution to the ITER construction phase. The complexity of the ITER activities puts the amount of the EU contribution at significant risk of increasing, mainly resulting from changes in the scope of the project and delays in implementation. In 2015, the F4E Joint Undertaking launched a major exercise to calculate the estimated cost at completion (EAC) of the EU contribution to the construction phase of the project. The result was an expected cost increase of around 2 375 million euro. The F4E Joint Undertaking has not yet updated the valuation of its contribution to the ITER project beyond the construction phase. In its meeting of 15 and 16 June 2016 the ITER Council endorsed an updated integrated schedule for the ITER project which identifies the date of achievement of the strategic milestone of the construction phase of the project (‘First Plasma’) as December 2025.






Comments made in the Court’s audit reports










14.


Without calling its opinions into question, the Court made 61 comments (2014: 55) affecting all Joint Undertakings to highlight matters of importance and to indicate room for improvement. An overview of the comments is provided in Annex II. The main issues raised by the Court in its comments are summarised below.












15.


In three cases (BBI, FCH, ECSEL), the members of the Joint Undertakings other than the EU did not provide the required reports on the 
value of their in-kind contributions
 relating to their participation in H2020 projects. Consequently, in these cases, the amount of 2015 in-kind contributions entered in the accounts of the Joint Undertakings is based on estimates.












16.


The 
level of information on budgetary implementation
 varies between Joint Undertakings, demonstrating the need for clear guidelines from the Commission on the information to be provided by the Joint Undertakings in their annual accounts and in their annual reports on budgetary and financial management.












17.


In four cases (Clean Sky, IMI, FCH, SESAR), the 
implementation rate for commitment/payment appropriations in 2015
 was lower than expected, due to delays in signing grant agreements. In four cases (BBI, FCH, SESAR, ECSEL), the majority of 2015 
commitments were made at a global level
, reflecting the fact that individual grant award procedures were not completed during the year.












18.


The Court reports on the Joint Undertakings’ 
multiannual budget implementation of the FP7, TEN-T and H2020 programmes
. More detailed information on the multiannual implementation of commitments and payments may be found in the Joint Undertakings’ annual activity reports.












19.


The Joint Undertakings have set up 

ex ante control procedures
 based on financial and operational desk reviews, and perform 

ex post audits of beneficiaries
. These checks are key tools for assessing the legality and regularity of the underlying transactions, including the cash and in-kind contributions from members other than the EU. The ex post audits have permitted the Joint Undertakings (except F4E and ECSEL) to establish residual error rates, which are below 2 % in all cases.












20.


As regards the 
F4E Joint Undertaking
, significant progress has been made in addressing the issues related to the cost and schedule of the ITER project, although F4E continued to develop its 
monitoring and control systems
 during 2015. The F4E Joint Undertaking increased the 
competitiveness of its operational procurement procedures
 in 2015 (with 55 % of tenders using open procedures compared to 42 % in 2014), but further efforts are required to increase the competitiveness of the procedures.






Follow-up of previous years’ comments










21.


In most cases, in relation to the 
monitoring and reporting of project research results
, the Joint Undertakings disclosed specific indicators on research results in their annual activity reports (performance indicators and indicators for monitoring cross-cutting issues), as required by H2020 rules.












22.


In July 2015, the Commission issued guidelines to the Joint Undertakings related to rules on 
conflicts of interest
, including a common template for the declaration of absence of a conflict of interest, which should be incorporated by the Joint Undertakings into their procedures.





CONCLUSIONS









23.


The Court issued unqualified opinions on the reliability of the accounts for the financial year ended 31 December 2015 for all of the Joint Undertakings.












24.


The Court issued unqualified opinions on the legality and regularity of the underlying transactions for the financial year ended 31 December 2015 for six of the seven Joint Undertakings. The Court issued a qualified opinion on the legality and regularity of the underlying transactions for the ECSEL Joint Undertaking.












25.


The Joint Undertakings improved their procedures by taking corrective actions in response to the Court’s comments from previous years. Nevertheless, a number of issues remain to be addressed by the Joint Undertakings, in order to ensure further improvement.






(1)  The SESAR Joint Undertaking also received funding from the trans-European networks transport programme (TEN-T).

(2)  Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (OJ L 298, 26.10.2012, p. 1).

(3)  Article 107 of Commission Delegated Regulation (EU) No 1271/2013 (OJ L 328, 7.12.2013, p. 42).

(4)  An emphasis of matter paragraph is used to draw attention to a matter which is not materially misstated in the accounts, but is of such importance that it is fundamental to users’ understanding of the accounts.


ANNEX I
Joint Undertakings' activities, budget and staff












JOINT UNDERTAKING


Parent DG


Policy Area


Main Activity


Budget


Staff




2014 (million euros)


2015 (million euros)


2014 Establishment plan


2015 Establishment plan




BBI


DG RTD


Research


Research and development of bio-based products and biofuels


n/a


21,1 


n/a


10




CLEAN SKY


DG RTD


Research


Aeronautical research and development


153,6 


245,9 


37


42




ECSEL (as from 27 June 2014)


DG CONNECT


Research


Electronic components and system research and innovation


n/a


107,7 


28


31




F4E — FUSION FOR ENERGY


DG ENER


Research


Fusion energy research and development


567,6 


526,1 


262


262




FCH — FUEL CELLS AND HYDROGEN


DG RTD


Research


Fuel cells and hydrogen research and development


97,5 


95,1 


26


24




IMI — INNOVATIVE MEDICINES INITIATIVE


DG RTD


Research


Pharmaceutical research and development


170,8 


195,4 


37


44




SESAR


DG MOVE


Research


Research and development of air traffic management system


121,9 


140,1 


42


42





Total




1 111,4 




1 331,4 




432




455








ANNEX II
Comments made by the Court in 2015





















JOINT UNDERTAKING


Budgetary and financial management


Key controls of the JU's supervisory and control systems


Other matters and follow-up of previous observations




Presentation of the accounts


Implementation of the 2015 budget


Multiannual budget implementation under FP7/TEN-T


Multiannual budget implementation under H2020


Internal Control Systems and Accounting systems


Operational procurement and grants


Overall control and monitoring of operational procurement contracts and grants


Anti-fraud strategy


Legal framework


Monitoring and reporting of project research results


Conflict of interest


Commission’s Internal Audit Service (IAS) audits


Annual activity report


Intellectual property rights and industrial policy


Host State Agreement


Rules implementing the Staff Regulations




BBI


x


x


 


x


x


 


 


x


 


x


x


 


 


 


 


 




CLEAN SKY


x


x


x


x


x


 


 


x


 


x


x


x


 


 


 


 




ECSEL


x


x


x


x


x


 


 


x


 


x


x


 


 


 


 


 




F4E


x


x


 


 


x


x


x


x


x


 


 


 


x


x


x


x




FCH


x


x


x


x


x


 


 


x


 


x


x


x


 


 


 


 




IMI


x


x


x


x


x


 


 


x


 


x


x


x


 


 


 


 




SESAR


 


x


x


x


x


 


 


x


 


x


x


x


 


 


 


 





Subtotals




6




7




5




6




7




1




1




7




1




6




6




4




1




1




1




1






Total




24




9




28