Source: EURLEX
Language: en
Format: md

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| 17.12.2013 | EN | Official Journal of the European Union | C 369/1 |

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REPORT

on the annual accounts of the Artemis Joint Undertaking for the financial year 2012, together with the Joint Undertaking’s replies

2013/C 369/01

CONTENTS

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|  | Paragraph | Page |
| Introduction … | 1-5 | 2 |
| Information in support of the statement of assurance … | 6 | 2 |
| Statement of assurance … | 7-18 | 2 |
| Opinion on the reliability of the accounts … | 12 | 3 |
| Basis for a qualified opinion on the legality and regularity of the transactions underlying the accounts … | 13-16 | 3 |
| Qualified opinion on the legality and regularity of the transactions underlying the accounts … | 17 | 4 |
| Comments on budgetary and financial management … | 19-23 | 4 |
| Implementation of the budget … | 19-22 | 4 |
| Calls for proposals … | 23 | 4 |
| Comments on key controls of the Joint Undertaking's supervisory and control systems | 24 | 4 |
| Other matters … | 25-31 | 4 |
| Internal audit function and the Commission’s Internal Audit Service … | 25-26 | 4 |
| Monitoring and reporting of research results … | 27-29 | 5 |
| Annual activity report … | 30 | 5 |
| Follow-up of previous observations … | 31 | 5 |

INTRODUCTION

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| 1. | The Artemis Joint Undertaking, located in Brussels, was set up in December 2007[(1)](#ntr1-C_2013369EN.01000101-E0001) for a period of 10 years. |

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| 2. | The main objective of the Joint Undertaking is to define and implement a ‘research agenda’ for the development of key technologies for embedded computing systems across different application areas in order to strengthen European competitiveness and sustainability, and allow the emergence of new markets and societal applications[(2)](#ntr2-C_2013369EN.01000101-E0002). |

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| 3. | The founding members of the Artemis Joint Undertaking are the European Union, represented by the Commission, certain EU Member States (Belgium, Denmark, Germany, Estonia, Ireland, Greece, France, Italy, Hungary, the Netherlands, Austria, Portugal, Romania, Slovenia, Spain, Finland, Sweden and the United Kingdom) and Artemis-IA, an association representing companies and other research organisations active in the field of embedded computing systems in Europe. In 2009, the Czech Republic, Cyprus, Latvia and Norway also became members of the Joint Undertaking. |

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| 4. | The maximum EU contribution to the Joint Undertaking, to cover running costs and research activities, is 420 million euro to be paid from the budget of the Seventh Framework Programme[(3)](#ntr3-C_2013369EN.01000101-E0003). Artemis-IA is to make a maximum contribution of 30 million euro to the running costs. The Artemis Member States are to make in-kind contributions to the running costs (by facilitating the implementation of projects) and provide financial contributions of at least 1,8 times the EU contribution. In-kind contributions are also to be provided by the research organisations participating in projects. |

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| 5. | The Joint Undertaking started to work autonomously on 26 October 2009. |

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

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| 6. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. |

STATEMENT OF ASSURANCE

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| 7. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:   |  |  | | --- | --- | | (a) | the annual accounts of the Artemis Joint Undertaking, which comprise the financial statements[(4)](#ntr4-C_2013369EN.01000101-E0004) and the reports on the implementation of the budget[(5)](#ntr5-C_2013369EN.01000101-E0005) for the financial year ended 31 December 2012; and |  |  |  | | --- | --- | | (b) | the legality and regularity of the transactions underlying those accounts. | |

The management’s responsibility

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| 8. | In accordance with Articles 33 and 43 of Commission Regulation (EC, Euratom) No 2343/2002[(6)](#ntr6-C_2013369EN.01000101-E0006), the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.   |  |  | | --- | --- | | (a) | The management’s responsibilities in respect of the Joint Undertaking's annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer[(7)](#ntr7-C_2013369EN.01000101-E0007), and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects. |  |  |  | | --- | --- | | (b) | The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. | |

The auditor’s responsibility

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| 9. | The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council[(8)](#ntr8-C_2013369EN.01000101-E0008) with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. |

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| 10. | The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. |

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| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |

Opinion on the reliability of the accounts

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| 12. | In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2012 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. |

Basis for a qualified opinion on the legality and regularity of the transactions underlying the accounts

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| 13. | The Joint Undertaking’s ex post audit strategy[(9)](#ntr9-C_2013369EN.01000101-E0009) was adopted by a Governing Board decision on 25 November 2010 and is a key tool[(10)](#ntr10-C_2013369EN.01000101-E0010) for assessing the legality and regularity of the underlying transactions. The payments made in 2012 relating to certificates of acceptance of costs issued by the national funding authorities of the Member States (NFAs) amounted to 7,3 million euro, which represents 43 % of the total operational payments. |

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| 14. | The audit of project cost claims has been delegated to the NFAs. The administrative agreements signed with the NFAs do not include practical arrangements for ex post audits. |

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| 15. | The Artemis Joint Undertaking received audit reports from the NFAs covering approximately 45 % of the costs related to completed projects. However, the Joint Undertaking did not assess the quality of these audits. Moreover, by the end of April 2013, the Joint Undertaking had not received information on the audit strategies of all NFAs[(11)](#ntr11-C_2013369EN.01000101-E0011). It was therefore not in a position to assess whether ex post audits provide sufficient assurance as to the legality and regularity of the underlying transactions[(12)](#ntr12-C_2013369EN.01000101-E0012). |

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| 16. | The information available on the implementation of the Joint Undertaking’s ex post audit strategy is not sufficient for the Court to conclude whether this key control tool is functioning effectively. |

Qualified opinion on the legality and regularity of the transactions underlying the accounts

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| 17. | In the Court’s opinion, except for the possible effects of the matter described in the basis for a qualified opinion in paragraphs 13 to 16, the transactions underlying the annual accounts for the year ended 31 December 2012 are, in all material respects, legal and regular. |

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| 18. | The comments which follow do not call the Court’s opinions into question. |

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

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| 19. | Contrary to the Joint Undertaking's financial rules[(13)](#ntr13-C_2013369EN.01000101-E0013), its published 2012 budget did not show differentiated payment appropriations for operational expenditure. |

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| 20. | The Joint Undertaking’s 2012 budget included operational commitment appropriations amounting to 55,1 million euro. At the end of the year, the Governing Board decided to reduce the operational appropriations to 39,5 million euro but failed to follow the procedure established in Article 28 of the Joint Undertaking's financial rules[(14)](#ntr14-C_2013369EN.01000101-E0014). |

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| 21. | The utilisation rates for (A) operational commitment appropriations (after the reduction of operational appropriations), (B) operational payment appropriations and (C) payment appropriations for administrative expenditure were as follows:   |  |  |  | | --- | --- | --- | | Operational commitment appropriations | Operational payment appropriations | Payment appropriations for administrative expenditure | | 100 % | 62 % | 76 % | |

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| 22. | The programme manager’s budget implementation estimates for the end of 2012 and the actual payments under the different calls were as follows:   |  |  |  |  |  |  | | --- | --- | --- | --- | --- | --- | |  | Yearly calls for proposals | | | | | | 2008 | 2009 | 2010 | 2011 | 2012 | | JU estimates for budget implementation at the end of 2012 | 100 % | 82,5 % | 49,6 % | 14,6 % | nil | | Actual payments made at the end of 2012 | 69 % | 46 % | 25 % | 3 % | nil |   The above figures are evidence of a low budget implementation rate mainly due to a complex financial process for the closure of the projects. |

Calls for proposals

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| 23. | The Council Regulation setting up the Joint Undertaking envisaged a maximum total budget of 410 million euro to cover operational expenditure. The actual implementation rate and the anticipated value of calls for proposals together represent 206 million euro[(15)](#ntr15-C_2013369EN.01000101-E0015), or only 50,2 % of the total budget. |

COMMENTS ON KEY CONTROLS OF THE JOINT UNDERTAKING’S SUPERVISORY AND CONTROL SYSTEMS

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| 24. | During 2012, the Joint Undertaking intensified its efforts to establish and implement effective financial, accounting and management control procedures. However, as reported in the Court’s report for 2011, further work is needed, in particular regarding the internal control standards[(16)](#ntr16-C_2013369EN.01000101-E0016) and the financial verification of cost claims[(17)](#ntr17-C_2013369EN.01000101-E0017). |

OTHER MATTERS

Internal audit function and the Commission’s Internal Audit Service

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| 25. | Article 6(2) of the Regulation setting up the Joint Undertaking stipulates that it must have an internal audit capability. However, as at the end of 2012, this important element of the internal control system had not yet been set up. |

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| 26. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 25 November 2010. However, the Joint Undertaking’s financial rules have not yet been amended to include the provisions of the framework Regulation referring to the powers of the Commission’s Internal Auditor. |

Monitoring and reporting of research results

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| 27. | The Seventh Framework Programme (FP7) establishes a monitoring and reporting system covering the protection, dissemination and transfer of research results. |

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| 28. | In the grant agreements signed with beneficiaries, the Joint Undertaking has included specific provisions governing intellectual property rights and the dissemination of research results. Implementation of these provisions is monitored by the Joint Undertaking at different stages of the funded projects. |

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| 29. | Nevertheless, the way the results of this monitoring are reported needs to evolve further to fully meet the provisions of Article 7 of Decision No 1982/2006/EC[(18)](#ntr18-C_2013369EN.01000101-E0018) and Article 27 of Regulation (EC) No 1906/2006[(19)](#ntr19-C_2013369EN.01000101-E0019) |

Annual activity report

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| 30. | The Executive Director’s declaration of assurance included in the 2012 annual activity report expresses a reservation concerning the ex post audit strategy. However, the information included in the reservation is not sufficient as regards the implementation of the ex post audit strategy. The main concern is that the Joint Undertaking has not analysed the audit strategies of the NFAs and the audit reports received from them (see paragraphs 13-17). |

Follow-up of previous observations

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| 31. | During 2012, the Joint Undertaking continued to make progress on the formalisation of security policies. However, further work is needed to finalise the Disaster Recovery Plan[(20)](#ntr20-C_2013369EN.01000101-E0020). |

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 22 October 2013.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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