Source: EURLEX
Language: en
Format: md

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| 17.12.2013 | EN | Official Journal of the European Union | C 369/25 |

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REPORT

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

2013/C 369/04

CONTENTS

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|  | Paragraph | Page |
| Introduction … | 1-5 | 26 |
| Information in support of the statement of assurance … | 6 | 26 |
| Statement of assurance … | 7-15 | 26 |
| Opinion on the reliability of the accounts … | 12 | 27 |
| Basis for a qualified opinion on the legality and regularity of the transactions underlying the accounts … | 13 | 27 |
| Qualified opinion on the legality and regularity of the transactions underlying the accounts … | 14 | 27 |
| Comments on budgetary and financial management … | 16-20 | 27 |
| Implementation of the budget … | 16-17 | 27 |
| Calls for proposals … | 18-19 | 28 |
| Comments on key controls of the Joint Undertaking’s supervisory and control systems … | 20 | 28 |
| Other matters … | 21-30 | 28 |
| Internal audit function and the Commission’s Internal Audit Service … | 21-23 | 28 |
| Monitoring and reporting of research results … | 24-26 | 28 |
| Follow-up of previous observations … | 27-30 | 28 |

INTRODUCTION

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| 1. | The European Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (IMI Joint Undertaking), located in Brussels, was set up in December 2007[(1)](#ntr1-C_2013369EN.01002501-E0001) for a period of 10 years. |

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| 2. | The objective of the IMI Joint Undertaking is to significantly improve the efficiency and effectiveness of the drug development process, with the long-term aim that the pharmaceutical sector produce more effective and safer innovative medicines[(2)](#ntr2-C_2013369EN.01002501-E0002). |

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| 3. | The founding members of the Joint Undertaking are the European Union, represented by the Commission, and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Any legal entity directly or indirectly supporting research and development in a Member State or in a country associated with the Seventh Framework Programme[(3)](#ntr3-C_2013369EN.01002501-E0003) may apply to become a member of the IMI Joint Undertaking. |

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| 4. | The maximum EU contribution to the IMI Joint Undertaking, to cover running costs and research activities, is 1 billion euro to be paid from the budget of the Seventh Framework Programme. The EU and EFPIA, as founding members, are to contribute equally to the running costs, each with an amount not exceeding 4 % of the total EU contribution. Other members are to contribute to the running costs in proportion to their contribution to research activities. The research companies which are members of EFPIA are to contribute to the funding of research activities through in-kind contributions[(4)](#ntr4-C_2013369EN.01002501-E0004) at least equal to the EU financial contribution[(5)](#ntr5-C_2013369EN.01002501-E0005). |

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| 5. | The Joint Undertaking started to work autonomously on 16 November 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 IMI Joint Undertaking, which comprise the financial statements[(6)](#ntr6-C_2013369EN.01002501-E0006) and the reports on the implementation of the budget[(7)](#ntr7-C_2013369EN.01002501-E0007) 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[(8)](#ntr8-C_2013369EN.01002501-E0008), 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[(9)](#ntr9-C_2013369EN.01002501-E0009), 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[(10)](#ntr10-C_2013369EN.01002501-E0010) 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 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 underlying transactions

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| 13. | The Joint Undertaking’s ex post audit strategy[(11)](#ntr11-C_2013369EN.01002501-E0011) was adopted by a Governing Board decision on 14 December 2010 and is a key tool for assessing the legality and regularity of the underlying transactions. 56 ex post audits had been completed as of June 2013, covering 4,4 million euro (37,3 % of the accepted IMI JU’s contribution for the first call validated by June 2011)[(12)](#ntr12-C_2013369EN.01002501-E0012). The detected error rate resulting from these audits was 5,82 %. |

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

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| 14. | In the Court’s opinion, except for the possible effects of the matter described in paragraph 13, the transactions underlying the annual accounts of the Joint Undertaking for the year ended 31 December 2012 are, in all material respects, legal and regular. |

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| 15. | 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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| 16. | The 2012 annual budget and implementation plan were adopted by the Governing Board on 22 December 2011. For 2012, where operational activities are concerned, IMI achieved a 96 % execution rate for commitment appropriations (351 million euro) and a rate of 100 % for payment appropriations (103 million euro). Despite this high level of budgetary execution, a significant amount in commitment appropriations (162 million euro) is still no more than a global figure, meaning that, while calls have been launched, no corresponding grant agreements have been signed. IMI’s financial statements show 543 million euro of carried-forward contractual obligations, which indicates a significant need for funding until 2017. |

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| 17. | A high level of payment and commitment appropriations for administrative expenditure in 2012 were still unused at year’s end (26,81 % of commitment appropriations and 39,8 % of payment appropriations). |

Calls for proposals

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| 18. | In 2012, the Joint Undertaking launched four calls for proposals and signed 11 grant agreements. In 2012 it committed 351 million euro, or almost 37 % of its total available budget (960 million euro maximum funding stipulated in Regulation (EC) No 73/2008), for research activities. The time needed to sign agreements decreased in 2012, from 413 days for the final grant agreements under the fourth call to 161 days for the sixth call. |

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| 19. | At the end of 2012, the cumulative total of approved commitments for research costs was 736 million euro. IMI needs in principle to commit a further 224 million euro for research activities (23 % of the 960 million euro maximum) by the end of 2013, and EFPIA members need to commit an equivalent amount in kind. By the end of 2012 EFPIA had committed 706 million euro, and it now needs to commit 254 million euro more to match IMI’s 960 million euro contribution. |

Comments on key controls of the Joint Undertaking’s supervisory and control systems

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| 20. | In 2012 the Joint Undertaking has continued developing adequate and comprehensive internal control systems. Nevertheless, further work is needed in documenting and updating operational and administrative procedures (especially for ex post and accounting closure activities), which will mitigate the risks of error and inconsistent practices. |

OTHER MATTERS

Internal audit function and the Commission’s Internal Audit Service

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| 21. | In 2011, the Commission’s Internal Audit Service carried out a risk assessment exercise, and on 3 November 2011 the strategic audit plan for 2012-2014 was approved by the Governing Board. |

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| 22. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 8 March 2011. However, the Joint Undertaking’s financial rules have not yet been amended to include the provisions of the framework Regulation[(13)](#ntr13-C_2013369EN.01002501-E0013). |

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| 23. | In 2012 the Commission’s Internal Audit Service carried out an assurance review of IMI’s negotiation, grant agreement preparation and pre-financing processes. The IAS concluded that the existing internal controls provided reasonable assurance as to whether, with the exception of specific issues related to the management of conflicts of interests, documentation of the negotiation process and the related controls, and an IT application used during the negotiation process, the business objectives had been achieved. The Joint Undertaking’s action plan to address the IAS recommendations was validated by the IAS on 29 October 2012. |

Monitoring and reporting of research results

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| 24. | The Seventh Framework Programme (FP7) establishes a monitoring and reporting system covering the protection, dissemination and transfer of research results[(14)](#ntr14-C_2013369EN.01002501-E0014). |

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| 25. | In the grant agreements signed with members and other beneficiaries, the Joint Undertaking has included specific provisions governing intellectual property rights and the dissemination of research activities and results, in accordance with Article 15 of the Council Regulation setting up the Joint Undertaking. Implementation of these provisions is monitored by the Joint Undertaking at different stages of the funded projects. |

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| 26. | The Joint Undertaking regularly presents specific reports on ongoing projects[(15)](#ntr15-C_2013369EN.01002501-E0015). However, as part of its objective to contribute to the implementation of the Seventh Framework Programme, which is stated in Article 2 of Regulation (EC) No 73/2008, the Joint Undertaking should also determine, together with the two Founding Members (the Commission and EFPIA), which information is to be made available for the general monitoring report that is regularly produced on FP7, and for other reporting tools of the Commission. |

Follow-up of previous observations

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| 27. | In 2012 the business continuity plan and disaster recovery plan were finalised. |

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| 28. | The accounting officer has reported on the validation of the accounting system on 27 September 2012 and most of the weaknesses identified were addressed by the end of the year. However, the validation of the accounting system does not yet cover ex post audit results. |

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| 29. | The methodology for evaluating in-kind contributions[(16)](#ntr16-C_2013369EN.01002501-E0016) was approved by the Governing Board on 11 November 2011. These contributions are validated by way of ex-ante certification and ex post audits. In 2012, the first 14 certified methodologies for in-kind contributions were accepted and the first three ex post audits covering in-kind contributions were launched. |

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| 30. | Article 12(5) of the Council Regulation setting up the Joint Undertaking does not recognise the right of the Court of Auditors to audit the in-kind contributions of EFPIA companies, although they are recorded in IMI’s financial statements. It is estimated that these contributions will represent approximately 1 billion euro over IMI’s lifetime. |

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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