Source: EURLEX
Language: en
Format: md

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# 52011DC0323

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS Synthesis of the Commission’s management achievements in 2010 /\* COM/2011/0323 final \*/**

  

Annex 1: Reservations 2006 – 2010[1]

Chapter — Agriculture and Natural Resources

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

AGRI || 1 || 1. Serious deficiencies in IACS in Portugal, Bulgaria and Romania. || 2 || 1. Expenditure for rural development measures under Axis 2 (improving the environment and the countryside) of the 2007-2013 programming period 2. Serious deficiencies in IACS in Bulgaria and Romania || 2 || 1. Expenditure for rural development measures under Axis 2 (improving the environment and the countryside) of the 2007-2013 programming period. 2. Management and control system for SAPARD in Bulgaria and Romania. || 2 || 1. Insufficient implementation of IACS in Greece 2. Exactitude of rural development control data of Member States giving a first indication of the error rate in this policy area || 1 || 1. Insufficient implementation of IACS in Greece

CLIMA || 1 || 1. Significant security weakness identified in the national registries of the EU Emissions Trading System (ETS). || || || || || || || ||

MARE (former FISH) || 1 || 1. Management and control systems for one FIFG operational programme in Germany. || 2 || 1. Management and control systems for FIFG operational programmes in two Member States and specific measures in another three Member States. 2. Eligibility of payments made to Member States to compensate additional costs in the marketing of certain fishery products from the Outermost Regions. || 1 || Reservation on direct centralised management concerning the eligibility of costs reimbursed for expenditure in the area of control and enforcement of the Common Fisheries Policy, where the annual error rate detected by ex-post controls is higher than the 2% of the annual payments made for the MS programmes and on a multiannual basis represents more than 2% of sample payments. || || || 0 ||

ENV || 0 || || 1 || Eligibility of expenditures declared by beneficiaries of grants || 0 || || 1 || Eligibility of expenditures declared by the beneficiaries of action grants || 0 ||

SANCO || 0 || || 0 || || 0 || || 0 || 0 || 1 || 1. Insufficient assurance of business continuity of a critical activity

Chapter — Cohesion

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

REGIO || 2 || 1. Reservation on ERDF management and control systems for certain programmes in the period 2007-2013 in Bulgaria, Czech Republic, Germany, Greece, Italy, Latvia, Lithuania, Spain, Romania, United Kingdom, 13 European Territorial Cooperation programmes) and 6 IPA-Cross-borders programmes). 2. Reservation on ERDF management and control systems for certain programmes in the period 2000-2006 in Bulgaria, Germany, Hungary, Italy, Latvia, Lithuania, The Netherlands and concerning 9 Interreg programmes || 2 || 1. Reservation on ERDF management and control systems for certain programmes in the period 2007-2013 in Germany, Italy, Spain, Bulgaria, 15 European Territorial Cooperation programmes 2. Reservation on ERDF management and control systems for certain programmes in the period 2000-2006 in Bulgaria, Italy, Germany, and UK and concerning 15 Interreg programmes || 2 || 1. Reservation on ERDF management and control systems for the period 2000-2006 in certain programmes in: BELGIUM, GERMANY, ITALY, SPAIN, + 21 INTERREG programmes 2. Management and control system for the road sector in BULGARIA in 2008 || 2 || 1. Reservation concerning the ERDF management and control systems for certain programmes in the period 2000-2006 in: CZECH REPUBLIC, FINLAND, GERMANY, GREECE, IRELAND, ITALY, LUXEMBOURG, POLAND, SLOVAKIA, SPAIN + 51 INTERREG programmes. 2. Reservation concerning the management and control systems for the COHESION FUND (period 2000-2006) in: - Bulgaria, Czech Republic, Slovakia, Hungary and Poland. || 2 || 1. Reservation concerning the management and control systems for ERDF in United Kingdom - 2. Reservation concerning the management and control systems for ERDF in the INTERREG programmes (except IIIB North West Europe and Azores, Canaries, Madeira)

EMPL || 2 || 1. Management and control systems for identified operational programmes under ESF 2000-2006 in Germany, France, Italy and Spain. 2. Management and control systems in ESF in Austria, Belgium, Bulgaria, Germany, Finland, Hungary, Ireland, Italy, Sweden, Slovakia, Spain and the United Kingdom for certain programmes in the period 2007-2013 || 2 || 1. Management and control systems for identified operational programmes under ESF 2000-2006 in Belgium, Germany, France, Italy and Spain. 2. Management and control systems in ESF in Belgium, Germany, Italy, Luxembourg, Romania and Spain; for certain programmes in the period 2007-2013 || 1 || Management and control systems for identified ESF Operational Programmes in Spain, United Kingdom, France, Italy, Poland, Belgium and Luxembourg (quantification: 41 million EUR, 0.6%) || 1 || Management and control systems for identified ESF Operational Programmes in - Spain, - United Kingdom, - France, - Italy, - Slovakia, - Portugal, - Belgium and - Luxembourg. || 1 || 1. Systèmes de gestion et de contrôles de programmes opérationnels du FSE en Espagne, en Ecosse (objectifs 2 et 3, UK), en Suède (objectif 3 en partie), en Slovaquie, en Slovénie, en Lettonie et dans les régions Calabre et Lazio (IT)

Chapter — Research, Energy and Transport

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

RTD || 1 || Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || Rate of residual errors with regards to the accuracy of cost claims in FP6 || 1 || Reservation concerning errors relating to the accuracy of the cost claims and their conformity with the provisions of the Fifth Research Framework Programme (FP5). || 2 || 1. Accuracy of the cost claims and their conformity with the provisions of FP5 research contracts. 2. Absence of sufficient evidence to determine the residual level of persisting errors with regard to the accuracy of cost claims in FP6 contracts.

INFSO || 0 || || 1 || Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || Rate of residual errors with regards to the accuracy of cost claims in FP6 || 1 || Reservation concerning the rate of residual errors with regard to the accuracy of cost claims in Framework Programme 6 contracts. || 3 || 1. Allocation of research personnel 2. Errors relating to the accuracy of cost claims and their compliance with the provisions of the research contracts, FP5 3. Absence of sufficient evidence to determine the residual level of persisting errors with regard to the accuracy of cost claims in Framework Programme 6 contracts

ENTR (see also below) || 1 || 1. Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || 1. Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || Rate of residual errors with regards to the accuracy of cost claims in FP6 || 1 || Reservation concerning the rate of residual errors with regard to the accuracy of cost claims in FP6. || 1 || 1. Errors relating to accuracy and eligibility of costs claims and their compliance with the provisions of the research contracts under FP 5

MOVE (former TREN) || 1 || Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%) || 1 || Rate of residual errors with regards to the accuracy of cost claims in FP6 || 1 || Erreurs concernant l’exactitude et l’éligibilité des déclarations de coûts et respect des termes des contrats du 5e PCRD || 1 || 1. Erreurs concernant l’exactitude et l’éligibilité des déclarations de coûts et respect des termes des contrats du 5e PCRD

ENER (former TREN) || 1 || 1. Accuracy of cost claims under FP6 (error rates above materiality threshold of 2%)

Chapter — External Aid,
Development and Enlargement

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

ELARG || 0 || || 0 || || 1 || Potential irregularities in the management of PHARE funds under extended decentralised management by two Bulgarian Implementing Agencies (named). || 1 || Potential irregularities in the management of PHARE funds under extended decentralised management by the following Bulgarian Implementing Agencies: - Central Finance and Contract Unit (CFCU) - Ministry for Regional Development and Public Works (MRDPW). || 0 ||

DG RELEX || 0 || || 1 || Lack of capacity to carry out adequate ex-post controls for CFSP and Stability Instrument || 0 || || 0 || || 0 ||

Chapter — Education and
Citizenship

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

EAC || 1 || Too high error rate in centralised direct management, due to lack of justifying documents for cost claims, concerning projects from the previous generation of programmes || 1 || Too high error rate in centralised direct management, due to lack of justifying documents for cost claims, concerning projects from the previous generation of programmes || 0 || || 0 || || 1 || 1. Faiblesse des systèmes de contrôle constatées dans certaines Agences Nationales

EACEA || 1 || Too high error rate in centralised direct management for the Culture and Youth programmes, due to lack of justifying documents for cost claims || 0 || || 0 || || 0 || || 0 ||

HOME (former JLS) || 2 || 1. Reputational damage due to new risks likely to further delay the completion of the SIS II project. 2. Reputational damage due to delays in the entry into operations of the VIS project. || 2 || 1. Reputational damage due to delays in the completion of the SIS II project. 2. Reputational damage due to a delay in the completion of the VIS project. || 1 || Delays in the implementation of the Schengen Information System II (SIS II), || 2 || 1. Faiblesse des systèmes de contrôle et de gestion du Fonds européen pour les Réfugiés en Italie, pour les périodes de programmation 2000-2004, et 2005-2007 2. Mise en œuvre incomplète des mécanismes de supervision de la Commission en gestion partagée pour le Fonds européen pour les réfugiés 2005-2007. || 1 || 1. Faiblesse des systèmes de contrôle et de gestion du Fonds européen pour les Réfugiés en Italie, pour la période de programmation 2000-2004

JUSTICE (former JLS) || 0 || || 1 || Residual error rate in non-audited population of grants under programmes for fundamental rights and citizenship. || 0 || || 0 || || 0 ||

COMM || 1 || Potential non-compliance with applicable legislation on Intellectual Property Rights || 1 || potential non-compliance with applicable legislation on Intellectual Property Rights || 2 || 1. Reservation on the quality failings revealed by the controls. 2. Possible infringement of intellectual property rights by Commission departments. || 1 || Ex-post control system || 1 || 1. Ex-post control system

Chapter — Economic and
Financial Affairs

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

ENTR (see also above) || 1 || Reservation concerning the reliability of the financial reporting by the delegated body about the implementation of actions under joint and centralised indirect management. || 1 || Reservation concerning the reliability of the financial reporting by the delegated body about the implementation of the joint programme. || 1 || || 1 || Unsatisfactory functioning of the financing of European Standardisation || 1 || Unsatisfactory functioning of the financing of European Standardisation

ESTAT || 0 || || 0 || || 0 || || 0 || || 1 || 1. Absence de garantie sur la régularité des paiements effectués en 2006 dans le cadre des conventions de subvention signées avec trois Instituts nationaux de statistiques pour lesquels des manquements ont été constatés en 2006

ECFIN || 0 || || 0 || || 1 || Possibility that new mitigating controls put in place following an ex-post control report on funds managed by an external body entrusted with indirect centralized management are not effective. || 1 || Possibility that additionality requirements are not sufficiently met. || 1 || 1. Possibility that additionality requirements are not sufficiently met

Chapter — Administrative and
other expenditure

DG || || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

DIGIT || 0 || || 0 || || 0 || || 1 || Inadequacy of the Data Centre building infrastructure in Luxembourg. || 1 || 1.Business continuity risks due to inadequacy of the data centres building infrastructure.

IAS || 0 || || 0 || || 0 || || 0 || || 1 || 1. Audit of community bodies (regulatory agencies)

Total

|| || Reservations 2010 || || Reservations 2009 || || Reservations 2008 || || Reservations 2007 || || Reservations 2006

TOTAL || 17 || || 20 || || 16 || || 17 || || 20 ||

Annex 2:
Executive Agencies, Regulatory Agencies and PPPs

In line with practice in most Member
States, using agencies to implement key tasks has become an established part of
the way the European Union works.

Executive agencies operate within a clear institutional framework, governed by a
single legal base[2]. Their tasks must relate
to the management of Community programmes or actions, they are set up for a
limited period and they are always located close to Commission headquarters.
The Commission’s responsibility for executive agencies is clear: the Commission
creates them, maintains ‘real control’ over their activity, and appoints the Director.
Their Annual Activity Reports are annexed to the report of their parent
Directorate(s)-General. A standard Financial Regulation, governing the
establishment and implementation of the budget, applies to all executive
agencies. A revision of the working arrangements was agreed with the European
Parliament in October 2007, with the aim to further facilitate
inter-institutional cooperation in this field.

Six executive
agencies exist:

–
the Executive Agency for Competitiveness and
Innovation Programme (EACI – formerly known as IEEA);

–
the Executive Agency for Health and Consumers  (EAHC
– formerly known as PHEA);

–
the Education, Audiovisual and Culture Executive
Agency (EACEA);

–
the European Research Council Executive Agency (ERCEA);

–
the Research Executive Agency (REA);

–
the Trans-European Transport Network Executive
Agency (TEN-TEA).

‘All these
executive agencies were operational in 2010 (no new executive agencies were
created during the year).

Their Annual
Activity Reports, which were attached to those of their parent DG[3], reported that the executive
agencies had not yet fully implemented between three and six internal control
standards by the end of 2010. Five of the six executive agencies reported that
further efforts were required in the area of business continuity, and four
mentioned partial compliance with the document management requirements. Thus,
the central services noted that the parent DGs need to closely monitor the
agencies’ further implementation of the control standards, with a view to
reaching full compliance within the near future.

The importance of the executive agencies to the Commission
can be seen by the fact that 45 % of DG EAC’s budget is currently, and up
to 33 % of DG RTD’s FP7 budget is foreseen to be managed by one or more
executive agencies. In view of this, the Commission’s supervisory arrangements
over the executive agencies become important. These are ensured by the
Commission’s representation on the Steering Committee, monitoring of the agency’s
set-up of its internal control system, the follow-up of audits carried out by
various bodies, periodic coordination meetings between the agencies and their
parent DGs as well as other measures.

The breakdown
of staff employed on 31/12/2010 by the executive agencies was as follows:

|| Temporary agents (officials seconded by the Commission and agents recruited by the agency) || Contractual agents || Seconded national experts || Total

EACI || 33 || 109 || 0 || 142

EAHC || 10 || 34 || 0 || 44

EACEA || 97 || 295 || 0 || 392

ERCEA || 94 || 218 || 4 || 316

REA || 99 || 309 || 0 || 408

TEN-TEA || 31 || 62 || 0 || 93

Total || 364 || 1027 || 4 || 1395

The Commission’s ‘2007 screening report suggested
that there were no strong candidates for a new executive agency[4].
If new needs appear, the starting point would be to explore the option of
extending the scope of an existing executive agency to cover a new programme.
Under the current circumstances, it is however unlikely that new executive
agencies will be needed until the end of the current financial framework in
2013. The Commission has respected its 2007 commitment not to create any new
executive agencies beyond those foreseen to cope with a doubling of the Research budget and some limited extensions
of the mandate of existing executive agencies. No further extension of the
mandate of the existing six executive agencies has occurred in 2010.

A 2009 special report[5]
by the European Court of Auditors examined the executive agencies. The report
concludes that agencies provide better service delivery than the Commission
(reduced contracting time, more rapid approval procedures, shorter payment
times) and also offer the advantages of simplified processes and increased
external visibility for EU actions.

The report also suggests that, despite
these achievements the initiative to set up the executive agencies was mainly
driven by constraints on employment within the Commission and the political will
to save costs for the management of the programmes concerned. The report
confirms that externalisation to Executive Agencies has resulted in cost
savings, which, however, are difficult to quantify due to a lack of reliable
data for enabling a comparison with the ex-ante situation.

As a result of the efforts of a
Commission-internal working group on executive agencies, in 2010 the central
services issued a note[6] containing specific
guidelines on the structure and content of the executive agencies’ work
programmes, including a template for the work programme and a limited number of
suggested standard key performance indicators.

The 32 regulatory agencies are
independent legal entities. 27 of these agencies receive funds from the
European Union budget and are therefore granted discharge by the European
Parliament in individual discharge decisions. The remaining five agencies do
not receive EU funding and thus do not receive discharge by the European
Parliament (two of these agencies[7]
are fully self-financed, and three[8]
are funded on an intergovernmental basis and financed directly by the
participating Member States). In 2010 the founding acts for 2 new agencies
entered into force: BEREC (Body of European Regulators of Electronic
Communications - Regulation 1211/2009) and EASO (Eur Asylum Support Office -
Regulation 439/2010).

In a Communication of March 2008 entitled ‘EU
agencies: the way forward’[9] the Commission drew
attention to the lack of a common vision on the role and functions of
regulatory agencies. It announced a moratorium on creating new agencies and a horizontal evaluation of regulatory agencies.

The evaluation was finalised in December
2009. It reported that there is no single legal framework governing the
establishment and closure of EU de-centralised agencies, and that alternatives
to creating agencies were paid limited attention until impact assessments came
into practice. Furthermore, a number of chosen location sites for the agencies
were assessed as inefficient. As regards agencies’ effectiveness, the report
concluded that the activities of the majority of agencies are coherent with
their mandate, and that in general there was clear evidence that agencies have
achieved the planned outputs. The evaluation further considered that in order
to operate efficiently with regards to the administrative tasks, an agency
needs to reach a certain critical size, somewhere between 50 and 100 staff. Finally,
it was found that monitoring was not very well developed in terms of the use of
quantifiable objectives and indicators.

The 2008 Communication also proposed to
establish an inter-institutional working group to set ground rules to apply to
all regulatory agencies. The inter-institutional Working Group was set up in
March 2009 between the European Parliament, the Council of the European Union
and the Commission with a view to assess the existing situation and in
particular the coherence, effectiveness, accountability and transparency of
these Agencies and find a common ground on how to improve their work. The group
was called to address a number of key issues put forward by the participating
Institutions, including the role and position of the agencies in the EU’s
institutional landscape, their creation, structure and operation, as well as funding,
budgetary, supervision and management issues.

Further to the kick-off meeting at
political level held in Strasbourg on 10 March 2009, technical work started in
spring 2009 and continued during 2010. Since the
kick-off meeting held in March 2009, various meetings at political level have
endorsed the work progressively carried out at technical level, bringing the
analysis of the issues at stake to a deeper level. This is expected to continue
throughout 2011, with a view to arriving at common agreement on the way forward
in early 2012.

In March 2011, the European ‘Parliament’s
Committee on Budgetary Control[10]
adopted reports proposing a Parliament decision to grant all agencies discharge
for 2009, with the exception of the European Police College (CEPOL) and the
European Medicines Agency (EMEA). The discharge decisions of these two agencies
for the financial year 2009 were postponed.

This followed a qualified opinion by the
European Court of Auditors with regard to the legality and regularity of CEPOL’s
underlying transactions in 2009, for the fourth successive year. The Court’s
opinion on CEPOL’s accounts for 2009 was however better than the 2008 opinion.

Directorate-General for Home Affairs, being
responsible for the grant contribution to CEPOL’s running costs reported that
despite Parliament’s refusal to grant discharge for the financial year 2008,
there were improvements to the situation in 2010. A new Director of the College
was appointed and two important posts were filled; for the budget officer and
the accounting officer. Also, following Commission recommendations, new
financial rules, a new strategy and a scoreboard were adopted by the Management
Board, with a view to improve the administration of the agency. Directorate-General
for Home Affairs nevertheless maintained CEPOL as a ‘reputational event’ in its
2010 AAR.

As regards EMEA, the European Court of
Auditors for the first time issued a qualified opinion on the legality and
regularity of the agency’s underlying transactions in 2009. Parliament voiced
concerns regarding the agency’s management of procurement procedures and the
procedures for managing conflicts of interests in relation to the agency’s
staff and experts. The agency is in the process of replying to the concerns.

Annex 3:
Report on negotiated procedures 2010

1.
Legal basis

Article 54 of the Implementing Rules of the
Financial Regulation requires AODs to record contracts concluded under
negotiated procedures. Furthermore, the Commission is required to annex a
report on negotiated procedures to the summary of the AAR.

2.
Methodology

A distinction has been made between the 46
Directorates-General, Services, Offices and Executive Agencies which normally
do not provide external aid, and those three Directorates-General (EuropeAid,
Enlargement and External Relations) which conclude procurement contracts in the
area of external relations. These contracts are distinct because they are
awarded on their own account (but outside of the territory of the European
Union) or because they have a different legal basis (Chapter 3 of
Title IV of Part Two of the Financial Regulation). A separate approach has
been used for procurement contracts of these three Directorates-general
considering they have special characteristics as regards data collection (decentralised
services, …), the total number of contracts concluded, thresholds to be applied
for the recording of negotiated procedures (EUR 10 000), as well as the
possibility to have recourse to negotiated procedures in the framework of the
rapid reaction mechanism (extreme urgency).

3.
Overall results of negotiated procedures recorded
3.1.
The 46 Directorates-General, Services or Offices,
excluding the three ‘external relations’ Directorates-general

On the basis of the data received, the
following statistics were registered: 125 negotiated procedures
with a total value of EUR 214 million were processed out of a total of 856
procedures (negotiated, restricted or open) for contracts over EUR 60,000 with
a total value of EUR 2486 million.

For the Commission, the average proportion
of negotiated procedures in relation to all procedures amounts to 14.6 %
in number (12 % in 2009), which represents some 8.6 %
of all procedures in value (24.4 % in 2009).

An authorising service is considered to
have concluded a ‘distinctly higher’ proportion of negotiated procedures ‘ ‘than
the average recorded for the Institution’ if it exceeds the average proportion
by 50 %, or if the increase from one year to the next is over 10 %.
Thus, the reference threshold for 2010 was fixed at 21.9 %
(17.9 % in 2009).

Some 8 Directorates-general or services out
of the 46 exceeded the reference threshold in 2010, and another 3 increased
their number of negotiated procedures by more than 10% compared to last year.
Among those 11 services, it should be noted that 4 Directorates-general
concluded only one to four negotiated procedures, but because of the low number
of contracts awarded by each of them, the average was exceeded. In addition, 19
out of 46 Directorates-general have not used any negotiated procedure,
including 7 services that awarded no contracts at all.

The assessment of negotiated procedures
compared with the previous year (2009) shows an increase in the order of 2.6
percentage points in relative number and a sharp decrease of 15.8 percentage
points in terms of relative value.

3.2.
The three ‘external relations’ Directorates-General

On the basis of the data received, the
following statistics were registered: 136 negotiated procedures for
a total value of contracts EUR 100 million were processed out of a total of 731 procedures
for contracts over EUR 10 000 with a total value of about EUR 1368 million.

For the three ‘external relations’ Directorates-General,
the average proportion of negotiated procedures in relation to all procedures
amounts to 18.6 % in number, which represents some 7.3 %
of all procedures in value terms. Only one Directorate-general exceeds the
reference threshold of 27.9 % (average + 50%).

If compared with previous years, these Directorates-general
have registered a decrease of 8.6 points in number of negotiated
procedures in relation to all procedures compared to the previous year.

4.
Analysis of the justifications and corrective
measures

The following categories of justifications
have been presented by those Directorates-general who exceeded the thresholds:

–
Statistical deviations due to the low number of contracts awarded under all procedures. Indeed
8 out of the 11 DGs over average have carried out fewer than 15 procurement
procedures in 2010.

–
Objective situations of the economic activity
sector, where the number of operators may be very
limited or even in a monopoly situation (for reasons of intellectual property,
specific expertise, etc.) for instance in the nuclear area. Situations of
technical captivity may also arise especially in the IT domain (proprietary
software or maintenance of complex servers hosting critical information
systems, etc).

–
Similar services/works as provided for in the
initial tender specifications. Some services in
charge of large inter-institutional procedures are faced with estimations of
needs at the beginning of (usually framework) contracts that do not always
match the consumption trend of the contract during its execution. The leading
service must then use a negotiated procedure on behalf of all institutions
party to the contract.

–
Unsuccessful open or restricted procedure, leading to a negotiated procedure.

Besides it should be highlighted that the
number of negotiated procedures in 2010 compared to 2009 has decreased in
absolute terms (from 143 to 125), but the overall number of procurement
procedures has decreased further (from about 1200 to 850), so this explains the
slight increase in relative terms. The decrease in value is quite steep (from EUR
578 million to EUR 214 million).

Several corrective measures have already
been proposed or implemented by the Directorates-general concerned:

–
Regular update of standard model documents and
guidance documents.

–
Training and improved inter-service communication. The Central Financial Service provided regular practical training
sessions on procurement.

–
Improvement of the system of evaluation of
needs of Directorates-general/services and an improved
programming of procurement procedures. The Commission’ horizontal services
will continue their active communication and consultation policy with the other
DGs, institutions, agencies and other bodies along the following axes:

§
permanent exchange of information;

§
ad-hoc surveys prior to the initiation of
(inter-institutional) procurement procedures for the evaluation of needs;

Annex 4:
Summary of Waivers of recoveries of established
amounts receivable in 2010

(Article
87.5 IR)

In accordance with Article 87(5) of the
Implementing Rules, the Commission is required to report each year to the
budgetary authority, in an annex to the summary of the Annual Activity Reports,
on the waivers of recovery involving EUR 100.000 or more.

The following table shows the total amount
and the number of waivers above EUR 100.000 per Directorate-General/Service for
the EC budget and the European Development Fund for the financial year 2010.

EC budget:

Directorate-General/Service || Amount of waivers (in EUR) || Number of waivers

AIDCO || 6.037.553 || 15

COMP || 4.833.229 || 3

EACEA || 875.742 || 5

ECHO || 540.000 || 1

ELARG || 2.159.762 || 1

EMPL || 252.111 || 1

ENER || 642.468 || 2

ENTR || 300.000 || 1

ENV || 132.897 || 1

INFSO || 225.326 || 1

MOVE || 148.123 || 1

RTD || 257.339 || 2

Total: || 16.404.550 || 34

European Development Fund:

Directorate-General/Service || Amount of waivers (in EUR) || Number of waivers

EDF || 600.961 || 3

Annex 5:
Compliance with payment time-limits and
suspension of time-limits

(Article
106.6 IR)

Time limits for payments are laid down in
the Implementing Rules of the Financial Regulation[11] (hereinafter IR), and exceptionally in sector-specific regulations.
Under Article 106 IR, payments must be made within 45 calendar days from the
date on which an admissible payment request is registered or 30 calendar days
for payments relating to service or supply contracts, save where the contract
provides otherwise. Commission standard contracts are in line with the time limits
provided for in the IR. However, for payments which, pursuant to the contract,
grant agreement or decision, depend on the approval of a report or a
certificate (i.e. the interim and/or final payment), the payment time starts
running when the report or certificate in question has been approved[12]. Under Article 87 of the Regulation of the European Parliament and
the Council laying down general provisions on the European Development Fund, the
European Social Fund and the Cohesion Fund, a specific rule applies: payments
have to be made within two months[13].

Following the revised Implementing Rules
which entered into application on 1 May 2007, compliance with payment time limits
was reported for the first time by the Services in the 2007 Annual Activity
Reports[14].

In accordance with the applicable rules,
the payment times reported in this annex have been calculated as follows:

–
Where the payment is contingent upon the
approval of a report, the time from approval of the report until payment;

–
where no report is required, the time from
reception of the payment request until payment.

The Commission’s global average payment time has developed as follows over the last
few years:

|| 2008 || 2009 || 2010

Global average payment time || 34,0    days || 26,1    days || 25,8 days

The data shows that the Commission services
have reduced their payment times significantly in the past few years,
especially in 2009 when the global average payment time fell from 34 to
26 days. In 2010, the global average payment time remained around 26
days, indicating that further efforts could still be made to reduce it.

The table
below provides the evolution of payments made after expiration of the
statutory time limit (‘late payments’) during the three last years, based
on data extracted from the ABAC accounting system:

|| 2008 || 2009 || 2010

Late payments in number || 22,7 % || 14,0 % || 15,9 %

Late payments in value || 14,0 % || 6,8 % || 6,0 %

Average number of overdue days[15] || 47,5 days || 39,2 days || 34,2 days

The table shows that 2009 saw a significant
drop in late payments compared to the statutory limit, both as regards their
number and their value. Also, the average number of overdue days was reduced
from 48 days in 2008 to 39 days in 2009. In 2010 the positive trend
continued overall, with a further reduction in the value of late payments
from 7 % to 6 % and a drop in the average number of overdue days from 39 to 34
days. Improvements however slowed down in 2010 compared to 2009. There
was also a slight increase in the number of late payments, although most late
payments concerned comparably lower amounts.

In its April 2009 Communication[16],
the Commission announced its intention to reduce its payment times further
beyond the statutory time limits, setting the following ambitious targets:

first pre-financing payments within 20
days from the signature date of the grant agreement, compared to the
statutory time limit of 45 days;

all other payments within 30 days,
compared to the statutory time limit of 45 days.

In 2010, the first full year of application
of the targets, 22 % of payments (in terms of number) fell short of target. Nevertheless,
it should not be forgotten that close to 80 % of payments met the new
targets. Services’ meeting of targets is expected to improve further next
year.

As regards interest paid for late payments
(see figures in the table below) the total amount paid by the Commission
continued to increase in 2009, following a rise in 2008 due to the fact that as
from 01/01/2008 payment of interest for late payments became automatic and, in
principle[17], no longer conditional
upon the presentation of a request for payment. In 2010, the total
amount of late payment interests stabilised as a result of the reduction in
late payments.

|| 2008 || 2009 || 2010

Interest paid for late payments (rounded amounts) || EUR 576 000 || EUR 808 000 || EUR 810 000

The causes of late payments include
inter alia the complexities of evaluating supporting documents, in particular the
technical reports that in some cases require external expertise, difficulties at
efficiently coordinating the financial and operational checks of payment requests,
and issues with the management of payment suspensions.

In
conclusion, the 2009 Communication establishing Commission-internal payment
targets has provided a clear incentive to services to reduce their payment
times. This was particularly evidenced in 2009 when the global average payment
time fell from 34 to 26 days.

In 2010, the global average payment time remained at 26 days, indicating
that further efforts could still be made to reduce it. The main focus
should be to further reduce late payments from their current level of 6 % of
payments in terms of value.

[1]    This table presents a summary of reservations; it is not
intended to offer an exhaustive description of them. For details of the
reservations, please consult the AAR of the relevant Commission department on
http://ec.europa.eu/atwork/synthesis/aar/index\_en.htm

[2]               Council Regulation (EC) No 58/2003 of 19 December
2002 laying down the statute for executive agencies to be entrusted with
certain tasks in the management of Community programmes (OJ L 11, 16.1.2003).

[3]               EACI (parent DGs: MOVE, ENTR, ENER, ENV); EAHC (parent
DG: SANCO); EACEA (parent DGs: EAC, INFSO, AIDCO); ERCEA (parent DG: RTD); REA
(parent DGs: ENTR, RTD); TEN-TEA (parent DG: MOVE).

[4]               SEC(2007) 530 ‘Planning & optimising Commission
human resources to serve EU priorities’.

[5]               Special report 13/2009: ‘Delegating implementing
tasks to Executive Agencies: a successful option?’

[6]               Ref. Ares(2010) 140547 of 16 March 2010.

[7]               The Office for Harmonisation in the Internal Market
(OHIM) and the Community Plant Variety Office (CPVO).

[8]               The European Institute for Security Studies (ISS),
the European Union Satellite Centre (EUSC) and the European Defence Agency
(EDA).

[9]               Communication from the Commission to the European
Parliament and the Council: European Agencies – the way forward - COM(2008)135.

[10]             At its meeting of 21 March 2011.

[11]             Commission Regulation (EC) No 2342/2002 of 23 December
2002 (OJ L 357, 31.12.2002, p. 1) as last amended by Regulation (EC) No
478/2007 of 23 April 2007 (OJ L 111, 28.4.2007, p. 13).

[12]             Pursuant to Article 106(3) IR, the time allowed for
approval may not exceed:          
(a) 20 calendar days for straightforward contracts relating to the supply of
goods and services;       
(b) 45 calendar days for other contracts and grants agreements;               
(c) 60 calendar days for contracts and grant agreements involving technical
services or actions which are particularly complex to evaluate.

[13]             Regulation (EC) No 1083/2006 of the European Parliament
and of the Council laying down general provisions on the European regional
Development Fund, the European Social Fund and the Cohesion fund and repealing
Regulation (EC) No 1260/1999 (OJ L 210, 31.7.2006, p. 25).

[14]             Based on available data in ABAC as of end of the
financial year 2007.

[15]             i.e. above the statutory time limit.

[16]             Communication from Mrs Grybauskaite: ‘Streamlining
financial rules and accelerating budget implementation to help economic
recovery’; SEC(2009) 477 of 08/04/2009.

[17]             With the exception of small amounts (below 200 euros in
total).

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE
COUNCIL AND THE COURT OF AUDITORS

Synthesis
of the Commission’s management achievements in 2010

1.
Introduction

In line with Article 317
of the Treaty on the Functioning of the European Union (TFEU), the European Commission
implements the budget on its own responsibility and within the limits of
the appropriations, having regard to the principles of sound financial
management.  By adopting this Synthesis Report, the Commission takes overall political
responsibility for the management by its Directors-General and Heads of
Service, on the basis of the assurances and reservations made by them in their Annual
Activity Reports (AAR). In the Synthesis Report, the Commission also identifies
the key management issues to be addressed as a matter of priority and the action
to be taken to address identified weaknesses.

In 2009, for the third
successive year, the Court gave an unqualified positive opinion on the
consolidated accounts. The positive trend in reducing the overall error rate
continued. For the first time ever, the Court estimated that the most likely
error rate across the budget was between 2% and 5%. The Court’s assessment[1] of the quality of the
AARs also improved.

Reporting on the Commission’s management achievements is more than reporting on error-rates. The
current economic climate has put added value and high quality spending
uppermost in the minds of citizens. In their AARs, the Authorising Officers by
Delegation present in part I how they used financial and human resources to
achieve the policy objectives set by the College, in a sound financial manner,
showing the reader how policies have generated added value for EU society.

In
finalising its proposals for the next multi annual financial framework, the Commission
will propose improvements, notably in shared management, where Member States implement
some 80% of the budget.The Treaty on the Functioning of the European Union has
reinforced the responsibility of Member States, which must cooperate with the
Commission in implementating the budget, underlining their control and audit
obligations[2].

2.
Strengthening the basis of assurance

The College delegates operational
implementation to the Directors-General and Heads of Service, who, as ‘Authorising
Officers by Delegation’ (AOD), are responsible for the sound and efficient
management of resources and for ensuring adequate and effective control systems
in their services. Directors-General and Heads of Service report on the
performance of their duties in the AAR[3], which include a signed declaration of assurance covering the
legality and regularity of financial transactions. Assurance is an objective examination of
evidence for the purpose of providing an independent assessment of the
effectiveness of risk management, control and governance processes. This
examination is carried out by management, who monitor the functioning of the
internal control systems on a continuous basis, and by internal and external
auditors. The results are reported in each AAR, which is
the main vehicle for Directors-General to document their accountability to the
College.

2.1.
Impact of internal reorganisations on assurance

2010 saw the
implementation of a number of important changes and reorganisations. The Treaty
on the Functioning of the European Union, which entered into force on 1
December 2009, created the function[4] of High Representative of
the Union for Foreign Affairs and Security Policy and Vice-President of the
Commission, and specified that the High Representative be assisted by the European
External Action Service (EEAS). Preparations to create the EEAS took
place throughout 2010, and the service was set up on 1 January 2011. Certain
provisions of the Financial Regulation have been amended[5].
The Commission remains responsible for the implementation of the budget,
including operational appropriations implemented by Heads of Delegations who
are sub-delegated authorising officers of the Commission.

Following the
establishment of the new College and the allocation of portfolios, a number
of DGs were restructured[6].
This included, the creation of the new Directorates-General for Justice, for
Home Affairs, for Climate Action, for Energy and for Mobility and Transport as
well as the transfer of a number of Directorates between Directorates-General. In
line with the Commission’s policy of not asking for new
posts from the budgetary authorities, Shared Resources Directorates and Shared
Internal Audit Capabilities (SIACs) were created, allowing pooling professional
expertise and generating economies of scale.

The Commission implemented
these changes smoothly. Central Services helped by
updating the circular[7] on how to proceed with
the AARs in these circumstances. The new Directors-General received hand-over
notes from their predecessors. The Internal Audit Service examined several aspects
of these reorganisations, and thus contributed to improved administration and
governance.

2.2.
Dialogue between Directors General and the
College

Each[8]
AAR explicitly confirms that the responsible Commissioner(s) ha(s)ve been
informed of the main aspects of the AARs, including any reservations envisaged,
before the final signature of the declaration of assurance.

The AARs are the main vehicle through which the
AODs document their accountability to the College and are a source of evidence
for the DAS. The Commission has instructed the Secretariat General and the
Directorate-General for Budget to continue giving guidance to Directorates-General
and Services, through a regular review of Standing Instructions, guidance
notes, training measures and peer-review meetings. All Directors-General and
Heads of Service are invited to give their active support to all measures
promoted by the Central Services to enhance the quality of the reporting tools.

2.3.
Internal Audit

The Audit Progress
Committee (APC) focused its work on the main risks identified by audit engagements
and improved the flow of information to the College on audit issues, including on
issues of corporate dimension and including qualitative information on how
action plans improve the overall control environment. In its annual report and
information notes, the APC informed the College that progress had been made on
implementating the outstanding accepted audit recommendations considered ‘critical’
or ‘very important’, as called for in the 2009 Synthesis Report. In 2010, no ‘critical’
recommendations and 26 ‘very important’ recommendations remained pending six
months after their due date. 97 ‘very important’ recommendations were accepted
but are pending for less than six months.

Based
on the information provided by the APC, the Commission took note of the
progress made in implementating the audit recommendations and instructs the
Services to continue this work. Directors-General and
Heads of Service should ensure that the outstanding recommendations are given due
attention.

In March 2011, the Commission’s
Internal Audit Service submitted the 2010 Annual Internal Audit Report for the
year 2010 as stipulated under Article 86(3) of the Financial Regulation.

In May 2011, the Commission’s
Internal Audit Service issued its first Overall Opinion. It is based on work
carried out by the Internal Audit Capabilities and the Internal Audit Service
during the period 2008 to 2010 as part of the coordinated strategic audit plan.
The opinion focuses on financial management. The Commission’s Internal Auditor
considers that, in 2010, the Commission has put into place governance, risk
management and internal control procedures which are adequate to give
reasonable assurance over the achievement of its financial objectives, with the
exception of those areas of financial management over which Directors-General
have expressed reservations in their declarations of assurance and subject to
remarks about the management of the risks concerning errors in the underlying
transactions. This opinion does not cover the Global Navigation Satellite
System programme whose audit was not completed by end-2010. In particular, it
takes into account that management has adopted plans which the IAS considers
are adequate to address the residual risks identified by auditors over the last
three years, and to implement the recommendations made, and that the
implementation of these plans is monitored through reports by management and
through follow-up audits.

The
Commission took note of these reports, which provide comfort to the College as
regards the performance of the governance and internal control in place in its
Services and give reasonable assurance as regards its capacity to achieve its
objectives.

2.4.
Further improving the clarity and coherence of
AARs

AARs constitute a major
source of evidence for the European Court of Auditors (ECA) and the discharge
authorities. In the Court’s view, the quality of these reports has improved in
recent years. In its Annual Report for 2009, the ECA gave all Commission DGs
and Services’ AARs ‘A’ and ‘B’[9] grades.

The Standing Instructions
for the AARs have been further fine-tuned to improve the quality of the
evidence presented to support assurances made and the readability of the
reports.Central Services continued to intervene early in the process of
drafting the AARs, discussing key issues with Directorates-General and Services
and providing the guidance needed to improve the quality of the final texts.
Again, (pre-)peer-reviews have proven to be an effective platform for the
different Services, as peers, to share their opinion on how to formulate a
number of cross-cutting issues in their AAR, how to ensure coherence of
approach and adequately tackle identified weaknesses.

During the peer-review
process, a number of aspects were identified to improve the presentation, in
particular the overall argumentation supporting assurance and the description
of the contribution of the individual building blocks. These include: a) the reasoning
to use when only a risk-based control sample is available; b) the description
of the sampling methodology used and c) the mathematical methods used to
extrapolate the results from the audit sample to the entire population.

The
Commission is committed to continuously improving the readability and
comparability of the AARs.

3.
Assurance gathered through the AARs and reservations
made by the Directors-General

Having examined the AARs,
and in particular the declarations signed by each Director-General, the
Commission notes that they all give reasonable assurance regarding the
use of resources for the intended purpose, respect of the principles of sound
financial management and the fact that the control procedures used give the
necessary guarantees on the legality and regularity of the underlying
transactions. Some Directors-General disclosed residual weaknesses and made
reservations in their AAR, without calling into question the overall level
of assurance given.

Twelve Directors-General
and one Director of an Executive Agency issued a total of seventeen
reservations in their 2010 AAR. These included fifteen of the twenty-one[10]
reservations already made in 2009 and on which action was still ongoing at the
end of 2010, plus two new reservations.

The most common concerns stem
from the complex eligibility rules for grant beneficiaries (an issue
which affects funds under direct centralised management) and from the
application of public-procurement rules (a frequent cause of errors in
Cohesion policy). Every Director-General and Head of Services identified the
main reasons for their reservations and set out remedial actions to address
them.

After assessing the control
results, six reservations carried over from previous years were lifted. To lift
a reservation, AODs were asked to present the measures put in place to address
the weaknesses identified, that the measures were effective and that the weaknesses
had been effectively addressed. In most cases, this implies audit evidence that
error rates had decreased to an acceptable level or that systems have been
strengthened and are functioning properly.

3.1.
          Agriculture
and natural resources

For Agriculture and
Natural Resources, a slight increase in the error rate to just above 2% led the
Court, in its 2009 annual report, to conclude that this chapter was affected by
material error. The Court reiterated that further efforts are required to
simplify the rules and conditions in the area of Rural Development.

In the 2010 AAR, the Director-General for Agriculture and Rural Development made one reservation.
Given the importance of the Integrated Administration and Control System (IACS)
for the management and control of agricultural expenditure, and the serious deficiencies
in the IACS in Bulgaria, Portugal and Romania, a reservation was made for
reputational reasons, even if the financial impact of the deficiencies did not
exceed the materiality threshold. This Directorate-General did lift ‘the reservation
for expenditure for rural development measures under Axis 2 (improving the
environment and the countryside), that was existing since 2007. In 2010, as a
result of the work of the Directorate-General for Agriculture and Rural
Development which has investigated Member States’ reporting of errors for
measures under Axis 2 and provided detailed guidelines for such reporting, the
quality and reliability of Member States’ control statistics and the degree of
quantification of the errors found and reported have improved significantly.
These improvements allow the Directorate-General for Agriculture and Rural
Development to calculate the residual error rate more precisely than in
previous years, when it did not have the necessary assurance that Member States
compiled their statistics with the necessary rigor. On the basis of the figures
reported by Member States, the residual error rate estimated for 2010 amounts
to 1.84% and is, thus, below the 2% materiality threshold used by the Court of
Auditors. Also the residual error rate for rural development as a whole is,
with 1.13% (2.1% in 2009), below the materiality threshold. Moreover, the
action plan set out in the reservation of previous years has now been
completed. Any further reduction of errors could only be achieved by increasing
the level of on-the-spot checks, which would not be cost effective.

Last year, the
Director-General for Maritime Affairs and Fisheries made a reservation
concerning different operational programmes and measures related to the
Financial Instrument for Fisheries Guidance (FIFG). An action plan was drawn
up and successfully implemented. As a result, the reservation could be lifted
for all expenditure except for one programme in Germany, for which further
examination and additional checks were deemed necessary and are being carried
out.

The results of an
additional study on the legal framework and the arguments made by the Members
States on the eligibility rules for payments made to Member States
compensating additional costs in the marketing of certain fishery products from
the Outermost Regions, showed that this reservation could be lifted.

The Directorate-General
for Environment successfully implemented the action plan issued last year
after making a reservation on the eligibility of expenditure declared by grant
beneficiaries. The reservation was therefore lifted.

The Director-General for
Climate Action issued a reservation as a result of the reputational
damage to the Commission resulting from a significant security breach in the
national registries of the EU Emissions Trading System (ETS).

The Commission recalls the need for proper implementation
of the IACS in Bulgaria, Romania and Portugal. The Portuguese authorities are
urged to reinforce their action plan. The Bulgarian plan will be closely
monitored for its timely completion. Romania has already completed its action
plan and will be closely followed so as to ensure the correct application of
the new elements in the handling of the 2011 claims.

3.2.
          Cohesion

Cohesion Policy is
implemented on the basis of shared management and has had for many years an
estimated level of error considerably higher than the other policy groups. In
2009 there was a significant decrease in the Court’s estimate of the most
likely error. The Commission considers[11] that this
improvement partly reflects the enhanced control provisions under the 2007-2013
regulatory framework for cohesion, and the impact of the 2008 Commission Action
Plan which it has implemented in order to strengthen its supervisory role. However,
year-to-year variations in detected error rates are also influenced by the relative
stage in the multiannual implementation cycle. 2010 was the first year in which
most programmes under the current regulatory framework were fully running, and
most national authorities implemented projects and declared expenditure, thus
increasing the inherent risk of errors.

Therefore, the Commission has
proposed in the review of the Financial Regulation that national authorities
provide an annual managerial declaration for all programmes under
shared-management. This is the best way to provide a credible and reliable assurance
that the EU budget as a whole is used and controlled properly.

Nonetheless, Cohesion Policy
remains the area of expenditure with the highest error rate in the DAS 2009 and
is the only policy area where the Court estimates that the likely error rate is
above 5%. The Commission considered that enhanced efforts
are required to reduce this error rate.

The Director-General
for Employment, Social Affairs and Inclusion made two reservations: one
concerns management and control systems for identified operational programmes
under ESF 2000-2006 (in Germany, France, Italy and Spain) and the other under
ESF 2007-2013 (in Austria, Belgium, Bulgaria, Germany, Ireland, Italy,
Slovakia, Spain and the United Kingdom). The first reservation is quantified at
0.14% of interim payments for the 2000-2006 period; the second is quantified at
1.13% of interim payments for the 2007-2013 period. Both reservations were
issued for reputational reasons, in view of serious deficiencies in key aspects
of the management and control systems of the identified operational programmes.

The Director-General
for Regional Policy issued two reservations: one on management and control
systems under the ERDF/Cohesion Fund in the period 2000-2006 (in Bulgaria,
Germany, Hungary, Italy, Latvia, The Netherlands and concerning 9 Interreg
programmes), and another on ERDF/Cohesion Fund management and control systems
for the period 2007-2013 (in Bulgaria, Czech Republic, Germany, Greece, Italy,
Latvia, Lithuania, Romania,  Spain, The United Kingdom, 13 European Territorial
Cooperation programmes and 6 programmes for IPA/cross-border cooperation).

Overall, the estimate of amount
at risk for the operating programmes reported for the Cohesion Policy
corresponds to between 0.8% and 1.5% of 2010 payments for Cohesion as a whole. This
estimated average is without prejudice of underlying wide variations between
Member States and, in some cases, among operational programmes and regions within
a single Member State. While the risk of irregularities in a number of programmes
can be considered manageable on a multiannual basis, it can be much higher than
the estimated averages in a number of programmes and Member States when
measured on an annual basis. The Commission will continue to rigorously
exercise its supervisory role by pressing Member States to address the deficiencies
detected in their management and control systems and also by applying
interruptions and suspensions of payments, as well as  financial corrections
whenever necessary.

The Commission will
focus its efforts notably on these systems, through concerted preventive and
corrective actions.The amounts at risk differ from
the error rate calculated by the European Court of Auditors for the DAS in its
Annual Report. The difference between the reasonable assurance given by AODs
and the Court’s assessment of the control systems stems from various factors.
These include the fact that in a number of policy areas the Commission
implements multi-annual control strategies and, thus, the AODs assess the
functioning of the control systems accordingly, while the Court is required to
express an annual opinion. The amount at risk reported
in the AARs by the Commission services for structural actions takes into
account the various mitigating and corrective actions in place under the
multi-annual management and control systems (allowing corrections to be made
some years after the disbursement of funds by the Member State to the
beneficiaries and by the Commission to the Member State) and the analysis covers the specific situation of each programme.

Therefore the error
rate in the Court's DAS is likely to be higher as it includes errors
which can be  corrected in subsequent years once all actors in the control
chain have intervened.. Another factor of difference is the fact that the
error-rate reported annually by the Court is calculated on the basis of errors
identified in the year in a sample of programmes and extrapolated to all
expenditure under Cohesion. This can be explained by the fact that most
programmes and authorities have now implemented projects on the ground and
declared expenditure, thereby increasing the inherent risks of errors.

The reservations for the
programming period 2007-2013 made by the Director-General for Regional Policy
have a wider scope than in previous years, concerning more operational
programmes in more Member States and with higher estimated amounts at risk. The
reservations for the programming period 2007-2013 entered by the Director-General
for Employment, Social Affairs and Inclusion concern less operational
programmes than in 2009 but in more Member States and with an overall lower
estimated rate of amount at risk.

Furthermore, 2010 was the
first year in which the national audit authorities were required to report the
error rate found following audits on representative samples of operations. As
of this year, the Director-General for Employment, Social Affairs and Inclusion
has relied on these rates for estimating the financial impact of the
reservation, rather than on predefined estimated error levels[12],
whenever these figures were deemed to be of adequate quality. The approach for
the future is to rely as much as possible on error rates reported by the
National Audit Authorities, if they are deemed to be of adequate quality.

The AARs clearly spell out
the nature of the problems encountered and present robust action plans. The
following areas of action are notable examples:

–
Use of interruption and suspension procedures
and of financial corrections (see section 4.2.1).

–
Services will continue to provide additional guidance
and support to national audit authorities, especially on the coverage and
quality of the audits and on drawing up annual control reports and audit
opinions to maximise the added value of these.

–
Services will concentrate control efforts, but
also guidance and administrative capacity building activities, on the
eligibility of costs and on the application of public procurement rules,
areas where the majority of the estimated errorshave occurred in 2008 en 2009.
The Commission is taking initiatives to further streamline the public
procurement processes (see section 4.4.2).

–
Services will continue to carry out or where
appropiate increase on–the-spot audits of operations and systems using a
risk-based approach, under their audit strategies.

The
Commission is also concerned about the effectiveness of EU funds spent by
regions/Member States to re-imburse projects that have already been completed and
paid for by national budgets before the starting date for eligibility and
outside the frame of applicable project selection rules. (‘retrospective
projects’). The Commission will, in cooperation with the Member States, clarify
eligibility rules, conditions and pre-requisites for the inclusion of legal and
regular retrospective projects in the co-financed programmes and will propose
in its package for the Structural Funds post 2013 new rules on this issue.

The Commission has proposed in the context of the
revision of the Financial Regulation to introduce annual management
declarations of assurance by the accredited bodies for all programmes under
shared management.

The Commission calls on the Member States to already demonstrate
their commitment to improving accountability by reinforcing where necessary
control measures, in particular as regards first level
management checks, before certifying expenditure to the Commission and by
following its guidance on annual summaries to make them a valuable additional
source of assurance. While the legal base for the annual summaries does not require
an overall assurance statement, the Commission encourages all Member States to
follow the example of the eleven that in 2010 included assurance statements and
to take other measures to demonstrate their commitment to the sound management
of EU funds.

The Commission has instructed
the Cohesion Policy DGs to ensure a high level of transparency as regards their
assessment of the control systems in each Member State, as well as information
on interruptions,  suspensions of payments, and financial corrections,
reporting them systematically in their AARs. Furthermore, the Commission has
also instructed them to continue with systematic and timely  interruptions and  suspension
procedures, whenever serious control deficiencies or irregularities are
identified.

3.3.
          Research,
energy and transport

The Research DGs’ common
audit strategy for the 6th Framework Programme (FP6) (2007-2010)
has proved successful in terms of audit coverage and in achieved audit results.
At the end of the period, the multi-annual residual error rate[13]
fell substantially, for some DGs to a level very close to the 2% target. The recurrent
FP6 reservations were not lifted, with the exception of the Director-General
for Information Society and Media who decided not to qualify his declaration of
assurance, despite having found a residual error rate slightly above the 2%
threshold. The Director-General explained in his AAR why he expects the
multi-annual error-rate (i.e. mesured for the whole FP6) to drop below the
target in the course of 2011.

The 7th
Framework Research Programme (FP7) is gaining momentum. As a result, the
amount of pre-financing will fall below the amount of payments against cost statements.
The latter are considered to represent a higher inherent risk (and thus higher
potential error rates). The audit sample that has been executed until now is
not sufficiently representative to allow precise calculation of residual the
error rate and to draw conclusions on assurance at this stage. It is expected
that as of 2011, the audited sample will be sufficient for the AODs to  rely
also on the residual error rate criterion and to decide
whether a reservation for this Framework Programme is required. The provisional
error rates (between 4% and 5%) in the audits completed so far indicate that
the error rate for the entire population could exceed the 2% threshold.

The provisions on the
costs eligible for funding are complex and the audits revealed that differences
of interpretation of these povisions caused most of the errors detected in the Chapter
‘Research, energy and transport’. In 2010, a high-level Task Force examined
management and organisational issues in the research area and issued recommendations
including ways to improve the goverance of audits and control in this area.

In the meantime, further
corrective actions have been introduced for FP7 by providing a common framework
for external auditors to deliver audit certificates, including the definition
of a compulsory set of procedures. Moreover, the simplification measures[14]
introduced on 24 January 2011 are expected to further reduce the error rate.
The decision to allow beneficiaries to apply their statutory accounting methods
when requesting reimbursement for average personnel costs and the possibility
reimbursing SME-owners (and other natural persons not receiving a salary) through
flat-rate payments is expected to have a positive effect on error rates.
Despite the positive effects of simplification measures, the situation will be
reviewed again, once the amount of payments against cost statements will be
higher and the audit sample statistically wide enough.

In
its 2010 Communication, ‘Simplifying the Implementation of the Research Framework
Programmes’[15], the Commission
presented measures and options for simplifying EU research funding and called
on the other EU institutions to join the debate and give feedback on the
options.

3.4.
          External aid,
development and enlargement

Overall, the internal
control situation regarding External Action was satisfactory in 2010. ‘To
better substantiate the assurance in the area of external aid, DG EuropeAid is
developing an indicator for the estimated impact of residual errors with a
commitment to put in place a methodology for this during 2011.

The Director-General for External
Relations lifted the reservation made on reputational grounds on the management
of the Common Foreign and Security Policy (CFSP) and the Stability Instrument
following improvements made to the methodology and the capacity for executing
ex-post controls.

The Commission has created
the Service for Foreign Policy Instruments responsible for ensuring financial
control of instruments, including the CFSP budget and the Stability Instrument.
This Commission service reports directly to the Vice-President and High
Representative of the Union for Foreign Affairs and Security Policy.

The
Commission has instructed the Head of the Service for Foreign Policy
Instruments to closely monitor the further implementation of the action plan
initiated previously by the Director-General for External Relations.

3.5.
          Education and
citizenship

The Director-General for Communication
maintained the 2008 reservation on the potential non-compliance with
applicable legislation on Intellectual Property Rights by Commission services,
on reputational grounds. Most corrective action detailed in the action plan has
been taken, in particular on training, awareness raising and international
coordination. The Director-General for Communication has announced that this
reservation will be lifted once the copyright agreements related to the
preparation of a daily press review compiled by this Directorate-General are in
place.

The Director-General for Education
and Culture maintained the reservation regarding the error rate in centralised
direct management, given the significant occurrence of errors in the
underlying transactions found through ex-post controls. This reservation was
extended with a reservation by the Director of the Education, Audiovisual and
Culture Executive Agency. The error rate in the parent DG was 3.4%,
while the error-rates of two of the seven main programmes managed by the
Executive agency, respectively the Culture program and the Youth programme,
amounts to 4,28% and 7,38%. The observed errors mostly concern the
inability of beneficiaries to produce justifying documents or documents of
sufficient quality. The parent DG and the Agency have a coordinated action plan
to improve the information to beneficiaries and desk control strategies based
on a risk assessment.

The Director-General for
Home Affairs made two reservations in the AAR 2010, both concerning reputational
damage due to delays in implementing large-scale IT systems, the VIS and the SIS II projects. Significant progress was made in 2010 towards their successful
deployment. The detailed action plan was fully implemented but news events
caused additional delays, such as lack of readiness in some Member States and
the political situation in North Africa which had an impact on the rollout of VIS.

The Director-General for Justice
was able to lift the reservation on the financial risk corresponding to the
residual error rate estimated at 2,15% in the non audited population of
grants under ABB activity 1804 - fundamental rights and citizenship.

The
Commission is satisfied with the work undertaken to adress the potential
violation of Intellectual Property Rights by its Services.

The
Commission regrets that the ex-post controls by the Directorate-General for
Education and Culture show an increase in error rates and that the reservation
has been extended to two programmes managed by the Executive Agency, despite work
done to better inform beneficiaries of the requirements. It invites the
Services to step up their efforts.

The
Commission recognises that developing and managing  large-scale IT systems such
as SIS II and VIS present particular challenges. It will continue its efforts to
enhance governance and improve cooperation with stakeholders as far as the SIS
II is concerned, and to follow-up the political situation in the Member States
and in North Africa in order to mitigate the risk of delays in the VIS.

3.6.
Economic and financial affairs

Also for 2010, the
Director-General for Enterprise and Industry issued a reservation
relating to the reliability of financial reporting by a delegated body. The
actions related to the improvement of the monitoring and control framework as
well as the weaknesses in the procurement procedures were addressed as
announced in 2009. But audit evidence on the annual accounts 2009 indicated other
weaknesses in the internal control systems of the delegated body and
highlighted concerns on the reliability of the financial reporting for 2010. It
is not possible to quantify the impact, if there is any, since it will only be
known after the audits of the 2010 financial reports, scheduled to take place
in 2011.

Joint
management presents particular challenges, in terms of management of EU funds.
The Commission has instructed the Secretariat-General and the
Directorate-General for Budget to launch, together with the relevant services,
a review of the most frequently encountered problems and, if appropriate, to
propose improvements to joint management.

4.
Cross-cutting issues and solutions
4.1.
The cost-effectiveness of control

Public spending requires
effective, efficient and proportionate controls, providing assurances to citizens
and their representatives. However, there is a level of control beyond which
the additional controls would conflict with the objective of the effectiveness
of the programme (if it results in potential applicants choosing not to apply
for EU support) and/or the objectives of sound financial management.

In 2010, the Commission
adopted a Communication proposing a Tolerable Risk of Error (TRE) for
Research, Energy and Transport policies and for Rural Development[16].
The TRE-initiative was prompted by the need to provide a clear and shared
understanding of the proper risk/control balance, taking into account the EU
added value of investing in certain areas, while keeping control systems within
an acceptable level of cost. Inter-institutional discussions on this concept
are ongoing.

In the meantime,
Directorates-General for whose policy area the Commission has already published
a proposal are providing more information on the cost effectiveness of
controls in their AARs. Their analysis compares the costs of potential
additional controls and their benefits, i.e. the value of errors likely to be
detected and corrected. This analysis does not change the currently applicable
2% materiality level for legality and regularity, but provides valuable
information to the AOD on whether additional controls are justified in view of
the risks, taking into account the principles of sound financial management.

The
Commission instructs the Central Services to assist other services in further
developing their analysis and reporting on the cost-effectiveness of controls
in the next AARs and to expand this analysis to other policy areas.

The
Commission calls upon the AOD to align control systems with the risks
identified and the cost-effectiveness of controls, in line with the new requirements
proposed in the revised Financial Regulation[17], expected to
enter into force as of 2012. The Commission will continue to work together with
the competent authorities in the Member States to optimise the (cost)-effectiveness
of the control systems.

4.2.
Improvement of information in shared management on
suspension of payments, recoveries and financial corrections
4.2.1.
Information on interruption of payment
procedures and suspension of payments

The Commission encouraged its
services to interrupt payments procedures and to propose suspension procedures,
where necessary and as soon as the legal conditions are met.

Regarding shared
management, the Commission has increased the number of interruptions or
suspension of payment procedures, as soon as there is evidence suggesting a
significant deficiency in the management and control systems in accordance with Articles 91 and 92 of
Regulation (EC) No 1083/2006.

The services operating
transactions in shared management mode have reported on  all
interruption/suspensions decisions in their AAR. This information includes the
operational programmes concerned, the Member States affected, the type of
weaknesses, the main facts triggering the decision and the budgetary impact of
the decision. This information constitutes an important aspect of reasonable
assurance.

Following the introduction
of the new interruption instrument for the 2007-2013 programming period, in
2010, Directors-General operating in shared management made the formal decision
to interrupt payments totalling EUR 2.6 billion. The College also adopted
six decisions suspending payments.

The
Commission confirms that Authorising Officers by Delegation should systematically
interrupt payment procedures and propose to the College to suspend procedures
when the applicable conditions are met and until the
necessary corrective measures have been implemented by the relevant national
authorities.

4.2.2.
Information from Member States on financial
corrections and recoveries made at their level

Correcting amounts
unduly paid is a major aspect of sound financial
management. In 2010, continued efforts have been made to impose financial
corrections when necessary, improve the quality of the Member States data on
financial corrections and recoveries and promote the use of best practices so
to ensure an improved recovery mechanism at Member State and EU level.

Regarding shared
management, the AARs provide detailed information on financial corrections implemented
and reported by Member State to the Commission and an assessment of the
national control systems (see section 4.2.4). This additional information comes
in response to the requests made by the discharge rapporteur during the
discussion on the 2009 discharge resolution.

In the area of Cohesion
policy, Member States implement financial corrections resulting from their own
audit work work and from EU audits. These are reported
with one year’s delay, so in 2010 they reported on their 2009 corrections.

Regarding Regional Policy,
Member States reported that by the end of 2009, they had made EUR 3.6 billion
of cumulative financial corrections on the 2000-2006 programmes (including
recoveries of EUR 1.7 billion and withdrawals of EUR 1.9 billion).

Regarding Employment,
Member States reported having implemented cumulative financial corrections for
the 2000-2009 period of EUR 1.2 billion (out of which, recoveries amounted to EUR
0,2 billion and withdrawals EUR 1.0 billion).

4.2.3.
Financial corrections imposed by the Commission
on Member States

The other reported financial
corrections were those imposed by the Commission on Member States. The
Directorate-General for Regional Policy reported cumulative financial
corrections resulting from EU audits in the period 2000-2010 of EUR 6.7
billion. More than half of the total corrections were made in the last three
years of this period (EUR 3.9 billion for 2008-2010). The Directorate-General
for Emploiment, Social Affairs and Inclsuion reported cumulative financial
corrections resulting from EU audits of EUR 1.5 billion. In financial year
2010, DG AGRI executed financial corrections resulting from EU audits of EUR
834 million. 97% of agreed/decided financial corrections for programmes under
Cohesion Policy as a whole have already been implemented by end 2010 (through
recovery orders or withdrawals by Member States from subsequent paument
claims).

Since 2009, the notes to
the annual accounts of the European Union contain more extensive information on
financial corrections decided by the Commission and implemented in the course
of the year as well as on recoveries. This information will be expanded in the
notes to the 2010 accounts.

4.2.4.
Assessment of control systems in Member States

For the first time, the 2010
AARs disclosed  the Commission’s assessment of each Member State’s control system taken into account the various levels of assurance per programme in
each Member State. The number of Member States for which the assessment
resulted in a reservation varied between policy areas: 12 Member States plus several cross-border programme for Regional aid policy, compared to 10 Member States for Employment policy, 4 Member States for Fisheries policy and 3 Member States for Agriculture. Information is also provided on how the assessment of
control systems leads to the Directors-General’ quantification of the total
amount under reservation.

4.3.
Adding value to declarations from responsible
public authorities

2010 was the first year of
full implementation of the single audit system in the Cohesion Policy for
the 2007-2013 programming period. As for all new systems, there were some
start-up problems as regards the reliability of the information submitted by
the audit authorities in the Member States. The annual control reports submitted
at the end of 2010 covered the results of audits carried out during the
previous 12-month period ending on 30 June 2010. Out of the 460 national audit
opinions due, 14 included a disclaimer of opinion (207 in 2009), 265 were
unqualified (108 in 2009), 175 were qualified (93 in 2009) and 5 were adverse
(2 in 2009)[18], and 1 was not received.
The Commission carefully analysed the reported audit opinions and added its own
assessments, where appropriate. In future years, all parties will have gained
more experience, and reliability of the reported error rates is expected to
improve.

Member States’
increased responsibility for implementing funds under shared management was also proposed in the triennial revision of the Financial
Regulation, introducing a requirement for all entities entrusted with the
management of EU funds under shared management[19] to provide management
declarations of assurance.

Regarding Agricultural and
Rural Development Policy, all 82 paying agencies provided an annual statement of assurance which covers the completeness,
accuracy and veracity of the accounts as well as a declaration that a system is
in place which provides reasonable assurance on the legality and regularity of
the underlying transactions. In addition, those Member
States with more than one paying agency (except for Romania) provided an annual
summary in accordance with the legal requirements. The extent of the
qualifications to these statements and summaries is presented in the related AAR and is not material overall.

The
Commission launched an external evaluation of the annual summaries from the
Member States, which has recently been made available to the other institutions.
This study concludes that the annual summary in its current form has provided
little added value.

The Commission will continue to organise annual
meetings such as the annual meetings of the ‘Homologues Group’[20]
and bilateral control coordination meetings and annual management meetings, as
well as training measures. To further reinforce Member States’ accountability
under Article 317 of the TFEU, the Commission included in its proposal for the
triennial revision of the Financial Regulation the requirement for the
responsible bodies accredited in the Member States to provide annual management
declarations covering all funds in shared management.

Although
not a formal legal requirement, four[21] Member States also issue
national declarations issued at senior national level. These are
valuable to render the controls and accountability structures more transparent.
They are not intended to provide information in addition to that included in
existing reports.

4.4.
Simplifying and reducing the administrative
burden

The complexity of the
provisions fixing what costs are eligible for funding, including the
requirement to reimburse actual costs incurred, has been a frequent reason for the
reservations made by the AOD’s. It has been the cause of recurring reservations
in the Chapter on ‘Research, Energy and Transport’ for several years, and has
affected some areas of expenditure in the Chapters on ‘Cohesion Policy’ and ‘Education
and Citizenship’.

4.4.1.
Revision of the Financial Regulation and its
Modalities of Execution

In 2010, the Commission
used the triennial revision of the Financial Regulation to adapt the financial
rules. It had three objectives: simplifying rules, notably in grant management
by allowing the extended use of lump sums, flat rates and scales of unit costs;
increasing the leverage of EU funds by allowing the use of EU trust funds,
financial instruments and public-private partnerships and increasing
accountability of the Commission and implementating partners by harmonising the
current management modes and strengthening their provisions.

The next step is to use
this opportunity to change sectoral legislation along similar lines. An inter-service
group has been set up with a mandate to ensure coherence between the
Financial Regulation provisions and sectoral legislation. The end product of
this exercise should meet three criteria: a) reduce the risk of errors,  b)
reduce administrative burden for beneficiaries (in particular SMEs) and other stakeholders
(such as implementing bodies and contractors), and c) reduce the operating cost
of controls.

The
Commission calls on the other institutions to react positively to its proposal
for the triennial revision of the Financial Regulation.

4.4.2.
Rules on grants and public procurement

Errors in the application
of laws governing public procurement are an important cause of underlying
errors in the Chapter on ‘Cohesion’. The Commission presented a Green Paper[22]
on updating the EU rules governing public procurement with the objective of
ensuring that contract money is spent in the best possible way.

Together with the results of
the economic evaluation of the effectiveness of the current rules, the results
of the Green Paper consultation will feed the reflection on how exactly the EU
public procurement rules can be improved. A legislative proposal has been
announced in the Single Market Act for end 2011.

Regional policy has been
particularly concerned by irregularities linked to incorrect implementation of
public procurement rules, as well as weaknesses in management verifications to
detect these irregularities. Actions are foreseen to address this particular
source of errors, in particular through an in-depth analysis and subsequent
discussions with the concerned managing authorities in the Member States
concerned. Additional targeted guidance and training to public authorities and
to beneficiaries are envisaged in order to enhance the administrative capacity
where necessary.

4.5.
Corporate Strategy for Management Information
Systems

The audit work performed
by the Internal Audit Service in recent years on large IT systems and corporate
IT systems confirmed the need to improve IT strategic decision-making,
procurement and project management processes at both DG and Commission levels,
in order to ensure that IT projects are properly aligned with the Commission’s
objectives, are better coordinated, provide value for money and are
successfully implemented in a timely manner.

In 2010, an inter-service
Task Force was set up with a mandate to study the current IT situation in the
Commission. Its findings were formally endorsed in a Communication to the
Commission[23]. As follow-up, a new IT
governance has been put in place. The new ABM+IT Steering Committee[24]
will propose a corporate IT strategy for the Commission, oversee the
streamlining and harmonisation of IT projects and set targets for efficiency
gains and IT security.

To improve preparedness
and allow for a co-ordinated response to cyber attacks aimed at the Commission
a Cyber Attack Response Team (CART) was set up by the Directorate-General
for Human Resources and Security in co-operation with the Directorate-General
for Informatics.

4.6.
Human resources

Since 2008, the Commission
has regularly monitored recruitment by setting targets by Directorate-General
and by function group and endorsing a monitoring system aiming at re-adjusting geographical
balance after the 2004 enlargement and at obtaining a balanced distribution
across different services. The transitional period for the recruitment of
EU-10 nationals ended on 31 December 2010. The target for EU-10 recruitment
had already been exceeded globally in 2008, although there remains a relatively
high proportion of temporary agents. In 2010, the share of temporary agents
constantly decreased, as effect of the recruitment of laureates of internal and
open EU-10 targetted competitions. By way of analogy with the EU-10,
recruitment targets were set for EU-2 recruitments and a monitoring system was
introduced in 2009, to be maintained until the end of the EU-2 transition
period (end 2011).

In a climate of zero-growth,
new political priorities need to be achieved through optimal allocation of
staff and internal redeployment of posts. As the result of targeted
measures in these areas, the 2009 annual ‘screening report’ and updates in 2010
showed a continuous decrease in the share of Commission staff working in
administrative and support functions.

The
Commission reiterates its commitment to reducing overheads and re-allocating
savings to front-line activities.

Executive
Summary

–
The Commission notes that the Authorising
Officers by Delegation were successful in correcting the weaknesses in 25% of
the reservations formulated last year. These improvements include improved
compliance with the eligibility rules for expenditure declared by grant beneficiaries.

–
There are still areas for improvement, in particular
in some areas of shared management. The Commission will work with the Member
States in the light of their increased responsibilities under Article 317 of the
Treaty on the Functioning of the European Union. It invites them to continue strengtening
the management and control systems and especially the first level management checks,
before expenditure is certified to the Commission. It
will continue to rigorously exercise its supervisory role by asking Member
States to address the weakest points in their management and control systems, and
by applying in a systematic and timely manner interruptions and suspensions of
payments, and financial corrections whenever necessary. The Commission calls on
the other institutions to support its proposal on annual management
declarations for all expenditure under indirect/shared management in the
context of the revision of the Financial Regulation, and on the Member States
to anticipate the entry into force of these provisions.

–
The Commission acknowledges the difficulties
posed by complex rules for grant beneficiaries. It has already put forward
proposals to simplify the rules for grant schemes in the context of the
triennial revision of the Financial Regulation and is now working on following
these simplifications through into sectoral legislation.

–
The EU's public procurement rules should be
modernised. A Green Paper[25] on updating the EU rules governing public procurement has been
presented covering a broad range of possible  aspects of the future legislative
reform. The Commission has announced the adoption of a legislative proposal for
the revision of the public procurement directives end 2011.

–
The Commission invites the other institutions
and the Member States to use the discussions on the next multiannual financial framework
to improve the design of funding schemes, as well as their delivery, management
and control mechanisms, in order to enhance their effectiveness and ensure that
the control of EU expenditure is efficient, proportional and cost-effective.

–
The Commission notes that for Cohesion Policy,
most programmes and authorities have now implemented projects on the ground and
declared expenditure. Although Cohesion programmes are multiannual by nature,
this increased volume of transactions also increased the inherent risk of error
in 2010. For Cohesion policy as a whole, the reporting year saw a significant
increase in the rate of error and the volume of erroneous payments. The
reservations made by the Directorates-General for Regional Policy in 2010 cover
more operational programmes in more Member States than in previous years. For
Employment and Social Affairs, the reservations made concern less operational
programmes than in 2009 but in more Member States (43 programmes in reservation
in 2010 from both 2000-2006 and 2007-2013 programming periods in 10 Member
States, compared to 59 programmes in 7 Member States in 2009). Furthermore, in
2010, the Directorate-General for Employment, Social Affairs and Inclusion relied
on the error rates reported by audit authorities in the Member States whenever
these figures were considered of adequate quality. This difference in approach
partially explains the difference in the rates reported by the European Court
of Auditors.

–
The Commission welcomes the initiative taken in Denmark, the Netherlands, Sweden and the United Kingdom to provide voluntary national declarations. In
2010, the Commission issued a staff working document[26] examining in detail the scope and content of voluntary national
declarations. In the same document, the Commission provided technical guidance
for public authorities on adding value to declarations and increasing assurance
on execution in shared management. The document was sent to the European
Parliament and to the Council of the European Union on 23 February 2011. The
guidance concludes that the Commission’s Financial Regulation proposal for annual
management declarations signed by the accredited bodies, would however constitute
a first more practical and useful step. This is reinforced by the recent external
evaluation of the annual summaries which concludes that these documents, in
their current form, provided little added-value to the Commission's assurance
process.

[1]    OJ C 303, 9.11.2010, sections 1.27-1.31.

[2]    Article 317 of the Treaty on the Functioning of the European
Union (TFEU).

[3]    Article 60 of the Financial Regulation.

[4]    The Establishment Decision creating the EEAS was submitted to
the Council on 22 April. It subsequently involved amendments to the Financial
Regulation and the Staff Regulations and the adoption of an amending budget.

[5]    Regulation (EC) No 1081/2010 of 24 November 2010.

[6]    Announcement of portfolio decisions made by the President elect
on 27 November 2009.

[7]    Circular SEC(2002) 657 was replaced by SEC(2010) 1333, section 3, ‘Change of Directors General/Heads of Service/AOD and transfer/split of activities between services’.

[8]    The Directors General for Human Resources and Security and the Director
of the European Personnel Selection Office did not indicate so in their AAR but did confirm accordingly in a note addressed to the Central Services.

[9]    An ‘A’ rating means that the Director-General’s declaration and
the AAR give a fair assessment of financial management in relation to
regularity, ‘B’ means that the Director-General’s declaration and the AAR give
a partially fair assessment of financial management in relation to regularity, ‘C’
would mean that the Director-General’s declaration and the AAR do not give a
fair assessment of financial management in relation to regularity (OJ C 303, 9.11.2010,
p. 88.).

[10]   This number includes an adjustment to reflect the creation of the
Directorates General for Mobility and Transport and for Energy. Last year, the
reservation made by the Directorate General for Transport and Energy only
counted for one in the Synthesis Report on 2009.

[11]   Communication from the Commission to the European Parliament, The
Council and the Court of auditors, ‘Impact of the action plan to strengthen the
Commission’s supervisory role under shared management of structural actions’ - COM(2010) 52, 18.2.2010.

[12]   The so-called ‘flat-rates for financial corrections’

[13]   The multi-annual residual error rate, is the real impact of an
error on the EU-budget taking into account corrections and recoveries,
including those done in subsequent years.

[14]   C(2011) 174 final, 24.1.2011, Commission Decision of 24 January 2011
on three measures for simplifying the implementation of Decision No
1982/2006/EC of the European Parliament and of the Council and Council Decision
No 970/2006/Euratom and amending Decisions C(2007) 1509 and C(2007) 1625.

[15]   COM(2010) 187, 29.4.2010.

[16]   COM(2010) 261, 26.5.2010.

[17]   COM(2010) 815, Article
63(2).

[18]   There were also four ‘not applicable’ cases’, where the
compliance assessment had not yet been approved.

[19]   Expenditure under shared management mode mainly concerns
structural and agriculture expenditure.

[20]   Contact group for cooperation with the Audit Authorities from Member States, the Commission, and the Court of Auditors.

[21]   National (governmental) declarations have been signed by the
respective Minister of Finance of The Netherlands and Sweden; the UK’s Permanent Secretary; and the Auditor-General in Denmark.

[22]   Examining implementation of the current EU directives (2004/18/EC
and 2004/17/EC).

[23]   SEC(2010) 1182, 7.10.2010, ‘Getting the Best from IT in the
Commission’.

[24]   Activity Based Management Steering Group for IT, presided by the
Secretary General.

[25]   Green Paper on the future modernisation of the EU public
procurement Directives (2004/18/EC and 2004/17/EC).

[26]   Commission staff working paper, ‘Adding value to Declarations:
increasing assurance on execution in shared management’ - SEC(2011) 250, 23.2.2011.

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