Source: EURLEX
Language: en
Format: md

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| 10.1.2013 | EN | Official Journal of the European Union | C 6/36 |

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REPORT

on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2011, together with the replies of the Joint Undertaking

2013/C 6/05

INTRODUCTION

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| 1. | The European Joint Undertaking for ITER[(1)](#ntr1-C_2013006EN.01003601-E0001) and the Development of Fusion Energy was set up in March 2007[(2)](#ntr2-C_2013006EN.01003601-E0002) for a period of 35 years. While the main fusion facilities are to be developed at Cadarache in France, the Joint Undertaking is located in Barcelona. |

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| 2. | The tasks of the Joint Undertaking are[(3)](#ntr3-C_2013006EN.01003601-E0003):   |  |  | | --- | --- | | (a) | to provide the contribution of Euratom to the ITER International Fusion Energy Organisation[(4)](#ntr4-C_2013006EN.01003601-E0004); |  |  |  | | --- | --- | | (b) | to provide the contribution of Euratom to the ‧Broader Approach Activities‧ (complementary joint fusion research) with Japan for the rapid development of fusion energy; and |  |  |  | | --- | --- | | (c) | to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility. | |

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| 3. | The members of the Joint Undertaking are Euratom, represented by the European Commission, the Member States of Euratom and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion and have expressed their wish to become Members (at 31 December 2011: Switzerland). |

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

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| 4. | The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. |

STATEMENT OF ASSURANCE

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| 5. | Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts[(5)](#ntr5-C_2013006EN.01003601-E0005) of the European Joint Undertaking for ITER and the Development of Fusion Energy, which comprise the ‘financial statements’[(6)](#ntr6-C_2013006EN.01003601-E0006) and the ‘reports on the implementation of the budget’[(7)](#ntr7-C_2013006EN.01003601-E0007) for the financial year ended 31 December 2011, and the legality and regularity of the transactions underlying those accounts. |

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| 6. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002[(8)](#ntr8-C_2013006EN.01003601-E0008). |

The Management's responsibility

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| 7. | As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking’s Financial Regulation, under his own responsibility and within the limits of the authorised appropriations[(9)](#ntr9-C_2013006EN.01003601-E0009). The Director is responsible for putting in place[(10)](#ntr10-C_2013006EN.01003601-E0010) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts[(11)](#ntr11-C_2013006EN.01003601-E0011) that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular. |

The Auditor's responsibility

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| 8. | The Court’s responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the Joint Undertaking’s annual accounts and the legality and regularity of the transactions underlying them. |

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| 9. | The Court conducted its audit in accordance with the IFAC and ISSAI[(12)](#ntr12-C_2013006EN.01003601-E0012) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical and professional requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. |

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| 10. | The Court’s audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity’s preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court’s audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. |

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| 11. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. |

Opinion on the reliability of the accounts

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| 12. | In the Court’s opinion, the annual accounts of the Joint Undertaking fairly present, in all material respects, its financial position as of 31 December 2011 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation. |

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

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| 13. | In the Court’s opinion, the transactions underlying the annual accounts of the Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2011 are, in all material respects, legal and regular. |

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| 14. | The comments which follow in paragraphs 15 to 32 do not call the Court’s opinions into question. |

COMMENTS ON THE BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

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| 15. | The utilisation rates for the available commitment and payment appropriations were 99,7 % and 85,7 % respectively. Out of the 611 million euro of commitment appropriations available for operational activities, 42 % were implemented through direct individual commitments while the remaining 58 % was implemented through global commitments. |

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

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| 16. | The Court of Auditors has previously reported that the Joint Undertaking’s internal control systems had not been fully established and implemented as required by its Financial Regulation[(13)](#ntr13-C_2013006EN.01003601-E0013). On 31 May 2010 the Joint Undertaking’s Internal Auditor issued a report which raised concerns about the financial circuits and the separation of duties. |

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| 17. | In response to this, the Governing Board adopted a management improvement plan in June 2010 together with a proposal to change the organisational structure and reinforce the financial circuits. Although significant progress has been made[(14)](#ntr14-C_2013006EN.01003601-E0014), a number of actions need to be implemented:   |  |  | | --- | --- | | — | an integrated tool to manage budget, financial and operational information is not yet in place; |  |  |  | | --- | --- | | — | a management system to monitor project and budget implementation is expected to be operational by the third quarter of 2012; |  |  |  | | --- | --- | | — | the validation of the underlying systems by the accounting officer is not completely finished and should continue in 2012[(15)](#ntr15-C_2013006EN.01003601-E0015); |  |  |  | | --- | --- | | — | a comprehensive ex post audit strategy for grants and operational contracts has not been adopted (see paragraphs 22 and 23); |  |  |  | | --- | --- | | — | the action plans adopted by the Joint Undertaking in response to the internal audits on the financial circuits, grant management and experts contracts have not been fully implemented[(16)](#ntr16-C_2013006EN.01003601-E0016); |  |  |  | | --- | --- | | — | a risk management exercise at corporate level has not been carried out. | |

Procurement and grants

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| 18. | As pointed out in its 2010 report[(17)](#ntr17-C_2013006EN.01003601-E0017), the Joint Undertaking needs to enhance its efforts to increase competition. The number of offers received for the operational procurement procedures signed in 2011 was still low[(18)](#ntr18-C_2013006EN.01003601-E0018) and amounted to two on average; for grants the average number of proposals received was only one per call. |

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| 19. | In one case the decision to cancel an open procedure and to use a negociated procedure was not duly justified. In another case, the Joint Undertaking decided to negotiate with two companies which submitted offers under the open procedure (although one of them was not technically compliant). In another case both the choice of the negotiated procedure and the quantities and price contracted were not duly justified. |

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| 20. | The Court’s audit has confirmed the findings of an internal audit carried out in 2011 in the area of procurement, notably:   |  |  | | --- | --- | | — | the pre-information notice is not used as an instrument for increasing ex ante publicity of forthcoming tenders[(19)](#ntr19-C_2013006EN.01003601-E0019); |  |  |  | | --- | --- | | — | there is no system to track and manage changes in the contract requirements and thus identify and remedy cost deviations; |  |  |  | | --- | --- | | — | the duration of the procurement process is often excessive and there are inefficiencies in preparing tender documents; |  |  |  | | --- | --- | | — | cost estimates are not well documented. | |

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| 21. | The audit also revealed that the ex ante control procedures applied to payments made under contracts and grant agreements are not sufficiently documented[(20)](#ntr20-C_2013006EN.01003601-E0020). |

Quality assurance audits and ex post controls on procurement and grants

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| 22. | The Joint Undergtaking has a system to perform audits[(21)](#ntr21-C_2013006EN.01003601-E0021) at the level of contractors with the aim of checking compliance with the quality assurance requirements[(22)](#ntr22-C_2013006EN.01003601-E0022). However, the scope of these audits does not cover the financial aspects of the implementation of the contracts. |

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| 23. | During 2011 the Joint Undertaking started ex post controls to asses the legality and regularity of the implementation of grants awarded. Despite the progress made[(23)](#ntr23-C_2013006EN.01003601-E0023), the Joint Undertaking lacks an overall ex post control strategy. Such a strategy should cover the implementation of grant contracts and procurement contracts. |

OTHER MATTERS

Intellectual property rights and Industrial Policy

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| 24. | On 28 March 2012 the Governing Board adopted the Joint Undertaking’s policy on intellectual property rights and dissemination of information. However, detailed rules for its implementation had not been drawn-up at the time of the audit (April 2012) as required under the Statutes[(24)](#ntr24-C_2013006EN.01003601-E0024). |

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| 25. | The Governing Board has not yet adopted the industrial policy required under the Statutes[(25)](#ntr25-C_2013006EN.01003601-E0025). |

Late payment of membership contributions

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| 26. | Payments of the 2011 contributions by 12 members were subject to delays. |

Commission Internal Audit Service

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| 27. | The mission charter of the Commission’s Internal Audit Service was adopted by the Governing Board on 25 November 2011 together with a coordinated strategic audit plan for 2012-2014. The Joint Undertaking's Financial Regulation has been amended accordingly to introduce the provisions of the Framework Regulation[(26)](#ntr26-C_2013006EN.01003601-E0026) referring to the powers of the Commission’s internal auditor. |

Financial Regulation and Implementing Rules

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| 28. | On 9 October 2008 the Court issued Opinion No 4/2008 on Fusion for Energy's Financial Regulation. This opinion contained 50 recommendations. At its meeting of 1 June 2011 the Joint Undertaking’s Governing Board decided to broadly accept the Court of Auditors’ observations (37 recommendations were fully accepted, 11 accepted with comments and only two rejected), amending its Financial Regulation accordingly[(27)](#ntr27-C_2013006EN.01003601-E0027). |

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| 29. | However, the Court considers that certain provisions in the Joint Undertaking's implementing rules[(28)](#ntr28-C_2013006EN.01003601-E0028) depart from the implementing rules of the EU General Financial Regulation without sufficient justification. |

EU contribution to ITER construction phase

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| 30. | In July 2010[(29)](#ntr29-C_2013006EN.01003601-E0029). the Council agreed the revised budget estimate of the Joint Undertaking's contribution for the construction phase amounting to 6,6 billion euro (2008 value), thus doubling the initial estimate. As reported by the internal auditor[(30)](#ntr30-C_2013006EN.01003601-E0030), the Joint Undertaking does not yet have a tool to regularly monitor the validity of the estimates and report on potential deviations. |

Follow up of previous observations

Status of the financing of the ITER project for 2012-13

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| 31. | On 1 December 2011 an agreement was reached by the Council, the European Parliament and the Commission on the financing of the 1 300 million euro of additional costs for the ITER project for 2012-2013[(31)](#ntr31-C_2013006EN.01003601-E0031). |

Host State agreement

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| 32. | According to the Host State Agreement signed with the Kingdom of Spain on 28 June 2007, the permanent premises should have been made available to the Joint Undertaking by June 2010. However, at the time of the audit (April 2012) this had not occurred. |

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 15 November 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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