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Document 52017TA0928(01)
Annual report of the Court of Auditors on the implementation of the budget concerning the financial year 2016, together with the institutions' replies
Annual report of the Court of Auditors on the implementation of the budget concerning the financial year 2016, together with the institutions' replies
Annual report of the Court of Auditors on the implementation of the budget concerning the financial year 2016, together with the institutions' replies
OJ C 322, 28.9.2017, p. 1–280
(BG, ES, CS, DA, DE, ET, EL, EN, FR, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)
28.9.2017 |
EN |
Official Journal of the European Union |
C 322/1 |
In accordance with the provisions of Article 287(1) and (4) of the TFEU and Articles 148(1) and 162(1) of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 and Articles 43, 48 and 60 of Council Regulation (EC) No 215/2008 of 18 February 2008 on the Financial Regulation applicable to the 10th European Development Fund, as amended by Regulation (EU) No 567/2014
the Court of Auditors of the European Union, at its meeting of 13 July 2017, adopted its
ANNUAL REPORTS
concerning the financial year 2016
The reports, together with the institutions’ replies to the Court’s observations, were transmitted to the authorities responsible for giving discharge and to the other institutions.
The Members of the Court of Auditors are:
Klaus-Heiner LEHNE (President), Karel PINXTEN, Henri GRETHEN, Ladislav BALKO, Lazaros S. LAZAROU, Hans Gustaf WESSBERG, Pietro RUSSO, Ville ITÄLÄ, Kevin CARDIFF, Baudilio TOMÉ MUGURUZA, Iliana IVANOVA, George PUFAN, Neven MATES, Alex BRENNINKMEIJER, Danièle LAMARQUE, Nikolaos MILIONIS, Phil WYNN OWEN, Oskar HERICS, Bettina JAKOBSEN, Janusz WOJCIECHOWSKI, Samo JEREB, Jan GREGOR, Mihails KOZLOVS, Rimantas ŠADŽIUS, Leo BRINCAT, João FIGUEIREDO, Juhan PARTS, Ildikó GÁLL-PELCZ.
ANNUAL REPORT ON THE IMPLEMENTATION OF THE BUDGET
(2017/C 322/01)
TABLE OF CONTENTS
General introduction | 7 |
Chapter 1 |
— The statement of assurance and supporting information | 9 |
Chapter 2 |
— Budgetary and financial management | 39 |
Chapter 3 |
— Getting results from the EU budget | 65 |
Chapter 4 |
— Revenue | 133 |
Chapter 5 |
— ‘Competitiveness for growth and jobs’ | 149 |
Chapter 6 |
— ‘Economic, social and territorial cohesion’ | 165 |
Chapter 7 |
— ‘Natural resources’ | 205 |
Chapter 8 |
— ‘Security and citizenship’ | 241 |
Chapter 9 |
— ‘Global Europe’ | 251 |
Chapter 10 |
— ‘Administration’ | 269 |
GENERAL INTRODUCTION
0.1. |
The European Court of Auditors was established by the Treaty on the Functioning of the European Union (1) as the external auditor of the EU’s finances. In this capacity we act as the independent guardian of the financial interests of all EU citizens, notably by helping to improve the EU’s financial management. More information on our work can be found in our activity report, our special reports, our landscape reviews and our opinions on new or updated EU laws or other decisions with financial management implications (2). |
0.2. |
This annual report, our 40th on the implementation of the EU budget, covers the 2016 financial year. A separate annual report covers the European Development Funds. |
0.3. |
The EU’s general budget is approved annually by the Council and the European Parliament. Our annual report, together with our special reports, provides a basis for the discharge procedure in which the Parliament, acting on a recommendation from the Council, decides whether the Commission has satisfactorily met its budgetary responsibilities. On publication we forward it to national parliaments, the European Parliament and the Council. |
0.4. |
The central part of our annual report is the statement of assurance on the reliability of the EU consolidated accounts and the legality and regularity of transactions (‘regularity of transactions’). This statement is supplemented by specific assessments for each major area of EU activity. |
0.5. |
Our report this year is structured as follows:
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0.6. |
As there are no separate financial statements for individual MFF headings, the conclusions to each chapter do not constitute an audit opinion. Instead, the chapters describe significant issues specific to each MFF heading. |
0.7. |
We aim to present our observations in a clear and concise way. We cannot always avoid using terms specific to the EU, its policies and budget, and to accounting and auditing. On our website we have published a glossary with definitions and explanations of most of these specific terms (4). The terms defined in the glossary appear in italics upon first usage in each chapter. |
0.8. |
The Commission’s replies to our observations (or, where appropriate, the replies of other EU institutions and bodies) are presented with this report and should be taken into consideration alongside it. However, it is our responsibility, as external auditor, to report our audit findings and draw the necessary conclusions so as to provide an independent and impartial assessment of the reliability of the accounts and the regularity of transactions. |
(1) Articles 285 to 287 (OJ C 326, 26.10.2012, pp. 169-171).
(2) Available on our website: www.eca.europa.eu.
(3) Chapter 8 covers heading 3 (‘Security and citizenship’). The analysis of heading 3 does not include an estimated level of error. We do not provide a specific assessment for spending under heading 6 (‘Compensations’) or for expenditure outside the MFF.
(4) http://www.eca.europa.eu/Lists/ECADocuments/GLOSSARY_AR_2016/GLOSSARY_AR_2016_EN.pdf
CHAPTER 1
Statement of assurance and supporting information
TABLE OF CONTENTS
The Court's statement of assurance provided to the European Parliament and the Council — Independent auditor’s report | I‐XXVIII |
Introduction | 1.1‐1.3 |
The role of the European Court of Auditors | 1.1‐1.2 |
EU spending is a significant tool for achieving policy objectives | 1.3 |
Reliability of accounts — Audit findings for the 2016 financial year | 1.4‐1.7 |
The accounts were not affected by material misstatements | 1.4‐1.6 |
Key audit matters | 1.7 |
Regularity of transactions: revenue and around half of expenditure are free from material error | 1.8‐1.34 |
Our 2016 audit results show an improvement | 1.9‐1.21 |
The Commission's estimates of levels of error … | 1.22‐1.24 |
… are, in most cases, broadly in line with our own findings | 1.25‐1.27 |
The Commission provided figures on corrections and recoveries | 1.28‐1.30 |
Corrections and recoveries are triggered in a variety of ways | 1.31‐1.32 |
In certain circumstances we take corrective action into account when estimating the level of error | 1.33‐1.34 |
We report suspected fraud to OLAF | 1.35‐1.36 |
Conclusions | 1.37‐1.38 |
Audit results | 1.38 |
Annex 1.1 — |
Audit approach and methodology |
Annex 1.2 — |
Frequency of detected errors in audit sampling for the year 2016 |
THE COURT'S STATEMENT OF ASSURANCE PROVIDED TO THE EUROPEAN PARLIAMENT AND THE COUNCIL — INDEPENDENT AUDITOR’S REPORT |
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Opinion |
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Reliability of the accounts |
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Opinion on the reliability of the accounts |
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Legality and regularity of the transactions underlying the accounts |
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Revenue |
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Opinion on the legality and regularity of revenue underlying the accounts |
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Payments |
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Qualified opinion on the legality and regularity of payments underlying the accounts |
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Basis for opinion |
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Basis for qualified opinion on the legality and regularity of payments underlying the accounts |
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Key audit matters |
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We assessed the provision for pension and other employee benefits presented in the accounts |
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We assessed the accrued charges presented in the accounts |
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We sought additional information from the Commission to support the valuation of financial instruments under shared management |
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Other matters |
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Responsibilities of management |
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Auditor's responsibilities for the audit of the consolidated accounts and underlying transactions |
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13 July 2017 |
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Klaus-Heiner LEHNE |
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President |
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European Court of Auditors |
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12, rue Alcide De Gasperi, Luxembourg, LUXEMBOURG |
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INTRODUCTION |
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The role of the European Court of Auditors |
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EU spending is a significant tool for achieving policy objectives |
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Box 1.1 — EU spending as a proportion of Member States’ total general government spending and of gross national income
Source for Member States’ GNI: Agreed set of forecasts of traditional own resources and VAT/GNI bases of 19.5.2016 (European Commission). Source for Member States’ general government spending: Eurostat — annual national accounts. Source for EU spending: European Commission accounting data. Compiled by ECA. |
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RELIABILITY OF ACCOUNTS — AUDIT FINDINGS FOR THE 2016 FINANCIAL YEAR |
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The accounts were not affected by material misstatements |
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Key audit matters |
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REGULARITY OF TRANSACTIONS: REVENUE AND AROUND HALF OF EXPENDITURE ARE FREE FROM MATERIAL ERROR |
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Box 1.2 — Summary of 2016 findings on regularity of transactions
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Our 2016 audit results show an improvement |
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Box 1.3 — The estimated level of error (most likely error, MLE) (2014 to 2016)
Source: ECA. |
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Results in different areas of expenditure show distinct patterns of error |
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Box 1.4 — 2016 entitlement-based and administrative payments are free from material error (billion euro)
Source: ECA. |
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Box 1.5 — Contribution to the overall estimated level of error for 2016 by MFF heading
Source: ECA. |
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Box 1.6 — Breakdown of the overall estimated level of error by type of error
Source: ECA. |
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Management mode has a limited impact on levels of error |
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Box 1.7 — Average estimated level of error by management mode and by basis for payment (2016)
Source: ECA. |
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The Commission’s estimates of levels of error … |
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Box 1.8 — The ECA’s 2016 audit results compared with the Commission’s estimates of amounts at risk at payment in its 2016 annual activity reports
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…are, in most cases, broadly in line with our own findings |
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The Commission provided figures on corrections and recoveries … |
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Box 1.9 — 2016 corrective measures: how were they implemented in different spending areas?
Source: ECA, based on the FSDA of the 2016 consolidated accounts of the EU and underlying data. |
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1.30. |
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Corrections and recoveries are triggered in a variety of ways |
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1.31. |
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In certain circumstances we take corrective action into account when estimating the level of error |
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WE REPORT SUSPECTED FRAUD TO OLAF |
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CONCLUSIONS |
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Audit results |
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(1) The consolidated financial statements comprise the balance sheet, the statement of financial performance, the cash flow statement, the statement of changes in net assets, and a summary of significant accounting policies and other explanatory notes (including segment reporting).
(2) The budgetary implementation reports comprise also the explanatory notes.
(3) 66,0 billion euro. We provide further information in paragraph 1.10 of our 2016 annual report.
(4) 63,3 billion euro. We provide further information in paragraph 1.11 of our 2016 annual report.
(5) See International Public Sector Accounting Standard (IPSAS) 25 — Employee benefits. For the PSEO, the defined benefit obligation reflects the present value of expected future payments that the EU will be required to make to settle the pension obligations resulting from employee service in the current and prior periods.
(6) See glossary: sound financial management.
(7) See parts 2 of chapters 5, 6 and 7.
(8) See 2016 consolidated annual accounts of the EU, Budgetary implementation reports and explanatory notes, 4.3 MFF: Implementation of payment appropriations.
(9) The consolidated accounts comprise:
(a) |
the consolidated financial statements consisting of the balance sheet (presenting the assets and liabilities at the end of the year), the statement of financial performance (recognising the income and expenses of the year), the cashflow statement (disclosing how changes in the accounts affect cash and cash equivalents) and the statement of changes in net assets as well as the related notes; |
(b) |
the budgetary implementation reports on revenue and expenditure for the year as well as the related notes. |
(10) See Recommended Practice Guideline 2 (RPG 2) ‘Financial Statement Discussion and Analysis’ of the International Public Sector Accounting Standards Board (IPSASB).
(11) See the statement of financial performance in 2016 consolidated annual accounts of the EU.
(12) Auditors are required to report on key audit matters as a result of the introduction in 2016 of ISSAI 1701 following the ISA 701.
(13) Annex 1.1 , paragraphs 7 to 10.
(14) A clearing transforms pre-financing into accepted expenditure. In an overstated clearing part of the amount booked to the accounts as expenditure is not justified by financial reports.
(15) Direct management (budget implemented directly by the European Commission), indirect management (budget implementation entrusted to non-EU partner countries, international organisations, national agencies, the EIB group, etc.), shared management (budget implementation shared between the Commission and Member States).
(16) Mainly expenditure covered by chapters 5 and 8, and also including parts of the expenditure covered by chapters 6 and 7 that are implemented under direct or indirect management. The extrapolated error for shared management expenditure is based on the examination of 560 transactions (drawn from a population of 94,5 billion euro); the extrapolation for other forms of operational expenditure is based on the examination of 321 transactions (drawn from a population of 25,4 billion euro).
(17) Payments made, less new pre-financing, but including previous pre-financing actually cleared during the financial year (2016 AMPR COM(2017) 351 final, Annex 3, p. 16).
(18) We reviewed the AARs of BUDG and ESTAT (paragraph 4.20); RTD, EAC and MOVE (paragraph 5.20); REGIO and EMPL paragraph 6.26); AGRI (paragraph 7.28); MARE, ENV and CLIMA (paragraph 7.31); NEAR (paragraph 9.29); HR, DIGIT, OIB, OIL, OP and PMO (paragraph 10.7) and DEVCO (AR EDFs paragraph 33).
(19) MFF heading 1a ‘Competitiveness’ (see paragraph 5.21).
(20) MFF heading 1b ‘Cohesion’ (see paragraph 6.34).
(21) MFF heading 2 ‘Natural resources’ (see paragraph 7.29).
(22) 2016 AMPR (COM(2017) 351 final), part II.
(23) See special report No 4/2017.
(24) Article 80(4) of the Financial Regulation states that ‘The Commission shall base its financial corrections on the identification of amounts unduly spent, and the financial implications for the budget. Where such amounts cannot be identified precisely, the Commission may apply extrapolated or flat-rate corrections in accordance with the sector-specific rules’.
(25) The estimated level of error for cohesion does not include a quantification of 2016 disbursements to financial instruments, amounting to 2,5 billion euro, that we consider to be outside the eligibility period defined in Article 56(1) of Council Regulation (EC) No 1083/2006 (OJ L 210, 31.7.2006, p. 25) (paragraphs 6.20 to 6.21). These disbursements would represent an estimated level of error of 2,0 % to overall EU expenditure.
(26) We do not provide a specific assessment for spending under MFF Heading 3 (‘Security and citizenship’), MFF Heading 6 (Compensations), or for other spending (special instruments outside the 2014-2020 MFF such as the Emergency Aid Reserve, the European Globalisation Adjustment Fund, the European Union Solidarity Fund and the Flexibility Instrument). Work in these areas contributes, however, to our overall conclusion on spending for the year 2016.
Source: ECA.
(27) Estimated level of error: see Box 1.2 and footnotes.
(28) Some DGs manage expenditure allocated under more than one MFF heading (AGRI, EACEA, ECFIN, EMPL and REGIO).
(29) The (full) names of the Commission DGs and executive agencies abbreviated in this box can be found in section 9.6 of the inter-institutional style guide (http://publications.europa.eu/code/en/en-390600.htm).
(30) BUDG, COMP, DGT, DIGIT, EPSC, EPSO/EUSA, ESTAT, HR, IAS, OIB, OIL, OLAF, OP, PMO, SCIC, SG, SJ and SRSS.
(31) Percentage of expenditure that may not comply with the regulatory and contractual requirements applicable at the time of payment.
(32) Most DGs disclosed the amount at risk as one figure. Some disclosed a range from minimum to maximum (ECFIN, FISMA, CNECT, RTD, REA, OIB and INEA) while DG REGIO presented a range from average to maximum.
ANNEX 1.1
AUDIT APPROACH AND METHODOLOGY
1. |
Our audit approach is set out in the Financial and Compliance Audit Manual available on our website. We use an assurance model to plan our work. In our planning, we consider the risk of errors occurring (inherent risk) and the risk of errors not being prevented or detected and corrected (control risk). |
PART 1 — Audit approach and methodology for the reliability of accounts
2. |
We examine the EU’s consolidated accounts to determine their reliability. These consist of:
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3. |
The consolidated accounts should properly present, in all material respects:
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4. |
In our audit, we:
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PART 2 — Audit approach and methodology for the regularity of transactions
5. |
Auditing the transactions underlying the accounts for regularity involves testing whether they comply with the relevant rules and regulations ( Box 1.2 ). |
6. |
In our audit work we consider whether we can make efficient use of the checks on regularity already performed by others. If we want to use the results of these checks, in line with audit standards, we assess the independence and competence of the other party and the scope and adequacy of its work. |
How we test transactions
7. |
Under each MFF heading (chapters 5 to 10), we test a representative sample of transactions in order to estimate the share of irregular transactions in the overall population. |
8. |
For each selected transaction, we determine whether or not the claim or payment was made for the purpose approved in the budget and specified in legislation. We examine how the amount of the claim or payment was calculated (for larger claims: based on a selection representative of all items in the transaction). This involves tracing the transaction from the budgetary accounts to the final recipient (e.g. a farmer, or the organiser of a training course or development aid project), testing compliance at each level. |
9. |
When testing revenue transactions, our examination of value added tax and GNI-based own resources takes as a starting point the macroeconomic aggregates based on which these are calculated. We examine the Commission’s controls on these Member State contributions up to the point they were received and recorded in the consolidated accounts. For traditional own resources, we examine the customs authorities’ accounts and the flow of duties — again up to the point they were received and recorded by the Commission. |
10. |
On the expenditure side, we examine payments once expenditure has been incurred, recorded and accepted. This applies to all categories of payments (including those made to purchase assets). We do not examine advances at the point they were made, but rather once:
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11. |
Our audit sample is designed to provide an estimate of the level of error for the expenditure as a whole rather than for individual transactions (e.g. a particular project). We use monetary unit sampling to select claims or payments and, at a lower level, individual items within a transaction (e.g. project invoices, parcels in a claim by a farmer). The error rates reported for these items should not be seen as a conclusion on their respective transactions, but rather contribute directly to the overall level of error for EU expenditure as a whole. |
12. |
We do not examine transactions in every Member State, beneficiary state and region in any given year. While we may name certain Member States, beneficiary states and/or regions, this does not mean that the examples do not occur elsewhere. The illustrative examples presented in this report do not form a basis for conclusions to be drawn on the specific Member States, beneficiary states and/or regions concerned. |
13. |
Our approach is not designed to gather data on the frequency of error in the whole population. Therefore, figures presented on the number of errors detected in an MFF heading, in expenditure managed by a DG or in spending in a particular Member State are not an indication of the frequency of error in EU-funded transactions or in individual Member States. Our sampling approach applies different weightings to different transactions, according to the value of the expenditure concerned and the intensity of our audit work. This weighting is removed in frequency information which gives as much weight to rural development as to direct support for natural resources, and to European Social Fund expenditure as to regional and cohesion payments. |
How we evaluate and present the results of transaction testing
14. |
An error may concern all or part of the amount involved in an individual transaction. We consider whether errors are quantifiable or non-quantifiable, i.e. whether or not it is possible to measure how much of the amount examined was affected by the error. Errors detected and corrected prior to and independently of our checks are excluded from the calculation and frequency of error, since their detection and correction demonstrate that the control systems have worked effectively. |
15. |
Our criteria for the quantification of public procurement errors are described in the document ‘Non-compliance with the rules on public procurement — types of irregularities and basis for quantification’ (1). |
16. |
Our quantification may differ from that used by the Commission or Member States when deciding how to respond to the misapplication of the public procurement rules. |
Estimated level of error
17. |
What we estimate is the ‘most likely error’ rate (MLE). We do this for most MFF headings and for overall budget spending. The MLE takes account of quantifiable errors only and is expressed as a percentage. Examples of errors are quantifiable breaches of applicable regulations, rules, and contract and grant conditions. We also set the lower error limit (LEL) and the upper error limit (UEL). |
18. |
We use the level of 2 % as materiality threshold for our opinion. We also take account of the nature, amount and context of errors. |
How we examine systems and report the results
19. |
The Commission, other EU institutions and bodies, Member State authorities, beneficiary countries and regions establish systems for managing the risks to the budget and overseeing/ensuring the regularity of transactions. It is helpful to examine these systems in order to identify areas for improvement. |
20. |
Each MFF heading, including revenue, involves many individual systems. We select a sample of systems each year and present the results together with recommendations for improvement. |
How we arrive at our opinions in the statement of assurance
21. |
The work reported in chapters 4 to 10 forms the basis for our opinion on the regularity of transactions underlying the EU's consolidated accounts. Our opinion is set out in the statement of assurance. Our work allows us to arrive at an informed opinion as to whether errors in the population exceed or fall within the materiality limits. |
22. |
Where we find a material level of error and determine its impact on the audit opinion, we must determine whether or not the errors, or the absence of audit evidence, are ‘pervasive’. In doing so, we apply the guidance contained in ISSAI 1705 (extending this guidance to apply to issues of legality and regularity, in accordance with our mandate). Where errors are material and pervasive, we present an adverse opinion. |
23. |
An error or an absence of audit evidence are deemed ‘pervasive’ if, in the auditor’s judgment, they are not confined to specific elements, accounts or items of the financial statements (i.e. they are spread throughout the accounts or transactions tested), or, if they are so confined, they represent or could represent a substantial proportion of the financial statements, or relate to disclosures which are fundamental to users’ understanding of the financial statements. |
24. |
Our best estimate of the level of error for overall spending in 2016 is 3,1 %. We did not assess this error as pervasive, as it is confined to a specific type of spending in only some spending areas. The estimated level of error found for the different MFF headings varies, as described in chapters 5 to 7 and 9 and 10. |
Suspected fraud
25. |
If we have reason to suspect that fraudulent activity has taken place, we report this to OLAF, the EU’s anti-fraud office. OLAF is responsible for carrying out any resulting investigations. We report several cases per year to OLAF. |
PART 3 — Link between the audit opinions on the reliability of accounts and on the regularity of transactions
26. |
We have issued:
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27. |
Our work and our opinions follow the IFAC’s International Standards on Auditing and Codes of Ethics and INTOSAI’s International Standards of Supreme Audit Institutions. |
28. |
Where auditors issue audit opinions on both the reliability of accounts and the regularity of transactions underlying those accounts, these standards state that a modified opinion on the regularity of transactions does not, in itself, lead to a modified opinion on the reliability of accounts. The financial statements, on which we express an opinion, recognise that there is a material issue in relation to breaches of the rules governing expenses charged to the EU budget. Accordingly, we have decided that the existence of a material level of error affecting regularity is not, in itself, a reason to modify our separate opinion on the reliability of the accounts. |
(1) http://www.eca.europa.eu/Lists/ECADocuments/Guideline_procurement/Quantification_of_public_procurement_errors.pdf
ANNEX 1.2
FREQUENCY OF DETECTED ERRORS IN AUDIT SAMPLING FOR THE YEAR 2016
CHAPTER 2
Budgetary and financial management
TABLE OF CONTENTS
Introduction | 2.1-2.3 |
Budgetary management in 2016 | 2.4-2.14 |
Payments were well within the limits set by the annual budget | 2.4-2.7 |
Extensive use of special instruments and margins leaves little flexibility to respond to unforeseen events | 2.8-2.10 |
Outstanding commitments reached an all-time high | 2.11-2.14 |
Financial management issues related to the 2016 budget | 2.15-2.31 |
The EU budget’s financial exposure is significant | 2.15-2.20 |
The EU is making increasing use of financial instruments | 2.21-2.23 |
Member States may face challenges in using the available EU funds | 2.24-2.26 |
Overall reporting on spending on migration and the refugee crisis needs to be more coherent and comprehensive | 2.27-2.28 |
EU funding arrangements continue to increase in complexity | 2.29-2.31 |
Risks and challenges for the future | 2.32-2.39 |
Avoiding another backlog of unpaid claims | 2.32-2.33 |
Financing the new MFF | 2.34-2.39 |
Conclusions and recommendations | 2.40-2.48 |
Conclusions | 2.40-2.47 |
Recommendations | 2.48 |
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INTRODUCTION |
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BUDGETARY MANAGEMENT IN 2016 |
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Payments were well within the limits set by the annual budget |
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Box 2.1 — The budget in 2016 (million euro)
Source: Consolidated annual accounts of the European Union — Financial year 2016, ‘Aggregated reports on the implementation of the budget and explanatory notes’, tables 4.1 and 4.3. |
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Extensive use of special instruments and margins leaves little flexibility to respond to unforeseen events |
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FINANCIAL MANAGEMENT ISSUES RELATED TO THE 2016 BUDGET |
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The EU budget’s financial exposure is significant |
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Box 2.2 — Exposure to guarantees (billion euro)
Source: 2016 EU accounts, Notes 4.1.1-3 to the Financial Statements. |
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Box 2.3 — Other long-term legal obligations at end 2016 (million euro)
Source: 2016 EU accounts, Note 5.3 to the Financial Statements. |
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The EU is making increasing use of financial instruments |
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Box 2.4 — Financial instruments benefiting from EU budgetary support
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Box 2.5 — EFSI funding by Member State (million euro)
Source: EIB end-year operational report ‘European Fund for Strategic Investments — IIW and SMEW. Schedule II of the EFSI Agreement’ — reporting date: 31 December 2016. |
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Member States may face challenges in using the available EU funds |
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Box 2.6 — Outstanding commitments of ESI Funds at 31 December 2016 as a percentage of 2016 general government expenditure by Member State
Source: European Court of Auditors based on information from the Commission. Eurostat data on general government expenditure for 2016; April 2017. |
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Box 2.7 — EU funds (*1) as a proportion of Member States’ Gross Fixed Capital Formation (*2)
Source: European Court of Auditors based on information from the Commission. Eurostat data on Gross Fixed Capital Formation (Investments). |
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Overall reporting on spending on migration and the refugee crisis needs to be more coherent and comprehensive |
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EU funding arrangements continue to increase in complexity |
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Box 2.8 — Entities and instruments involved in financing and implementation of EU policies
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Legend:
The wider perspective of the implementation of the EU’s Policies, operations and financing activities as of June 2017
Report and discharge by budgetary authority: European Parliament and the Council
To some extent report and discharge by budgetary authority: EP and Council
Audit by the European Court of Auditors
Managed by the Commission — direct/shared management
Managed by the EIB Group
EFSI initiative
To some extent EFSI initiative
In the Consolidated Annual Accounts of the EU Fund sources indicated by the colour of the boxes:
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Acronyms and abbreviation used
ACP-EU The Countries of Africa, the Caribbean and the Pacific and European Union Partnership EMFF European Maritime and Fisheries Fund Approp. Appropriations EP European Parliament BOP Balance of payments ERDF European Regional Development Fund CF Cohesion Fund ESF European Social Fund Copernicus The European Earth Observation Programme ESIF European Structural and Investment Fund COSME Competitiveness of enterprises and SMEs (COSME) ESM European Stability Mechanism CPVO Community Plant Variety Office EUIPO European Union Intellectual Property Office EAFRD European Agricultural Fund for Rural Development EUTF Bêkou Emergency Trust Fund for the Central African Republic EaSI The Employment and Social Innovation (EaSI) programme EUTF Colombia Trust Fund for Colombia EBRD European Bank for the Reconstruction and Development EUTF Madad EU Regional Trust Fund in Response to the Syrian Crisis ECB European Central Bank FRT Facility for Refugees in Turkey ECSC European Coal and Steel Community Galileo The European Union's Global Satellite Navigation System (GNSS) EDF European Development Fund GLF Greek Loan Facility EFSF European Financial Stability Facility H2020 Horizon 2020 EU Research and Innovation EFSI European Fund for Strategic Investments IPOL Internal Policies EFSM European Financial Stabilisation Mechanism ITER International Thermonuclear Experimental Reactor (agreement and organisation) EIB European Investment Bank MFA Macro-financial assistance EIF European Investment Fund Prog. Programme ELM External Lending Mandate SME Initiative Small and medium-sized enterprise initiative Source: European Court of Auditors. |
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RISKS AND CHALLENGES FOR THE FUTURE |
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Avoiding another backlog of unpaid claims |
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Financing the new MFF |
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Box 2.9 — Commitments and payments projections to the end of the MFF in 2020 (billion euro)
Source: For financial years 2007-2016: Consolidated annual accounts of the European Union; for projections on financial years 2017-2020: MFF Regulation and 2017 technical adjustment. |
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CONCLUSIONS AND RECOMMENDATIONS |
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Conclusions |
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Recommendations |
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The Commission accepts this recommendation. The Commission will ensure in its proposals an orderly balance between commitments and payments. However, the Commission notes that the final decisions are made by the co-legislators. |
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The Commission partially accepts the recommendation. The Commission always proposes to count the payments for special instruments over and above the ceilings. However, the final decision will be taken by the budgetary authority on a case-by-case basis. |
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The Commission accepts the recommendation. The Commission will analyse possible consolidation of its existing reporting in order to produce comprehensive information on refugee and migration expenditure. |
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The Commission accepts the recommendation. The White Paper on the Future of Europe in 2025 launched an overall debate and reflection process preceding the next MFF preparations. In this context, the Commission adopted a reflection paper on the future of EU finances in June 2017. The EU financial architecture and other issues such as duration, flexibility and predictability will form part of the overall reflection process to prepare the next MFF. |
(1) Council Regulation (EU, Euratom) No 1311/2013 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020 (the ‘MFF Regulation’) (OJ L 347, 20.12.2013, p. 884).
(2) These figures correspond to appropriations for commitment of 1,04 % of EU GNI and appropriations for payment of 0,98 % of EU GNI for 2014-2020 as set out in the latest Technical adjustment to the MFF — COM(2016) 311 final of 30 June 2016: ‘Communication from the Commission to the Council and the European Parliament: Technical adjustment of the financial framework for 2017 in line with movements in GNI and adjustments of cohesion policy envelopes (Article 6 and 7 of Regulation (EU, Euratom) No 1311/2013 laying down the multiannual financial framework for the years 2014-2020)’ (‘2017 technical adjustment’).
(3) Additional payment appropriations above the own resources limit can be made from income other than own resources income.
(4) Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union (OJ L 168, 7.6.2014, p. 105) sets a limit of appropriations for commitment of 1,26 % of EU GNI and for appropriations for payment of 1,20 % of EU GNI.
(5) A briefing paper on the Commission’s communication, ‘EU budget: time to reform? A briefing paper on the mid-term review of the Multiannual Financial Framework 2014-2020’, an opinion on the proposal to extend and expand the European Fund for Strategic Investments (EFSI), Opinion No 2/2016 (OJ C 465, 13.12.2016), and an opinion on the proposal to revise the Financial Regulation, Opinion No 1/2017 (OJ C 91, 23.3.2017).
(6) Excluding carryovers and assigned revenue.
(7) For these delays see pages 45 and 46 of the ‘Report on Budgetary and Financial Management of the European Commission — Financial year 2016’ and Annex 6 ‘Payment forecast’ — Section 3, third paragraph of document SWD(2016)299 final of 14 September 2016‘Commission staff working document accompanying document “Communication from the Commission to the European Parliament and the Council: Mid-term review/revision of the multiannual financial framework 2014-2020 (COM(2016) 603 final)”’.
(8) Reasons for the length of the adoption procedure of the legal bases for 2014-2020 programmes are set out in paragraphs 11 and 36 of our special report No 2/2017 (http://eca.europa.eu).
(9) Special report No 36/2016 (http://eca.europa.eu).
(10) Annex 6 ‘Payment forecast’ — Section 3, third paragraph — SWD(2016)299 final.
(11) Amending budget No 4. This and other amending budgets increased commitment appropriations by 273 million euro and payment appropriations by 31 million euro.
(12) See the ‘EU Budget result’ page in the ‘Budgetary implementation reports and explanatory notes’ section of the ‘Consolidated annual accounts of the EU — Financial year 2016’ (‘2016 EU accounts’).
(13) The Emergency Aid Reserve, the European Union Solidarity Fund, the European Globalisation Adjustment Fund and the Flexibility Instrument. See Articles 9-12 of the MFF Regulation.
(14) Annex 6 ‘Payment forecast’, Section 6 of document SWD(2016)299 final.
(15) See Council document 7031/17 ADD 1.
(16) Article 13 of the MFF Regulation.
(17) Decisions (EU) 2017/339 and (EU) 2017/344 of the European Parliament and Council of 14 December 2016 on the mobilisation of the contingency margin (OJ L 50, 28.2.2017).
(18) Article 14 of the MFF Regulation.
(19) Based on the 2017 technical adjustment.
(20) Article 17 of the MFF Regulation.
(21) A ‘commitment’ has a different basis in different areas of the budget — see paragraph 2.5 and Figure 2.1 of our 2015 annual report.
(22) To arrive at the figure, we divide outstanding commitments (2016: 238,3 billion euro; 2007: 138,4 billion euro) by differentiated payments made, i.e. payments that were made on multiannual commitments during the year (2016: 81,5 billion euro; 2007: 63,3 billion euro).
(23) See note 4 of the 2016 EU accounts.
(24) See note 2.4.1 of the 2016 EU accounts.
(25) See note 2.10 of the 2016 EU accounts.
(26) Article 3(3) of the MFF Regulation.
(27) We made a recommendation in our Opinion No 1/2017 on the proposal.
(28) See note 5.3 of the 2016 EU accounts.
(29) The Commission submitted a proposal to the budgetary authority to increase the size of the EFSI. We published Opinion No 2/2016 on the proposal.
(30) EIB end-year operational report ‘European Fund for Strategic Investments — IIW and SMEW. Schedule II of the EFSI Agreement’ — reporting date: 31 December 2016. The EFSI guarantee covers 11,2 billion euro.
(31) GFCF is often considered by economists to be an important indicator of longer-term economic growth and productivity.
(*1) EU funds do not include MFF Heading 5 ‘Administration’.
(*2) Member States where EU funds were greater than 5 % of Gross Fixed Capital Formation (GFCF) on average during the period 2007-2015. GFCF consists of resident producers’ acquisitions, less disposals of fixed tangible or intangible assets.
(32) Measures taken so far included:
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establishing the refugee facility for Turkey (FRT); setting up an emergency trust fund for the Central African Republic (EUTF Bêkou); |
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reinforcing the trust fund for Syria (EUTF Madad); |
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increasing funding to the Asylum, Migration and Integration Fund (AMIF) and the Internal Security Fund (ISF); |
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transferring funds to a new budget line for providing emergency support within the EU and |
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reinforcing the budgets of relevant agencies, FRONTEX, EUROPOL, the European Asylum Support Office and the European Migrant Smuggling Centre. |
(33) See paragraphs 1.46 and 1.52 of our 2012 annual report.
(34) Conclusions to Annex 6 of document SWD(2016)299 final.
(35) Council Regulation (EU, Euratom) 2017/1123 (OJ L 163, 24.6.2017, p. 1).
(36) Based on existing results at end 2016 and on the MFF, including the 2017 technical adjustment, we have made the conservative assumption that 98 % of commitments appropriations will be converted to commitments. We have taken the estimate of de-commitments calculated by the Commission in the mid-term review, and we have assumed that 99 % of payment appropriations will become payments excluding payments related to special instruments as per the Commission’s assumption. Assigned revenue and carryovers have not been included in the 2017-2020 projections due to the difficulty in calculating them and their minimal impact on the projections.
(37) Annex 6 to document SWD(2016)299 final gives a figure of 254 billion euro. Our projection is based on an estimated use of 648,1 billion euro of commitment appropriations and 604,3 billion euro payment appropriations available in the MFF for the years 2017-2020 (based on the 2017 technical adjustment).
(38) Article 3(2), second subparagraph of Decision 2014/335/EU, Euratom.
(39) Article 25 of the MFF Regulation.
(40) Article 9 of the Interinstitutional Agreement of 2 December 2013, between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management.
(41) See paragraph 2.47, Recommendation 2 of our 2015 annual report.
(*3) Based on the latest available implementation reports.
(*4) Based on maximum amounts of operating programme allocations at 31 December 2016.
(*5) For the 2014-2020 programming period, we estimated the indicative budget for the financial instruments in indirect management to be 7,4 billion euro (2015 annual report, Figure 2.10).
(42) For ERDF and ESF financial instruments, the total corresponding EU contribution paid at 31 December 2015 amounted to 11,6 billion euro, of which only 8,5 billion euro (73 %) reached the final beneficiaries. These amounts correspond to a nine year implementation period (2007-2015) (Commission document EGESIF_16-0011-00, Summary of data on the progress made in financing and implementing financial engineering instruments reported by the managing authorities in accordance with Article 67(2)(j) of Regulation (EC) No 1083/2006 (OJ L 210, 31.7.2006, p. 25), p. 66).
(43) Special report No 5/2015 (http://eca.europa.eu).
(44) At 31 December 2014, the EU’s overall contribution to 2007-2013 programming period for financial instruments in indirect management amounted to almost 3,8 billion euro (excluding blending facilities).
(45) See paragraph 2.22 and footnote 35.
CHAPTER 3
Getting results from the EU budget
TABLE OF CONTENTS
Introduction | 3.1 |
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3.2-3.51 |
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3.3-3.12 |
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3.13-3.51 |
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3.52-3.59 |
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3.60-3.71 |
Conclusions and recommendations | 3.72-3.77 |
Conclusions | 3.72-3.75 |
Recommendations | 3.76-3.77 |
Annex 3.1 — |
Detailed status of recommendations by report |
Annex 3.2 — |
Key improvements and unresolved weaknesses by report |
Annex 3.3 — |
Follow-up of previous recommendations for performance issues |
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INTRODUCTION |
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PART 1 — PERFORMANCE REPORTING: HOW DOES THE COMMISSION’S APPROACH COMPARE WITH GOOD PRACTICE? |
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Section 1 — The performance reporting framework |
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Box 3.1 — The performance reporting framework applied by the Commission
Source: ECA, based on Commission information. |
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A. Programme statements |
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Box 3.2 — 2017 Programme statements: objectives and indicators
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B. Sectoral reports |
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C. Strategic plans, management plans and annual activity reports |
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D. Evaluations |
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Box 3.3 — Number of evaluations at the Commission between 2000 and 2015 (three-year rolling average line and annual figures)
Source: Commission's evaluations database (2000-2015). |
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E. Annual management and performance report (AMPR) |
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F. Other reports with performance information |
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Section 2 — Comparison with good performance reporting practices elsewhere |
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A. Introduction |
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B. Scope for improving the performance framework |
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(a) The Commission uses two sets of objectives and indicators to measure the performance, respectively, of its services and of spending programmes |
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(b) The Commission has a large number of objectives and indicators |
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Box 3.4 — 2016 OECD Performance budgeting survey results
Source: OECD presentation at the 12th annual meeting of OECD senior budget officials, performance and results network, 25 November 2016. |
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Box 3.5 — The EU has more objectives and indicators (per billion euro) than France or the Netherlands
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C. Performance reporting is not exhaustive |
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(a) Performance reporting is not well balanced, as it provides limited information about challenges and failures |
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(b) Limited information on performance data quality affects transparency |
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Box 3.6 — Reporting frequency to monitor ongoing performance
Source: ECA, based on survey on performance reporting. |
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D. Performance reports are rather narrative and could make better use of visual and navigation aids |
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Source Australian Department of Social Services, Annual Report 2015-2016 (35) (pp. 253 and 258) and Department of Education and Training, Annual Report 2015-2016 (36) (pp. 225 and 238). |
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Box 3.8 — France: State General Budget results report uses pictures rather than text
Source: ECA, based on the Report on the State General Budget 2015. © Direction du Budget, ministère de l'Action et des Comptes publics, France. |
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Box 3.9 — World Bank: 2016 annual report uses many tools to enhance accessibility
Source: ECA, based on the World Bank’s Annual Report 2016. ‘World Bank. 2016. The World Bank Annual Report 2016. Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/24985 License: CC BY 3.0 IGO.’ |
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Box 3.10 — Use of visual and navigation aids in the Commission’s performance reports
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E. The Commission does not demonstrate that it systematically uses evaluation results |
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(a) Recommendations not always made |
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(b) The Commission does not demonstrate that evaluation recommendations are systematically followed up |
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F. Core performance reports do not include a declaration or information on the quality of performance information |
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G. Performance information provided by the Commission is not easily accessible |
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PART 2 — RESULTS OF THE COURT’S PERFORMANCE AUDITS: COMMON CHALLENGES IDENTIFIED IN SOME 2016 SPECIAL REPORTS |
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Introduction |
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Box 3.11 — More special reports than ever before (three-year rolling average line and annual figures)
Source: ECA. |
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Box 3.12 — Our special reports cover all MFF headings and more
Source: ECA. |
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Box 3.13 — Recommendations cover a wide range of topics
Source: ECA. |
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Box 3.14 — How persuasive are we?
Source: ECA. |
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Sustainability of public finances |
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Box 3.15 — Common problems identified in reports on the sustainability of public finances
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3.55. |
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Environment, energy and climate change |
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Box 3.16 — Common problems identified in reports on the environment, energy and climate change
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3.57. |
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Added value/cost reduction |
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Box 3.17 — Common problems identified in reports on EU institutions, bodies and agencies
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3.59. |
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PART 3 — FOLLOW-UP OF RECOMMENDATIONS |
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Scope and approach |
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The reports contained a total of 131 recommendations issued between 2010 and 2013 on a variety of topics (see Box 3.18 ). Details on their implementation status are given in Annex 3.1 . |
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Box 3.18 — More recommendations followed up than in any previous year
Source: ECA. |
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How has the Commission addressed our recommendations? |
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Box 3.19 — High number of recommendations implemented
Source: ECA. |
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Box 3.20 — Recommendations frequently led to significant corrective action
Source: ECA. |
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A mixed bag of results |
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3.70. |
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Box 3.21 — Almost all recommendations not initially accepted were nevertheless implemented
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CONCLUSIONS AND RECOMMENDATIONS |
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Conclusions |
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3.73. |
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1. Scope for improving the performance framework (paragraphs 3.15-3.23) |
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2. Performance reporting is not exhaustive (paragraphs 3.24-3.32) |
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3. Performance reports are rather narrative and could make better use of visual and navigation tools (paragraphs 3.33-3.35) |
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4. The Commission does not demonstrate that it systematically uses evaluation results (paragraphs 3.36-3.42) |
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5. Core performance reports do not include a declaration or information on the quality of performance information (paragraphs 3.43-3.45) |
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6. Performance information provided by the Commission is not easily accessible (paragraphs 3.46-3.51) |
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Recommendations |
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The Commission accepts the recommendation. The Commission is committed to producing high-quality performance reports that describe results in a balanced manner. In the Annual Management and Performance Report the Commission reports on major management challenges in a separate dedicated section (under Section 2). Where problems were encountered in the course of the year the report describes how Commission departments tackled these challenges. In future the Commission will strive to give more information on the main challenges for achieving results in its core performance reports (Annual Activity Reports, Annual Management and Performance Report and programme statements). |
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The Commission accepts the recommendation. The Commission is committed to continuously improve the user-friendliness of its performance reporting. The 2016 Annual Management and Performance Report has already considerably improved with graphics, charts and images. |
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The Commission accepts the recommendation. In order to improve transparency, the Commission will provide information on the source and quality of data where available. Given that a significant amount of performance data is provided by Member States, the Commission will analyse to what extent they provide information on the quality of performance data. |
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The Commission partially accepts the recommendation. The Commission will strive to make performance information more easily accessible. It is committed to carrying out an assessment to appraise the feasibility, the costs and the potential benefits of such a web presence. The action as recommended would be implemented subject to the outcome of this assessment. In line with the Synergies and Efficiencies decision of the Commission from April 2016, a dedicated web portal and search engine should not be aimed at, but rather a relevant web presence using the corporate search engine of the Europa website. |
(1) Article 317 TFEU.
(2) The initiative is structured around four key questions: ‘Where do we spend? How do we spend? How are we assessed? How do we communicate?’ http://ec.europa.eu/budget/budget4results/index_en.cfm
(3) Article 38(3)(e). Until the end of 2017, the Financial Regulation uses the term ‘activity statement’.
(4) As of 2017, the structure and content of the statements was modified. This description reflects the modified statements.
(5) http://ec.europa.eu/budget/library/biblio/documents/2018/DB2018_WD01_en.pdf
(6) Article 66(9) of the Financial Regulation.
(7) Commission Staff Working Document, Better Regulation Guidelines, SWD(2015)111 final, 19.5.2015, p. 49.
(8) http://ec.europa.eu/smart-regulation/evaluation/search/search.do
(9) According to the BRGs, the requirement to provide judgements can be a critical factor distinguishing an evaluation from a study.
(10) https://ec.europa.eu/commission/news/eu-2016-general-report-activities-european-union_en
(11) http://ec.europa.eu/budget/financialreport/2015/foreword/index_en.html
(12) http://europa.eu/rapid/press-release_AC-16-3892_en.htm?locale=FR
(13) https://ec.europa.eu/commission/state-union-2016_en
(14) https://ec.europa.eu/budget/euprojects/search-projects_en
(15) Issued by the International Public Sector Accounting Standards Board (IPSASB) in March 2015.
(16) Governments: Australia, Canada, France, the Netherlands, the UK and the USA. Other international organisations: the Council of Europe, the Food and Agriculture Organisation of the United Nations (FAO); the International Committee of the Red Cross (ICRC); the OECD; UNESCO; the UN General Secretariat; the World Bank and the World Health Organisation (WHO).
(17) MOPAN is a network of like-minded donor countries for monitoring the performance of multilateral development organisations at country level. See http://www.mopanonline.org/
(18) Department of Finance, Resource management guide 131-137 http://www.finance.gov.au/resource-management/performance/
(19) See 2012 synthesis report, COM(2013) 334 final, p. 3.
(20) See ‘Standing Instructions for 2013 annual activity reports’, p. 3, and ‘Instructions for the 2014 Management Plans’, p. 9.
(21) Existence = breadth of performance information available; use = extent to which performance information is used in budgetary decision-making; consequences = impact on management and/or the budget.
(22) ‘Loi organique relative aux lois de finance’.
(23) See for instance IPSASB Recommended Practice Guideline 3.
(24) http://extranet.who.int/programmebudget/Biennium2014/Programme/Overview/12
(25) http://www.who.int/about/finances-accountability/reports/en/
(26) Independent Evaluation Group: Behind the mirror — A report on the self-evaluation systems of the World Bank Group (2016).
(27) http://www.mopanonline.org/assessments/iadb2015-16/index.htm
(28) Ref. Ares(2016)6517649 — 21/11/2016.
‘Flexibility is offered to DGs while selecting the key general and specific objectives they want to report on in the narrative of section 1. The performance story should be based on a selection and description of the “key” results (positive or negative) in view of achieving the “key” general and specific objectives. Not all objectives and achievements need to be covered, but only:
— |
those which are of such importance that the reader would expect them to be reported in an AAR (because omission would lead to a distorted opinion as regards the performance of the DG; or because the deviations from the targets are remarkable; or because certain activities attracted major media-attention, …) even if the DG considers that they have no actual impact on assurance, and; |
— |
those whose results shown in the performance tables in annex show important deviations from set planned values.’ |
(30) The Staff Working Document attached to the Commission's report on the follow-up to the 2014 Discharge sets out the approach for reporting results on the Europe 2020 Strategy.
(31) Opinion No 1/2017 concerning the proposal for a Regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union, paragraph 97.
(32) The approach is explained here: http://www.pc.gov.au/research/ongoing/report-on-government-services/2017/approach/performance-measurement
(33) See paragraph 3.13(ii).
(34) The toolbox complements the Better Regulation Guidelines, which apply to impact assessments, evaluations and fitness checks. See http://ec.europa.eu/smart-regulation/guidelines/toc_tool_en.htm, p. 287 and p. 290.
(35) https://www.dss.gov.au/about-the-department/publications-articles/corporate-publications/annual-reports/dss-annual-report-2015-16-0
(36) https://docs.education.gov.au/documents/department-education-and-training-annual-report-2015-16
(37) http://www.who.int/about/finances-accountability/evaluation/evaluation-report-nov2016.pdf
(38) https://ieg.worldbankgroup.org/managementactionrecord
(39) Chapter 3 of the overview report ‘Results and performance of the World Bank Group 2015’.
(40) http://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=31300
(41) SWD(2015)111 final, Chapter VI ‘Guidelines on evaluation and fitness checks’.
(42) Impact assessment, guidance, further monitoring…
(43) http://www.finance.gov.au/resource-management/pgpa-act/
(44) ‘True and fair view in this context means a reliable, complete and correct view on the state of affairs in the DG’.
(45) We also referred to this issue in our opinion No 1/2017, paragraph 95.
(46) The Commission explained its overall political responsibility for the management of the EU budget in reply to paragraph 21 of our special report No 27/2016: ‘The Commission considers that this encompasses accountability for the work of its services.’.
(47) http://ec.europa.eu/info/files/2015-annual-management-and-performance-report-eu-budget-com-2016-446-final_en, pp. 5 and 58.
(48) http://www.rijksbegroting.nl/
(49) https://www.gov.uk/government/publications
(50) http://www.worldbank.org/en/results
(51) http://pdu.worldbankgroup.org/
(52) https://europa.eu/european-union/documents-publications_en
(53) http://www.eca.europa.eu/en/Pages/AuditReportsOpinions.aspx?ty=Special%20report&tab=tab4
(54) 1a (‘Competitiveness for growth and jobs’), 1b (‘Economic, social and territorial cohesion’), 2 (‘Sustainable growth: natural resources’), 3 (‘Security and citizenship’), 4 (‘Global Europe’), 5 (‘Administration’).
(55) HELCOM is the governing body of the Helsinki Convention on the protection of the marine environment of the Baltic Sea Area.
(56) In SR 20/2012 and SR 23/2012.
(57) The Contact Committee is an assembly of the heads of EU SAIs, including the ECA.
(58) See also our opinion No 1/2017 concerning the proposal for a Regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (paragraphs 90-99): http://www.eca.europa.eu/en/Pages/DocItem.aspx?did=40627
ANNEX 3.1
DETAILED STATUS OF RECOMMENDATIONS BY REPORT
No |
SR |
Report title |
SR paragraph |
Fully implemented |
Implemented in most respects |
Implemented in some respects |
Not implemented |
No longer relevant |
Could not be verified |
1 |
SR 14/2010 |
The Commission’s management of the system of veterinary checks for meat imports following the 2004 hygiene legislation reforms (Natural resources) |
Par. 90 bullet 1 |
x |
|
|
|
|
|
Par. 90 bullet 2 |
x |
|
|
|
|
|
|||
Par. 90 bullet 3 |
x |
|
|
|
|
|
|||
Par. 90 bullet 4 |
|
x |
|
|
|
|
|||
Par. 90 bullet 5 |
|
x |
|
|
|
|
|||
Par. 90 bullet 6 |
x |
|
|
|
|
|
|||
Par. 90 bullet 7 |
x |
|
|
|
|
|
|||
Par. 90 bullet 8 |
x |
|
|
|
|
|
|||
Par. 91 |
x |
|
|
|
|
|
|||
2 |
SR 11/2012 |
Suckler cow and ewe and goat direct aids under partial implementation of SPS arrangements (Natural resources) |
Par. 58 |
x |
|
|
|
|
|
Par. 60 |
x |
|
|
|
|
|
|||
Par. 64 |
x |
|
|
|
|
|
|||
Par. 64 |
|
|
x |
|
|
|
|||
3 |
SR 14/2012 |
Implementation of EU hygiene legislation in slaughterhouses of countries that joined the EU since 2004 (Natural resources) |
Par. 52(a) |
x |
|
|
|
|
|
Par. 52(b) |
x |
|
|
|
|
|
|||
Par. 52(c) |
x |
|
|
|
|
|
|||
Par. 52(d) |
x |
|
|
|
|
|
|||
Par. 53(a) |
x |
|
|
|
|
|
|||
Par. 53(b) |
x |
|
|
|
|
|
|||
Par. 53(c) |
x |
|
|
|
|
|
|||
Par. 53(d) |
|
x |
|
|
|
|
|||
Par. 54(a) |
x |
|
|
|
|
|
|||
Par. 54(b) |
|
|
|
x |
|
|
|||
Par. 54(c) |
|
|
|
x |
|
|
|||
4 |
SR 20/2012 |
Is structural measures funding for municipal waste management infrastructure projects effective in helping Member States achieve EU waste policy objectives? (Natural resources) |
Par. 72(a)(i) |
|
|
|
|
|
x |
Par. 72(a)(ii) |
|
|
|
|
|
x |
|||
Par. 72(a)(iii) |
|
|
|
|
|
x |
|||
Par. 72(b) |
|
|
x |
|
|
|
|||
Par. 74(a) |
|
|
|
|
|
x |
|||
Par. 74(b) |
|
x |
|
|
|
|
|||
Par. 74(c) |
x |
|
|
|
|
|
|||
Par. 76(a)(i) |
|
|
|
|
|
x |
|||
Par. 76(a)(ii) |
|
|
|
|
|
x |
|||
Par. 76(a)(iii) |
|
|
|
|
|
x |
|||
Par. 76(b)(i) |
x |
|
|
|
|
|
|||
Par. 76(b)(ii) |
|
|
x |
|
|
|
|||
Par. 77(a) |
|
|
|
x |
|
|
|||
Par. 77(b) |
x |
|
|
|
|
|
|||
Par. 77(c) |
x |
|
|
|
|
|
|||
Par. 77(d) |
|
|
|
|
x |
|
|||
5 |
SR 23/2012 |
Have EU structural measures successfully supported the regeneration of industrial and military brownfield sites? (Cohesion) |
Par. 65(a) (MS) |
|
|
|
|
|
x |
Par. 65(b) (MS) |
|
|
|
|
|
x |
|||
Par. 65(c) (MS) |
|
|
|
|
|
x |
|||
Par. 65(a) (COM) |
|
|
x |
|
|
|
|||
Par. 65(b) (COM) |
x |
|
|
|
|
|
|||
Par. 68(a) (MS) |
|
|
|
|
|
x |
|||
Par. 68(b) (MS) |
|
|
|
|
|
x |
|||
Par. 68(c) (MS) |
|
|
|
|
|
x |
|||
Par. 68(d) (MS) |
|
|
|
|
|
x |
|||
Par. 68(e) (MS) |
|
|
|
|
|
x |
|||
Par. 68(f) (MS) |
|
|
|
|
|
x |
|||
Par. 68(a) (COM and MS) |
x |
|
|
|
|
|
|||
Par. 73(a) (MS) |
|
|
|
|
|
x |
|||
Par. 73(b) (MS) |
|
|
|
|
|
x |
|||
Par. 73(c) (MS) |
|
|
|
|
|
x |
|||
Par. 73(d) (MS) |
|
|
|
|
|
x |
|||
Par. 73(e) (MS) |
|
|
|
|
|
x |
|||
Par. 73(a) (COM) |
x |
|
|
|
|
|
|||
Par. 73b (COM) |
x |
|
|
|
|
|
|||
Par. 73(e) (MS last sentence) |
|
|
|
x |
|
|
|||
6 |
SR 5/2013 |
Are EU cohesion policy funds well spent on roads? (Cohesion) |
Par. 55 Rec. 1 |
|
|
x |
|
|
|
Par. 55 Rec. 2(a) |
x |
|
|
|
|
|
|||
Par. 55 Rec. 2(b) |
|
x |
|
|
|
|
|||
Par. 55 Rec. 2(c) |
x |
|
|
|
|
|
|||
Par. 55 Rec. 3 |
x |
|
|
|
|
|
|||
Par. 55 Rec. 4 |
|
|
x |
|
|
|
|||
7 |
SR 17/2013 |
EU climate finance in the context of external aid (External actions) |
Par. 69 Rec. 1 |
x |
|
|
|
|
|
Par. 69 Rec. 2 |
x |
|
|
|
|
|
|||
Par. 69 Rec. 3 |
|
|
x |
|
|
|
|||
Par. 69 Rec. 4 |
|
x |
|
|
|
|
|||
Par. 69 Rec. 5 |
x |
|
|
|
|
|
|||
8 |
SR 14/2013 |
EU direct financial support to the Palestinian Authority (External actions) |
Par. 81(a) |
x |
|
|
|
|
|
Par. 81(b) |
x |
|
|
|
|
|
|||
Par. 81(c) |
x |
|
|
|
|
|
|||
Par. 82(a) |
x |
|
|
|
|
|
|||
Par. 82(b) |
x |
|
|
|
|
|
|||
Par. 83 |
|
x |
|
|
|
|
|||
Par. 84 |
|
x |
|
|
|
|
|||
Par. 85 |
|
|
x |
|
|
|
|||
9 |
SR 13/2013 |
EU development assistance to Central Asia (External actions) |
Par. 87 First indent |
x |
|
|
|
|
|
Par. 87 Second indent |
x |
|
|
|
|
|
|||
Par. 87 Third indent |
|
|
x |
|
|
|
|||
Par. 87 Fourth indent |
x |
|
|
|
|
|
|||
Par. 87 Fifth indent |
x |
|
|
|
|
|
|||
Par. 87 Sixth indent |
|
x |
|
|
|
|
|||
10 |
SR 9/2013 |
EU support for governance in the Democratic Republic of the Congo (External actions) |
Par. 94 Rec. 1(a) |
x |
|
|
|
|
|
Par. 94 Rec. 1(b) |
|
x |
|
|
|
|
|||
Par. 94 Rec. 1(c) |
|
x |
|
|
|
|
|||
Par. 94 Rec. 1(d) |
|
x |
|
|
|
|
|||
Par. 94 Rec. 2(a) |
x |
|
|
|
|
|
|||
Par. 94 Rec. 2(b) |
x |
|
|
|
|
|
|||
Par. 94 Rec. 3(a) |
x |
|
|
|
|
|
|||
Par. 94 Rec. 3(b) |
|
x |
|
|
|
|
|||
Par. 94 Rec. 3(c) |
x |
|
|
|
|
|
|||
Par. 94 Rec. 4(a) |
|
x |
|
|
|
|
|||
Par. 94 Rec. 4(b) |
|
|
x |
|
|
|
|||
Par. 94 Rec. 4(c) |
x |
|
|
|
|
|
|||
11 |
SR 4/2013 |
EU cooperation with Egypt in the field of Governance (External actions) |
Par. 80(a) |
x |
|
|
|
|
|
Par. 80(b) |
x |
|
|
|
|
|
|||
Par. 80(c) |
x |
|
|
|
|
|
|||
Par. 80(d) |
x |
|
|
|
|
|
|||
Par. 80(e) |
x |
|
|
|
|
|
|||
Par. 81(a) |
x |
|
|
|
|
|
|||
Par. 81(b) |
x |
|
|
|
|
|
|||
Par. 81(c) |
x |
|
|
|
|
|
|||
Par. 82 |
x |
|
|
|
|
|
|||
12 |
SR 12/2012 |
Did the Commission and Eurostat improve the process for producing reliable and credible European statistics? (Others) |
Par. 107 |
|
|
x |
|
|
|
Par. 108(a) |
x |
|
|
|
|
|
|||
Par. 108(b) |
x |
|
|
|
|
|
|||
Par. 108(c) |
|
|
x |
|
|
|
|||
Par. 108(d) |
|
|
|
x |
|
|
|||
Par. 108(e) |
|
x |
|
|
|
|
|||
Par. 108(f) |
x |
|
|
|
|
|
|||
Par. 108(g) |
x |
|
|
|
|
|
|||
Par. 109(a) |
x |
|
|
|
|
|
|||
Par. 109(b) |
x |
|
|
|
|
|
|||
Par. 109(c) |
x |
|
|
|
|
|
|||
Par. 109(d) |
x |
|
|
|
|
|
|||
Par. 109(e) |
|
x |
|
|
|
|
|||
Par. 109(f) |
|
x |
|
|
|
|
|||
Par. 109(g) |
x |
|
|
|
|
|
|||
13 |
SR 2/2013 |
Has the Commission ensured efficient implementation of the seveth framework programme for research? (Smart and inclusive growth) |
Par. 99 Rec. 1 second and third indents |
x |
|
|
|
|
|
Par. 99 Rec. 1 first and fourth indents |
x |
|
|
|
|
|
|||
Par. 99 Rec. 2 |
|
x |
|
|
|
|
|||
Par. 100 Rec. 3 first indent |
x |
|
|
|
|
|
|||
Par. 100 Rec. 3 second indent |
x |
|
|
|
|
|
|||
Par. 101 |
x |
|
|
|
|
|
|||
Par. 102 |
x |
|
|
|
|
|
|||
Par. 103 |
x |
|
|
|
|
|
|||
Par. 104 first part |
|
|
|
x |
|
|
|||
Par. 104 second part |
|
|
|
|
x |
|
|||
Total number of recommendations |
131 |
72 |
18 |
12 |
6 |
2 |
21 |
The Commission's replies
SR 14/2012:
Reply to paragraph 54(c): The Commission considers that the recommendation is no longer relevant. In the current programming period (2014-2020), the measure has been discontinued.
ANNEX 3.2
KEY IMPROVEMENTS AND UNRESOLVED WEAKNESSES BY REPORT
No |
SR |
Report title |
Improvements |
Weaknesses |
1 |
SR 14/2010 |
The Commission’s management of the system of veterinary checks for meat imports following the 2004 hygiene legislation reforms |
Commission proposal on import control activities has been adopted. It simplifies and clarifies regulatory framework. Harmonisation of rules for reinforced checks. Improvement of IT systems network. Development of guidance documents and training programmes. Improvement of the risk assessment model used for programming audits of the Directorate-General for Health and Food Safety. Member States take corrective action following recommendations by the Directorate-General for Health and Food Safety. EU animal welfare strategy included in international agreements on sanitary and phytosanitary measures. |
Some international agreements on sanitary and phytosanitary measures are still under negotiation. Third countries (with some exceptions) still resist recognising the EU as a single entity. The new EU Regulation on official controls is expected to enter into application by the end of 2019. Implementing acts have yet to be adopted. Council and Parliament have not considered the article in the Commission proposal delegating powers to the Commission on laying down rules on performance indicators. Verification of the specific amount of fees for import checks is considered a low priority within the scope of the audits on imports of the Directorate-General for Health and Food Safety. |
2 |
SR 11/2012 |
Suckler cow and ewe and goat direct aids under partial implementation of Single Payment Scheme arrangements |
Targeting requirements added for voluntary coupled support. Member States now need to provide definition of specific type of production in justification of measures. The Commission has set up a common monitoring and evaluation framework, together with specific rules and indicators. |
Despite some evaluation work already done or underway, no comprehensive Commission evaluation has yet been made of the schemes' impact. |
3 |
SR 14/2012 |
Implementation of EU hygiene legislation in slaughterhouses of countries that joined the EU since 2004 |
Follow-up audits of DG SANTE's recommendations to the Member States are regularly carried out. Guidelines, training courses and workshops are available. Electronic database of national hygiene sectorial guides developed. A framework of standard operating procedures has been adopted to clarify the relationship responsibilities between DG SANCO and the Consumers, Health, Agriculture and Food Executive Agency. |
There are no overview reports dealing with audit/analysis of the Member States' multiannual national control plans. No evaluation report on trends in the development of national guides or their quality. Lack of statistics on training addressed to food business operators by Member States. No evaluation on the impact of the EU funds used to implement hygiene and food safety standards. |
4 |
SR 20/2012 |
Is structural measures funding for municipal waste management infrastructure projects effective in helping Member States achieve EU waste policy objectives? |
Ex ante conditionality ensures the existence of waste management plans and links EU support to achievements. Better definition of waste quantities. Guidance and information-sharing on waste plans. Steps made in waste prevention and recycling of products. Waste treatment clarified. |
No assurance that the actions described in waste management plans ensure that waste is treated before disposal in landfills and that there is a focus on waste management infrastructures treating waste segregated at source. No assurance that waste monitoring systems and databases provide reliable data. Reduced rates of assistance not systematically applied. Waste prevention targets not set up. |
5 |
SR 23/2012 |
Have EU structural measures successfully supported the regeneration of industrial and military brownfield sites? |
Integrated sustainable urban development and regeneration are clearly promoted. The regeneration and decontamination of brownfield sites are a priority for 2014-2020. Definition and guidelines for the application of the polluter pays principle are in place. Compliance with EU State aid rules is checked and interim payments may be suspended in case of non-compliance. Further guidance has been issued to remind Member States of their obligation to determine the funding gap. |
No EU standards for the definition of contaminated sites and the significance of the environmental and health risks they pose. No EU methodology for the definition of site-specific remediation standards. No follow-up on the application of reimbursement clauses. |
6 |
SR 5/2013 |
Are EU cohesion policy funds well spent on roads? |
New guide to cost/benefit analysis published in 2014 includes a case study of road projects with a breakdown of costs and main reasons for differences in unit costs. The main principles of the cost/benefit analyses are in legal acts and guidance is more detailed. Future co-financing of major road projects and Connecting Europe Facility projects is conditional upon a cost/benefit analysis, including a feasibility study, option analysis, demand analysis with traffic forecasts and modelling. Quality is checked by independent experts. There is an exchange of best practices related to traffic forecasts and specific assistance is provided to Member States (by JASPERS). |
The unit cost calculation exercise is not yet fully completed. Concerns remain about non-major projects which are fully designed, selected and implemented at Member State level. No EU-wide database with cost benchmarks. |
7 |
SR 17/2013 |
EU climate finance in the context of external aid |
The climate finance roadmap has been published. The Commission has issued guidelines for reporting and proposed a methodology for determining additionality. Commitment appropriations are displayed. An independent evaluation of the Global Climate Change Alliance is publicly available. The Climate Diplomacy Action Plan was adopted in 2015. Expert working groups have been set up and meet regularly. |
No indication whether the EU's 20 % spending target for development aid in climate action is being met. Independent evaluation only briefly assessed why most Member States did not choose to co-finance the Global Climate Change Alliance. |
8 |
SR 14/2013 |
EU direct financial support to the Palestinian Authority |
Links identified between the EU and the Palestinian Authority's action plan and EU support to Palestine. EU support is programmed on multiannual basis. The Results-Oriented Framework includes specific and time-bound indicators. Competitive tenders were used. Decision taken to discontinue the funding of civil servants' salaries and pensions in Gaza. Specific issues related to EU support have been raised at technical meetings with the Israeli authorities. |
Conditionality has not been applied systematically. No documentation on the implementation of the decision on salaries and pensions has yet been received. The Commission and EEAS have not prepared a detailed action plan of the steps Israel needs to take in order to enhance the effectiveness of EU support to Palestine, nor have they used the potential leverage offered by the framework of broader EU-Israeli cooperation. |
9 |
SR 13/2013 |
EU development assistance to Central Asia |
EU values are promoted through a more pragmatic and flexible approach. The number of sectors has been reduced. Estimates of necessary human resources (in person-years) are prepared. Budget support conditions are applied. Public finance management is monitored, anti-corruption measures are implemented. New programmes have been developed. Key performance indicators are reported and monitored. |
Reporting on administrative costs (human resources, equipment etc.) at regional or country level is lacking. Reporting is not available on actual versus planned spending and on objectives achieved at regional level. |
10 |
SR 9/2013 |
EU support for governance in the Democratic Republic of the Congo |
Improved programming focuses also on rural and infrastructure development. Local actors were involved in the development of the Environment programme, their needs are addressed. Political dialogue has been held. The EU has repeatedly stressed the importance of holding elections as required by the constitution. Improvements in the transparency of natural resources governance. Better governance, transparency and accountability have had positive effects on fraud and corruption. The Commission identifies main risks and proposes mitigating measures. The number of sectors targeted by EU aid is lower than in the previous period. Indicators are usually time-bound and more realistic. Programme adjustments are documented. Leaders have held meetings and issued joint statements. |
Commission does not earmark aid to support the electoral process. The political dialogue on presidential and legislative elections is still ineffective. No support defined in the National Indicative Programme for enforcing the external audit process and national oversight institutions. Lack of well-defined corruption indicators. Enforcement of anti-corruption laws absent from the progamme. Many important thematic groups are inactive. They also generally lack information on their missions, objectives, strategies, budgets, responsibilities and coordination among members. |
11 |
SR 4/2013 |
EU cooperation with Egypt in the field of Governance |
A limited number of human rights and democracy priorities identified, related dialogue resumed. Funding increased for the European Instrument for Democracy and Human Rights and the Civil Society Organisation. Coordination and proper distribution of funds between different instruments is ensured. A roadmap tailors Civil Society Organisation support, the Financial Regulation allows the procedure to be accelerated. Public Finance Management and the fight against corruption are emphasised in meetings. Conditionality has been applied: the Commission has suspended budget support operations in Egypt. |
|
12 |
SR 12/2012 |
Did the Commission and Eurostat improve the process for producing reliable and credible European statistics? |
The system of European statistics has been strengthened. Regulatory framework has been amended, recognising the importance of the Code of Practice. European Statistical Governance Advisory Board was involved in peer reviews, which are now publicly available. Guidelines and procedures are established for the EU statistical programme. Priorities are reviewed. Progress on the implementation of modernisation projects is regularly reported. Staff costs have been analysed to increase efficiency. Guidelines for procurement enhance competition. |
There is a need for transparent and objective procedures for recruiting and dismissing heads of statistical offices. Obstacles remain in the access to and effective use of data. Coordination of statistics and resources are areas of concern. Supervisory function has not been established to oversee verifications and inspections. |
13 |
SR 2/2013 |
Has the Commission ensured efficient implementation of the seveth framework programme for research? |
Horizon 2020 has introduced more flexibility in the reporting of costs. Streamlined requirements for applicants. More coherence in Framework Programme 7 management via the Common Support Centre. Integrated IT workflows, indicators, common audit service. Joint Technology Initiatives framework is more flexible. |
The EIT is not covered by the Common Support Centre and its rules are not consistently harmonised with the Horizon 2020 framework, which leads to inefficiency for its beneficiaries. The Commission has not implemented effective measures to guarantee the additionality of the successor to the Risk Sharing Finance Facility. This was confirmed in November 2016 by an independent evaluation which expressed concerns about the non-additionality of 28 % of projects and recommended establishing clear selection criteria to guarantee additionality. |
The Commission's replies
SR 12/2012:
An appropriate legal framework and necessary safeguards exist to ensure that appointment and dismissal procedures concerning Eurostat's Director-General are transparent, ensuring full compliance with the principle of independence as foreseen in Regulation (EC) No 223/2009 in this respect.
The transparency has been confirmed by the recent procedure concerning the post of Director-General of Eurostat which was open to external applicants. In addition, ESGAB's independent reporting on the implementation of the Code of Practice by the Commission (Eurostat) is best served by it not being directly involved in the appointment of Eurostat's Director-General. Finally, the inter-institutional relations between the European Parliament, the Council and the Commission are well established, for instance as regards legislative procedure but also by making the Commission as a whole accountable before the Parliament. The annual statistical dialogue foreseen in Regulation (EC) No 223/2009 aims at ensuring appropriate involvement of, and information to, the Parliament on statistical matters, including by foreseeing that the newly appointed Director-General of Eurostat shall appear before the relevant committee of the Parliament immediately after appointment.
ANNEX 3.3
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR PERFORMANCE ISSUES
Year |
Court recommendation |
Court's analysis of the progress made |
Commission reply |
|||||
Fully implemented |
Being implemented |
Not implemented |
Not applicable |
Insufficient evidence |
||||
In most respects |
In some respects |
|||||||
2013 |
The Commission should: |
|
|
|
|
|
|
|
Recommendation 1: on the next occasion that the Financial Regulation is reviewed, rationalise its reporting framework for performance |
|
|
X |
|
|
|
|
|
Recommendation 2: ensure that the evaluation report presents a summary account that brings together all the information available on the progress towards Europe 2020 targets in order to provide the reader with a clear overview of the achievements made |
|
|
X |
|
|
|
|
|
Recommendation 3: further develop its performance managing and reporting system so that it allows the Commission to take responsibility for sound financial management as well as the EU budget's contribution to policy achievements in the annual declarations of assurance by the directors-general. |
|
|
|
X |
|
|
|
CHAPTER 4
Revenue
TABLE OF CONTENTS
Introduction | 4.1-4.6 |
Brief description of revenue | 4.2-4.5 |
Audit scope and approach | 4.6 |
Regularity of transactions | 4.7 |
Examination of annual activity reports and other elements of internal control systems | 4.8-4.20 |
Overview of GNI and VAT reservations, and TOR open points | 4.9 |
The impact of globalisation on national accounts under ESA 2010 | 4.10-4.13 |
Management of TOR | 4.14-4.18 |
The Commission’s calculations of EEA/EFTA contributions and of Member States’ contributions following the entry into force of the 2014 ORD | 4.19 |
Annual activity reports and other governance arrangements | 4.20 |
Conclusion and recommendations | 4.21-4.23 |
Conclusion | 4.21 |
Recommendations | 4.22-4.23 |
Annex 4.1 — |
Results of transaction testing for revenue |
Annex 4.2 — |
Numbers of outstanding GNI reservations, VAT reservations and TOR open points by Member State at 31.12.2016 |
Annex 4.3 — |
Follow-up of previous recommendations for revenue |
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INTRODUCTION |
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Box 4.1 — Revenue — 2016 Breakdown
(billion euro)
Total revenue 2016 (1)
144,7 |
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Brief description of revenue |
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Box 4.2 — Impact of the new own-resources decision on the amount raised from individual own resources in 2014 and 2015
(billion euro)
Source: 2016 consolidated accounts of the European Union. |
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Box 4.3 — Impact of the new own-resources decision on individual Member States’ contributions in 2014 and 2015
(billion euro)
Source: 2016 consolidated accounts of the European Union. |
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Audit scope and approach |
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REGULARITY OF TRANSACTIONS |
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EXAMINATION OF ANNUAL ACTIVITY REPORTS AND OTHER ELEMENTS OF INTERNAL CONTROL SYSTEMS |
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Overview of GNI and VAT reservations, and TOR open points |
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The impact of globalisation on national accounts under ESA 2010 |
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Box 4.4 — Relocations of R&D assets: the impact on Ireland’s national accounts In September 2016, Ireland informed the Commission that its GNI had increased by 23,9 % (+39,4 billion euro) in 2015. This was caused by a small number of multinational companies transferring large amounts of intangible assets to Ireland. These mainly consisted of capitalised R&D expenditure, which is recorded in the balance sheet as intellectual property products (IPPs). The specifications which make up these IPPs are used as a basis for contract manufacturing in various countries of the world. In addition, when R&D assets are relocated, the compilation of GNI is complicated by the following factors:
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Management of TOR |
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The Commission’s calculations of EEA/EFTA contributions and of Member States’ contributions following the entry into force of the 2014 ORD |
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Annual activity reports and other governance arrangements |
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CONCLUSION AND RECOMMENDATIONS |
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Conclusion |
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Recommendations |
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The Commission accepts the recommendation. Work is already under way to encourage Member States to raise the priority of this work and, in particular, to profile large multinational enterprises. The Commission will provide guidance and, if necessary, reservations will be set. Please see also the common reply to paragraphs 4.11, 4.12 and 4.13. |
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|
The Commission accepts the recommendation. R&D is given high attention in the current verification round. The implementation of the relevant ESA 2010 rules is being checked for all Member States in detail, including the impact of globalisation. |
(1) The initial calculation is based upon forecast GNI. Differences between forecast and final GNI are adjusted in subsequent years, and affect the distribution of own resources between Member States rather than the total amount collected.
(2) Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the EU (OJ L 168, 7.6.2014, p. 105).
(3) The Member States’ contributions were recalculated taking into account the following:
— |
A reduced VAT call rate of 0,15 % applies to Germany, the Netherlands, and Sweden, while the call rate for the other Member States remains 0,3 %. |
— |
Lump-sum reductions in GNI-based payments were given to Austria, Denmark, the Netherlands and Sweden. |
— |
The retention rate of the TOR collected was reduced to 20 % (from the previous rate of 25 %). |
— |
For own-resources purposes, GNI is calculated according to ESA 2010 (previously, ESA 95 was used). See footnote 10. |
(4) A recovery order is a document in which the Commission records amounts that are due to it.
(5) Our starting point was the agreed GNI data and the harmonised VAT base prepared by the Member States. We did not directly test the statistics and data produced by the Commission and the Member States.
(6) Iceland, Liechtenstein and Norway contribute to the EU budget under the EEA agreement. Switzerland also contributes to the EU budget under different agreements.
(7) Our audit used data from the visited Member States’ TOR accounting systems. We could not audit undeclared imports or those that had escaped customs surveillance.
(8) These three Member States were selected on a rota basis, taking into consideration the size of their contribution.
(9) Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (OJ L 168, 7.6.2014, p. 39) and Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union (OJ L 168, 7.6.2014, p. 29).
(10) ESA (European system of national and regional accounts) 2010 is the newest internationally compatible EU accounting framework. It is used to create a systematic and detailed description of an economy. See Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union (OJ L 174, 26.6.2013, p. 1).
(11) Council Regulation (EC) No 2223/1996 of 25 June 1996 on the European system of national and regional accounts in the Community (OJ L 310, 30.11.1996, p. 1).
(12) The change in the national accounts rules (from ESA 95 to ESA 2010) on the treatment of R&D led to an increase in Member States’ GNI. According to a recent estimate made by the Commission, the average increase in stated GNI as a result of these changes was 2,0 %.
(13) This data is subject to revision for four years, after which it becomes time-barred, unless reservations are set by the Commission.
(14) See paragraph 4.18 of the 2015 annual report, paragraph 4.22 of the 2014 annual report, paragraph 2.16 of the 2013 annual report, and paragraphs 2.32 and 2.33 of the 2012 annual report.
(15) See paragraphs 4.15 and 4.16 of the 2015 annual report, paragraph 4.19 of the 2014 annual report, paragraph 2.14 of the 2013 annual report, and paragraph 2.31 of the 2012 annual report.
(16) At the ACOR meeting held on 7 July 2016, the Commission presented information on the Member States’ reports for 2015 under Article 17(5) of the own-resources Regulation (Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system of the Communities’ own resources (OJ L 130, 31.5.2000, p. 1)).
(17) Belgium, Estonia, Italy, Portugal, Romania and Slovenia.
(18) We recommended in previous reports (see recommendations 3 and 4 of the 2013 annual report, and recommendation 3 of the 2014 annual report) that the Commission improve the existing guidance on post-clearance audits and encourage its implementation by Member States. Although the Commission has made some progress in this area, our recommendations have not yet been fully implemented.
(19) See paragraph 4.20 of the 2015 annual report.
(20) We chose our 2013 report for this year’s follow-up exercise as, typically, enough time should have elapsed for the Commission to have implemented our recommendations.
(1) This amount represents the EU’s budget revenue. The amounts in the statement of financial performance are presented differently, using the accrual-based system. As a result of using this system, the EU’s revenue is stated to be 146,2 billion euro in the statement of financial performance.
Source: 2016 consolidated accounts of the European Union.
ANNEX 4.1
RESULTS OF TRANSACTION TESTING FOR REVENUE
|
2016 |
2015 |
|
|
|||
SIZE AND STRUCTURE OF THE SAMPLE |
|||
|
|||
Total transactions |
55 |
55 |
|
|
|||
ESTIMATED IMPACT OF QUANTIFIABLE ERRORS |
|||
|
|
|
|
Estimated level of error |
0,0 % |
0,0 % |
|
|
|
|
|
|
Upper error limit (UEL) |
0,0 % |
|
|
Lower error limit (LEL) |
0,0 % |
|
ANNEX 4.2
NUMBERS OF OUTSTANDING GNI RESERVATIONS, VAT RESERVATIONS AND TOR OPEN POINTS BY MEMBER STATE AT 31.12.2016
Member State |
GNI reservations (situation at 31.12.2016) |
VAT reservations (situation at 31.12.2016) |
TOR ‘open points’ (situation at 31.12.2016) |
Belgium |
0 |
4 |
29 |
Bulgaria |
0 |
2 |
4 |
Czech Republic |
0 |
0 |
6 |
Denmark |
0 |
3 |
19 |
Germany |
0 |
8 |
8 |
Estonia |
0 |
1 |
2 |
Ireland |
0 |
12 |
12 |
Greece |
2 |
8 |
26 |
Spain |
0 |
1 |
26 |
France |
0 |
5 |
26 |
Croatia |
0 |
1 |
0 |
Italy |
0 |
4 |
18 |
Cyprus |
0 |
1 |
5 |
Latvia |
0 |
2 |
2 |
Lithuania |
0 |
0 |
0 |
Luxembourg |
0 |
10 |
1 |
Hungary |
0 |
1 |
8 |
Malta |
0 |
0 |
2 |
Netherlands |
0 |
5 |
46 |
Austria |
0 |
10 |
6 |
Poland |
0 |
4 |
8 |
Portugal |
0 |
0 |
20 |
Romania |
0 |
2 |
16 |
Slovenia |
0 |
0 |
4 |
Slovakia |
0 |
0 |
2 |
Finland |
0 |
4 |
10 |
Sweden |
0 |
3 |
7 |
United Kingdom |
0 |
4 |
22 |
TOTAL 31.12.2016 |
2 |
95 |
335 |
TOTAL 31.12.2015 |
55 |
85 |
325 |
GNI process-specific reservations are not included in the table. Source: European Court of Auditors. |
ANNEX 4.3
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR REVENUE
Year |
Court recommendation |
Court's analysis of the progress made |
Commission reply |
|||||
Fully implemented |
Being implemented |
Not implemented |
Not applicable |
Insufficient evidence |
||||
In most respects |
In some respects |
|||||||
2013 |
Recommendation 1: The Commission should encourage Member States to provide more clarification on the methodologies they use for the compilation of data in the area of the non-observed economy and promote harmonisation between Member States in this area. |
X |
|
|
|
|
|
|
Recommendation 2: The Commission should put in place and closely monitor a detailed action plan with clear milestones to address the problems in the compilation of Greece’s national accounts. |
X |
|
|
|
|
|
|
|
Recommendation 3: The Commission should establish minimum risk analysis standards for the customs post-clearance audits, including building upon the information in the existing database of imports, in order to allow Member States to better target risky importers. |
|
X |
|
|
|
|
|
|
Recommendation 4: The Commission should encourage Member States to use the existing guidance, and monitor, the implementation of Member States’ post-clearance audits. |
|
X |
|
|
|
|
The Commission will continue to assess Member States' reports made under Article 6 of Regulation (EU, Euratom) No 608/2014 and will impress on them the need to perform proper controls, including post-clearance audits. In its traditional own resources inspections, the Commission always recommends to Member States that they follow the Commission's Customs Audit Guide. In its inspections in 2017 the Commission has been requesting the Member States to confirm that they use the Guide in the preparation and implementation of their post clearance controls. The recommendation refers to a continuous process that the Commission keeps pursuing. |
|
2013 |
Recommendation 5: The Commission should encourage Member States to correctly use A and B accounts and to ensure that they are demonstrably complete and correct. |
|
X |
|
|
|
|
Under the current legal framework the carrying out of controls is a Member State competence. In its inspections the Commission encourages Member States to correctly use the A and B accounts, and will continue to do so. It will continue to examine the use of the A and B accounts in the course of its inspections and will request the Member States to ensure that they are complete and correct. |
CHAPTER 5
‘Competitiveness for growth and jobs’
TABLE OF CONTENTS
Introduction | 5.1-5.6 |
Brief description of ‘Competitiveness for growth and jobs’ | 5.2-5.5 |
Audit scope and approach | 5.6 |
Part 1 — Regularity of transactions | 5.7-5.27 |
The main source of quantifiable errors is the reimbursement of ineligible costs declared by beneficiaries | 5.9-5.11 |
Most non-quantifiable errors concerned research and innovation projects | 5.12 |
Horizon 2020: continuing simplification but further efforts required | 5.13-5.19 |
Annual activity reports corroborated our findings and conclusions, but we found different approaches in their presentation of error rates and amounts at risk | 5.20-5.23 |
Common Audit Service: significant efforts needed to improve planning, monitoring and reporting processes for Horizon 2020 | 5.24-5.27 |
Conclusion and recommendations | 5.28-5.31 |
Conclusion | 5.28-5.29 |
Recommendations | 5.30-5.31 |
Part 2 — Performance issues in research and innovation projects | 5.32-5.35 |
Most projects achieved their expected outputs and results | 5.34-5.35 |
Annex 5.1 — |
Results of transaction testing for ‘Competitiveness for growth and jobs’ |
Annex 5.2 — |
Overview of errors with an impact of at least 20 % for ‘Competitiveness for growth and jobs’ |
Annex 5.3 — |
Follow-up of previous recommendations for ‘Competitiveness for growth and jobs’ |
|
|
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INTRODUCTION |
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||||||||||
Box 5.1 — MFF sub-heading 1a — ‘Competitiveness for growth and jobs’ — 2016 breakdown (billion euro)
|
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|
||||||||||
Brief description of ‘Competitiveness for growth and jobs’ |
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Audit scope and approach |
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PART 1 — REGULARITY OF TRANSACTIONS |
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Box 5.2 — Most errors occurred in research and innovation projects
Source: European Court of Auditors. |
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The main source of quantifiable errors is the reimbursement of ineligible costs declared by beneficiaries |
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Most non-quantifiable errors concerned research and innovation projects |
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Horizon 2020: continuing simplification but further efforts required |
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Annual activity reports corroborated our findings and conclusions, but we found different approaches in their presentation of error rates and amounts at risk |
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Common Audit Service: significant efforts needed to improve planning, monitoring and reporting processes for Horizon 2020 |
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CONCLUSION AND RECOMMENDATIONS |
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Conclusion |
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Recommendations |
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The Commission accepts the recommendation. Some Simplified Cost Options (SCOs) are already in use in Horizon 2020, and the Commission is continually considering how they can be extended. |
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The Commission accepts the recommendation. The specific circumstances of each DG and each spending programme may always require some fine-tuning of the approach to calculating error rates. However, the Commission is continually working on increasing consistency in these calculations. |
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The Commission accepts the recommendation and has already set out an action plan which is being implemented. |
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PART 2 — PERFORMANCE ISSUES IN RESEARCH AND INNOVATION PROJECTS |
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Most projects achieved their expected outputs and results |
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It should be noted that dissemination often occurs after the end of the project, for example due to the time required to publish/file a patent. |
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(1) We also performed a limited review of the calculation of the error rates published in the annual activity reports of the Directorate-General for Communication Networks, Content and Technology (DG CNECT), the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW), the European Research Council Executive Agency (ERCEA) and the Research Executive Agency (REA).
(2) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 2,1 % and 6,1 % (the lower and upper error limits respectively).
(3) The errors ranged from 1 % to 20 % of the value examined and concerned projects under the Trans-European Networks-Transport programme (2 cases), the Competitiveness and Innovation Programme (2 cases), the Lifelong Learning Programme (2 cases), the Connecting Europe Facility (1 case), and an annual subsidy payment to the European Institute of Innovation and Technology (1 case).
(4) In certain cases, for example cost statements for Seventh Research Framework Programme projects where the EU contribution exceeds 375 000 euro, independent auditors must certify that the declared costs are eligible.
(5) Information included in supporting documentation and databases or emerging from standard cross-checks and (other) mandatory checks.
(6) 25 transactions contained both quantifiable and non-quantifiable errors.
(7) See also the 2012 annual report, paragraph 8.18 and paragraph 8.42 (recommendation 2); and the 2013 annual report, paragraph 8.12.
(8) See the 2014 annual report, paragraph 5.12.
(9) See for example the 2015 annual report, paragraph 5.13.
(10) See the 2015 annual report, paragraph 5.23.
(11) The 2014 annual report, paragraphs 5.29 to 5.31.
(12) Minimum/maximum error rates of 0 %/0,5 %, 0 %/0,6 %, 0 %/1,99 % and 0 %/2 % respectively.
(13) See 2015 annual report, paragraph 5.26.
(14) We chose our 2013 report for this year’s follow-up exercise as, typically, enough time should have elapsed for the Commission to have implemented our recommendations.
(15) We assessed performance of collaborative projects involving multiple participants and excluded transactions such as mobility payments to individual researchers.
(16) In two of these four cases, reported progress was also only partly in line with the objectives.
(17) In one of these six cases, reported progress was also only partly in line with the objectives.
(18) In line with the harmonised definition of underlying transactions (for details see Annex 1.1 , paragraph 10).
Source: 2016 consolidated accounts of the European Union.
ANNEX 5.1
RESULTS OF TRANSACTION TESTING FOR ‘COMPETITIVENESS FOR GROWTH AND JOBS’
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2016 |
2015 |
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SIZE AND STRUCTURE OF THE SAMPLE |
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Total transactions |
150 |
150 |
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ESTIMATED IMPACT OF QUANTIFIABLE ERRORS |
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Estimated level of error |
4,1 % |
4,4 % |
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Upper error limit (UEL) |
6,1 % |
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Lower error limit (LEL) |
2,1 % |
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ANNEX 5.2
OVERVIEW OF ERRORS WITH AN IMPACT OF AT LEAST 20 % FOR ‘COMPETITIVENESS FOR GROWTH AND JOBS’
Introduction
Applying the general audit methodology set out in Annex 1.1 , we tested a representative sample of transactions to estimate the level of irregularity within the population for this MFF sub-heading. The errors we detected in testing do not constitute an exhaustive list — either of individual errors or of possible error types. The findings outlined below concerning errors with an impact of at least 20 % of the transaction value examined are presented by way of example (1). These errors were found in transactions worth between 155 000 euro and 1,3 million euro, with a median value (2) of 273 000 euro.
Examples of error
Seventh Research Framework Programme projects
Example 1 — declared costs not covered by grant agreement
The beneficiary (a non-EU public body participating in a project to develop protective coatings for ships) declared costs that were actually incurred by another entity which was not part of the grant agreement. The ineligible costs amounted to 100 % of the total costs examined.
Example 2 — excessive personnel costs declared
The amounts declared for reimbursement could not be reconciled to the accounts of the beneficiary (a non-profit research organisation participating in a collaborative project on the development of secure supply-chain systems), and the beneficiary was not able to provide all underlying calculations used to prepare the cost statement. We found that the hourly rate used to calculate salary costs was excessively high. The ineligible costs amounted to 81 % of the total costs examined.
Example 3 — ineligible indirect costs and bonus payments
The beneficiary (a public body participating in a project on the development of a cloud-based internet infrastructure for services) claimed personnel costs which included ineligible bonus payments. In addition, the beneficiary declared actual indirect costs, but did not satisfy the criterion of having an analytical accounting system identifying the project-related indirect costs. The ineligible costs amounted to 51 % of the total costs examined.
Example 4 — incorrectly calculated personnel costs and other ineligible costs
The beneficiary (a non-EU public body participating in a project in the field of biofuels technology) calculated personnel costs incorrectly and also charged costs without sufficient evidence of their relation to the project. The ineligible costs amounted to 38 % of the total costs examined.
Example 5 — excessive personnel costs
The beneficiary (an SME participating in a project to develop coordinated solutions to EU health emergencies) declared excessively high personnel costs and also charged amounts for personnel costs incurred outside the period of the cost statement. The ineligible costs amounted to 37 % of the total costs examined.
Example 6 — time recording discrepancies
We identified numerous discrepancies in the timesheets underlying the personnel costs declared by the beneficiary (a public body participating in a project to develop energy-efficient systems based on internet technologies). The ineligible costs amounted to 21 % of the total costs examined.
(1) These errors account for more than half of the overall estimated level of error for ‘Competitiveness for growth and jobs’.
(2) I.e. half of all errors with an impact of at least 20 % were found in transactions worth less than 273 000 euro, and the remainder in transactions worth more than this amount.
ANNEX 5.3
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR ‘COMPETITIVENESS FOR GROWTH AND JOBS’
Year |
Court recommendation |
Court's analysis of the progress made |
Commission reply |
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Fully implemented |
Being implemented |
Not implemented |
Not applicable |
Insufficient evidence |
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In most respects |
In some respects |
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2013 |
The Commission should: |
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Recommendation 1: extend and intensify its communication campaign to raise awareness among beneficiaries and independent auditors about the eligibility rules for research spending under FP7; |
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X |
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The Communication campaign was initially related to FP7 and covered a full range of participants (around 4 500 ). The Commission is now focusing on providing guidance for Horizon 2020. Beneficiaries and their auditors are attending these meetings. Additionally, guidance related to all material aspects of the grant management is available to all stakeholders through the internet. |
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Recommendation 2: across the policy group, make its control activities more risk-driven, focusing checks on high-risk beneficiaries (for example entities with less experience of European funding) and reducing the burden of checks on less risky beneficiaries; |
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X |
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The Commission's Control Strategies for the current funding programmes are designed to include more risk-based controls. |
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Recommendation 3: for the new 2014-2020 programmes for research and other internal policies, provide timely, consistent and clear guidance to beneficiaries and managing authorities in respect of the revised eligibility and control requirements. |
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For the current funding programmes the Commission has provided considerable guidance to beneficiaries on all the important aspects related to the implementation of the programme. The information is being updated regularly by the Commission. It has been distributed via internet, but also during publicity campaigns, meetings with Member States and in ad hoc meetings with participants and their auditors. |
CHAPTER 6
‘Economic, social and territorial cohesion’
CONTENTS
Introduction | 6.1-6.6 |
Brief description of ‘Economic, social and territorial cohesion’ | 6.2-6.4 |
Audit scope and approach | 6.5-6.6 |
Part 1 — Regularity of transactions | 6.7-6.37 |
Results of transaction testing | 6.7-6.19 |
Use of financial instruments in shared management in the 2007-2013 programming period | 6.20-6.25 |
Annual activity reports of the Commission and other governance issues | 6.26-6.27 |
Commission's assurance for the 2007-2013 programming period | 6.28-6.29 |
Commission's assurance for the 2014-2020 programming period | 6.30-6.37 |
Conclusion and recommendations | 6.38-6.41 |
Conclusion | 6.38-6.39 |
Recommendations | 6.40-6.41 |
Part 2 — Assessment of project performance | 6.42-6.57 |
Assessment of performance system design | 6.44-6.50 |
Assessment of project performance | 6.51-6.55 |
Conclusion | 6.56-6.57 |
Annex 6.1 — |
Results of transaction testing for ‘Economic, social and territorial cohesion’ |
Annex 6.2 — |
Overview of the results of transaction testing for each Member State |
Annex 6.3 — |
Overview of errors with an impact of at least 20 % for ‘Economic, Social and Territorial Cohesion’ |
Annex 6.4 — |
Follow-up of previous recommendations for ‘Economic, social and territorial cohesion’ |
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INTRODUCTION |
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Box 6.1 — MFF sub-heading 1b ‘Economic, social and territorial cohesion’ — 2016 breakdown (billion euro)
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Brief description of ‘Economic, social and territorial cohesion’ |
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Audit scope and approach |
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PART 1 — REGULARITY OF TRANSACTIONS |
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Results of transaction testing |
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Box 6.2 — ‘Economic, social and territorial cohesion’ — Breakdown of the estimated level of error
Source: European Court of Auditors. |
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Ineligible expenditure |
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Ineligible projects |
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Infringements of internal market rules |
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Public procurement |
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State aid |
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Information not always used appropriately |
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Use of financial instruments in shared management in the 2007-2013 programming period |
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Contributions were under-used and instruments did not achieve their full potential |
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Box 6.3 — Cumulative disbursement rates for 2011-2015 in ERDF and ESF (billion euro)
Source: European Court of Auditors based on the Commission’s implementation report. |
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Box 6.4 — Disbursement of financial instruments in Cohesion at 31 December 2015
Source: European Court of Auditors based on Commission’s guidance note EGESIF_16-0011-00, 20 September 2016. |
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Incomplete or inaccurate reporting on financial instruments by Member States |
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Annual activity reports of the Commission and other governance issues |
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Commission’s assurance for the 2007-2013 programming period |
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Commission’s assurance for the 2014-2020 programming period |
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Comments on the start of the 2014-2020 period |
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Commission’s new assurance model for Cohesion spending |
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Comments on the information provided in the AARs for the 2014-2020 period |
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6.34. |
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Clarification required for the definition of the audit population of financial instruments and state aid advances |
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Consistency between information in the AARs and our own findings |
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Box 6.5 — Overview of information in the AARs for the 2007-2013 period
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CONCLUSION AND RECOMMENDATIONS |
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Conclusion |
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Recommendations |
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The Commission accepts this recommendation and is already taking into account, among others, the particular areas pointed out by the Court concerning financial instruments, State Aid and major projects during its review of the 2007-2013 closure packages currently underway. The Commission recalls that it is the responsibility of the Member States to notify major projects to the Commission. |
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The Commission accepts this recommendation. |
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The Commission accepts this recommendation, as it fully agrees to consider alternative design and delivery mechanisms including the one recommended by the ECA, but it cannot commit yet to a detailed position concerning its proposals for the post 2020 ESI funds. It also notes that the proposed amendment of the Common Provisions regulation presented and adopted by the Commission end of 2016 (so called Omnibus), if adopted by other institutions, would already allow under certain conditions to move away from the reimbursement of costs in favour of payments based on projects' performance. The presentation of timely legislative proposals for Cohesion policy is a priority for the Commission. The timing, however, is dependent on the adoption of the proposal for the MFF Regulation. The Commission's proposal for the cohesion policy legislative package post 2020 will be presented subsequently. The Commission will work closely with the co-legislators with a view to a timely adoption and entry into force of the legislative framework. |
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PART 2 — ASSESSMENT OF PROJECT PERFORMANCE |
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Assessment of performance system design |
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One third of the projects examined were covered by a performance measurement system with output and result indicators linked to the OP objectives |
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Assessment of project performance |
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Box 6.6 — Assessment of project performance
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88 of the 90 projects with both output and result indicators met their objectives at least partially |
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66 of the 70 projects where only output indicators were defined and assessed met their output objectives at least partially |
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Conclusion |
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(1) These objectives are stated in Articles 174 to 178 of the Treaty on the Functioning of the European Union (TFEU).
(2) For both the 2007-2013 and 2014-2020 programming periods, the CF is of relevance to Bulgaria, the Czech Republic, Estonia, Greece, Croatia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Portugal, Romania, Slovenia and Slovakia. Spain was also eligible during 2007-2013, but only for transitional support.
(3) For the 2007-2013 programming period the Commission approved 440 OPs (322 ERDF/CF and 118 ESF); for 2014-2020 it approved 392 OPs (most covering more than one fund).
(4) The sample was drawn from all clearings and payments with the exception of advances. The 180 transactions came from 54 interim payments for 2007-2013, and related to 92 ERDF projects, 36 CF projects, 40 ESF projects, 11 ERDF financial instruments and one ESF financial instrument.
(5) Bulgaria, the Czech Republic, Germany, Ireland, Greece, Spain, Italy, Hungary, Malta, Poland, Portugal, Romania, Slovakia, the United Kingdom and the Greece-Bulgaria ETC.
(6) Bulgaria, Germany, Greece, Italy, Poland, Portugal, Slovakia and the United Kingdom.
(7) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 2,2 % and 7,4 % (the lower and upper error limits respectively).
(8) See also the annual reports for 2012 (paragraph 6.23), 2013 (paragraph 6.16), 2014 (paragraph 6.29) and 2015 (paragraph 6.15).
(9) Article 14(4) of Regulation (EU) No 1304/2013 of the European Parliament and of the Council of 17 December 2013 on the European Social Fund (OJ L 347, 20.12.2013, p. 470); Article 68 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council (OJ L 347, 20.12.2013, p. 376).
(10) See Articles 39 and 41 of Council Regulation (EC) No 1083/2006 (OJ L 210, 31.7.2006, p. 25). A major project is an operation comprising a series of works, activities or services, and which is intended by itself to accomplish an individual task of a precise economic or technical nature. It will also have clearly identified goals and a total cost exceeding 50 million euro.
(11) This amount represents the total expenditure for the contracts awarded, part of which was certified by the expenditure declarations which we examined.
(12) The contract value of around 49 % of the 121 procedures was above the threshold for application of the EU public procurement rules (enacted in national law), and 33 concerned the ERDF/CF and one the ESF.
(13) Directives of 26 February 2014 on public procurement (2014/24/EU), the award of concession contracts (2014/23/EU) and procurement by entities operating in the water, energy, transport and postal services sectors (2014/25/EU) (OJ L 94, 28.3.2014).
(14) The Member States that had enacted all three directives by that date are the Czech Republic, Denmark, Germany, Greece, France, Italy, Ireland, Hungary, Cyprus, Latvia, Malta, the Netherlands, Poland, Romania, Slovakia, Sweden and the United Kingdom.
(15) 2015 annual report, paragraph 6.24. Eight Member States had transposed all three directives as of May 2016.
(16) See Article 258 TFEU.
(17) Nine ERDF/CF (including two JESSICA financial instruments) and two ESF (including one financial instrument).
(18) In the form of supporting documentation, including standard cross-checks, information in databases and the results of mandatory checks.
(19) Commission Decision C(2015) 2771.
(20) See the 2014 annual report, paragraph 6.52, and the 2015 annual report, paragraph 6.45.
(21) European Commission, ‘Summary of data on the progress made in financing and implementing financial instruments reported by the managing authorities in accordance with Article 67(2)(j) of Regulation (EC) No 1083/2006, situation as at 31 December 2015’, EGESIF 16-0011-00, 20 September 2016. The figures for 2016 will be published by 1 October 2017.
(22) 2015 annual report, paragraph 6.42.
(23) Financial instruments offer Member States the possibility of using the funds more than once — i.e. all returns on investments or loans, including profits, are ploughed back into the same activities.
(24) By the end of April of every year, each DG prepares an annual activity report for the previous year. This is submitted to the European Parliament and the Council and then published. The report is accompanied by a statement from the director-general indicating whether the budget under his or her responsibility has been implemented in a legal and regular way — essentially, whether the level of irregularities is below the Commission’s 2 % materiality threshold. For OPs where this is not the case, the director-general may issue a full or partial reservation.
(25) In its AAR the Commission refers to the ‘residual risk rate’ when dealing with the closure of the 2007-2013 programming period and to the ‘residual total error rate’ when dealing with the 2014-2020 programming period. These two rates are conceptually equal but apply to different time frames. In this chapter we refer to both as ‘residual rate(s)’.
(26) Except for Croatia, which has until 31 March 2018.
(27) Guidelines on the closure of the OPs, Commission Decision C(2015) 2771, Annex VI.
(28) Special report No 36/2016: ‘An assessment of the arrangements for closure of the 2007-2013 cohesion and rural development programmes’.
(29) Special report No 4/2017: ’Protecting the EU budget from irregular spending: The Commission made increasing use of preventive measures and financial corrections in Cohesion during the 2007-2013 period’.
(30) ERDF, CF and ESF/YEI.
(31) We noted the issue of delays in special report No 2/2017: ‘The Commission’s negotiation of 2014-2020 Partnership Agreements and programmes in Cohesion’.
(32) Article 139(5) of Regulation (EU) No 1303/2013.
(33) This includes 391 ESIF OPs and 28 FEAD OPs.
(34) Including 0,7 billion euro in up-front endowments to financial instruments.
(35) This includes 61 ESIF OPs and eight FEAD OPs.
(36) EGESIF_15-0002-03 of 09/10/2015.
(37) See also the 2015 annual report, paragraphs 6.60 to 6.63.
(38) Article 41 of Regulation (EU) No 1303/2013.
(39) Article 42(1) of Regulation (EU) No 1303/2013.
(40) The error rates reported by audit authorities for year n relate to expenditure certified to the Commission in year n-1. The Court’s error rates for year n relate to expenditure paid by the Commission in year n.
(41) We chose our 2013 report for this year’s follow-up exercise as, typically, enough time should have elapsed for the Commission to have implemented our recommendations.
(42) Proposal for a Regulation (EC) on the financial rules applicable to the general budget of the Union, COM(2016) 605 final, 14.9.2016.
(43) EGESIF_15-0002-03 of 09/10/2015.
(44) See the 2013 annual report, paragraph 10.10.
(45) See also the 2014 annual report, paragraphs 6.80 to 6.86, and the 2015 annual report, paragraphs 6.77 to 6.89.
(46) Project applications, grant agreements, contracts and/or co-financing decisions.
(47) Article 22(6) and (7) and Article 127 of Regulation (EU) No 1303/2013.
(48) Article 142(1) of Regulation (EU) No 1303/2013.
(49) These four projects were in Ireland.
(50) The Slovakian OP and the ETC OP for Greece/Bulgaria were the only two programmes in which project and OP output and result objectives were mutually consistent.
(51) Annex to the Commission Decision amending Decision C(2013) 1573 on the approval of the guidelines on the closure of operational projects, C(2015) 2771 final 30.4.2015, paragraph 3.5.
(52) See Special Report No 2/2017: ‘The Commission’s negotiation of 2014-2020 Partnership Agreements and programmes in Cohesion’ (paragraphs 149 to 151); opinion No 1/2017 concerning the proposal for a revision of the ‘Financial Regulation’ (OJ C 91, 23.03.2017), paragraphs 147 and 148.
(53) In line with the harmonised definition of underlying transactions (for details see Annex 1.1 , paragraph 10).
(54) This figure includes contributions to financial instruments under shared management.
Source: 2016 consolidated accounts of the European Union.
ANNEX 6.1
RESULTS OF TRANSACTION TESTING FOR ‘ECONOMIC, SOCIAL AND TERRITORIAL COHESION’
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2016 |
2015 |
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SIZE AND STRUCTURE OF THE SAMPLE |
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Total transactions |
180 |
223 |
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ESTIMATED IMPACT OF QUANTIFIABLE ERRORS |
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Estimated level of error |
4,8 % |
5,2 % |
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Upper error limit (UEL) |
7,4 % |
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Lower error limit (LEL) |
2,2 % |
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ANNEX 6.2
OVERVIEW OF THE RESULTS OF TRANSACTION TESTING FOR EACH MEMBER STATE
ANNEX 6.3
OVERVIEW OF ERRORS WITH AN IMPACT OF AT LEAST 20 % FOR ‘ECONOMIC, SOCIAL AND TERRITORIAL COHESION’
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Introduction |
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Applying the general audit methodology set out in Annex 1.1 , we tested a representative sample of transactions to estimate the level of irregularity within the population for this MFF heading. The errors we detected in testing do not constitute an exhaustive list — either of individual errors or of possible error types. The findings outlined below concerning errors with an impact of at least 20 % of the transaction value examined are presented by way of example. These errors were found in transactions worth between 74 000 euro and 10,3 million euro, with a median of 0,9 million euro (1). |
The Commission takes note of the ECA's comment in annex 6.2 that the overview of ECA transactions is not a guide to the relative level of error in the Member States in the sample. The Commission points out that detailed information on the Commission's and the Member States' audit results are presented for each Member State in the Annual Activity Reports and their technical annexes of the Commission departments implementing EU funds in shared management. The Commission will follow up the cases identified by the ECA and will propose action as it deems necessary. |
Examples of error |
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Ineligible expenditure |
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Example 1 — Several breaches of EU and national eligibility rules |
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The beneficiary for an ERDF-funded research project in Spain infringed several EU and national eligibility rules: direct costs were incorrectly included in the calculation of indirect costs, and recoverable VAT and an erroneous salary amount were wrongly declared for co-financing. Moreover, some expenditure was not substantiated by supporting documents. |
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We found similar cases (quantified up to or above 20 %) in three other ERDF projects in Spain. |
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Example 2 — Recoverable VAT declared as eligible for EU co-financing |
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In Poland, a local authority receiving CF funding for a tram project declared VAT as eligible expenditure. However, the VAT paid on new infrastructure which the public will be charged to use is in fact recoverable and thus ineligible for co-financing. |
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Example 3 — No calculation of the funding gap for revenue-generating projects, and ineligible VAT |
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A Bulgarian beneficiary received ERDF funding to purchase the equipment which it used for educational purposes. When calculating the amount of eligible expenditure, the beneficiary did not take account of revenue generated by services provided to the general public at these facilities. It also declared some amounts of recoverable VAT. |
The Commission will ask the beneficiary to provide a funding-gap calculation including all related revenues and operational costs and will conclude accordingly. |
Example 4 — Financial correction wrongly applied |
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As a result of our audit for 2014 (2), the Commission imposed a 25 % financial correction on a CF project in Malta. However, instead of first certifying all eligible expenditure and then applying the correction, the Member State authorities certified expenditure up to 75 % of the project’s initial budget. As a consequence, the non-certified part of the project expenditure, relating to costs not concerned by the financial correction, will, in principle, not be subject to audit. |
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Example 5 — Work-placement hours not documented and unjustified payment of the performance-related share of a contractor’s fee |
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The beneficiary for an ESF project in Ireland to deliver training for unemployed job-seekers was unable to provide evidence in support of the hours charged for participants’ work placements, as required by the national eligibility rules. In connection with the same project, the Member State authorities paid out the performance-related share of a contractor’s fee for a training course even though the work-placement result was below the agreed target. |
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We found examples of errors of ineligible expenditure (quantified up to 20 %) in the Czech Republic, Spain, Hungary and Romania as well as the Greece-Bulgaria ETC OP. |
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Example 6 — Grant conditions not met |
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The beneficiary for an ERDF project in Spain did not comply with the requirement in the call for proposals to retain the co-financed equipment in the region for the agreed period. This made the equipment ineligible for co-financing. |
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Ineligible projects |
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Example 7 — Ineligible beneficiary |
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The call for proposals for an ERDF project in the Czech Republic specified that only SMEs were eligible. When verifying compliance with this requirement, the managing authority based its decision on the beneficiary’s declaration and the information from its monitoring system. This was insufficient to ensure the proper status of the beneficiary. It resulted in funding going to a beneficiary that was not an SME. |
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Example 8 — Project partially ineligible |
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Priority Axis 3 of an ESF OP in Spain, which aims at increasing human capital, has three specific objectives. The relevant objective for a project examined within this OP was the development of human potential in the field of research and innovation. The Member State authorities retroactively declared for co-financing the salaries paid to medical professionals during specialised residential internships in 2014. While these internships had some ties to research activities, their main objective was to prepare specialised medical staff for the Spanish health system. It is therefore disproportionate to consider the whole project as primarily a research activity. Moreover, this training scheme is anyway compulsory for medical specialists under Spanish law. Part of the project was consequently ineligible and should not have been declared for co-financing. |
The Commission considers that the training of health service professionals through the ‘EIR’ (resident interns in specialisation)) programme of postgraduate studies is eligible under Priority Axis 3 ‘Increase and improvement of human capital’, since it contributes to the achievement of its objectives. Completing such postgraduate studies is a legal requirement in Spain to conduct clinical research. Furthermore, the Managing Authority has provided evidence of a total of 99 specific research activities for the 20 participants sampled by the Court, including scientific publications, participation in competitive research programmes with external funding and being part of highly qualified research groups. Therefore, the Commission considers that the certified expenditure fully meets the eligibility criteria. |
We found a similar case in another ESF project in Spain. |
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Public procurement infringements |
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Example 9 — Wrong use of a secondary competition in a framework contract |
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The beneficiary for an ERDF project in the United Kingdom to erect a footbridge used a framework contract to award the works. The procedure chosen by the beneficiary for the secondary competition did not allow for identification of the most economically advantageous offer. In addition, the beneficiary incorrectly applied discount rates during negotiation with the contractor and awarded additional works directly to the same contractor. The procedure therefore infringed the principles of equal treatment and non-discrimination and departed from the procedure described in the framework agreement. As a result, the contract was unlawful and the related expenditure was ineligible for EU funding. |
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Example 10 — Unlawful amendment of contract |
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The beneficiary for a CF project in Hungary (extension of a sewage treatment plant) substantially modified the contract after signature without relaunching the procedure. Amendments of this sort are in breach of public procurement rules. |
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Example 11 — Unsuitable economic operators invited to tender |
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Only one of three companies invited to tender for an ESF language-training project in Hungary had a suitable profile to deliver the training. The effect of inviting two unsuitable candidates to participate was that the contract was awarded directly without due justification. |
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(1) These errors account for more than three-quarters of the overall estimated level of error for ‘Economic, social and territorial cohesion’.
(2) 2014 annual report, Box 6.1, example (a).
ANNEX 6.4
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR ‘ECONOMIC, SOCIAL AND TERRITORIAL COHESION’
E = DG Employment, Social Affairs and Inclusion; R = DG Regional and Urban Policy; X = Common assessment for both DGs
Year |
Court Recommendation |
Court's analysis of the progress made |
Commission reply |
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Fully implemented |
Being implemented |
Not implemented |
Not applicable |
Insufficient evidence |
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In most respects |
In some respects |
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2013 |
Chapter 5, recommendation 1: require from the Member States in their management declarations (according to Article 59(5)(a) of the Financial Regulation) an explicit confirmation regarding the effectiveness of the first level checks performed by the managing and certifying authorities |
R |
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Chapter 5, recommendation 2: carry out an assessment of the ‘first level checks’ performed during the 2007-2013 programme period in accordance with Article 32(5) of the Financial Regulation. Taking account of the weaknesses identified, the Commission should analyse the costs and benefits of possible corrective measures and take (or propose) appropriate action (such as the simplification of the applicable provisions, improvements in the control systems and re-design of the programme or delivery system) |
R |
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Chapter 5, recommendation 3: analyse the underlying reasons for the high number of cases of non-compliance with EU state aid rules |
R |
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Chapter 5, recommendation 4: analyse the reasons for the persistent delays in disbursement of EU funds through FEIs and take corrective measures accordingly |
R (1) |
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Chapter 5, recommendation 5: confirm in the annual activity report (AAR) of the Directorate-General for Regional and Urban Policy that the Commission’s calculation of the ‘residual error rate’ is based on accurate, complete and reliable information on financial corrections. In order to do so, the Commission should request audit authorities to certify the accuracy of the data on financial corrections reported by certifying authorities for each OP whenever it deems such action necessary. |
R (1) |
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2013 |
Chapter 5, recommendation 6 (also chapter 6): consistently disclose in its annual activity reports the reasons for not making reservations (or making reservations with a lower financial impact) in cases where this is due to exceptions to applicable Commission guidance or approved audit strategies |
X (1) |
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Chapter 6, recommendation 1: follow up with the Member States the weaknesses identified in DG EMPL’s risk-based thematic audit of management verifications. This would require strengthening the checks related to compliance with public procurement rules and other relevant sources of errors (costs not linked to the project or with no added value). |
E |
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Chapter 6, recommendation 2: confirm in its AARs that it has carried out appropriate checks to ensure that the ‘residual error rate’ is based on accurate, complete and reliable information on financial corrections. In order to do so, the Commission should ask audit authorities to certify the accuracy of the data on financial corrections reported by certifying authorities for each OP, whenever it deems such an action necessary. |
E (1) |
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Chapter 6, recommendation 3: ensure that Articles 78 and 130 of the CPR for the 2014-2020 programme period are applied in a manner that precludes the accumulation of pre-financing in addition to the initial pre-financing payment |
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E (2) |
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Chapter 6, recommendation 4: ensure that the Member State authorities in charge of managing structural funds address the issue of charging personnel costs at higher rates for EU projects compared to those financed by national funds |
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E (3) |
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Chapter 6, recommendation 5: ensure, when approving the OPs for the new programme period, that Member States have considered all simplification possibilities allowed by the 2014-2020 European Structural and Investment Funds regulations |
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E (4) |
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(1) Implementation should continue until closure.
(2) Recommendation not accepted by the Commission (see the 2014 annual report, paragraph 6.79).
(3) No systemic measures taken.
(4) The new programming period is not yet sufficiently advanced for implementation to be fully assessed.
CHAPTER 7
‘Natural resources’
TABLE OF CONTENTS
Introduction | 7.1-7.8 |
Brief description of ‘Natural resources’ | 7.3-7.6 |
Audit scope and approach | 7.7-7.8 |
Part 1 — Regularity of transactions | 7.9-7.35 |
EAGF — Market and direct support | 7.11-7.19 |
Rural development, the environment, climate action and fisheries | 7.20-7.27 |
Annual activity reports and other governance arrangements | 7.28-7.31 |
Conclusion and recommendations | 7.32 -7.35 |
Conclusion | 7.32-7.33 |
Recommendations | 7.34-7.35 |
Part 2 — Performance | 7.36-7.56 |
Performance assessment of rural development projects | 7.37-7.42 |
Assessment of greening performance | 7.43-7.54 |
Conclusions | 7.55-7.56 |
Annex 7.1 — |
Results of transaction testing for ‘Natural resources’ |
Annex 7.2 — |
Overview of the results of transaction testing for each Member State for rural development, the environment, climate action and fisheries |
Annex 7.3 — |
Overview of errors with an impact of at least 20 % for rural development, the environment, climate action and fisheries |
Annex 7.4 — |
Follow-up of previous recommendations for ‘Natural resources’ |
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INTRODUCTION |
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Box 7.1 — MFF heading 2 ‘Natural resources’ — 2016 breakdown (billion euro)
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Brief description of ‘Natural resources’ |
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Audit scope and approach |
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PART 1 — REGULARITY OF TRANSACTIONS |
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Box 7.2 — Breakdown of estimated level of error by error type — ‘Natural resources’
Source: European Court of Auditors. |
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EAGF — Market and direct support |
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Box 7.3 — Breakdown of estimated level of error by error type — EAGF
Source: European Court of Auditors. |
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Overstated or ineligible area, including for the new greening payment |
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7.15. |
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Box 7.4 — New definition of permanent pasture helped reduce the error rate In previous years ineligible permanent grassland was a key source of error (22). Such errors have now significantly decreased in both number and scale due, in particular, to the new definition of permanent pasture under the reformed CAP. While the former definition restricted eligibility to the portion of a parcel which was covered by grass or other herbaceous vegetation, the scope has now been extended to any vegetation suitable for grazing, including shrubs and trees, provided they are not predominant. Member States may also extend eligibility to land on which non-herbaceous vegetation is predominant, if it forms part of established local practices. The photos below illustrate the change in policy. |
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Image 1 — Non-herbaceous vegetation is now eligible if it can be grazed and is not predominant
Prior to the 2013 CAP reform, this parcel had an eligibility rate of 40 % corresponding to its grass cover. Under the new definition, the eligibility rate has increased to 60 %, to reflect other vegetation suitable for grazing (such as bushes and small trees). Source: European Court of Auditors. |
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Image 2 — Non-herbaceous vegetation can also be predominant, if part of established local practices
Several Member States (23) have opted to admit, as eligible pastureland, land on which non-herbaceous vegetation suitable for grazing is predominant (e. g. grazable heathland). Source: European Court of Auditors. |
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Box 7.5 — Correct classification of land is important for ensuring compliance with greening requirements |
Box 7.5 — Correct classification of land is important for ensuring compliance with greening requirements |
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EU legislation states that arable land used to grow grasses becomes permanent pasture once it has been excluded from crop rotation for five consecutive years. |
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In the Czech Republic and Poland the LPIS database contained no information on historical land uses. In such situations, authorities cannot perform automated cross-checks to verify whether arable land used to grow grasses has become permanent grassland. This creates a risk that the authorities may not detect declared EFAs which are in fact on permanent grassland (i.e. not arable land). |
DG AGRI is opening conformity clearance procedures that will protect the EU financial interest against this risk. |
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We also found weaknesses in the classification of permanent grassland or the related cross-checks in Germany (Bavaria, Mecklenburg-Vorpommern, North Rhine-Westphalia, Saxony-Anhalt, Schleswig Holstein), France, Italy (Lombardy), Portugal and the United Kingdom (England). |
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Ineligible beneficiary/expenditure |
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Rural development, the environment, climate action and fisheries |
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Box 7.6 — Breakdown of the estimated level of error — Rural development, the environment, climate action and fisheries
Source: European Court of Auditors. |
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DG AGRI’s annual activity report |
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DG MARE, DG ENV and DG CLIMA annual activity reports |
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Conclusion and recommendations |
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Conclusion |
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Recommendations |
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The Commission accepts this recommendation. Remedial actions are already ongoing in the Member States concerned, where necessary conformity clearance procedures will protect the EU budget. |
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The Commission accepts this recommendation. During the audits in different Member States the best practices are shared, also in the form of recommendations given to improve the control and management system. The Commission organises on a regular basis seminars, conferences where the best practices are disseminated. IT solutions are also being explored. |
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PART 2 — PERFORMANCE |
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Performance assessment of rural development projects |
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Implementation of investment projects |
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Reasonableness of costs and the potential for increased use of simplified cost options |
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Box 7.7 — Simplified cost options can help ensure costs are reasonable In the United Kingdom (England) we audited a project to build a new roof for a livestock-gathering area. The payment was based on a standard unit cost for roofs of 62 GBP per square metre, with a maximum available grant per farm of 10 000 GBP. The standard unit cost for the roof came from a publication which is one of the most widely used independent sources of agricultural business information in the United Kingdom. The prices in the publication are updated every year. |
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Assessment of greening performance |
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Box 7.8 — Crop diversification requirements
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Crop diversification |
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Box 7.9 — Changes in crop diversification following the introduction of greening
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Ecological focus areas |
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Box 7.10 — Changes in EFAs following the introduction of greening
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Conclusions |
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(1) Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ L 347, 20.12.2013, p. 549).
(2) With the exception of certain co-financed measures, such as promotion measures and the school fruit scheme.
(3) Covering, in particular, support for the wine and fruit/vegetable sectors, and for school milk and fruit, as well as measures targeting the outermost regions of the EU.
(4) The European Parliament, the Council and the European Commission reached an agreement on the CAP reform in 2013. A number of legislative texts aimed at its practical implementation were approved thereafter.
(5) Based on aid applications submitted in 2015 (i.e. claim year 2015).
(6) Decoupled payments are granted for all eligible agricultural land, irrespective of whether it is used for production.
(7) We are currently examining the implementation of the BPS, with a view to publishing a special report (see our 2017 Work Programme; http://eca.europa.eu).
(8) Area-related measures are those where payment is linked to the number of hectares, such as agri-environment payments and compensatory payments to farmers in areas with natural handicaps.
(9) Non-area-related measures are typically investments to, for example, modernise farms or set up basic services for the rural economy and local population.
(10) Other EU spending areas beyond the MFF heading ‘Natural resources’ also provide funding for the environment and climate action.
(11) Our approach is based on a number of randomly selected items (e.g. parcels or invoices) for each transaction. Therefore, a detected error does not necessarily reflect the overall level of error for the transaction in question.
(12) Belgium (Wallonia and Flanders), Bulgaria, the Czech Republic, Denmark, Germany (Bavaria, Hamburg-Jonas, Mecklenburg-Vorpommern, North Rhine-Westphalia, Saxony-Anhalt, Schleswig Holstein), Ireland, Greece, Spain (the Basque Country, Andalusia, the Region of Murcia, the Valencian Community, Aragon, Castilla-La Mancha, Extremadura and Castile and León), France, Italy (AGEA, Calabria, Lombardy, Tuscany and Veneto), Latvia, Lithuania, Hungary, the Netherlands, Poland, Portugal, Romania, Slovakia, Finland, Sweden and the United Kingdom (England, Northern Ireland and Scotland). The sample also included one transaction under direct management.
(13) Bulgaria, the Czech Republic, Denmark, Germany (Lower Saxony-Bremen, Saxony and Saxony-Anhalt), Estonia, Ireland, Greece, Spain (Andalusia, Castilla-La Mancha and Extremadura), France (Midi-Pyrénées and Rhône-Alpes), Croatia, Italy (Basilicata), Lithuania, Hungary, Austria, Poland, Portugal (Azores and mainland), Romania, Slovakia, Finland and the United Kingdom (England and Scotland). The sample included seven transactions under direct management, of which two concerned EU funds spent on fisheries partnership agreements outside the European Union.
(14) DG ENV and DG CLIMA have a common financial resources directorate.
(15) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 1,5 % and 3,5 % (the lower and upper error limits respectively).
(16) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 0,8 % and 2,6 % (the lower and upper error limits respectively).
(17) See paragraph 7.35 of our 2014 annual report.
(18) See paragraph 7.17 of our 2015 annual report.
(19) Information included in supporting documentation and databases or emerging from standard cross-checks and other mandatory checks.
(20) See paragraph 7.17 of our 2015 annual report and paragraphs 60 to 64 of our special report No 25/2016 ‘The Land Parcel Identification System: a useful tool to determine the eligibility of agricultural land — but its management could be further improved’ (http://eca.europa.eu).
(21) See also paragraphs 46 to 48 of our special report No 25/2016.
(22) See paragraph 7.20 of our 2015 annual report, paragraph 7.21 in our 2014 annual report, paragraph 3.9 in our 2013 annual report, paragraph 3.13 in our 2012 annual report, paragraph 3.12 in our 2011 annual report.
(23) Germany, Greece, Spain, France, Croatia, Italy, Portugal, Sweden and the United Kingdom.
(24) Only certain EFA eligible land uses can be on land other than arable land (e.g. short rotation coppice and afforested areas). Permanent features eligible as EFAs, such as landscape features and buffer strips, can be on land directly adjacent to arable land.
(25) Not all the visited farms were subject to all three practices, some being exempt from one or more, mainly due to their small size.
(26) See also paragraphs 37 and 38 of our special report No 25/2016.
(27) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 2,1 % and 7,7 % (the lower and upper error limits respectively).
(28) Information included in supporting documentation and databases or emerging from standard cross-checks and other mandatory checks.
(29) See special report No 23/2014 ‘Errors in rural development spending: what are the causes, and how are they being addressed?’ (http://eca.europa.eu).
(30) The average level of error reported by Member States is 1,09 % for the EAGF and 1,78 % for the EAFRD.
(31) Certification bodies are required to ascertain, on the basis of a representative sample, the legality and regularity of the expenditure for which the paying agencies have requested reimbursement from the Commission. The certification bodies issued their first opinions on regularity for the 2015 financial year.
(32) For details see special report No 7/2017 ‘The certification bodies’ new role on CAP expenditure: a positive step towards a single audit model but with significant weaknesses to be addressed’ (http://eca.europa.eu).
(33) We chose our 2013 report for this year’s follow-up exercise as, typically, enough time should have elapsed for implementation of our recommendations.
(34) See part 2 of chapter 7 of our 2014 and 2015 annual reports.
(35) Reimbursement of costs is associated with higher levels of error. On this topic, see also paragraphs 1.21 to 1.24 of the 2015 annual report.
(36) Article 67(1) of Regulation (EU) No 1303/2013 of the European Parliament and of the Council (OJ L 347, 20.12.2013, p. 320). Certain forms of simplified cost options were already allowed in the 2007-2013 programming period for some rural development measures, but not for investment projects.
(37) See paragraphs 58 to 63 of our special report No 22/2014 ‘Achieving economy: keeping the costs of EU-financed rural development project grants under control’ (http://eca.europa.eu).
(38) Our experience in auditing expenditure on economic, social and territorial cohesion also shows that projects implemented using simplified cost options are less error-prone. See paragraph 6.15 of the 2015 annual report.
(39) Recital 41 of Regulation (EU) No 1307/2013 of the European Parliament and of the Council (OJ L 347, 20.12.2013, p. 608).
(40) See Recital 42 of Regulation (EU) No 1307/2013.
(41) Recital 44 of Regulation (EU) No 1307/2013.
(42) Farms with less than 15 ha of arable land are exempt from the EFA requirement.
(43) Our estimate is based on the actual changes made by the farms which we sampled for EAGF payments. The greening requirement for crop diversification sets a limit for the first crop of 75 % of the total arable area for farms with more than 10 hectares of arable land. The maximum possible change attributable to greening is thus 25 % of the arable area of farms subject to this requirement (namely when a farm had a monoculture in 2014 and fulfilled the requirement in 2015). However, many farms already fulfilled the requirement in 2014: for these farms, we considered that no change occurred. Moreover, very few farms which had to adapt their crop diversification actually had monocultures in 2014.
(44) The Commission’s review of greening after one year concluded that ‘the relocated area due to the diversification obligation’ amounted to around 0,8 % of arable land. See Commission Staff Working Document ‘Review of greening after one year’ SWD(2016) 218, Annex 4, Section 5.2.2.
(45) Our estimate is based on the actual changes made by the farms which we sampled for EAGF payments. To comply with the EFA requirement, a farmer claiming more than 15 ha of arable land has to ensure that an area equivalent to 5 % of his total arable land is an EFA. The maximum possible change attributable to greening is thus 5 % of the arable area of farms subject to this requirement (namely when a farm had no EFA in 2014 and fulfilled the requirement in 2015). However, many farms already fulfilled the requirement in 2014, and most farms already had some proportion of EFA in 2014, even if not 5 %.
(46) COM(2017) 152 final.
(47) In line with the harmonised definition of underlying transactions (for details see Annex 1.1 , paragraph 10).
Source: 2016 consolidated accounts of the European Union.
ANNEX 7.1
RESULTS OF TRANSACTION TESTING FOR ‘NATURAL RESOURCES’
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2016 |
2015 |
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SIZE AND STRUCTURE OF THE SAMPLE |
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Agriculture: Market and direct support |
217 |
180 |
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Rural development, environment, climate action and fisheries |
163 |
179 |
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Total transactions ‘Natural resources’ |
380 |
359 |
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ESTIMATED IMPACT OF QUANTIFIABLE ERRORS |
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Estimated level of error: Market and direct support |
1,7 % |
2,2 % |
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Estimated level of error: Rural development, environment, climate action and fisheries |
4,9 % |
5,3 % |
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Estimated level of error: ‘Natural resources’ |
2,5 % |
2,9 % |
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Upper error limit (UEL) |
3,5 % |
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Lower error limit (LEL) |
1,5 % |
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The lower and upper error limits for Agriculture: Market and direct support are: 0,8 and 2,6 %. The lower and upper error limits for Rural development, environment, climate action and fisheries are: 2,1 and 7,7 %. |
ANNEX 7.2
OVERVIEW OF THE RESULTS OF TRANSACTION TESTING FOR EACH MEMBER STATE FOR RURAL DEVELOPMENT, THE ENVIRONMENT, CLIMATE ACTION AND FISHERIES (1)
(1) The seven examined transactions under direct management are not included in the map.
ANNEX 7.3
OVERVIEW OF ERRORS WITH AN IMPACT OF AT LEAST 20 % FOR RURAL DEVELOPMENT, THE ENVIRONMENT, CLIMATE ACTION AND FISHERIES
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Introduction |
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Applying the general audit methodology set out in Annex 1.1 , we tested a representative sample of transactions to estimate the level of irregularity within the population for this MFF heading. The errors we detected in testing do not constitute an exhaustive list — either of individual errors or of possible error types. The findings outlined below concerning errors with an impact of at least 20 % of the transaction value examined are presented by way of example for the specific assessment covering rural development, the environment, climate action and fisheries (1). These errors were found in transactions worth between 1 600 euro and 1 million euro, with a median value of just under 100 000 euro (2). |
The Commission takes note of the ECA's comment in annex 7.2 that the overview of ECA transactions is not a guide to the relative level of error in the Member States in the sample. The Commission points out that detailed information on the Commission's and the Member States' audit results are presented for each Member State in the Annual Activity Reports and their technical annexes of the Commission departments implementing EU funds in shared management. |
Examples of error |
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Rural development, the environment, climate action and fisheries |
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Ineligible beneficiary/expenditure |
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Example 1 — Support for micro, small and medium-sized enterprises granted to cooperative belonging to a large multinational company |
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In Lithuania we examined a payment made to a cooperative for investment support in the processing and marketing of agricultural produce. Under EU and national rules, such support is available only to micro, small and medium-sized enterprises, as determined by the number of employees, annual turnover and annual balance sheet total. Related enterprises, such as mother or daughter companies, have to be included in the calculation. We found that the cooperative concerned belonged to a large multinational company, and so did not qualify as a micro, small or medium-sized enterprise. The beneficiary was not eligible for support, leading to a 100 % error. |
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Example 2 — Beneficiary purchased supported machinery from a related company |
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We examined a payment made to an agricultural company in Hungary for the purchase of machinery. We found conclusive evidence that the beneficiary had links with the company that supplied the machinery. Under national law this renders the whole payment ineligible, leading to a 100 % error. |
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Example 3 — Non-compliance with the LIFE programme’s eligibility rules |
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We examined a payment for a directly managed environmental project financed by the LIFE programme. We identified several violations of the LIFE programme’s eligibility rules on personnel costs; for example: contracts did not mention the LIFE programme, timesheets had not been certified and costs had not been charged on the basis of actual time worked. We reported an error of 60 % of the costs examined. |
According to Article 25(1) of the LIFE Common Provisions (based on Article 126 of the FR) eligible costs must be based on actual costs incurred, therefore, costs cannot be based on a budgeted daily rate. The time personnel worked for the project should be documented through appropriate means (timesheets). It should be noted, however, that reported time up to 2 days per month per calendar year is accepted without timesheets. Furthermore, if time worked for the project can be documented through alternative sources (e.g. extracts from an analytical accountancy system), the Commission would consider the related costs eligible. While it is not a condition that the project should specifically be mentioned in the contract of the employee, the project should be mentioned in the timesheets or other means for time registration. Furthermore, if the time worked for the project can be documented through alternative sources than timesheets, such as extracts from an analytical accountancy system, the related costs would be considered to be eligible. If timesheets are not signed by the employee and validated by a supervisor, they are not of an acceptable standard and the related costs are deemed ineligible. However, such timesheets are only considered ineligible in case they are systematically not signed and validated. Timesheets which only randomly are not signed and validated, are considered to be a clerical error, and are usually not disregarded. |
Examples 4 and 5 — Regional government received EU funding for works calculated on basis of inflated costs |
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We examined two sets of works paid for by the regional government of Andalusia in Spain: one for the reconstruction of a rural road and the other for a rural house with an adjacent farm building. In both cases, we found that the works had been directly awarded to a company at inflated prices. We reported errors of 33 % and 41 % of the costs examined respectively. |
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Example 6 — Joint aid application was not permitted |
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We examined a payment made to an agricultural company in Estonia for the purchase of machinery. The project application was filed together with another company. According to the national rules, joint applications qualify for higher aid amounts, but are only permitted if neither applicant has, directly or indirectly, a dominant influence over the other. However, we found that this condition was not met, leading to a 32 % error. |
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We found errors due to ineligible beneficiaries/expenditure (quantified up to 20 %) in Denmark, Germany, Greece, Portugal (mainland), Italy (Basilicata), Austria and Poland. |
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Overstated or ineligible area |
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Example 7 — Support for conservation of traditional orchards paid for area with too few traditional trees |
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In Portugal we examined a payment made to a farmer under the rural development measure ‘agri-environment-climate’ for the conservation of the Azores’ traditional orchards. One national prerequisite for receiving the payment was an orchard with at least one variety which is traditional in the Azores and which, if grown with other trees, should constitute at least 80 % of the tree population. We visited the two parcels claimed, and found that they did not contain enough eligible trees. The parcels did not comply with the eligibility rule, leading to a 100 % error. |
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Example 8 — Support paid for areas with no agricultural activity |
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The rural development measure ‘Payments to areas facing natural or other specific constraints’ supports farms in certain designated areas such as mountainous areas. Payments are made annually per hectare of eligible land to compensate farmers for all or some of the additional costs incurred and income foregone on account of the agricultural production constraints faced in such areas. Farmers must perform an agricultural activity in the designated areas to be eligible. |
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In Croatia we visited a farm which had received a ‘mountain areas’ compensation payment. We inspected a sample of three parcels, which the beneficiary had claimed as pastureland. On one of the parcels we found no sign of any agricultural activity, e.g. grazing. The parcel was therefore ineligible for compensation. There were ineligible areas on the two other parcels, due to the presence of thick forestation. We note that the paying agency had identified similar problems and has subsequently initiated recovery. On the basis of our sample, we estimated a 91 % error. |
The Commission understands that the Croatian Authorities identified the potential ineligibility of the land as a result of the LPIS Quality Assessment and strove to follow it up with a view to correcting the error. The Commission understands that the Croatian Authorities updated the LPIS after the rapid field visit and instigated the recovery of the support within the deadlines set by EU law; hence there will be no financial impact from the over-declaration. |
We found errors due to overstated or ineligible area (quantified up to 20 %) in the Czech Republic, Germany (Saxony), Spain (Extremadura), France (Rhône-Alpes), Croatia, Portugal (Azores and mainland), Slovakia, Finland and the United Kingdom (England). |
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Non-compliance with public procurement rules |
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Example 9 — Public body unduly excluded lowest offer for execution of works |
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In Poland we examined a payment made to a public body for the reconstruction of an embankment to protect agricultural land against river flooding. Construction works represented 97 % of the audited costs. We reviewed the public procurement procedure used to select the company which carried out the construction works, and found that the lowest offer had been excluded without valid reason. Therefore, the costs concerned were not eligible, leading to a 97 % error. |
The Commission understands that the decision to exclude the lowest offer was challenged by the unsuccessful bidder. However, the National Appeal Body (KIO) competent for the matter rejected this appeal. The Paying Agency followed the decision of the National Appeal Body. |
(1) These errors account for more than three-quarters of the overall estimated level of error for this specific assessment.
(2) I.e. half of all errors with an impact of at least 20 % were found in transactions worth less than 100 000 euro, and the remainder in transactions worth more than this amount.
ANNEX 7.4
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR 'NATURAL RESOURCES'
Year |
Court Recommendation |
Court's analysis of the progress made |
Commission reply |
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Fully implemented |
Being implemented |
Not implemented |
No longer applicable |
Insufficient evidence |
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In most respects |
In some respects |
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2013 |
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Recommendation 1: the Commission and Member States take the necessary measures to ensure that the IACS is used to its full potential. This comprises particular efforts in ensuring that:
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X |
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Recommendation 2: the Commission ensures that the reinforcement of assurance procedure is effectively applied in order to enhance the quality and comparability of the work performed by the audit bodies and that remedial action is taken in respect of the unjustified reduction by the Italian authorities of the on-the-spot inspection rate (see paragraphs 3.30 to 3.35); |
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X |
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2013 |
Recommendation 3: the Commission actively monitors the application of remedial actions with regard to the deficiencies in the control system applicable to EU aid for producer groups in Poland (see paragraphs 3.36 to 3.38). |
X |
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Recommendation 1: the Member States carry out their existing administrative checks better, by using all relevant information available to the paying agencies, as this has the potential to detect and correct the majority of errors (see paragraphs 4.8 and 4.20). In particular for investment measures, administrative checks should use all available information to confirm the eligibility of the expenditure, project and beneficiary (including all ultimate shareholders) and compliance of public procurement procedures with the applicable EU and/or national rules; |
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X |
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Recommendation 2: the Commission ensures that all cases where the Court detected errors are followed up appropriately (as identified in paragraphs 4.14, 4.20 and 4.21, as well as in paragraph 4.16 for environment). |
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X |
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The Commission understands that it has provided to the ECA evidence that all cases have been followed up appropriately. Individual transactions described under paragraphs 4.14 and 4.21 were covered by dedicated Commission audits. Systemic weaknesses described under paragraph 4.20 concern the same issues as those detected by the Commission auditors and as such are included in the risk assessment when the annual working programme is devised. In addition, concerning paragraph 4.16, as the beneficiary confirmed in writing during the evaluation of the final report, that he cannot recover VAT, the Commission had no reason to put this written confirmation in question. |
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Recommendation 3: the Member States ensure that action plans to address the high error rate in rural development are complete, by including all regions and addressing all measures, particularly investment measures, and take the Commission's and Court's audit findings into account (see paragraph 4.30). |
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X |
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2013 |
and for the CAP as a whole that: |
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Recommendation 4: the Commission documents how it calculates the expenditure covered by its conformity audits (see paragraph 4.24). |
X |
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Recommendation 5: the Commission takes steps to further reduce the backlog of open audit files, so as to enable all audits carried out prior to 2012 to be closed by the end of 2015 (see paragraph 4.27). |
X |
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Recommendation 6: the Commission further develops its approach to calculating the RER by ensuring that it takes into account all expenditure and paying agencies (see paragraph 4.29). |
X |
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Recommendation 7: financial corrections to Member States concerning the European Fisheries Fund are supported by evidence of their validation (see paragraph 4.34). |
X |
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CHAPTER 8
‘Security and citizenship’
CONTENTS
Introduction | 8.1-8.6 |
Brief description of the MFF heading | 8.2-8.5 |
Audit scope and approach | 8.6 |
Regularity of transactions | 8.7 |
Examination of selected systems | 8.8-8.12 |
Shared management | 8.8-8.10 |
Direct management | 8.11 |
Annual activity reports and other governance arrangements | 8.12 |
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INTRODUCTION |
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Box 8.1 — MFF heading 3 — 2016 breakdown (billion euro)
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Brief description of the MFF heading |
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Migration and security |
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Other areas |
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Audit scope and approach |
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REGULARITY OF TRANSACTIONS |
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EXAMINATION OF SELECTED SYSTEMS |
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Shared management |
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AMIF and ISF |
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Box 8.2 — Implementation of AMIF and ISF up to the 2015 financial year was relatively slow
Note: The implementation rate compares spending under shared management in the 2014 and 2015 financial years to the total allocation for the 2014-2020 funding period for the 13 Member States for which the Commission had cleared expenditure for 2014 and 2015. Source: Commission decision on the clearance of the annual accounts for national programmes concerning expenditure supported under the AMIF and ISF of the 2014 and 2015 financial years. |
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SOLID |
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Box 8.3 — System weaknesses relating to SOLID, AMIF and the ISF
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Direct management |
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Box 8.4 — Example of a finding |
Box 8.4 — Example of a finding |
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We examined a payment by the Commission (DG Migration and Home Affairs) to Greece of emergency assistance to transport non-EU migrants from Greek islands to the Greek mainland between August and November 2015, at the peak of the refugee crisis. |
The arrival of hundreds of thousands migrants in Greece required urgent and effective humanitarian response by the EU. The purpose of the action was to allow the transfer of migrants from the islands to the mainland to avoid a humanitarian catastrophe. For this, Greece concluded contracts with shipping companies to use boats that could therefore not be used for tourist activities or to provide regular services. The action was very urgent and extremely useful, and implemented in full respect of sound financial management. |
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The Greek authorities paid 8 million euro to charter vessels to be used to transport, accommodate and provide snacks to migrants. Under an agreement signed with the Greek authorities in November 2015, the Commission contributed a grant of 6 million euro to this action. |
The Greek authorities signed a contract in view to:
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The selected shipping companies transported over 150 000 migrants, providing them with accommodation and snacks, and charged adult migrants 60 euro per ticket (children were charged up to 30 euro) for their passage, earning up to 9 million euro. The vessels carried no passengers on their trips from the mainland to collect migrants from the islands. |
The call issued by the Greek authorities clearly stipulated that the contractor was called to deliver services beyond those normally foreseen in the cost of a ticket. This included provision of food, accommodation, etc., and the offers received also made clear, that the offer price took into account the fact that the boats had to make return journeys empty. The tender documents issued by the Greek authorities equally stipulated that the ticket price for such journeys could be charged by the contractor to the migrants. This was also reflected in the price of the offers submitted. |
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The Commission was informed that the migrants were charged by the shipping companies. However, when assessing the proposed action in October 2015, and evaluating the performance of the action before paying the balance of the grant in March 2016, the Commission did not refer to the potential income from migrants. The contract documentation between the Greek authorities and the shipping companies referred to charging migrants but did not estimate these revenues. There is therefore a lack of transparency of the split of funding between public sources and the revenue from migrants, for this emergency action. |
The Commission does not share the assessment of the ECA and this finding. The financial implementation of the action fully corresponds with the Grant agreement with the Greek authorities and is implemented in accordance with the rules in force, and therefore is legal and regular. The ticket price cannot be considered as relevant revenue for the purpose of the contract given that the purpose of the contract was to provide services over and beyond those foreseen in the ticket price. As such, the Commission considers that the tendering, evaluation of offers, award of contract, performance of services and payment by the Greek authorities were legal, regular and fully transparent. |
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The average market price in high season for a return ticket in economy class for the routes concerned was up to 90 euro. The income from migrants, of up to 60 euro per ticket, contributed to the revenues and consequently, to any profits of the shipping companies. EU legislation does not allow beneficiaries of EU grants to obtain profits from the implementation of a project, and indeed the Greek authorities, as grant beneficiary, did not make a profit. |
Considering also the fact that the migrants used all the facilities in the ship (including first class and cabins) and that there was no revenue from the shipping of vehicles or other services such as food to the shipping companies, the Commission considers that the Greek authorities paid a fair price for the shipping service. As already explained above, the contract was to provide services over and beyond those foreseen in the ticket price, and as such any potential revenue, or indeed profit if any, from the ticket is neither relevant for the grant agreement nor measurable. |
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The Greek authorities’ contracts with the shipping companies covered the use of vessels for periods of up to 20 days, at a cost of between 30 000 and 40 000 euro per day per ship, for a total of 228 shipping days. There were days on which ships were inactive in port, but the companies were paid as agreed in the contract. Three ships were inactive in port for 3, 4 and 5 days respectively, for which the shipping companies were paid 415 500 euro. |
The few days of inactivity of the vessels reported by the ECA were to be expected taking into account that they were obliged to be always on hand, based on the contract, to depart any time in the extreme emergency situation that Greece was facing during the grant period, towards any destination at any time. The Commission calculates that the days of inactivity were seven in total. |
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Annual activity reports and other governance arrangements |
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(1) 12 such bodies are currently active in the different policy areas of this heading.
(2) The legal act establishing AMIF can be found on the Eur-Lex website.
(3) The legal acts establishing these instruments can be found on the Eur-Lex website: External Borders Fund, European Return Fund, European Refugee Fund, European Fund for the integration of third-country nationals.
(4) The legal acts establishing these instruments can be found on the Eur-Lex website: ISF Borders and Visa, ISF Police.
(5) Germany, Spain, France, Italy and Lithuania.
(6) For AMIF in Spain and Austria and the ISF in Germany and France.
(7) Includes expenditure on consumers, justice, rights, equality and citizenship.
(8) In line with the harmonised definition of underlying transactions (for details see Annex 1.1 , paragraph 10).
Source: 2016 consolidated accounts of the European Union.
CHAPTER 9
‘Global Europe’
TABLE OF CONTENTS
Introduction | 9.1-9.5 |
Brief description of ‘Global Europe’ | 9.2-9.4 |
Audit scope and approach | 9.5 |
Regularity of transactions | 9.6-9.23 |
Annual activity reports and other governance arrangements | 9.24-9.33 |
DG NEAR system assessment | 9.24-9.27 |
Weaknesses in Audit Authorities | 9.24 |
2016 RER study | 9.25-9.27 |
DG DEVCO system assessment | 9.28 |
Annual activity reports | 9.29-9.33 |
Conclusion and recommendations | 9.34-9.37 |
Conclusion | 9.34-9.35 |
Recommendations | 9.36-9.37 |
Annex 9.1 — |
Results of transaction testing for ‘Global Europe’ |
Annex 9.2 — |
Overview of errors with an impact of at least 20 % for ‘Global Europe’ |
Annex 9.3 — |
Follow-up of previous recommendations for ‘Global Europe’ |
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INTRODUCTION |
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Box 9.1 — MFF heading ‘Global Europe’ — 2016 breakdown (billion euro)
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Brief description of ‘Global Europe’ |
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Audit scope and approach |
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REGULARITY OF TRANSACTIONS |
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Box 9.2 — ‘Global Europe’ — Breakdown of estimated level of error
Source: European Court of Auditors. |
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ANNUAL ACTIVITY REPORTS AND OTHER GOVERNANCE ARRANGEMENTS |
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DG NEAR system assessment |
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Weaknesses in the audit authorities |
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2016 RER study |
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DG DEVCO system assessment |
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Annual activity reports |
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CONCLUSION AND RECOMMENDATIONS |
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Conclusion |
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Recommendations |
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The Commission accepts this recommendation. |
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The Commission accepts this recommendation. |
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The Commission accepts this recommendation. |
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The Commission accepts this recommendation. |
(1) Such as, in particular, finance procurement contracts, grants, special loans, loan guarantees and financial assistance, budgetary support and other targeted forms of budgetary aid.
(2) Some transactions contained more than one error. In total we reported 56 errors.
(3) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 0,6 % and 3,6 % (the lower and upper error limits respectively).
(4) The Commission itself committed errors (in two cases) accounting for 0,6 % of the error rate, while the beneficiaries committed errors (in three cases) accounting for 0,1 % of this rate.
(5) Budget support payments financed by the general budget in 2016 amounted to 1,1 billion euro.
(6) Payments to international organisations from the general budget in 2016 amounted to 3,0 billion euro. We cannot state the proportion of this sum to which the notional approach applied, since the Commission does not monitor it separately.
(7) The efficiency and effectiveness of budget support is addressed in a number of the Court’s special reports, the latest ones being SR 32/2016 on ‘EU assistance to Ukraine’, SR 30/2016 on ‘The effectiveness of EU support to priority sectors in Honduras’ and SR 13/2016 on ‘EU assistance for strengthening the public administration in Moldova’ (http://eca.europa.eu).
(8) We did not perform checks on underlying items of expenditure if the Commission’s contribution was below 75 % of the action’s budget. In cases where such contributions lay between 75 % and 90 %, we assessed the need to perform checks on underlying items of expenditure on a case by case basis.
(9) 132 transactions: lower error limit = 1,1 % and upper error limit = 4,5 %, with 95 % confidence.
(10) Of the six cases reported in paragraph 9.8, five concern DG DEVCO and one DG NEAR.
(11) Twinning is an EU institution-building instrument developed by the Commission and based on partnership cooperation between public administrations of EU Member States and a beneficiary country for the achievement of mandatory results jointly agreed with the Commission.
(12) Chapter 8 of the 2015 annual report, paragraphs 8.30 and 8.31.
(13) Non-profit principle laid down in Article 125(4) of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (OJ L 298, 26.10.2012, p. 1).
(14) See DG NEAR’s 2016 annual activity report, p. 36 and 37.
(15) Best conservative estimate of the amount of expenditure authorised throughout the year but not compliant with the contractual and regulatory provisions applicable at the time payment is made.
(16) See DG NEAR’s 2016 annual activity report, p. 51.
(17) During our review, we found errors in 6 out of a sample of 25 cases that had not been taken into account in the calculation.
(18) See DG NEAR’s 2016 annual activity report, p. 38-48.
(19) We chose our 2013 report for this year’s follow-up exercise as, typically, enough time should have elapsed for the Commission to have implemented our recommendations.
(20) In line with the harmonised definition of underlying transactions (for details see Annex 1.1 , paragraph 10).
(21) Including 0,3 billion euro payments to the Guarantee Fund for External Actions.
Source: 2016 consolidated accounts of the European Union.
ANNEX 9.1
RESULTS OF TRANSACTION TESTING FOR ‘GLOBAL EUROPE’
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2016 |
2015 |
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SIZE AND STRUCTURE OF THE SAMPLE |
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Total transactions |
156 |
156 |
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ESTIMATED IMPACT OF QUANTIFIABLE ERRORS |
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Estimated level of error |
2,1 % |
2,8 % |
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Upper error limit (UEL) |
3,6 % |
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Lower error limit (LEL) |
0,6 % |
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ANNEX 9.2
OVERVIEW OF ERRORS WITH AN IMPACT OF AT LEAST 20 % FOR ‘GLOBAL EUROPE’
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Introduction |
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Applying the general audit methodology set out in Annex 1.1 , we tested a representative sample of transactions to estimate the level of irregularity within the population for this MFF heading. The errors we detected in testing do not constitute an exhaustive list — either of individual errors or of possible error types. The findings outlined below concerning errors with an impact of at least 20 % of the transaction value examined are presented by way of example (1). These errors were found in transactions worth between 281 000 euro and 19,0 million euro, with a median (2) value of over 1,3 million euro. |
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Examples of error |
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Absence of essential supporting documents |
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Example 1 — Unavailability of supporting documents |
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DG DEVCO — Indonesia We examined expenditure accepted by the Commission for a contribution agreement signed with an international organisation working to improve the security capacity of local staff. The beneficiary’s partners were unable to provide (all or certain) supporting documents to justify several audited costs, in particular consultancy costs, travel expenses and other operational costs, which were therefore considered ineligible. Ineligible expenditure resulted in an error rate of 41 %. |
The recovery procedure is ongoing. |
Example 2 — Unavailability of supporting documents |
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DG DEVCO — Niger We examined expenditure accepted by the Commission for a grant awarded to an NGO working in the field of access to sexual and reproductive health services. The beneficiary was unable to provide supporting documents to justify some of the audited costs, in particular staff salaries, insurance, national income tax, and vehicle and classroom hire. These costs were therefore considered ineligible. The related error rate was 50 %. |
The beneficiary has formally declared that the documents could not be supplied due to their loss during the move of their offices after the completion of the project. Therefore the Commission considers that this is not a case of bad management or refusal to give access. Nonetheless, the Commission has already launched the recovery of the amount concerned. |
Example 3 — Unavailability of supporting documents |
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DG DEVCO We examined expenditure accepted by the Commission for a contribution made to a trust fund managed by an international organisation working in the field of influenza pandemic preparedness in Asia. The beneficiary was unable to provide supporting documents to justify some of the audited costs, in particular for medicines and medical equipment. These costs were therefore considered ineligible in the RER study, a conclusion that we accepted. The related error rate was 35 %. |
This transaction is part of the DEVCO RER study. After the conclusion of the study the international organisation provided the Commission with evidence regarding the reasons for the lack of availability of the documents. As a consequence of a viral infection at a government building in Cambodia and of the ongoing works in another building which was partially destroyed in the Nepal 2015 earthquake, the beneficiary was unable to provide supporting documents to justify some of the audited costs, in particular for medicines and medical equipment. |
Expenditure not incurred |
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Example 4 — Clearing of pre-financing overstated |
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DG DEVCO We examined expenditure accepted by the Commission for a contribution agreement signed with an international organisation for the conservation and sustainable use of animal genetic resources in Africa. The Commission had accepted and booked an amount which was higher than the total amount of incurred expenditure declared by the beneficiary in the sole financial report available. The amount overstated and ineligible resulted in an error rate of 82 %. |
Following the Court's desk review, the relevant clearings have been cancelled. |
Ineligible expenditure |
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Example 5 — Origin of goods not proven |
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Foreign Policy Instruments — Niger We examined expenditure accepted by the Commission for a contribution to a public entity working to strengthen the role of institutional peacekeepers in certain regions of the country. The beneficiary had purchased motorcycles at the local market without sufficient proof that they had originated from an eligible country. Non-compliance with the ‘rule of origin’ makes the costs involved ineligible; in this case, though, the Commission incorrectly accepted them. We found two payments (advance payment of 40 % and the final payment of the balance for the same purchase) to be ineligible. The error rates for these two transactions were 27 % and 20 % respectively. |
The Commission recognises the ineligibility of expenditure due to non-compliance with the rule of origin. The Commission will take the necessary measures in order to prevent, detect and correct these errors in the future. In particular, in order to enhance its supervision over the Delegations, the Commission will implement Regional Teams as of 2017. The Delegation in Niger is also included in the Supervision Mission plan of 2017. The Commission is in the process of recovering the ineligible funds with a view to effectively protecting the financial interests of the EU. |
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Serious failure to respect public procurement rules |
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Example 6 — Absence of competition |
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DG NEAR — Turkey We examined expenditure accepted by the Commission for an agreement with a regional organisation providing capacity building in the field of the environment. The beneficiary had not respected the procurement rules requiring that at least three providers be consulted to ensure a competitive bid. Ineligible expenditure resulted in an error rate of 20 %. |
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(1) These errors account for more than half of the overall estimated level of error for ‘Global Europe’.
(2) I.e. half of all errors with an impact of at least 20 % were found in transactions worth less than 1,3 million euro, and the remainder in transactions worth more than this amount.
ANNEX 9.3
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR ‘GLOBAL EUROPE’
Year |
Court recommendation |
Court's analysis of the progress made |
Commission reply |
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Fully implemented |
Being implemented |
Not implemented |
Not applicable |
Insufficient evidence |
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In most respects |
In some respects |
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2013 |
The Court recommends that: |
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Recommendation 1: the Commission, and particularly DG ELARG, ensure that instructions to staff state that clearings should be made only on the basis of incurred expenditure and not be based on their own estimates; |
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Recommendation 2: FPI accredit all CFSP missions in accordance with the ‘six-pillar assessment’. |
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X |
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CHAPTER 10
‘Administration’
TABLE OF CONTENTS
Introduction | 10.1-10.5 |
Brief description of the MFF heading | 10.3 |
Audit scope and approach | 10.4-10.5 |
Regularity of transactions | 10.6 |
Annual activity reports and other governance arrangements | 10.7 |
Observations on institutions and bodies | 10.8-10.16 |
Observations common to several institutions and bodies | 10.8-10.13 |
Implementation of the budgetary principle of annuality | 10.8 |
Implementation of the 5 % reduction in staff numbers | 10.9-10.13 |
Observations on specific institutions and bodies | 10.14-10.16 |
European Parliament | 10.15 |
European Court of Auditors | 10.16 |
Conclusion and recommendations | 10.17-10.19 |
Conclusion | 10.17 |
Recommendations | 10.18-10.19 |
Annex 10.1 — |
Results of transaction testing for ‘Administration’ |
Annex 10.2 — |
Follow-up of previous recommendations for ‘Administration’ |
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INTRODUCTION |
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Box 10.1 — MFF heading 5 — 2016 breakdown (billion euro)
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Brief description of the MFF heading |
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Audit scope and approach |
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REGULARITY OF TRANSACTIONS |
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ANNUAL ACTIVITY REPORTS AND OTHER GOVERNANCE ARRANGEMENTS |
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OBSERVATIONS ON INSTITUTIONS AND BODIES |
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Observations common to several institutions and bodies |
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Implementation of the budgetary principle of annuality |
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Implementation of the 5 % reduction in staff numbers |
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Box 10.2 — Evolution of establishment plan posts and occupied posts between 2013 and 2017
Source: ECA, based on data supplied by the institutions. |
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Box 10.3 — Implementation of the 5 % reduction in staff numbers (2013 to 2017)
Source: ECA, based on data supplied by the institutions. |
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Observations on specific institutions and bodies |
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European Parliament |
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European Court of Auditors |
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CONCLUSION AND RECOMMENDATIONS |
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Conclusion |
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Recommendations |
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Parliament takes note of the recommendation and will aim for improvements while keeping the current set of rules. The General Secretariat will continue the additional efforts it started in 2016 to assist the political groups in improving their internal financial management: In particular, training sessions on the general principles of budgetary management and on procurement have been organised in cooperation with the groups and a guidance note on tendering by political groups has been issued. The groups themselves are also undertaking efforts for further harmonisation and improvement. |
(1) This includes the administrative expenditure of all the EU institutions, pensions and payments to the European Schools. For the latter, we issue a specific annual report which is submitted to the Board of Governors of the European Schools. A copy of this report is sent to the European Parliament, the Council and the European Commission.
(2) Our specific annual reports on agencies and other bodies are published in the Official Journal.
(3) Three for the European Parliament, one for the Council, 12 for the European Commission, one for the European Court of Justice and three for the European External Action Service.
(4) Based on Articles 9, 13, 202 and 203 of the Financial Regulation.
(5) The reduction aimed ‘to neutralise the additional capacity built up by the increase of working time to 40 hours per week’ and was to take place between 2013 and 2017 on the basis of the number of posts assigned to each institution — their ‘establishment plan’ at 1 January 2013. It was adopted in the Interinstitutional Agreement (IIA) of 2 December 2013 (paragraph 27 of the IIA of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management (OJ C 373 of 20.12.2013, p. 1)).
(6) Our examination covered the European Parliament, the Council, the European Commission, the Court of Justice of the European Union, the European Court of Auditors, the European Economic and Social Committee, the Committee of the Regions and the European External Action Service. We did not include the European Ombudsman or the European Data Protection Supervisor because their establishment plans were too small.
(7) DG for Human Resources and Security, Office for the Administration and Payment of Individual Entitlements (PMO), Offices for Infrastructure and Logistics in Brussels and in Luxembourg, Publications Office and DG for Informatics.
(8) PricewaterhouseCoopers, Société à responsabilité limitée, Réviseur d'Entreprises.
(9) We base our calculation of error on a representative sample. The figure quoted is the best estimate. We have 95 % confidence that the estimated level of error in the population lies between 0,0 % and 0,8 % (the lower and upper error limits respectively).
(10) The reduction of staff numbers for the European Ombudsman, for the European Data Protection Supervisor and in agencies is not covered by this annual report.
(11) See joint statement 3.3 in the European Parliament legislative resolution of 25 November 2015 on the joint text on the draft general budget of the European Union for the financial year 2016 approved by the Conciliation Committee under the budgetary procedure.
(12) The planned reductions concern the EEAS (2018) and the European Parliament (2018 and 2019).
(13) As a result of the delegation of tasks to the executive agencies.
(14) The European Parliament has decided to exclude political groups from the scope of the 5 % staff cuts.
(15) The target defined in the IIA was strictly limited to reducing staff numbers in the establishment plan.
(16) See the 2015 annual report, paragraph 9.14, and recommendation 4 in paragraph 9.18.
(17) The applicable legal framework is the ‘Rules on the use of appropriations from Budget Item 4 0 0, adopted by the Bureau on 30 June 2003’ (last amended by Bureau decisions of 14 April 2014 and 27 April 2015). The political groups manage the funds allocated to them according to the principles of indirect management of funds in analogical application of Article 60 of the Financial Regulation, taking into account the specific requirements of the groups.
(18) Expenditure in year n is cleared in year n+1 on the basis of a report on the accounts by an independent external audit. The Bureau of the Parliament may ask for appropriations to be repaid to the Parliament if the latter are deemed not to have been used in accordance with the Rules.
(19) See the 2015 annual report, paragraph 9.11, and recommendation 1 in paragraph 9.18.
(20) See the external auditor’s report on the financial statements referred to in paragraph 10.5.
(21) We chose our 2013 report for this year’s follow-up exercise as, typically, enough time should have elapsed for the institutions and bodies to have implemented our recommendations.
(22) In line with the harmonised definition of underlying transactions (for details see Annex 1.1 , paragraph 10).
Source: 2016 consolidated accounts of the European Union.
ANNEX 10.1
RESULTS OF TRANSACTION TESTING FOR ‘ADMINISTRATION’
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2016 |
2015 |
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SIZE AND STRUCTURE OF THE SAMPLE |
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Total transactions |
100 |
151 |
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ESTIMATED IMPACT OF QUANTIFIABLE ERRORS |
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Estimated level of error |
0,2 % |
0,6 % |
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Upper error limit (UEL) |
0,8 % |
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Lower error imit (LEL) |
0,0 % |
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ANNEX 10.2
FOLLOW-UP OF PREVIOUS RECOMMENDATIONS FOR ‘ADMINISTRATION’
Year |
Court recommendation |
Court's analysis of the progress made |
Institution's reply |
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Fully implemented |
Being implemented |
Not implemented |
Not applicable |
Insufficient evidence |
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In most respects |
In some respects |
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2013 |
Recommendation 1 (Commission): Updating of the personal situation and management of family allowances The Commission should take further steps to ensure that staff provide documents confirming their personal situation on a regular basis, as well as to improve systems for the timely processing of those documents that have an impact on the calculation of family allowances (see the 2013 annual report, paragraphs 9.11 and 9.20). |
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Recommendation 2 (EEAS): Updating of the personal situation and management of family allowances The EEAS should take further steps to ensure that staff provide documents confirming their personal situation on a regular basis, as well as to improve systems for the timely processing of those documents that have an impact on the calculation of family allowances (see the 2013 annual report, paragraphs 9.13 and 9.20). |
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With regard to the heading ‘Updating of the personal situation and management of family allowances’, EEAS staff are regularly reminded of their obligation to inform the Service without delay of any changes to their family situation, and unduly paid allowances are regularly recovered. The EEAS therefore considers that this recommendation is applied. |
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Recommendation 3 (EEAS): Procurement The EEAS should improve the design, coordination and conduct of procurement procedures by means of its Headquarters providing increased support and guidance to the Delegations (see the 2013 annual report, paragraphs 9.14, 9.15 and 9.20). |
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With regard to ‘Procurement’ (and also paragraph 10.14), we are actively taking steps to apply this recommendation. The EEAS is continuing to invest in improving the training, support and advice provided to delegation staff responsible for procurement. In addition, useful lessons should be drawn in future from the pilot project on the regionalisation of administrative support (in the 27 delegations in the neighbouring countries). |