18.12.2009

Official Journal of the European Union

C 310/1

REPORT

on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2008, together with the replies of the Joint Undertaking

2009/C 310/01

CONTENTS

	Paragraph	Page
INTRODUCTION …	1-5	2
STATEMENT OF ASSURANCE …	6-15	2
COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT …	16	3
Implementation of the budget …	16	3
OTHER MATTERS …	17-27	3
Internal control systems …	17-20	3
Financial Regulation of the Joint Undertaking …	21-23	3
Late payment of membership contributions …	24-25	4
Annual Activity Report …	26-27	4
Table …		5
Replies of the Joint Undertaking …		7

INTRODUCTION

1.	The European Joint Undertaking for ITER (1) and the Development of Fusion Energy was established in March 2007 (2) for a period of 35 years.

The members of the Joint Undertaking are the European Atomic Energy Community (Euratom) represented by the European Commission, the Member States of Euratom and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion and have expressed their wish to become members (at 31 December 2008: Switzerland).

The tasks of the Joint Undertaking are (see, also, the Table):

(a)	to provide the contribution of Euratom to the ITER International Fusion Energy Organisation (3);

(b)	to provide the contribution of Euratom to the ‘broader approach activities’ (complementary joint fusion research activities) with Japan for the rapid realisation of fusion energy;

(c)	to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility.

The indicative total resources for the Joint Undertaking for the period 2007 to 2041 are 9 653 million euro. The resources consist of a contribution from Euratom, contributions from France as the State hosting the ITER facilities, the annual membership contributions, voluntary contributions from members other than Euratom and additional resources.

5.	The Joint Undertaking started to work autonomously on 18 March 2008. While the main fusion facilities are to be developed at Cadarache in France, the seat of the Joint Undertaking is in Barcelona.

STATEMENT OF ASSURANCE

Pursuant to the provisions of Article 248 of the Treaty the Court has audited the annual accounts (4) of the European Joint Undertaking for ITER and the Development of Fusion Energy, which comprise the ‘financial statements’ (5) and the ‘reports on implementation of the budget’ (6) for the financial year ended 31 December 2008 and the legality and regularity of the transactions underlying those accounts.

7.	This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (7).

The Director's responsibility

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules of the Joint Undertaking (8) under his own responsibility and within the limits of the authorised appropriations (9). The Director is responsible for putting in place the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (10) that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular.

The Court's responsibility

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

10.

The Court conducted its audit in accordance with the IFAC and ISSAI (11) International Auditing Standards and Codes of Ethics. Those standards require that the Court complies with ethical requirements and plans and performs the audit to obtain reasonable assurance about whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

11.

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

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

Opinion on the reliability of the accounts

13.

In the Court's opinion, the Annual Accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy present fairly, in all material respects, its financial position as of 31 December 2008 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation.

Opinion on the legality and the regularity of the underlying operations

14.	In the Court's opinion, the transactions underlying the annual accounts of the Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2008 are, in all material respects, legal and regular.

15.	The comments which follow do not call the Court's opinions into question.

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Implementation of the budget

16.

For the year 2008, the budget outturn account showed a surplus of 57,6 million euro, which represents 38 % of the 149,7 million euro accrued revenue. Of this surplus 32,2 million euro were carried over to 2009 and 25,4 million euro has to be repaid to the Commission according to Article 16 of the Financial Regulation of the Joint Undertaking. The underspending mostly relates to delays in the progress of the Euratom fusion programme.

OTHER MATTERS

Internal control systems

17.

The Joint Undertaking is in a start-up phase and has not completely implemented its internal controls and financial information system during 2008. At the end of the year, the underlying business processes had not yet been formalised and had not been validated by the Accounting Officer as required by the Financial Regulation of the Joint Undertaking.

18.	In particular, further work is needed in the documentation of IT processes and activities, and the mapping of IT risks. The Joint Undertaking had also not developed a business continuity plan nor a data protection policy in 2008.

19.

Article 75 of the Financial Regulation of the Joint Undertaking stipulates that the Joint Undertaking should have an internal auditing service which must comply with relevant international standards. However, at the end of 2008, this important element of the internal control system had not been set up.

20.

The Court's testing of a sample of 40 transactions identified several cases where the internal controls had not operated correctly. For example, in six cases, the Joint Undertaking made budget commitments only after it had already entered into legal obligations, contrary to the requirements of Financial Regulation. In one case, the Joint Undertaking awarded a contract through a negotiated procedure without the required publication of a contract notice.

Financial Regulation of the Joint Undertaking

21.	The Financial Regulation of the Joint Undertaking was adopted by Decision of the Governing Board on 22 October 2007. On 28 February 2008, the Director of the Joint Undertaking requested the opinion of the Court on the Financial Regulation. The Court issued its Opinion No 4/2008 in October 2008.

22.	In its Opinion, the Court noted that the Financial Regulation of the Joint Undertaking is largely based on the principles of the framework Financial Regulation for Community bodies and of the general Financial Regulation.

23.

However, the Court identified a number of issues for which it considers that amendments are required in order to strengthen the financial framework of the Joint Undertaking. In particular, the Financial Regulation of the Joint Undertaking should contain more stringent rules on the award of research grants and should also make provision for the audit of the Joint Undertaking by the Internal Audit Service of the Commission, in line with the arrangements in place for the other Community bodies.

Late payment of membership contributions

24.	Within three months of the adoption of the budget, the Joint Undertaking should request its members to pay their annual contributions. Although the budget was adopted in December 2007, the Joint Undertaking only requested payment at the end of May 2008.

25.	The members were requested to pay their contributions by July 2008. Only five of the 23 members paid within this deadline. The Joint Undertaking had to issue three reminders and one member had still not paid at the end of 2008.

Annual activity report

26.

According to Article 14 of the Statutes and Article 43 of the Financial Regulation of the Joint Undertaking, the Director is required to prepare an annual activity report. The report should contain relevant financial and management information, indicating the results of the operations of the Joint Undertaking by reference to the objectives and the timetable set, the risks associated with the operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. After approval by the Governing Board, the report is to be sent to the European Parliament and the Court of Auditors by 15 June following the end of the financial year.

27.

The Court received the Annual Activity Report only in September 2009, three months after the deadline. Although the report provides financial and operational information, it does not meet all the requirements of the applicable regulations. The explanation of the implementation of the work programme does not include a detailed evaluation of the results with respect to the objectives and timetable set. The report does not include an assessment of the efficiency and effectiveness of the internal control system as required by the Financial Regulation.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 22 October 2009.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

Table

The European Joint Undertaking for ITER and the Development of Fusion Energy (Barcelona)

Areas of Community competence deriving from the Treaty

Competences of the Joint Undertaking as defined in Council Decision 2007/198/Euratom

Governance

Resources made available to the Joint Undertaking in 2008

(no data for 2007)

Main achievements for 2008

European Atomic Energy Community

Chapter 5 on ‘Joint Undertakings’, of the Treaty establishing the European Atomic Energy Community, and in particular

Article 45:

‘Undertakings which are of fundamental importance to the development of the nuclear industry in the Community may be established as Joint Undertakings within the meaning of this Treaty, in accordance with the following Articles’.

Article 49:

‘Joint Undertakings shall be established by Council decision. Each Joint Undertaking shall have legal personality’.

Objectives

—	To provide the contribution of the European Atomic Energy Community (Euratom) to the ITER International Fusion Energy Organisation.

—	To provide the contribution of Euratom to broader approach activities with Japan for the rapid realisation of fusion energy.

—	To prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility (IFMIF).

Tasks

—	Oversee preparation of the ITER project site,

—	provide components, equipment, materials and other resources to the ITER Organisation,

—	manage procurement arrangements vis-à-vis the ITER Organisation and, in particular, associated quality assurance procedures,

—	prepare and coordinate Euratom’s participation in the scientific and technical exploitation of the ITER project,

—	coordinate scientific and technological research and development activities in support of Euratom’s contribution to the ITER Organisation,

—	provide Euratom’s financial contribution to the ITER Organisation,

—	arrange to make human resources available for the ITER Organisation,

—	interface with the ITER Organisation and carry out any other activities in furtherance of the ITER Agreement.

1. Governing Board

The Governing Board shall be responsible for the supervision of the Joint Undertaking in the pursuit of its objectives and ensure close collaboration between the Joint Undertaking and its members in the implementation of its activities.

2. Executive Committee

The Executive Committee shall assist the Governing Board in the preparation of its decisions and shall carry out any other tasks which the Governing Board may delegate to it.

3. Scientific Programme Board

The Scientific Programme Board shall advise the Governing Board and the Director, as necessary, on the adoption and implementation of the project plan and work programmes.

4. Director

The Director shall be the chief executive officer responsible for the day-to-day management of the Joint Undertaking and shall be its legal representative.

5. External Audit

Court of Auditors.

6. Discharge Authority

Parliament on a recommendation of the Council.

Final budget for 2008

149,8 million euro of which 81,5 % funded by Community Contribution.

Staff numbers at 31 December 2008

145 posts in the establishment plan of which 101 occupied at 31.12.2008.

56 other posts (contractual, seconded national experts, employment agency staff).

Total staff number: 157 assigned to the following duties:

—	operational tasks: 102,

—	administrative and support tasks: 47,

—	mixed tasks: 8.

ITER International Agreement

—	11 procurements and 16 grants were launched and 3 procurement arrangements were concluded with the ITER Organisation,

—	a prototype superconductor for the ITER poloidal field coils made of niobium-titanium was successfully tested,

—	sub-scale pre-compression rings tested beyond the values required by ITER,

—	a poloidal sector model of the vacuum vessel was completed,

—	the manufacture of a full-scale shield prototype representative of the blanket module,

—	the mock-ups of the wall facing directly the plasma were successfully tested under a high heat flux,

—	the qualification of the divertor vertical target was achieved,

—	a test facility for the demonstration of the remote handling operations on the divertor was completed,

—	high power tests on the first industrial prototype of the 2 MW coaxial cavity gyrotron,

—	Cadarache site: the area was levelled and the main platform was prepared for excavations and construction.

Broader Approach Agreement

—	JT-60SA tokamak: a rebaselining exercise was completed whereby cost savings were obtained while maintaining the device performance,

—	IFMIF/EVEDA programme: several design activities were advanced and all major aspects of the accelerator system are now fixed,

—	FERC programme: the interfaces between the building and the supercomputer have been defined and benchmark codes established.

Source: Information submitted by the Joint Undertaking.

REPLIES OF THE JOINT UNDERTAKING

Implementation of the budget

Paragraph 16

F4E considers that the underspending to which the Court refers was inherent to the first year of financial autonomy of F4E from the Commission as well as to the delays in the start-up of the ITER International Organisation and the Euratom fusion programme as a whole. Mechanisms for periodical reporting are being established. As part of the action plan for the internal control standards, additional monitoring and reporting will be identified to tighten even further the controls on budget execution.

Internal control systems

Paragraphs 17-19

F4E agrees with the comments of the Court concerning the maturity of its internal control environment during its first operational year. Meanwhile, F4E can confirm that the Internal Auditor took up his duties on 1 July 2009. An Action Plan for the implementation of the internal control standards has been prepared, which also addresses the issues identified as concerns IT, and a working group is being set up which will coordinate, monitor and report on its implementation. Furthermore, a Data Protection Officer has been nominated and the necessary actions have been taken to further develop the Business Continuity and Data Recovery Plan.

In this context, F4E has set up a quality assurance system in 2008. An exercise of mapping all underlying business processes is under way.

Paragraph 20

F4E takes note of the comment of the Court concerning the absence of budgetary commitments before entering into legal obligations in six particular cases that derive from the obligations of Euratom under the ITER International Agreement and the Agreement with Japan.

These six cases are international multiannual arrangements between F4E and the ITER Organisation or the Japanese Domestic Agency, implementing the abovementioned international obligations of Euratom.

In order to address the remarks of the Court on this matter, F4E will seek advice from its members in the Governing Board, in particular Euratom. For these specific Agreements, making a budgetary commitment before entering into these arrangements would have a major impact on the capability of F4E to implement the international obligations of Euratom, as the amount that would need to be committed could exceed the available budget within the current framework programme.

F4E agrees with the Court’s comment concerning the single case where a negotiated procedure was initiated with having published a contract notice beforehand. It must be noted however, that it was a measure taken under exceptional circumstances. F4E duly documented its decision to deviate from standard procedures and at the same time established a mitigation plan to minimise any negative impacts. The mitigation plan was successfully implemented and the situation was redressed in the meantime.

F4E Financial Regulation

Paragraphs 21-23

An internal F4E Working Group has been set up to regularly analyse the necessity to amend the F4E Financial Regulation and its Implementing Rules in order to strengthen the financial framework, while taking into account the particular industrial and institutional environment of F4E. The Working Group will analyse the Court’s comments in view of proposing amendments to the Commission and the Governing Board.

Late payments of membership contributions

Paragraph 24

F4E agrees with the Court’s comment. However, the cause of the delay in the issue of the request for payment of the annual contributions for 2008 is attributable to the transitional period before F4E became financially autonomous from the Commission on 18 March 2008.

Paragraph 25

F4E agrees with the Court’s comment. However, given that 2008 was the first year for which the F4E members were requested to pay their annual membership contribution, most of the members needed some time to establish internal procedures necessary for authorising the payment of this specific contribution.

All F4E members have since paid their 2008 annual membership contributions.

During its ninth meeting in March 2009, the Governing Board of F4E reminded all members of the need to pay membership contributions in due time.

Annual activity report

Paragraphs 26-27

F4E agrees with the Court’s comments on the delay of the Annual Activity Report (AAR) and the absence of an assessment on the effectiveness and efficiency of the internal control system as well as a detailed evaluation of the results against the objectives and timetable set.

The delay is mainly attributable to the fact that a meeting of the F4E Governing Board did not take place before the deadline set out in the F4E Financial Regulation. In addition, the Governing Board did not approve the AAR during its meeting on 9 July but only on 14 September.

In order to ensure the timely approval of the AAR in the future, F4E will request a Governing Board meeting in early June and establish a procedure with the Governing Board and its subsidiary bodies to prepare well in advance the decision to approve the AAR and the associated analysis and assessment.

Due to the fact that F4E was understaffed and not fully operational during the reporting period, only rudimentary management indicators for the implementation of the Work Programme were available and risk assessments had not yet been carried out. These weaknesses will be addressed by F4E in the next AAR, taking into account that internal reporting processes are being developed and risk assessments prepared for all the major areas of F4E operational activities.

An action plan for the implementation of internal control standards has been established and entails, among other things, the launch of a risk-assessment exercise as well as an annual review of the effectiveness and efficiency of the internal control environment. Meanwhile, the internal auditor has been recruited and his audit and consulting services shall contribute to the assurance of the Authorising Officer on the effectiveness of the internal control system and the performance of departments in its implementation.

(1) ITER: International thermonuclear experimental reactor.

(2) Council Decision 2007/198/Euratom of 27 March 2007 establishing the European Joint Undertaking for ITER and the Development of Fusion Energy (OJ L 90, 30.3.2007, p. 58).

(3) The ITER International Fusion Energy Organisation was set up in October 2007 for an initial period of 35 years to implement the ITER project, which aims to demonstrate the scientific and technological feasibility of fusion energy. The members are Euratom, the People's Republic of China, the Republic of India, Japan, the Republic of Korea, the Russian Federation and the United States of America.

(4) These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations with summary information on the transfers of appropriations among the various budget items.

(5) The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in capital and the annex to the financial statements which includes the description of the significant accounting policies and other explanatory information.

(6) The budget implementation reports comprise the budget outturn account and its annex.

(7) OJ L 248, 16.9.2002, p. 1.

(8) Financial Regulation of the European Joint Undertaking for ITER and the Development of Fusion Energy adopted by Decision of its Governing Board on 22 October 2007.

(9) Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 of 23 December 2002 (OJ L 357, 31.12.2002, p. 72).

(10) The rules concerning the presentation of the accounts and accounting by Community bodies are laid down in chapter 1 of Title VII of Regulation (EC, Euratom) No 2343/2002 as last amended by Commission Regulation (EC, Euratom) No 652/2008 of 9 July 2008 (OJ L 181, 10.7.2008, p. 23) and are incorporated in the Financial Regulation of the Fusion for Energy Joint Undertaking.

(11) International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

18.12.2009

Official Journal of the European Union

C 310/9

REPORT

on the annual accounts of the SESAR Joint Undertaking for the financial year ended 31 December 2008, together with the replies of the Joint Undertaking

2009/C 310/02

CONTENTS

	Paragraph	Page
INTRODUCTION …	1-5	10
STATEMENT OF ASSURANCE …	6-15	10
COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT …	16-20	11
Non-respect of the budgetary principle of annuality …	16-17	11
Implementation of the budget …	18-20	11
OTHER MATTERS …	21-31	11
Internal control systems …	21-25	11
Recognition of assets …	26-27	12
Financial Regulation of the Joint Undertaking …	28	12
Late payment of membership contributions …	29	12
Annual Activity Report …	30-31	12
Table …		13
Replies of the Joint Undertaking …		15

INTRODUCTION

1.	The SESAR Joint Undertaking was established in February 2007 (1) in order to manage the activities of the SESAR (Single European Sky Air Traffic Management Research) project. The seat of the Joint Undertaking is in Brussels.

The SESAR project aims to modernise air traffic management (ATM) in Europe and is divided into three phases:

(a)

‘Definition phase’ started in 2005 and led by the European Organisation for Safety of Air Navigation (Eurocontrol), with co-financing from the Community budget through the Trans European Network — Transport programme. The outcome is the European ATM Master Plan, which defines the content, the development and deployment plans of the next generation of ATM systems;

(b)	‘Development phase’ (2008-2013) managed by the SESAR Joint Undertaking (see also the Table) and leading to the production of new technological systems, components and operational procedures as defined in the European ATM Master Plan;

(c)	‘Deployment phase’ (2014-2020) to be led by industry and stakeholders, for the large-scale production and implementation of the new air traffic management infrastructure.

The Joint Undertaking is designed as a public-private partnership. The founding members are the European Community represented by the European Commission, and Eurocontrol represented by its Agency. Following a call for expressions of interest, 15 public and private enterprises from the air navigation industry are candidate members of the Joint Undertaking. These include air navigation service providers, ground and aerospace manufacturing industry, aircraft manufacturers, airport authorities and airborne equipment manufacturers.

The budget for the development phase of the SESAR project is 2,1 billion euro, to be provided in equal parts by the Community, by Eurocontrol and by the participating public and private partners. The Community contribution is funded from the Seventh Framework Programme for Research and Technological Development and the Trans-European Networks — Transport programme. Around 90 % of the funding from Eurocontrol and the other stakeholders will take the form of in-kind contributions.

5.	The SESAR JU started to work autonomously on 10 August 2007.

STATEMENT OF ASSURANCE

Pursuant to the provisions of Article 248 of the Treaty the Court has audited the annual accounts (2) of the SESAR Joint Undertaking, which comprise the ‘financial statements’ (3) and the ‘reports on implementation of the budget’ (4) for the financial year ended 31 December 2008 and the legality and regularity of the transactions underlying those accounts.

7.	This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (5).

The Director’s responsibility

As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules of the Joint Undertaking (6) under his own responsibility and within the limits of the authorised appropriations (7). The Director is responsible for putting in place the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular.

The Court’s responsibility

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

10.

The Court conducted its audit in accordance with the IFAC and ISSAI (8) International Auditing Standards and Codes of Ethics. Those standards require that the Court complies with ethical requirements and plans and performs the audit to obtain reasonable assurance about whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular.

11.

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

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

Opinion on the reliability of the accounts

13.	In the Court’s opinion, the SESAR Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as of 31 December 2008 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation.

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

14.	In the Court’s opinion, the transactions underlying the annual accounts of the SESAR Joint Undertaking for the financial year ended 31 December 2008 are, in all material respects, legal and regular.

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

COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT

Non-respect of the budgetary principle of annuality

16.	The framework Financial Regulation states that the appropriations entered in the budget are authorised for one financial year running from 1 January to 31 December. The Statutes of the Joint Undertaking confirm that the financial year corresponds to the calendar year.

17.

However, Article 5 of the Financial Regulation of the Joint Undertaking states that the first financial reporting period starts when the Joint Undertaking begins autonomous operations in 2007 and ends on 31 December 2008. The Administrative Board adopted the final budget covering the period August 2007 to December 2008 in April 2008. This decision did not respect the principle of annuality laid down in the framework Financial Regulation and the Statutes of the Joint Undertaking.

Implementation of the budget

18.

The final budget adopted by the Administrative Board in April 2008 included commitment appropriations of 1 463 million euro and payment appropriations of 38 million euro. As few project activities had started by the end of 2008, the budget proved to be highly unrealistic. This is illustrated by the utilisation rates for commitment and payment appropriations, of 1 % and 17 % respectively.

19.	While the utilisation rate for payment appropriations was very low, revenue for the year amounted to 124,2 million euro and deposits in bank accounts at the end of the year totalled 116 million euro. The budgetary principle of equilibrium was not respected.

20.	According to the Financial Regulation of the Joint Undertaking, the staff establishment plan should have been adopted by the Administrative Board together with the budget. However, for the period 2007 to 2008, this was not done.

OTHER MATTERS

Internal control systems

21.

The Joint Undertaking is in a start-up phase and had not completely implemented its internal controls and management information systems by the end of 2008. The underlying business processes had not been formalised nor validated by the Accounting Officer as required by the Financial Regulation of the Joint Undertaking.

22.	The Joint Undertaking does not have yet a financial system integrating the general and budgetary accounting. A complete financial information system is only planned to be implemented at the end of 2009.

23.	The contracts and procurement unit has not yet developed adequate internal control systems. The Joint Undertaking has not yet developed a disaster recovery plan nor a data protection policy.

24.	According to its Financial Regulation, the Joint Undertaking should have an internal audit service which must comply with relevant international standards. However, this important element of the internal control system was not put in place until January 2009.

25.

The Court’s testing of a sample of 36 transactions identified several cases where the internal controls had not operated correctly. For example, in six cases, the Joint Undertaking made budget commitments only after it had already entered into legal obligations. In addition, staff insurance contracts were signed in the absence of the required procurement procedure. In these cases, the budget commitments were also signed after entering into the legal commitment, and the contracts were authorised by an official without the necessary powers.

Recognition of assets

26.	The Joint Undertaking will own all the tangible and intangible assets which it creates or which are transferred to it for the development phase of the SESAR project in accordance with specific agreements with its members (9).

27.

However, the Joint Undertaking has not yet developed an accounting policy in respect of assets which may result from the development phase of the project. There is no management information system in place to allow the allocation of costs to specific work packages or to identify the funding source of operational costs. This impedes the proper valuation of assets. Although this does not affect the 2008 accounts, as there has been limited operational activity, it will have significant impact from 2009 onwards.

Financial Regulation of the Joint Undertaking

28.

The Financial Regulation of the Joint Undertaking, adopted by the Administrative Board in July 2007, should be in line with the framework Financial Regulation for Community bodies. In particular, the provisions related to the implementation of the budget and presentation of the accounts, to procurement procedures and to the internal audit function need to be completed. Moreover, the Joint Undertaking has not adopted implementing rules for its Financial Regulation.

Late payment of membership contributions

29.

According to the Statutes, the founding members should pay a minimum initial contribution of 10 million euro within 1 year of the establishment of the Joint Undertaking. Eurocontrol paid its initial contribution on 21 August 2008, whereas the Joint Undertaking was established on 3 March 2007. The Commission had already paid the Community contribution on 1 August 2007.

Annual Activity Report

30.

According to Articles 7 and 16 of the Statutes of the Joint Undertaking, and Article 40 of the framework Financial Regulation for Community bodies, the Executive Director is required to draw up an annual activity report. The report should show the progress of the SESAR project, in particular with regard to the timetable, costs and performance. The report should contain relevant financial and management information, indicating the results of the operations of the Joint Undertaking by reference to the objectives set, the risks associated with the operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. By no later than 15 June following the end of the financial year, the management board should send to the budgetary authority and the Court of Auditors an analysis and assessment of the Authorising Officer’s annual report.

31.

The Court received the annual activity report in May 2009. Although the report provides financial and operational information, it does not meet all the requirements of the applicable regulations. The explanation of the progress of the project does not include a detailed evaluation of the results with respect to the objectives and timetable set. The report does not include an assessment of the efficiency and effectiveness of the internal control system as required by the framework Financial Regulation.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 22 October 2009.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

Table

SESAR Joint Undertaking (Brussels)

Areas of Community competence deriving from the Treaty

Competences of the Joint Undertaking as defined in Council Regulation (EC) No 219/2007 of 27 February 2007 as amended by Council Regulation (EC) No 1361/2008

Governance

Resources made available to the Joint Undertaking in 2007-2008

(first year of the Joint Undertaking)

Main products and services suppliedin 2007-2008

Common transport policy

‘The Council may, acting by a qualified majority, decide whether, to what extent and by what procedure appropriate provisions may be laid down for sea and air transport.’

(Article 80 of the Treaty)

Research and technological development

‘The Community may set up joint undertakings or any other structure necessary for the efficient execution of Community research, technological development and demonstration programmes.’

(Article 171 of the Treaty)

Objectives

—	To ensure the modernisation of the European air traffic management system by coordinating and concentrating all relevant research and development efforts in the Community,

—	to execute the ATM Master Plan.

Tasks

—	Manage the research, development and validation activities of the SESAR Project by combining public and private sector funding provided by its members and using external technical resources and in particular by using Eurocontrol’s experience and expertise.

In particular:

—

organise and coordinate the activities of the development phase of the SESAR project, in accordance with the ATM Master Plan, resulting from the definition phase of the project managed by Eurocontrol, by combining and managing under a single structure public and private sector funding, ensure the necessary funding for the activities of the development phase of the SESAR project in accordance with the ATM Master Plan,

—

ensure the involvement of the stakeholders of the air traffic management sector in Europe, in particular: air navigation service providers, airspace users, professional staff associations, airports, and manufacturing industry; as well as the relevant scientific institutions or the relevant scientific community,

—	organise the technical work of research and development, validation and study, to be carried out under its authority while avoiding fragmentation of such activities,

—	ensure the supervision of activities related to the development of common products duly identified in the ATM Master Plan and if necessary, to organise specific invitations to tender.

1. Administrative Board

Composition

(a)	a representative from each of the members of the Joint Undertaking;

(b)	a representative of the military;

(c)	a representative of civil users of airspace;

(d)	an air navigation service providers’ representative, designated by their representative organisation at European level;

(e)	an equipment manufacturers’ representative, designated by their representative organisation at European level;

(f)	an airports’ representative;

(g)	a representative from the bodies representing staff in the air traffic management sector, designated by their representative organisation at European level;

(h)	a representative of the relevant scientific institutions or the relevant scientific community, designated by their representative organisation at European level.

The Administrative Board shall be chaired by the representative of the Community.

Main tasks

(see Council Regulation (EC) No 219/2007)

(a)	adopt the ATM Master Plan endorsed by the Council as referred to in Article 1(2) of the SESAR Regulation and approve any proposal to modify it;

(b)	give guidelines and take the decisions necessary for the implementation of the development phase of the SESAR project and exercise overall control over its implementation;

(c)	approve the Joint Undertaking’s work programme and annual work programmes as well as the annual budget, including the staff establishment plan.

2. Executive Director

Appointed by the Administrative Board on a proposal from the Commission.

3. External audit

European Court of Auditors.

4. Discharge Authority

European Parliament upon a recommendation from the Council.

Final budget for 2007-2008

1 560,21 million euro Community contribution 10,3 %.

Staff numbers at 31 December 2008

Posts in the staff establishment plan: 23

Post occupied: 14

Other posts (auxiliary contracts, seconded national experts, local staff): 0

Total staff number: 14

Staff seconded from the Joint Undertaking members as part of their in-kind contribution: 8

assigned to the following duties:

—	Operational tasks: 9

—	Administrative and support tasks: 12

—	Mixed tasks: 1

—	Establishment of the SESAR Joint Undertaking structure including staff recruitment, procedures preparation, policies and processes definition. Re-design of the Joint Undertaking structure in order to align it with the new JTIs’ legal model.

—	Preparation, negotiation, discussion and launch of the membership process involving 15 candidate members for the realisation of around 300 projects framed in 16 Work Packages.

—	Preparation and initial establishment of the Work Programme Management structure.

—	Establishment of the framework for international cooperation.

—	Launch of operational activities (Industrial Support contract, AIRE initiative).

—	Launch of communication activities.

—	Number of procurement procedures for different administrative, technical and operational activities: 16

Source: Information submitted by the Joint Undertaking.

REPLIES OF THE JOINT UNDERTAKING

Paragraph 16

The measure adopted by the Administrative Board under Article 5.2 of the SESAR Joint Undertaking (SJU) Financial Regulations took into consideration the starting up of the activities and the limited expenditure during the first months of the life of the SJU.

Paragraph 18

The SJU is responsible for the development phase of the SESAR Programme which is expected to last until 2016. The programme is multiannual and, in this respect, will be characterised during its life by an expected imbalance between revenues and expenditure. Furthermore, the resources available at the end of 2008 in the SJU are needed for the launch of approximately 200 projects in late 2009 and early 2010.

The need to change the SJU basic act and the alignment of the SJU legal framework to that of a full Community body impacted on the capacity of the SJU to launch the programme as initially expected by the end of 2008.

Paragraphs 20-24

2007-2008 has been a start-up period for the SJU, and resources were concentrated on the initial set-up of the organisation and especially on the finalisation of the agreements with the candidates for SJU membership. Furthermore, the changes introduced by the new Council Regulation modifying the basic act of the SJU will allow the SJU during 2009 to set up progressively an adequate system for the management of the organisation in the future.

With regard to the financial system, the SJU is in the ‘EC waiting list’ for the implementation of ABAC and SAP, while internally is working on a management system for the operational aspects of the programme. Nevertheless, it is not expected that the SJU will have an integrated financial system before mid-2010, requiring the SJU to manage its resources with additional controls.

Paragraphs 25-26

The SJU will seek to develop an accounting policy for the recognition of the assets resulting from the programme by mid-2010. Furthermore, provisions concerning cost reporting, financial statements, etc are detailed in the Multilateral Framework Agreement governing the programme.

Paragraph 27

The SJU Financial Rules, which are based on the Commission’s Framework Regulation (EC, Euratom) No 2343/2002, were adopted by the SJU Administrative Board on 28 July 2009.

Paragraph 28

The reasons for the deferred payment of the initial Eurocontrol contribution were related to the adoption of the new Statutes of the SJU. While the intention of Eurocontrol to pay the contribution was clearly established, the SJU had to assess the detailed impact of the change of its basic act on the status of such a payment, before making the payment request.

Paragraphs 29-30

The SJU takes note of the comments of the Court. As already mentioned, 2007-2008 was the first year of the Joint Undertaking operations and was mostly dedicated to the set-up and organisation of the Public-Private Partnership. As a consequence, the annual activity report concentrates on the achievements in the set-up of the structure and the initial financial aspects. From 2009, the report will address the progress achieved towards the programme objectives.

(1) Council Regulation (EC) No 219/2007 of 27 February 2007 on the establishment of a Joint Undertaking to develop the new generation European air traffic management system (SESAR) (OJ L 64, 2.3.2007, p. 1) amended by Council Regulation (EC) No 1361/2008 of 16 December 2008 (OJ L 352, 31.12.2008, p. 12).

(2) These accounts are accompanied by a report on the budgetary and financial management during the year which gives inter alia an account of the rate of implementation of the appropriations with summary information on the transfers of appropriations among the various budget items.

(3) The financial statements include the balance sheet and the economic outturn account, the cash-flow table, the statement of changes in capital and the annex to the financial statements which includes the description of the significant accounting policies and other explanatory information.

(4) The budget implementation reports comprise the budget outturn account and its annex.

(5) OJ L 248, 16.9.2002, p. 1.

(6) SESAR Financial Regulation adopted by the Administrative Board on 3 July 2007.

(7) Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 of 23 December 2002 (OJ L 357, 31.12.2002, p. 72).

(8) International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI).

(9) Article 18 of the Statutes.

		ISSN 1725-2423 doi:10.3000/17252423.C_2009.310.eng
Official Journal of the European Union		C 310

English edition	Information and Notices	Volume 52 18 December 2009

Notice No	Contents	page
	IV Notices
	NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES
	Court of Auditors
2009/C 310/01	Report on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2008, together with the replies of the Joint Undertaking	1

2009/C 310/02	Report on the annual accounts of the SESAR Joint Undertaking for the financial year ended 31 December 2008, together with the replies of the Joint Undertaking	9