ANNEX

Clean Sky Joint Undertaking (Brussels)

Competences and activities

Areas of Union competence deriving from the Treaty (Extracts from Articles 187 and 188 of the Treaty on the Functioning of the European Union)	Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme provides for a Community contribution to the establishment of long-term public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 187 of the Treaty. Council Regulation (EC) No 71/2008 of 20 December 2007 setting up the Clean Sky Joint Undertaking (OJ L 30, 4.2.2008, p. 1)
Competences of the Joint Undertaking (Council Regulation (EC) No 71/2008)	Objectives — The Clean Sky Joint Undertaking shall contribute to the implementation of the Seventh Framework Programme and in particular Theme 7, Transport (including Aeronautics) of the Specific Programme Cooperation. — accelerating in the EU the development, validation and demonstration of clean Air Transport technologies for earliest possible deployment; — ensuring coherent implementation of European research efforts aiming at environmental improvements in the field of Air Transport; — creating a radically innovative Air Transport System based on the integration of advanced technologies and full scale demonstrators (ITDs), with the target of reducing the environmental impact of air transport through significant reduction of noise and gaseous emissions, and improvement of the fuel economy of aircrafts; — accelerating the generation of new knowledge, innovation and the uptake of research proving the relevant technologies and fully integrated system of systems, in the appropriate operational environment, leading to strengthened industrial competitiveness.
Governance	— The governing body of the JU is the Governing Board. The Executive team is led by an Executive Director. Industry is represented through various means such as ITD steering committees and National States representative group.
Resources available to the Joint Undertaking in 2011	Budget 192 350 991 euro Staff at 31 December 2011 24 posts provided for in the establishment plan (18 temporary staff and 6 contract staff) of which 23 posts were occupied; these were allocated to: Operational activities: 9; Administrative tasks: 14; Mixed tasks: 5
Activities and services provided in 2011	See Annual Activity Report 2011 of the Clean Sky Joint Undertaking at www.cleansky.eu
Source: Information supplied by the Clean Sky Joint Undertaking.

REPLIES OF THE CLEAN SKY JOINT UNDERTAKING

Basis for a qualified opinion on the legality and regularity of the transactions underlying the accounts

Paragraph 15

The Clean Sky Joint Undertaking (CSJU) welcomes the positive conclusion of the Court on the legality and regularity of all transactions underlying the annual accounts 2011 with the only exception of transactions relating to the validation of cost claims.

The validation of costs claimed by the JU’s beneficiaries leads to interim/final payments and clearing of pre-financing. The ex-post audits performed by the CSJU in 2011 covered costs validated by the management of the Joint Undertaking (JU) concerning the project execution 2008, 2009 and 2010. In the accumulated operational payments incurred by the JU from the beginning of the CS program until December 2011, only 49,5 % (1) were related to project execution 2008, 2009 and 2010.

The error detected by the JU’s ex-post audits carried out in 2011 amounts to 6,16 %. However, taking into account the corrective actions implemented by the JU as described further down in this comment, besides the detected error rate another indicator needs to be considered for the assessment of the legality and regularity of the validated cost claims: the residual error rate. According to the methodology described in the approved CSJU ex-post audit strategy, the residual error rate indicates the remaining error in the validated cost claims, after recovery mechanism have taken place. For the ex-post audits carried out in 2011 for previous years’ cost claims, the residual error rate amounts to 4,09 %, which leads to a comparatively limited amount at risk in respect of total accumulated operational payments incurred for the CS program until the end of 2011 (2,02 % (2)).

The JU acknowledges the relevance of the detected and residual error rates related to the audited cost claims and aims to enhance further the quality of its ex-ante validation process.

The JU has implemented its ex-post audit process in the year 2011, approximately one year after having achieved its autonomy in November 2009. The scope of the first audits covered the validation process of the year 2010, which was the first one carried out by the JU. In the year 2010 the JU was still in a start-up phase and the ex-ante controls related to the grant management were not yet fully mature to manage the high volume of grants.

With a view to the results of the first ex-post audit exercise carried out, the JU wishes to highlight the effectiveness of this element of its internal control system, through which the management has detected and corrected errors incurred during the JU’s ex-ante validation of cost claims. Final corrective actions are still on-going.

Since 2010, the JU has significantly developed its processes governing the validation of cost claims by setting up dedicated procedures including a database for grant management providing for a standard approval mechanism of cost claims by Financial and Project officers.

After the first ex-post audit exercise, the JU has established the appropriate recovery measures to correct the overpayments incurred in the past, including extrapolation of systematic errors detected in the audits on non-audited cost claims. It needs to be noted, that 75 % of the JU’s funds are granted to named beneficiaries (members of the CSJU), who participate in the CS projects until the end of the program. This situation facilitates the corrective measures to be taken by the JU through recoveries on the occasion of subsequent payments to the beneficiaries.

As a preventive measure, the procedures applied today for the ex-ante validation of cost claims take into account the results of the ex-post audits of previous years, in particular in cases of systematic errors. For the period 2008 to 2010, more than 80 % of the detected errors were of a systematic nature. This enables the JU also to provide guidance to the named beneficiaries, thus averting errors in future cost claims.

A significant part of the error detected in the ex-post audits of 2011 (approximately 50 %) was due to the usage of previous years’ accounting data, as actual data were not available at the time, when the financial statements were due. The JU is monitoring the process of subsequent adjustments within its ex-ante controls and will make sure in the coming reporting periods, that adjustments of previous years’ cost claims are submitted without delay.

The JU’s management considers it important to ensure a multi-annual control architecture for the grant management of the Clean Sky JU, which takes into account the opportunities for standard recovery procedures as well as for preventive measures. This is why the JU’s management has established control mechanisms and objectives for the multi-annual duration of the project, which are measured by indicators covering the entire program duration.

Comments on the budgetary and financial management

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The JU relies on the efficient and successful outcome of negotiations relating to the calls for proposals and has taken steps internally to improve and accelerate the process around this important aspect of the payments to new partners. The JU is seeing an overall improvement in the time to grant and is monitoring this closely at management level (3).

Paragraph 19

The JU acknowledges the delay of the Governing Board decision approving the carry-over of payment appropriations to the budget plan of the year 2012 (4). The time schedule for the JU’s budgetary planning and reporting cycle has been revised in order to take care of the appropriate timely approval of the Governing Board for the carry-overs to the year 2013.

Paragraph 20

The JU faced an exceptional situation in the first half of 2012 regarding the receipt of cost claims from its members for project execution in 2011. The financial statements for GAMs 2011, which were due 1st March 2012, were submitted by the beneficiaries with an unusual delay of up to 3-4 months. The JU has analysed the underlying reason for this delay together with the ITD coordinators (consortia leaders) and takes action to prevent a similar development in 2013. The following actions have been decided:

—	With agreement of the Governing Board (June 2012), a clear timetable for the 2013 process (January - June 2013) will be set out indicating deadlines and response times expected from the industry and the JU.

—	Through guidance and training the JU will contribute to improve the completeness and quality of the cost claims and related Certificates of Financial Statements (CFS).

—	Close monitoring will be further enhanced by the JU, providing pro-active assistance to the members for individual questions on eligibility of costs. This was not possible due to lack of resources in the first half of 2012.

—	A new IT tool for grant management will facilitate the process of submitting and validating cost claims.

Following the validation of finally received cost claims by management and approval by the Governing Board later in 2012, the related in-kind contributions will be transferred to the Net Assets of the JU in the 2012 Final accounts. Therefore, the status of the Net Assets as presented in the Final accounts 2011 has to be considered as transitional.

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

Paragraph 21

During the first quarter of the year 2012 and following previous year’s ECA recommendations, the JU has developed a dedicated procedure for the processes related to the validation of cost claims, integrating the POs in the validation process of the financial statements (5). Besides the validation of the technical reports, the POs check the information available on the usage of resources and notify the result of their validation to the Financial Officers. Clear rules have been developed ensuring the evidence of the financial and operational verification respectively authorisation for the validation of cost claims. The format of the previously used checklist has been improved, in order to provide evidence of the validation steps actually performed and to show the interaction between the financial and operational units.

Paragraph 22

The JU, following its experiences and previous observations of the Court regarding the processing of data relating to beneficiaries, developed a dedicated tool for the management of beneficiary data for the Grant agreements for members (GMT) in the last quarter of 2011. This tool was used for processing the cost claims of 2011 in the second quarter of 2012 and - after testing the reliability of the data encoded and of the resulting reports by the JU’s Accounting officer together with an external audit firm - results were applied for the Final Accounts 2011.

Paragraph 23

The JU takes note of the remarks of the Court and has taken steps to improve the internal approval processes for both financial and operational actors; indeed, there is now, through the above mentioned grant management tool, a more integrated approach to the validation of the cost claims and annual technical reports by the respective financial and operational actors and this is more visible in the process.

Regarding the segregation of duties, the JU is currently working out a modification of the financial circuits to ensure the segregation between the financial verification and authorisation in cases of absences of the normally foreseen financial actors.

Paragraph 24

The JU has taken note of the recommendations of the Accounting officer and as already stated, has made significant steps to implement GMT that will allow improving the validation of the cost claims and to be able to comprehensively and regularly report to the JU management.

Other matters

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In August 2011, Governing Board and management of the JU had been made aware by the Internal Audit Officer (IAO) on the involvement of the IAO in some core processes in the financial management of the JU and the potential consequences on the independence of the IAO. The risk of a potential lack of assurance regarding the concerned processes will be mitigated through the involvement of the IAS if required.

Paragraph 27

The JU will amend its financial rules following the next update to the framework financial regulation which is currently underway (see also item 30).

Paragraph 28

The request for payment of contributions 2011 to the Commission (as one of the Members of the JU) was duly accompanied by an appropriate cash-flow forecast. While a cash flow was not attached, the request to Members other than the EC was accompanied by an explanation of the requested amount and the repartition key, showing the share of each member or associate. Moreover, through the information on the annual accounts of the previous year and the approved annual budget of the year 2011, provided in the minutes of the Governing Board, all members were delivered with relevant financial details. The JU will make sure, that in future cash flow forecasts will be attached to payment requests also to members other than the Commission.

Paragraph 29

The adequate implementation of the detailed provisions in the Annex II, General conditions, of the Clean Sky JU Grant agreements for Members on the protection, use and dissemination of research results is still on-going.

A dedicated procedure, summarising the elements of the JU’s supervisory role and controls in place, will be established in due course.

Paragraph 30

The JU will amend its financial rules following the next update to the framework financial regulation which is currently underway. This will allow the JU to align itself with the commonly accepted rules and take advantage to clarify, where possible, the issues raised by the Court.

Paragraph 31

Together with the neighbouring JUs in their common building, Clean Sky JU has further worked on finalising the Disaster Recovery Plan. It is envisaged, that this will be completed by the end of 2012.

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(1)  Accumulated operational payments from 2008 to 2011 amount to 261 358 871 euro, final payments plus clearing of pre-financing for the years 2008 to 2010 add up to 129 295 956 euro.

(2)  = 4,09 % of (129 295 956 euro/261 385 871 euro)*100.

(3)  Since the start-up of the JU, the time to grant has improved from 418 days to 268 days as of the most recent call (Call 10). This shows a further improvement to that assessed by the Court.

(4)  The Governing Board did adopt the annual budget plan 2011 in December 2010 wherein an estimate of the carry over amount was included.

(5)  CS procedure No. 2.9.1, Interim Procedure for validating financial statements received from Members for the execution of GAMs 2011 and for adjustments received for previous years’ GAMs.