Annual Activity Report Annexes - European Commission...Done in Brussels 28.03.2014 Olivier Onidi 1...

2013

Annual Activity Report

Annexes

Directorate-General for Energy

Ref. Ares(2014)994800 - 31/03/2014

ener_aar_2013_annexes Page 2 of 57

ANNEX 1: Statement of the Acting Resources Director

I declare that in accordance with the Commission’s communication on clarification of the responsibilities of the key actors in the domain of internal audit and internal control in the Commission1, I have reported my advice and recommendations to the Director-General on the overall state of internal control in the DG.

I hereby certify that the information provided in Parts 2 and 3 of the present AAR and in its annexes is, to the best of my knowledge, accurate and exhaustive.

Done in Brussels 28.03.2014

<Signed>

Olivier Onidi

1 SEC(2003)59 of 21.01.2003.


ANNEX 2: Human and Financial resources

Human Resources by ABB activity

Code ABB Activity ABB Activity Establishment Plan posts

External Personnel Total

32 03 Trans-European networks 15 10 25

32 04 Conventional and renewable energies 133 36 169

32 05 Nuclear energy 283 10 293

32 06 Research related to energy 24 4 28

32 AWBL-01 Administrative support for the Directorate-General for Energy 10 2 12

32 AWBL-02 Policy strategy and coordination for the Directorate-General for Energy

56 7 63

06-32 AWBL-01 Shared administrative support for Energy and Mobility and Transport

7 0 7

Total 528 69 597

General remark: the above data rely on the snapshot of Commission personnel actually employed in each DG/ service as of 31 December of the reporting year. These data do not necessarily constitute full-time-equivalents throughout the year

Financial Resources by ABB activity (EUR Million) implementation of Commitment Appropriations (CA)

Code ABB Activity ABB Activity Operational

expenditure Administrative expenditure Total

3201 Admin (1) 2,261,278 (2) 2,261,278 3203 TEN 22,200,000 (1) (2) 408,946 22,608,946 3204 Convent/renew 161,304,2202 (1) (2) 8,238,875 169,543,095 3205 Nuclear energy 289,292,303 (1) (2) 363,000 289,655,303 3206 Research 233,292,054 (1) (2) 3,820,661 237,112,715

Total 706,088,577 15,092,760 721,181,337 (1) Heading 5 appropriations managed by the DG (global envelope) 32 01 02 (2) BA lines (32 01 04) and, when relevant 32 01 05 and 32 01 06.

2 Including EACI commitments


Implementation of decentralised administrative authorised operations of DG ENER Global envelope as of 31 December 2013

Appropriations Commitment Appropriations

Payment Appropriations

% Execution

32.010211.00 Other management expenditure

74,241

32.010211.00.01.10 Missions 940,000 940,000 741,413

32.010211.00.01.30 Representation expenses

18,000 18,000 5,002

32.010211.00.02.20 External meetings 609,550 609,550 298,862

32.010211.00.02.40 Internal meetings and conferences

99,350 99,239 16,014

32.010211.00.03 Committee meetings

286,500 286,500 172,897

32.010211.00.04 Studies and consultation

- - -

32.010211.00.05 Development of IT systems

136,896 136,896 22,430

32.010211.00.06 Training 226,949 180,093 133,286

TOTAL 2,391,486 2,261,278 1,389,903 94.56%


ANNEX 3: Draft annual accounts and financial reports

Annex 3 Financial Reports - DG ENER - Financial Year 2013

Table 1 : Commitments

Table 2 : Payments

Table 3 : Commitments to be settled

Table 4 : Balance Sheet

Table 5 : Economic Outturn Account

Table 6 : Average Payment Times

Table 7 : Income

Table 8 : Recovery of undue Payments

Table 9 : Ageing Balance of Recovery Orders

Table 10 : Waivers of Recovery Orders

Table 11 : Negotiated Procedures (excluding Building Contracts)

Table 12 : Summary of Contracts (excluding Building Contracts)

Table 13 : Building Contracts

Table 14 : Contracts declared Secret

Note : The figures are those related to the provisional accounts and not yet audited by the Court of Auditors


TABLE 1: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2013 (in Mio €)

Commitment appropriations

authorised

Commitments made %

1 2 3=2/1

Title 26 Commission¿s administration

26 26 01

Administrative expenditure of the `Commission-s administration- policy area 0.35 0.35 99.99 %

Total Title 26 0.35 0.35 99.99%

Title 32 Energy

32 32 01

Administrative expenditure of the Ènergy- policy area 16.24 15.09 92.94 %

32 03 Trans-European networks 24.78 22.20 89.59 %

32 04 Conventional and renewable energies 80.09 69.44 86.70 %

32 05 Nuclear energy 289.78 289.29 99.83 %

32 06 Research related to energy 249.50 233.29 93.51 %

Total Title 32 660.38 629.32 95.30%

Total DG ENER 660.73 629.67 95.30 %

* Commitment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous commitment appropriations for the period (e.g. internal and external assigned revenue).



TABLE 2: OUTTURN ON PAYMENT APPROPRIATIONS IN 2013 (in Mio €)

Chapter Payment

appropriations authorised *

Payments made %

1 2 3=2/1

Title 26 Commission¿s administration

26 26 01

Administrative expenditure of the `Commission-s administration- policy area 0.70 0.27 39.17 %

Total Title 26 0.70 0.27 39.17%

Title 32 Energy

32 32 01 Administrative expenditure of the Ènergy- policy area 19.44 14.21 73.08 %

32 03 Trans-European networks 27.39 27.00 98.55 %

32 04 Conventional and renewable energies 250.78 238.58 95.14 %

32 05 Nuclear energy 199.69 199.14 99.72 %

32 06 Research related to energy 194.68 143.66 73.79 %

Total Title 32 691.98 622.59 89.97%

Total DG ENER 692.68 622.86 89.92 %

* Payment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous payment appropriations for the period (e.g. internal and external assigned revenue).



TABLE 3 : BREAKDOWN OF COMMITMENTS TO BE SETTLED AT 31/12/2013 (in Mio €)

2013 Commitments to be settled Commitments to be

settled from

Total of commitments to be settled at end

Total of commitments to be settled at end

Chapter Commitments 2013 Payments 2013 RAL 2013 % to be settled financial years

previous to 2013

of financial year 2013(incl corrections)

of financial year 2012(incl. corrections)

1 2 3=1-2 4=1-2/1 5 6=3+5 7

Title 26 : Commission¿s administration

26 26 01

Administrative expenditure of the `Commission-s administration- policy area

0.35 0.04 0.31 88.66 % 0.00 0.31 0.34

Total Title 26 0.35 0.04 0.31 88.66% 0.00 0.31 0.34

Title 32 : Energy

32 32 01 Administrative expenditure of the Ènergy- policy area

15.02 11.52 3.49 23.26 % 0.00 3.49 3.20

32 03 Trans-European networks 22.20 10.00 12.20 54.95 % 95.60 107.80 112.60

32 04 Conventional and renewable energies 69.44 16.56 52.88 76.16 % 2,483.98 2,536.86 2,710.83

32 05 Nuclear energy 289.29 16.25 273.04 94.38 % 692.45 965.49 876.53

32 06 Research related to energy 233.29 2.33 230.97 99.00 % 424.00 654.97 590.54

Total Title 32 629.24 56.66 572.58 91.00% 3,696.04 4,268.62 4,293.69

Total DG ENER 629.59 56.70 572.90 90.99 % 3,696.04 4,268.93 4,294.04





TABLE 4 : BALANCE SHEET

BALANCE SHEET 2013 2012

A.I. NON CURRENT ASSETS 523,929,858 444,769,260

A.I.1. Intangible Assets 6,852,157 5,774,603

A.I.2. Property, plant and equipment 6,790,965 6,346,081

A.I.3. Invstmnts Accntd For Using Equity 0 0

A.I.4. Non-Current Financial Assets 56,625,191 950,425

A.I.5. LT Pre-Financing 453,393,006 431,698,151

A.I.6. LT Receivables 268,539

A.II. CURRENT ASSETS 381,470,715 249,497,821

A.II.2. Short-term Pre-Financing 338,715,859 212,982,367

A.II.3.2. Current Receivables and Recove 18,166,365 14,289,424

A.II.3. Current Financial Assets 4,769,749

A.II.5. Cash and Cash Equivalents 19,818,742 22,226,031

ASSETS 905,400,573 694,267,081

P.I. NET ASSETS/LIABILITIES 1,310,554 1,709,375

P.I.1. Reserves 1,310,554 1,709,375

P.III. CURRENT LIABILITIES -595,468,421 -1,427,264,135

P.III.4. Accounts Payable -595,468,421 -1,427,264,135

LIABILITIES -594,157,868 -1,425,554,760

NET ASSETS (ASSETS less LIABILITIES) 311,242,705 -731,287,679

P.I.2. Accumulated Surplus / Deficit 37,984,402.45 0.00

Non-allocated central (surplus)/deficit* -349,227,107.74 731,287,679.34

TOTAL 0.00 0.00

It should be noted that the balance sheet and economic outturn account presented in Annex 3 to this Annual Activity Report, represent only the (contingent) assets, (contingent) liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be adjusted following this audit. Note : The figures are those related to the provisional accounts and not yet audited by the Court of Auditors


TABLE 5 : ECONOMIC OUTTURN ACCOUNT

ECONOMIC OUTTURN ACCOUNT 2013 2012

II.1 SURPLUS/ DEF. FROM OPERATING ACTIVT -482,740,634.09 865,381,485.60

II.1.1. OPERATING REVENUES -13,526,385.52 -1,406,880.51

II.1.1.2. Other operating revenue -13,526,385.52 -1,406,880.51

II.1.2. OPERATING EXPENSES -469,214,248.57 866,788,366.11

II.1.2.1. Administrative Expenses 15,273,785.57 13,222,271.08

II.1.2.2. Operating Expenses -484,488,034.14 853,566,095.03

II.2. SURPLUS/DEF. NON OPERATING ACTIVIT -1,066,519.64 -1,971,539.84

II.2.1. FINANCIAL OPERATIONS -1,066,519.64 -1,971,539.84

II.2.1.1. Financial revenue -1,715,346.45 -1,989,944.33

II.2.1.2. Financial expenses 648,826.81 18,404.49

ECONOMIC OUTTURN ACCOUNT -483,807,153.73 863,409,945.76

Explanatory Note: Negative Economic Outturn Account because of change in the methodology of the Cut Off calculation for EEPR Projects It should be noted that the balance sheet and economic outturn account presented in Annex 3 to this Annual Activity Report, represent only the (contingent) assets, (contingent) liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be adjusted following this audit. Note: The figures are those related to the provisional accounts and not yet audited by the Court of Auditors


TABLE 6: AVERAGE PAYMENT TIMES FOR 2013 - DG ENER

Legal Times

Maximum Payment Time (Days)

Total Number of Payments

Nbr of Payments

within Time Limit

Percentage Average Payment Times (Days)

Nbr of Late Payments Percentage

Average Payment

Times (Days)

20 4 4 100.00 % 14.00

30 958 898 93.74 % 17.47 60 6.26 % 38.60

45 258 255 98.84 % 20.70 3 1.16 % 64.33

60 82 82 100.00 % 21.13

90 46 42 91.30 % 67.81 4 8.70 % 149.75

105 14 14 100.00 % 76.86

Total Number of Payments 1362 1295 95.08 % 67 4.92 %

Average Payment Time 21.87 20.60 46.39


Target Times

Target Payment Time (Days)


Nbr of Payments

within Target Time

Percentage Average Payment Times (Days)

Nbr of Late Payments Percentage

Average Payment

Times (Days)

20 54 46 85.19 % 12.89 8 14.81 % 34.38

30 952 873 91.70 % 18.07 79 8.30 % 39.09

75 1 1 100.00 % 58.00

90 14 13 92.86 % 74.92 1 7.14 % 102.00

Total Number of Payments 1021 933 91.38 % 88 8.62 %

Average Payment Time 20.43 18.65 39.38

Suspensions

Average Report Approval Suspension

Days

Average Payment

Suspension Days

Number of Suspended Payments

% of Total Number


Amount of Suspended Payments

% of Total Amount Total Paid Amount

40 35 191 14.02 % 1362 211,959,257.43 37.26 % 568,935,477.90

Late Interest paid in 2013

DG GL Account Description Amount (Eur)

ENER 65010100 Interest on late payment of charges New FR 5 113.66

5 113.66

Note: The figures are those related to the provisional accounts and not yet audited by the Court of Auditors


TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2013

Revenue and income recognized Revenue and income cashed from Outstanding

Chapter Current year RO Carried over RO Total Current Year RO Carried over RO Total balance

1 2 3=1+2 4 5 6=4+5 7=3-6

52 REVENUE FROM INVESTMENTS OR LOANS GRANTED, BANK AND OTHER INTEREST 1,331,723.60 24,546.20 1,356,269.80 1,331,723.60 11,846.20 1,343,569.80 12,700.00

59 OTHER REVENUE ARISING FROM ADMINISTRATIVE MANAGEMENT 524,723.30 0.00 524,723.30 524,723.30 0.00 524,723.30 0.00

60 CONTRIBUTIONS TO UNION PROGRAMMES 715,730.00 0.00 715,730.00 715,730.00 0.00 715,730.00 0.00

61 REPAYMENT OF MISCELLANEOUS EXPENDITURE 0.00 76,577.58 76,577.58 0.00 0.00 0.00 76,577.58

66 OTHER CONTRIBUTIONS AND REFUNDS 16,105,917.72 7,722,063.55 23,827,981.27 15,826,798.40 4,378,112.45 20,204,910.85 3,623,070.42

90 MISCELLANEOUS REVENUE 135,677.36 8,100.03 143,777.39 133,250.02 0.00 133,250.02 10,527.37

Total DG ENER 18,813,771.98 7,831,287.36 26,645,059.34 18,532,225.32 4,389,958.65 22,922,183.97 3,722,875.37



TABLE 8 : RECOVERY OF UNDUE PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount)

INCOME BUDGET RECOVERY ORDERS ISSUED IN 2013 Error Irregularity TOTAL Qualified TOTAL RC(incl. non-qualified) % Qualified/Total RC

Year of Origin (commitment) Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount

2004 1 71,964.51 1 71,964.51 1 71,964.51 100.00% 100.00%

2006 3 211,057.40 3 211,057.40 5 287,188.60 60.00% 73.49%

2007 5 166,508.25 5 166,508.25 7 301,216.67 71.43% 55.28%

2008 1 13,234.51 7 850,247.39 8 863,481.90 15 1,170,249.05 53.33% 73.79%

2009 2 132,204.33 2 132,204.33 8 643,336.25 25.00% 20.55%

2010 1 21,114.00 5 10,224,413.69 6 10,245,527.69 7 12,873,523.16 85.71% 79.59%

Sub-Total 2 34,348.51 23 11,656,395.57 25 11,690,744.08 50 16,758,983.14 50.00% 69.76%

EXPENSES BUDGET Error Irregularity OLAF Notified TOTAL Qualified TOTAL RC(incl. non-

qualified) % Qualified/Total RC

Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount INCOME LINES IN INVOICES 1 0.50

NON ELIGIBLE IN COST CLAIMS 12 16,831.24 54 28,219,828.34 66 28,236,659.58 85 43,097,945.06 77.65% 65.52%

CREDIT NOTES 23 314,638.19 12 30,808.06 35 345,446.25 40 570,834.73 87.50% 60.52%

Sub-Total 35 331,469.43 66 28,250,636.40 101 28,582,105.83 126 43,668,780.29 80.16% 65.45%

GRAND TOTAL 37 365,817.94 89 39,907,031.97 126 40,272,849.91 176 60,427,763.43 71.59% 47.30%



TABLE 9: AGEING BALANCE OF RECOVERY ORDERS AT 31/12/2013 FOR ENER

Number at 01/01/2013

Number at 31/12/2013 Evolution

Open Amount (Eur) at

01/01/2013

Open Amount (Eur) at

31/12/2013 Evolution

1996 1 -100.00 % 372,898.92 -100.00 %

1998 1 1 0.00 % 101,459.99 101,459.99 0.00 %

1999 1 1 0.00 % 157,238.07 157,238.07 0.00 %

2001 1 1 0.00 % 211,303.25 211,303.25 0.00 %

2002 1 1 0.00 % 205,611.00 205,611.00 0.00 %

2003 2 2 0.00 % 301,023.44 290,495.46 -3.50 %

2005 2 2 0.00 % 189,744.27 188,391.88 -0.71 %

2006 2 -100.00 % 45,761.96 -100.00 %

2008 1 -100.00 % 16,197.10 -100.00 %

2009 4 4 0.00 % 687,655.59 687,655.59 0.00 %

2010 3 3 0.00 % 1,064,132.62 1,064,132.62 0.00 %

2011 1 1 0.00 % 379,208.55 379,208.55 0.00 %

2012 14 8 -42.86 % 4,099,052.60 155,832.30 -96.20 %

2013 11 281,546.66

34 35 2.94 % 7,831,287.36 3,722,875.37 -52.46 %



TABLE 10 : RECOVERY ORDER WAIVERS IN 2013 >= EUR 100.000

Waiver Central Key Linked RO Central Key

RO Accepted Amount

(Eur)

LE Account Group

Commission Decision Comments

1 3233130032 3240013551 -372,898.92 Private Companies

Total DG -372,898.92

Number of RO waivers 1



TABLE 11 : CENSUS OF NEGOTIATED PROCEDURES - DG ENER - 2013

Procurement > EUR 60,000

Negotiated Procedure

Legal base Number of Procedures Amount (€)

Art. 134.1(b) 2 484,190.00

Total 2. 484,190.00


TABLE 12 : SUMMARY OF PROCEDURES OF DG ENER EXCLUDING BUILDING CONTRACTS

Internal Procedures > € 60,000

Procedure Type Count Amount (€) Internal

Procedures > € 60,000

Exceptional Negotiated Procedure without publication of a contract notice (Art. 134 RAP)

2 484,190.00

Open Procedure (Art. 127.2 RAP) 22 17,524,355.00

TOTAL 24 18,008,545.00

Additional Comments


TABLE 13 : BUILDING CONTRACTS

Total number of contracts :

Total amount :

Legal base Contract Number Contractor Name Description Amount (€)

No data to be reported


TABLE 14 : CONTRACTS DECLARED SECRET

Total Number of Contracts :

Total amount :

Legal base

Contract Number Contractor Name Type of

contract Description Amount (€)

No data to be reported


ANNEX 4: Materiality criteria

Research programmes

The Standing Instructions for the preparation of Annual Activity Reports stipulate that the quantitative materiality threshold must not exceed 2% of the authorised payments of the reporting year of the ABB expenditure. However, the Guidance on AARs also allows a multi-annual approach, especially for budget areas (e.g. programmes) for which a multi-annual control system is more effective. In such cases, the calculation of errors, corrections and materiality of the residual amount at risk should be done on a "cumulative basis" on the basis of the totals over the entire programme lifecycle.

Because of its multiannual nature, the effectiveness of the Research services' control strategy can only be fully measured and assessed at the final stages in the life of the framework programme, once the ex-post audit strategy has been fully implemented and systematic errors have been detected and corrected.

In addition, basing materiality solely on ABB expenditure for one year may not provide the most appropriate basis for judgements, as ABB expenditure often includes significant levels of pre-financing expenditure (e.g. during the initial years of a new generation of programmes), as well as reimbursements (interim and final payments) based on cost claims that 'clear' those pre-financings. Pre-financing expenditure is very low risk, being paid automatically after the signing of the contract with the beneficiary.

The general control objective for the Research services, following the standard quantitative materiality threshold proposed in the Standing Instructions, is to ensure for each FP (and the Coal and Steel Research Fund for DG RTD), that the residual error rate, i.e. the level of errors which remain undetected and uncorrected, does not exceed 2% by the end of the FP's management cycle. The question of being on track towards this objective is to be (re)assessed annually, in view of the results of the implementation of the ex-post audit strategy and taking into account both the frequency and importance of the errors found as well as a cost-benefit analysis of the effort needed to detect and correct them.

Notwithstanding the multiannual span of their control strategy, the Director-Generals of the Research DGs (and the Directors of ERCEA and REA) are required to sign a statement of assurance for each financial reporting year. In order to determine whether to qualify this statement of assurance with a reservation, the effectiveness of the control systems in place needs to be assessed not only for the year of reference but also with a multiannual perspective, to determine whether it is possible to reasonably conclude that the control objectives will be met in the future as foreseen. In view of the crucial role of ex-post audits defined in the common FP7 audit strategy, this assessment needs to check in particular whether the scope and results of the ex-post audits carried out


until the end of the reporting period are sufficient and adequate to meet the multiannual control strategy goals.

The criteria for making a decision on whether there is material error in the expenditure of the DG or service, and so on whether to make a reservation in the AAR, will therefore be principally, though not necessarily exclusively, based on the level of error identified in ex-post audits of cost claims on a multi-annual basis.

Effectiveness of controls

The starting point to determine the effectiveness of the controls in place is the cumulative level of error expressed as the percentage of errors in favour of the EC, detected by ex-post audits, measured with respect to the amounts accepted after ex-ante controls.

However, to take into account the impact of the ex-post controls, this error level is to be adjusted by subtracting:

- Errors detected corrected as a result of the implementation of audit conclusions.

- Errors corrected as a result of the extrapolation of audit results to non-audited contracts with the same beneficiary.

This results in a residual error rate, which is calculated in accordance with the following formula:

PEpERsysAPpERsER )*%(Re))(*%(Re%Re −−

=

where:

ResER% residual error rate, expressed as a percentage.

RepER% representative error rate, or error rate detected in the common representative sample, expressed as a percentage. For FP 7 this rate is the same for all Research services.

RepERsys% portion of the RepER% representing (negative) systematic errors, expressed as a percentage. The RepER% is composed of two complementary portions reflecting the proportion of negative systematic and non-systematic errors detected.

P total aggregated amount in € of EC share of funding in the auditable population. In FP7, the population is that of all received cost


statements, and the € amounts those that reflect the EC share included in the costs claimed in each cost statement.

A total EC share of all audited amounts, expressed in €. This will be collected from audit results.

E total non-audited amounts of all audited beneficiaries. In FP7, this consists of the total EC share, expressed in €, of all non-audited received cost statements for all audited beneficiaries (whether extrapolation has been launched or not).

If the residual error rate is not (yet) below 2% at the end of a reporting year within the FP's management lifecycle, a reservation must be considered.

The Common Representative Audit Sample (CRAS) is the starting point for the calculation of the residual error rate. It is representative of the expenditure of FP7 as a whole. Nevertheless, the Director-General (or Director for the Executive Agencies) must also take into account other information when considering if the overall residual error rate is a sufficient basis on which to draw a conclusion on assurance (or make a reservation) for specific segment(s) of FP7. This may include the results of other ex-post audits, ex-ante controls, risk assessments, audit reports from external or internal auditors, etc. All this information may be used in assessing the overall impact of a weakness and considering whether to make a reservation or not.

If the CRAS results are not used as the basis for calculating the residual error rate this must be clearly disclosed in the AAR, along with details of why and how the final judgement was made.

In case a calculation of the residual error rate based on a representative sample is not possible for a FP for reasons not involving control deficiencies,3 the consequences are to be assessed quantitatively by making a best estimate of the likely exposure for the reporting year based on all available information. The relative impact on the Declaration of Assurance would be then considered by analysing the available information on qualitative grounds and considering evidence from other sources and areas. This should be clearly explained in the AAR.

Adequacy of the audit scope

The quantity of the (cumulative) audit effort carried out until the end of each year is to be measured by the actual volume of audits completed. The data is to be shown per year and cumulated, in line with the current AAR presentation of error rates. The

3 Such as, for instance, when the number of results from a statistically-representative sample collected

at a given point in time is not sufficient to calculate a reliable error rate.


multiannual planning and results should be reported in sufficient detail to allow the reader to form an opinion on whether the strategy is on course as foreseen.

The Director-General (or Director for the Executive Agencies) should form a qualitative opinion to determine whether deviations from the multiannual plan are of such significance that they seriously endanger the achievement of the internal control objective. In such case, she or he would be expected to qualify his annual statement of assurance with a reservation.

Materiality is assessed for each Framework Programme

In 2013, the Research services managed financial operations under the sixth and seventh framework programmes, and the Coal and Steel Research Fund. Each is managed under different sets of regulatory and contractual provisions. Therefore, the assessment of the performance of the internal controls has to take into account these differences.

However, given that the expenditure for the 6th Framework Programme is now a very small part of operations, and given the full disclosure on the results for this FP in the AAR 2012, information on the 6th FP should only be reported if there are exceptional elements, the non-disclosure of which would result in the reader being misled.

EEPR and TEN-E programmes

The reasoning explained for research programmes applies as well for EEPR and TEN-E grants.

Because of their multiannual nature, the effectiveness of the control strategy for the EEPR and TEN-E programmes can only be fully measured and assessed at the final stages in the life programmes, once the ex-post audit strategy has been fully implemented and systematic errors have been detected and corrected.

The general control objective for EEPR and TEN-E programmes, following the standard quantitative materiality threshold proposed in the Standing Instructions, is to ensure that the residual error rate, i.e. the level of errors which remain undetected and uncorrected, does not exceed 2% by the end of the management cycles. The question of being on track towards this objective is to be (re)assessed annually, in view of the results of the implementation of the ex-post audit strategy and taking into account both the frequency and importance of the errors found as well as a cost-benefit analysis of the effort needed to detect and correct them.

The criteria for making a decision on whether there is material error in the expenditure of the DG or service, and so on whether to make a reservation in the AAR, will therefore be principally, though not necessarily exclusively, based on the level of error identified in ex-post audits of cost claims on a multi-annual basis.


As regards more specifically the EEPR programme, qualitative criteria have also been assessed to consider a potential reputational reservation:

- the nature and scope of the weakness; - the duration of the weakness; - the existence of compensatory measures (mitigating controls which reduce the

impact of the weakness); - the existence of effective remedial actions to correct the deficiencies (action

plans and financial corrections).

Effectiveness of controls

The starting point to determine the effectiveness of the controls in place is the cumulative level of error expressed as the percentage of errors in favour of the EC, detected by ex-post audits, measured with respect to the amounts claimed.

However, to take into account the impact of the ex-post controls, this error level is to be adjusted by subtracting the errors detected corrected as a result of the implementation of audit conclusions.

This results in a residual error rate, which is calculated in accordance with the following formula:

((P – A1) x (Err / A2)) + NonImpErr

ResER% = -------------------------------------------

P

where:

ResER% residual error rate, expressed as a percentage.

P total aggregated amount in € of EC share of all cost claims received before end 2013.

A1 total EC share of all audited beneficiaries, expressed in €.

A2 total EC share of audited cost statements, expressed in €.

Err total amount (€) of negative adjustments as a result of audits

NonImpErr total EC share of audit adjustments (only results in favour of the Commission) which have not been implemented (recovery, offsetting or forecast of revenue) by 1Q2014

If the residual error rate is not (yet) below 2% at the end of a reporting year within the FP's management lifecycle, a reservation must be considered.


ANNEX 5: Internal Control Template(s) for budget implementation (ICTs)

Grant direct management – FP7

* = not reported in this year's AAR.

Stage 1: Programming, evaluation and selection of proposals

A - Preparation, adoption and publication of the Annual Work Programme and Calls for proposals

Main control objectives: Ensuring that the most promising projects for meeting the policy objectives are among the proposals selected; Compliance; Prevention of fraud Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The annual work programme and the subsequent calls for proposals do not adequately reflect the policy objectives, priorities, are incoherent and/or the essential eligibility, selection and award criteria are not adequate to ensure the evaluation of the proposals. The annual work programmes are not consistent within the Research family and with the 7 years' framework

Hierarchical validation within the authorising department Inter-service consultation, including all relevant DGs Adoption by the Commission Explicit allocation of responsibility.

Coverage / Frequency: 100% Depth: All work programmes are thoroughly reviewed at all levels, including for operational and legal aspects.

Costs: * Benefits: Only qualitative benefits. A good Work Programme and well publicised calls should generate a large number of good quality projects, from which the most excellent can be chosen. There will therefore be real competition for funds.

Effectiveness: % of number of calls successfully concluded / number of calls planned in MP/WP % of requested funds/total budget available


B - Selecting and awarding: Evaluation, ranking and selection of proposals Main control objectives: Ensuring that the most promising projects for meeting the policy objectives are among the proposals selected; Compliance; Prevention of fraud

Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators

The evaluation, ranking and selection of proposals is not carried out in accordance with the established procedures, the policy objectives, priorities and/or the essential eligibility, or with the selection and award criteria defined in the annual work programme and subsequent calls for proposals.

Selection and appointment of expert evaluators Assessment by independent experts Validation by the AO of ranked list of proposals In addition, if applicable: Opinion of advisory bodies; comitology; inter-service consultation and adoption by the Commission; publication Systematic checks on operational and legal aspects performed before signature of the GA Redress procedure

100% vetting of experts for technical expertise and independence (e.g. conflicts of interests, nationality bias, ex-employer bias, collusion) 100% of proposals are evaluated. Coverage: 100% of ranked list of proposals. Supervision of work of evaluators. 100% of contested decisions are analysed by redress committee

Costs: * Benefits: The whole committed budget (because it will have been checked ex ante and could be considered as reasonably in the interests of the programme. Qualitative benefits Expert evaluators from outside the Commission bring independence, state of the art knowledge in the field and a range of different opinions. This will have an impact on the whole project cycle : better planned, better executed projects

Effectiveness: % of number of (successful) redress challenges / total number of proposals received Efficiency Indicators: Average evaluation cost per proposal (external experts paid only) Average time to inform applicants of the outcome of the evaluation (art.128.2.a) FR)


Stage 2: Contracting

Main control objectives: : Ensuring that the most promising projects for meeting the policy objectives are among the proposals selected; Compliance; Prevention of fraud Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The description of the action in the grant agreement includes tasks which do not contribute to the achievement of the programme objectives and/or that the budget foreseen overestimates the costs necessary to carry out the action. The beneficiary lacks operational and/or financial capacity to carry out the actions. Procedures do not comply with regulatory framework.

Project Officers implement evaluators' recommendations in discussion with selected applicants. Hierarchical validation of proposed adjustments. Validation of beneficiaries (operational and financial viability) Signature of the grant agreement by the AO. Financial verification where necessary Participant Guarantee Fund.

100% of the selected proposals and beneficiaries are scrutinised. Coverage: 100% of draft grant agreements. Depth may be determined after considering the type or nature of the beneficiary (e.g. SMEs, joint-ventures) and/or of the modalities (e.g. substantial subcontracting) and/or the total value of the grant.

Costs: * . Benefits: Difference between the budget value of the selected proposals and that of the corresponding grant agreements. + Qualitative benefits: The whole committed budget checked for quality (prevention of later errors). This stage should lead to a higher quality of scientific result.

Effectiveness * Efficiency Indicators: Average time to grant (FR 128.2)

Stage 3: Monitoring the execution

Main control objectives: ensuring that the operational results (deliverables) from the projects are of good value and meet the objectives and conditions; ensuring that the related financial operations comply with regulatory and contractual provisions; prevention of fraud; ensuring appropriate accounting of the operations Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The actions foreseen are not, totally or partially, carried out in accordance with the technical description and requirements foreseen in the grant agreement and/or the

Kick-off meetings and "launch events" involving the beneficiaries in order to avoid project management and reporting errors

100% of the projects are controlled, including only value-adding checks. Riskier operations subject to enhanced controls.

Costs: * Benefits: budget value of the costs claimed by the beneficiary, but rejected by staff Reductions in error rates

Effectiveness * Efficiency Indicators: Time-to-pay


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators amounts paid exceed that due in accordance with the applicable contractual and regulatory provisions.

Effective external communication about guidance to the beneficiaries Operational and financial checks in accordance with the financial circuits. Operation authorisation by the AO For riskier operations, enhanced ex-ante controls Scientific reviews if necessary If needed: application of Suspension/interruption of payments, Penalties or liquidated damages. Referring grant to OLAF

The depth depends on risk criteria. However, as a deliberate policy to reduce administrative burden, and to ensure a good balance between trust and control, the level of control at this stage is reduced a to a minimum High risk operations identified by risk criteria. Red flags: suspicions raised by staff, audit results, EWS or other reasons (being developed) Audit certificates required for any beneficiary claiming more than €375000 (FP7).

identified by audit certificates. % and value of reductions made to EC contribution paid out through the ex-ante desk checks / total value of EC contribution claimed

Stage 4: Ex-post controls

A - Reviews, audits and monitoring Main control objectives: Measuring the level of error in the population after ex-ante controls have been undertaken; detect and correct any error or fraud remaining undetected after the implementation ex-ante controls; identifying possible systemic weaknesses in the ex-ante controls, or weaknesses in the rules

Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The ex-ante controls (as such) do not prevent, detect and correct erroneous payments or attempted fraud to an extent

Ex-post control strategy: At intervals carry out audits of a representative sample of operations to measure the level

Common Representative Sample: MUS sample across the programme to draw valid management conclusions on

Costs: estimate of cost of staff involved in the coordination and execution of the audit strategy .Cost of the

Effectiveness: Number of audits finalised (+ % of beneficiaries & value


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators going beyond a tolerable rate of error.

of error in the population after ex-ante controls have been performed Additional sample to address specific risks Multi-annual basis (programme’s lifecycle) and coordination with other AOs concerned Validate audit results with beneficiary In case of systemic error detected, extrapolation to all the projects run by the audited beneficiary If needed: referring the beneficiary or grant to OLAF

the error rate in the population. Risk-based sample, determined in accordance with the selected risk criteria, aimed to maximise deterrent effect and prevention of fraud or serious error

appointment of audit firms for the outsourced audits. Benefits: budget value of the errors detected by the auditors. Non quantifiable benefits: Deterrent effect. Learning effect for beneficiaries. Improvement of ex-ante controls or risk approach in ex-ante controls by feeding back findings from audit. Improvement in rules and guidance from feedback from audit.

coverage) Representative error rate. Residual error rate in comparison to the tolerable threshold. Amount of budget of errors concerned. Total & Average ex-post audit cost in-house (FTE * standard staff cost) and/or outsourced (audit fees paid)

B - Implementing results from ex-post audits/controls Main control objectives: Ensuring that the (audit) results from the ex-post controls lead to effective recoveries; Ensuring appropriate accounting of the recoveries made Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators

The errors, irregularities and cases of fraud detected are not addressed or not addressed in a timely manner

Systematic registration of audit / control results to be implemented and actual implementation. Validation of recovery in accordance with financial circuits.

Coverage: 100% of final audit results with a financial impact. Depth: All audit results are examined in-depth in making the final recoveries. Systemic errors are extrapolated to all the non-audited projects of the

Costs: * Benefits: budget value of the errors, detected by ex-post controls, which have actually been corrected (offset or recovered).

Effectiveness: Number/value/% of audit results pending implementation Number/value/% of audit results implemented.


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators Authorisation by AO Notification to OLAF and regular follow up of detected fraud.

same beneficiary Loss: budget value of such ROs which are ‘waived’ or have to be cancelled.


Grant direct management – EEPR



Stage 2: Contracting

NOT APPLICABLE : The European Energy Programme for Recovery (EEPR) was designed to inject significant sums into the EU economy quickly in order to stimulate the EU recovery out of recession, while at the same time contributing to the goals of the European energy policy. To this end, all the money had to be committed by the end of 2010. Given that the first two stages of the control system were completed by the end of 2010, this ICT only focuses on stages 3 and 4.


Main control objectives: ensuring that the operational results (deliverables) from the projects are of good value and meet the objectives and conditions; ensuring that the related financial operations comply with regulatory and contractual provisions; prevention of fraud; ensuring appropriate accounting of the operations Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators

The actions foreseen are not, totally or partially, carried out in accordance with the technical description and requirements foreseen in the grant agreement and/or the amounts paid exceed that due in accordance with the applicable contractual and regulatory provisions.

Kick-off meetings and "launch events" involving the beneficiaries in order to avoid project management and reporting errors Effective external communication about guidance to the beneficiaries Operational (with independent technical experts) and financial checks in accordance with the financial circuits. Operation authorisation by the

100% of the projects are controlled. Riskier operations subject to enhanced controls. The depth depends on risk criteria. However, as a policy to reduce administrative burden, and to ensure a good balance between trust and control, the level of control at this stage is reduced a to a minimum High risk operations identified by risk criteria.

Costs: * Benefits: budget value of the costs claimed by the beneficiary, but rejected by staff Reductions in error rates identified by audit certificates.

Efficiency Indicators: Time-to-pay % and value of reductions made to EC contribution paid out through the ex-ante desk checks / total value of EC contribution claimed


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators AO For riskier operations, enhanced ex-ante controls If needed: application of Suspension/interruption of payments, Penalties . Referring grant/decision to OLAF

Red flags: suspicions raised by staff, audit results, EWS or other reasons (being developed) Audit certificates required for all beneficiaries.




The ex-ante controls (as such) do not prevent, detect and correct erroneous payments or attempted fraud to an extent going beyond a tolerable rate of error.

Ex-post control strategy: At intervals carry out audits of a representative sample of operations to measure the level of error in the population after ex-ante controls have been performed Additional sample to address specific risks Multi-annual basis (programme’s lifecycle) and coordination with other AOs concerned

Common Representative Sample: MUS sample across the programme to draw valid management conclusions on the error rate in the population. Risk-based sample, determined in accordance with the selected risk criteria, aimed to maximise deterrent effect and prevention of fraud or serious error

Costs: estimate of cost of staff involved in the coordination and execution of the audit strategy .Cost of the appointment of audit firms for the outsourced audits. Benefits: budget value of the errors detected by the auditors. Non quantifiable benefits: Deterrent effect. Learning effect for beneficiaries. Improvement of ex-ante controls or risk approach in ex-ante controls by feeding back

Effectiveness: Number of audits finalised (+ % of beneficiaries & value coverage) Representative error rate. Residual error rate in comparison to the tolerable threshold. Amount of budget of errors concerned.


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators Validate audit results with beneficiary In case of systemic error detected, extrapolation to all the projects run by the audited beneficiary If needed: referring the beneficiary or grant /decision to OLAF

findings from audit. Improvement in rules and guidance from feedback from audit.

Total & Average ex-post audit cost in-house (FTE * standard staff cost) and/or outsourced (audit fees paid)

B - Implementing results from ex-post audits/controls

Main control objectives: Ensuring that the (audit) results from the ex-post controls lead to effective recoveries; Ensuring appropriate accounting of the recoveries made Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators


Systematic registration of audit / control results to be implemented and actual implementation. Validation of recovery in accordance with financial circuits. Authorisation by AO Notification to OLAF and regular follow up of detected fraud.

Coverage: 100% of final audit results with a financial impact. Depth: All audit results are examined in-depth in making the final recoveries. Systemic errors are extrapolated to all the non-audited projects of the same beneficiary

Costs: * Benefits: budget value of the errors, detected by ex-post controls, which have actually been corrected (offset or recovered). Loss: budget value of such ROs which are ‘waived’ or have to be cancelled.



Grant direct management – TEN-E



A - Preparation, adoption and publication of the Annual Work Programme and Calls for proposals

Main control objectives: Ensuring that the most promising projects for meeting the policy objectives are among the proposals selected; Compliance; Prevention of fraud Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The annual work programme and the subsequent calls for proposals do not adequately reflect the policy objectives, priorities, are incoherent and/or the essential eligibility, selection and award criteria are not adequate to ensure the evaluation of the proposals.

Hierarchical validation within the authorising department Inter-service consultation, including all relevant DGs Adoption by the Commission Explicit allocation of responsibility.

Coverage / Frequency: 100% Depth: All work programmes are thoroughly reviewed at all levels, including for operational and legal aspects.

Costs: * Benefits: Only qualitative benefits. A good Work Programme and well publicised calls should generate a large number of good quality projects, from which the most excellent can be chosen. There will therefore be real competition for funds.

Effectiveness: % of number of calls successfully concluded / number of calls planned in MP/WP % of requested funds/total budget available


B - Selecting and awarding: Evaluation, ranking and selection of proposals Main control objectives: Ensuring that the most promising projects for meeting the policy objectives are among the proposals selected; Compliance; Prevention of fraud

Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The evaluation, ranking and selection of proposals is not carried out in accordance with the established procedures, the policy objectives, priorities and/or the essential eligibility, or with the selection and award criteria defined in the annual work programme and subsequent calls for proposals. The description of the action in the grant agreement includes tasks which do not contribute to the achievement of the programme objectives and/or that the budget foreseen overestimates the costs necessary to carry out the action. The beneficiary lacks operational and/or financial capacity to carry out the actions

Selection and appointment of in-house evaluators Proposal of decision by Evaluation Committee (evaluators + Head of Unit) Validation by the AO of ranked list of proposals In addition: approval by the management committee (Member States: comitology), inter-service consultation and adoption of the implementing decision with granted financial aid by the Commission; information to the companies who made a proposal Systematic checks performed on operational and legal aspects (e.g operational and financial viability)

100% vetting of in-house evaluators for technical expertise and independence (e.g. conflicts of interests, nationality bias) 100% of proposals are evaluated. Coverage: 100% of ranked list of proposals.

Costs: * Benefits: The whole committed budget (because it will have been checked ex ante and could be considered as reasonably in the interests of the programme. Difference between the budget value of the proposals and that implementing decision Qualitative benefits The whole committed budget checked for quality (prevention of later errors). This stage should lead to a higher quality of technical result.

Efficiency Indicators: Average evaluation cost per proposal (external experts paid only) Average time to inform applicants of the outcome of the evaluation (art.128.2.a) FR)


Stage 2: "Clarification" phase and notification of the individual decision

Main control objectives: the so-called "clarification stage" aims at working with the beneficiaries to adapt their initial proposals to the Commission implementing decision on the financial aid granted. Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The financial aid granted by the EU is set up in the implementing decision made by the Commission at Stage 1. The risk at this stage 2 is that a beneficiary would decide to withdraw its project because the technical complexity cannot be adapted to the EU financial contribution.

In-house staff working with beneficiaries to help adapt the projects to the EU financial contribution

100% of the list of selected projects and beneficiaries

Costs: * . Benefits: grant decisions showing good balance between technical excellence and EU financial aid adopted by the Commission

Efficiency Indicators: Average time to notify decisions (FR 128.2)


Main control objectives: ensuring that the operational results (deliverables) from the projects are of good value and meet the objectives and conditions; ensuring that the related financial operations comply with regulatory and contractual provisions; prevention of fraud; ensuring appropriate accounting of the operations Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators The actions foreseen are not, totally or partially, carried out in accordance with the technical description and requirements foreseen in the grant agreement and/or the amounts paid exceed that due in accordance with the applicable contractual and regulatory provisions.

Operational and financial checks in accordance with the financial circuits. Operation authorisation by the AO For riskier operations, enhanced ex-ante controls Scientific reviews if necessary If needed: application of

100% of the projects are controlled The depth depends on risk criteria. However, as a policy to reduce administrative burden, and to ensure a good balance between trust and control, the level of control at this stage is reduced a to a minimum

Costs: * Benefits: budget value of the costs claimed by the beneficiary, but rejected by staff Reductions in error rates identified by audit certificates.

Efficiency Indicators: Time-to-pay % and value of reductions made to EC contribution paid out through the ex-ante desk checks / total value of EC contribution claimed


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators Suspension/interruption of payments, Penalties Referring grant decisions to OLAF

High risk operations identified by risk criteria. Red flags: suspicions raised by staff, audit results, EWS or other reasons Audit certificates required for all beneficiaries (except Member States).




The ex-ante controls (as such) do not prevent, detect and correct erroneous payments or attempted fraud to an extent going beyond a tolerable rate of error.

Ex-post control strategy:At intervals carry out audits of a representative sample of operations to measure the level of error in the population after ex-ante controls have been performed Additional sample to address specific risks Multi-annual basis (programme’s lifecycle) and coordination with other AOs

Common Representative Sample: MUS sample across the programme to draw valid management conclusions on the error rate in the population. Risk-based sample, determined in accordance with the selected risk criteria, aimed to maximise deterrent effect and prevention of fraud or serious error

Costs: estimate of cost of staff involved in the coordination and execution of the audit strategy .Cost of the appointment of audit firms for the outsourced audits. Benefits: budget value of the errors detected by the auditors. Non quantifiable benefits: Deterrent effect. Learning effect for beneficiaries. Improvement of ex-ante controls or risk

Effectiveness: Number of audits finalised (+ % of beneficiaries & value coverage) Representative error rate. Residual error rate in comparison to the tolerable threshold. Amount of budget of errors


Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators concerned Validate audit results with beneficiary In case of systemic error detected, extrapolation to all the projects run by the audited beneficiary If needed: referring the beneficiary or grant to OLAF

approach in ex-ante controls by feeding back findings from audit. Improvement in rules and guidance from feedback from audit.

concerned. Total & Average ex-post audit cost in-house (FTE * standard staff cost) and/or outsourced (audit fees paid)

B - Implementing results from ex-post audits/controls Main control objectives: Ensuring that the (audit) results from the ex-post controls lead to effective recoveries; Ensuring appropriate accounting of the recoveries made Main risks Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators


Systematic registration of audit / control results to be implemented and actual implementation. Validation of recovery in accordance with financial circuits. Authorisation by AO Notification to OLAF and regular follow up of detected fraud.

Coverage: 100% of final audit results with a financial impact. Depth: All audit results are examined in-depth in making the final recoveries. Systemic errors are extrapolated to all the non-audited projects of the same beneficiary

Costs: * Benefits: budget value of the errors, detected by ex-post controls, which have actually been corrected (offset or recovered). Loss: budget value of such ROs which are ‘waived’ or have to be cancelled.



Indirect entrusted management DG ENER

The ICT covers: (1) the operating (administrative) budget of the executive agency EACI, (2) cross delegations to other Commission services, (3) the joint undertaking FCH JU, (4) the CPMA and EBRD for Nuclear Decommissioning, (5) the financial instrument s– ELENA facility and EEE F, (6) the operating (administrative) budget of the decentralised agency ACER.

Stage 1: Establishment (or prolongation) of the mandate to the entrusted entity ("delegation act"/"contribution agreement"/etc.)

Stage 2: Assessment and supervision of the entrusted entity’s financial and control framework (towards “budget autonomy”; “financial rules”).

NOT APPLICABLE : All entities have been established and achieved budget autonomy prior to 2013. This ICT therefore focuses on stages 3, 4 and 5.


Stage 3: Operations: monitoring, supervision, reporting.

Main control objectives: Ensuring that the Commission is fully and timely informed of any relevant management issues encountered by the entrusted entity, in order to possibly mitigate any potential financial and/or reputational impacts (legality & regularity, achievement of scientific objectives, sound financial management, true and fair view reporting, anti-fraud strategy).

Main risks

Mitigating controls Coverage, frequency and depth

Costs and benefits of controls Control indicators

The Commission is not informed of relevant management issues encountered by the entrusted entity in a timely manner.

(1) Executive agency: EACIThe following supervision mechanisms were applied in line with the instruments of delegation: • Annual Work Programmes (incl. priorities and result-oriented goals) approved by the Commission and an assessment of the activities carried out

Coverage: 100% of the entities are monitored/supervised. Frequency: - Regular Steering Committee meetings;

*Costs: Benefits: The average annual budget amount

Effectiveness: Number of serious issues arising not identified through standard reporting channels


Main risks



The Commission does not react upon and mitigate notified issues in a timely manner.

through the annual activity reports.. • DG ENER is member of the Steering Committee and participates in decisions on the Agency's organisation, staff, annual work programme, administrative budget, audit and anti-fraud issues. • DG ENER also monitors the EACľs work through regular (quarterly) reports and liaison meetings at different levels. • Detailed cooperation and supervision arrangements can be found in the Memoranda of Understanding, and in a number of Guidelines between the EACI and parent DGs (guidelines on exchange of information, on financial and budgetary relations, on establishment and management of concerted actions).

- Regular reports on use of resources and performance of tasks; - Formal opinion on Annual Work Programme and Annual Activity Report

entrusted to the entity.

As above (2) Cross-delegations

100 %: Being a Commission service itself, the AOD of the cross-delegated service is required to implement the appropriations subject to the same rules, responsibilities and accountability arrangements. Frequency: - The cross-delegation agreements require the AOD's of cross-delegated services to report to DG ENER on the use of appropriations.

*Costs: Benefits: The average annual budget amount entrusted to the entity.


As above (3) Joint Undertaking: FCH JU • DG RTD is responsible for this JU. • DG ENER is a member of the Governing Board

Coverage: 100% of the entities are monitored/supervised.


Effectiveness: Number of serious issues arising not identified through standard


Main risks



(meets t least twice a year) and participates in the preparation of a common Commission position on all items requiring a decision by the Board (e.g. multi-annual and annual implementation plans, budget planning and accounting systems)..

Frequency: - Regular Governing Board meetings; - Regular reports on use of resources and performance of tasks;

entrusted to the entity. reporting channels

As above

(4) CPMA and EBRD for Nuclear Decommissioning • For CPMA full state garantie and implementation through certified agency; for EBRD joint management (multi-donor fund covered by separate fund rules) and with EU representation within the EBRD Board of Directors. Commission decision on procedures is in place covering monitoring arrangements, evaluation and audit issues. • Daily project execution is monitored by the implementing bodies (national agency CPMA and EBRD). • Programme monitoring is done twice a year, in the Monitoring Committees chaired by the Commission, and in the Assemblies of Contributors for the International Decommissioning Support Funds (international multi donor funds). • Biannual reports by the beneficiaries and the Member States on the progress. Each Monitoring Committee analyses the monitoring report and takes the appropriate corrective measures when necessary. • Commission monitoring visits on-site take place at

*Costs: estimate of cost of staff involved in the actual monitoring of the entrusted entities. Benefits: The average annual budget amount entrusted to the entity.



Main risks



least twice a year. When necessary, corrective measures are taken to make sure that the objectives of the projects and of the overall programmes are met.

As above

(5) Financial instruments ELENA facility • The ELENA facility is entrusted to a number of international financial institutions (Council of Europe Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Kreditanstalt für Wiederaufbau). • DG ENER has given a cross-delegation to DG ECFIN to finance the ELENA facility. DG ECFIN monitors the management of the instrument and reports regularly to DG ENER. Project Bond Initiative •This is a joint initiative by the Commission and the EIB. It is managed by the EIB. EEE F The funds are jointly managed with the EIB and are then managed by a Fund Manager, mainly responsible for marketing and advising potential beneficiaries. DG ENER has published all available info on its webpage including relevant case studies: http://ec.europa.eu/energy/eepr/eeef/eeef_en.htm

*Costs: Benefits: The average annual budget amount entrusted to the entity.


As above (6) Decentralised agency: ACER The supervision of ACER has taken multiple forms:

Coverage: 100% of the entities are monitored/supervised.


Effectiveness: Number of serious issues arising not identified through standard


Main risks



• DG ENER is a member of the Administrative Board and has observer status in the Board of Regulators. • Regular coordination meetings at management level. • Frequent contacts at working level and regular reporting on progress, budgetary, staffing and audit issues. •Bilateral meetings when necessary. • A cash flow forecast is received with each payment request from the Agency.

Frequency: - Regular Administrative Board meetings; - Regular reports on use of resources and performance of tasks;

entrusted to the entity. reporting channels

Stage 4: Commission contribution: payment or suspension/interruption.

Main control objectives: Ensuring that the Commission adequately assesses the management situation at the entrusted entity, before either paying out the (next) contribution for the operational and/or operating budget of the entity, or deciding to suspend/interrupt the (next) contribution . This is very closely linked to stage 3 above. Main risks

Mitigating controls Coverage, frequency and depth Costs and benefits of controls Control indicators

The Commission pays out the (next) contribution to the entrusted entity, while not being aware of the management issues that may lead to financial and/or reputational damage. Bad cash forecast leading to the Commission paying too much compared to the EE's needs

See stage 3.

See stage 3. See stage 3. See stage 3.

Stage 5: Audit and evaluation, Discharge for Joint Undertakings and Decentralised Agencies


Main control objectives: Ensuring that assurance building information on the entrusted entity’s activities is being provided through independent sources as well, which may confirm or contradict the management reporting received from the entrusted entity itself (on the 5 ICOs).

Main risks


The Commission has not sufficient information from independent sources on the entrusted entity’s management achievements, which prevents drawing conclusions on the assurance for the budget entrusted to the entity.

1) Executive Agency EACI • The EACI is subject to audit by the Internal Audit Service of the Commission and by the European Court of Auditors and DG ENER uses their reports as an element of the supervision of agency. •In 2013 several audits were performed on the EACI, among them: - IAS audit on control strategy - IAS follow up audit on the management of guarantees - IAC follow up audit on ABAC access rights - DG BUDG follow up exercise on the validation of local accounting systems - ECA: DAS 2012: audit on the 2012 annual accounts of the Agency - ECA: audit 2012 cut-off procedure operational budget - ECA: audit of an IEE payment for the 2012 DAS ENER operational budget

*Costs:

Effectiveness: Assurance being provided; residual error rate within a tolerable range.


Main risks


(2) Cross-delegations • Being a Commission service itself, the AOD of the cross-delegated service is subject to audits by the Internal Audit Service and the Court of Auditors.

(3) Joint Undertaking FCH JU • The ENER SIAC 2013 audit of the coordination and monitoring of the FCH related activities confirmed that proper systems and practices are in place to ensure relevant and effective monitoring and coordination of the FCH JU.

(4) CPMA and EBRD for Nuclear Decommissioning • Financial audits were carried out by an external audit company and confirmed overall good management of the funds (minor issues being corrected).

(5) Financial instruments • Subject to cross-delegation arrangements or similar


Main risks


(6) Decentralised agency ACER • As required by the ACER founding Regulation, the Commission carried out a first evaluation of the functioning and the results of ACER's activities. This evaluation was based on the Commission's own assessment of the Agency's activities and the results of a public consultation. • In the DAS 2012, ECA found the annual accounts of ACER legal and regular in all material aspects and that they present fairly in all material respects the financial position of the Agency. The Court made five observations, one related to the school fees allowance paid to Agency staff, three related to technical budgetary issues and one related to the transparency of recruitment procedures. The agency has provided replies and justifications in relation to the observations and will further improve the recruitment procedure.


ANNEX 6: Implementation through national or international public-sector bodies and bodies governed by private law with a public sector mission

CPMA (Central Project Management Agency)

Requirement Information 1 Programmes concerned Decommissioning funding for Lithuania - Ignalina Programme –CPMA -2007

– 2013 2 Annual budgetary amount

entrusted to these bodies In 2013:

• there was no payment for the CPMA;

• €109.66 million was committed

3 Duration of the delegation 31 December 2020 4 Justification of recourse to

indirect centralised management

Indirect centralised management gives advantages of proximity and flexibility as it is easier to adapt it to the local and specific needs of the beneficiary country and allows for a better coordination with simultaneous co-financed measures ant national level. It also provides for increased ownership of the programme and simplified relationship between the Community and the beneficiary states. Delegating contract management to a national agency enables the Commission to focus on core activities (policy formulation, political drive, control and evaluation).

5 Justification of the selection of the bodies (identity, selection criteria, possible indication in the legal basis etc.)

When the scheme was set up, the CPMA was already an established national agency with an accredited implementation system. Before accession CPMA was the certified Lithuanian EDIS contracting authority/paying agency for the PHARE program. After accession CPMA was entrusted with the management of structural funds programmes. CPMA had, therefore, a direct experience in the management of programmes not requiring an ex-ante control by the Commission. A 2009 audit has confirmed that the

6. Synthetic description of the implementing tasks entrusted to these bodies

The CPMA National Agency is responsible for the implementation of the measures under the Ignalina Programme as specified in the Combined Programming Documents provided in the relevant Commission Financing Decisions and by the National Agency Operating Agreement.

The CPMA oversees the implementation by:

- overseeing the preparation or amendment of project identification fiches and submitting them for Commission's approval;

- the implementation of projects by the award of procurement contracts and grants in line with the Commission-approved project fiches;

- the management of the Community financial assistance;

- compiling information about the progress of activities under the procurement contracts and grants.


FCH JU (Fuel Cells and Hydrogen Joint Undertaking)

Requirement Information 1 Programmes concerned Seventh Framework Programme, in particular the Specific Programme

'Cooperation' themes for 'Energy’, 'Nanosciences, Nanotechnologies, Materials and New Production Technologies', 'Environment (including Climate Change)' and 'Transport (including Aeronautics)'.

2 Annual budgetary amount entrusted to these bodies

In 2013:

• €18.18 million was paid from DG ENER's budget4

• Nothing was committed from DG ENER's budget

3 Duration of the delegation Until 31.12.2017

4 Justification of recourse to indirect centralised management

Council Regulation (EC) No 521/2008.

Indirect centralised management by a Joint Undertaking in line with Article 187 of the Treaty on the Functioning of the European Union (TFEU) was selected with a view to increase the overall efficiency of research efforts and accelerate the development and deployment of fuel cells and hydrogen technologies, in the Members States and countries associated to the Seventh Framework Programme.

5 Justification of the selection of the bodies (identity, selection criteria, possible indication in the legal basis etc.)

Not applicable

6. Synthetic description of the implementing tasks entrusted to these bodies

See Article 2 of the Council Regulation (EC) No 521/20085 and Article 1 of its Annex6.

4 For the total budget entrusted to this JU, please refer to annex 6 of DG RTD's AAR 2013. 5 Council Regulation (EC) No 521/2008 of 30.05.2008 setting up the Fuel Cells and Hydrogen Joint Undertaking,

OJ L 153 of 12.06.2008 6 Statutes of the Fuel Cells and Hydrogen Joint Undertaking


ANNEX 7: AAR of Executive Agency (EACI)

This Annex is presented in separate documents.


ANNEX 8: Decentralised agencies

Name Acronym Policy concerned Subsidy paid in 2013

by DG ENER Agency for the Cooperation of Energy Regulators

ACER Energy €11,930,220


ANNEX 9: Performance information included in evaluations

1. Title of the Evaluation: Mid-term evaluation of the Covenant of Mayors (unit ENER/B3) ABB activity: Type of evaluation: Choose from:

Expenditure programme (E), The objective of the evaluation was to measure the impact of the Covenant of Mayors (CoM) and the extent to which it has reached its objectives during its first three years of operation.

Summary of performance related findings and recommendations:

State of play of the Covenant of Mayors Main Results of the mid-term evaluation:The CoM has played a strong role in involving local authorities in sustainable energy policy and in spreading the culture of CO2 emission measurement and reduction across European municipalities. The evaluation demonstrates the Covenant of Mayors provides signatories with strong added value as regards: • Their visibility and communication of their sustainable energy actions towards the citizens and outside the municipality; • The reinforcement of their capacity as a result of collective exercises to measure CO2 emissions and to design actions to diminish them; • The political emphasis put on CO2 emissions reduction; and • Transfers of knowledge, know-how and experience Main conclusions: • Clear strategic guidelines need to be set for the future• The CoM requires some improvements in the Sustainable Energy Action Plan process • The Covenant Office needs to; 1) assess the needs of the signatories and what expectations it wants to fulfil. 2) i) work further with the coordinators/supporters; ii) identify more systematically the existing expertise, needs and competences at the national level; iii) map all existing actions and instruments at the national level and present them in an adequate way for the signatories and potential signatories.

Availability of the report on Europa:

http://ec.europa.eu/energy/evaluations/doc/20130705-evaluation_com_final_report.pdf




2. Title of the Evaluation: Energy roadmap 2050 - Com (2011)885: (unit/ENER A1)

ABB activity: Type of evaluation: Choose from:

Expenditure programme (E), Regulatory instrument (R), Communication activity (C), Internal Commission activity (I), Other (O).

Summary of performance related findings and recommendations

Briefly describe the focus of the evaluation; main findings regarding efficiency, effectiveness, impact, and EU added value; and recommendations. The Study has provided an analysis of employment effects for selected scenarios of the energy roadmap 2050. It gave additional market employment data and guidance for future assessment of employment consequences of energy policies (study with evaluative criteria).


http://ec.europa.eu/energy/evaluations/annual_en.htm

http://ec.europa.eu/energy/evaluations/annual_en.htm


3. Title of the Evaluation: 2014 Progress report on renewable energy and sustainability of biofuels (Directive 2009/28) and Mid-term evaluation of the Renewable energy directive (Unit ENER/C1) ABB activity: Type of evaluation: Choose from:

Expenditure programme (E), Regulatory instrument (R), Communication activity (C), Internal Commission activity (I),


An evaluation study has been launched in 2013, and its results will contribute to the forthcoming 2014 Commission report on Renewable energy progress and sustainability of biofuels. These reports will address in particular compulsory reporting requirements in Articles 17 and 23, including review elements specified in Article 23 (8) of the Directive 2009/28. In view of covering additional evaluation elements, stemming from Commission's REFIT Communication adopted in 2013, another evaluation study will be launched in February 2014. Results of these evaluations will be included in the Commission's next Renewable energy progress report to be adopted by the end of 2014.


Not available yet.


4. Title of the Evaluation: European Energy Programme for Recovery (EEPR) -Amending regulation 1233/2010 establishing a European Energy Efficiency Fund (EEE F): (Unit ENER/C3)

ABB activity: Type of evaluation: Choose from: Expenditure programme (E)


State of play of the EEE F: • Six project approved for an amount of €79 million allocated• Projects pipeline contains potential investments of €114

million • It is expected that the full EU contribution will be allocated

to investments at the end of the Fund in March 2014

Main Results of the mid-term evaluation: • Cost-effectiveness :€1 spent for €108 of investment • Additionality: ability to provide long term financing, market

base and quality investments; awareness of energy efficiency business opportunities and innovative project finance

• Leverage effect: EU contribution has been more than doubled by additional investors commitments ; for €100 of EU fund, more than €110 is being provided by other investors

• Sound financial management :Deutsche Bank is the investment manager and produces monthly investment portfolio reports ; the Commission is member of the Supervisory and Management Boards of the Fund

Main conclusions:

• The EEE Fund provides a better understanding of the functioning of the energy efficiency market which requires:

a. Flexible financing instrument able to cope with local needs;

b. Project development assistance to overcome the gap in capacity to develop such a type of projects ;

c. Demand aggregation through bundling project is a requirement for the financial intermediaries and provision of guarantees


2013 EEPR annual implementation report: http://ec.europa.eu/energy/eepr/eeef/doc/com_2013_791_en.pdfCSW on the mid-term evaluation of the European Energy Efficiency Fund: http://ec.europa.eu/energy/eepr/doc/swd_2013_457.pdf

http://ec.europa.eu/energy/eepr/eeef/doc/com_2013_791_en.pdf

http://ec.europa.eu/energy/eepr/doc/swd_2013_457.pdf


5. Title of the Evaluation: Regulation 713/2009 – Art. 34 - ACER’s Performance (Commission Evaluation of the activities of ACER) (unit ENER/B2)

ABB activity: Type of evaluation:

Choose from: Expenditure programme (E), Regulatory instrument (R), Communication activity (C), Internal Commission activity (I), Other (O).


Briefly describe the focus of the evaluation; main findings regarding efficiency, effectiveness, impact, and EU added value; and recommendations. In the first evaluation report, the Commission concluded that ACER has become a credible and respected institution playing a prominent role in the EU regulatory arena. The Commission applauded ACER for its focus on the right priorities. ACER's annual work programmes and annual activity reports were considered to be useful tools to set priorities and report transparently on results achieved. However, the Commission encouraged ACER to plan its activities realistically against the background of available resources, to carry out a mid-term review where appropriate, to include key performance indicators in its Annual Activity Report and to establish a multi-annual work programme. The Commission considered that ACER's governance corresponds to the set up foreseen in the ACER Regulation. It welcomed the positive contribution made by national regulatory authorities whilstencouraging some of them to take a more active role in the valuable work undertaken by ACER's Working Groups.


http://ec.europa.eu/energy/gas_electricity/acer/doc/20140122_acer_com_evaluation.pdf



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