Annexes to COM(2009)43 - Impact Report on the Commission Action Plan towards an Integrated Internal Control Framework - Main contents
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| dossier | COM(2009)43 - Impact Report on the Commission Action Plan towards an Integrated Internal Control Framework. |
|---|---|
| document | COM(2009)43  |
| date | February 4, 2009 |
Impact
Indicator: Improved quality of reporting by external auditors. Agreed-upon-procedures, by more precisely specifying the work to be carried out by the auditor, should increase consistency and reliability of audit conclusions and provide better supporting evidence for management decisions on eligibility of funding.
Key supporting information
In External Aid a first assessment of a small number of reports indicated that agreed-upon-procedures are having the intended results although the quality and consistency of reports could be enhanced.
For Research it is too early to assess the improvement. Impact on errors cannot yet be measured and will need to be corroborated by future audits of projects covered under the new regime.
Actions 8 and 8N: Additional assurance from Supreme Audit Institutions
Action completed: The Commission has established relationships with independent SAIs.
Impact
Indicator: Number of SAIs in dialogue with the Commission. Reaction from the SAIs to payment reports from the Commission has been variable but has led to improvements in the reports.
Key supporting information
Five SAIs have requested detailed additional information and analysis (which the Commission has provided).
Ten SAIs have made an overarching report on EU financial management, and two more are considering it. [14]
3.3. Single audit approach: sharing results and prioritising cost-benefit
Actions 3N and 11N: Improved assurance via sanctions and recoveries
Actions completed: The scope of sanctions was extended in the 2007-13 sectorial legislation and the Commission is taking a more vigorous approach to recoveries and sanctions. Data quality on recoveries and financial corrections is being improved.
Impact
Indicator: Reliability, consistency and completeness of recovery data: The Court noted improvements in data on 2007 recoveries. Further improvements have been made for the 2008 accounts, yet to be audited by the Court, both on Commission recoveries and on those reported by Member States.
Key supporting information
The Court stated "more information concerning the recovery of undue payments has been presented … However, the notes to the financial statements do not yet contain complete and reliable information on the financial correction activities made by the Member States" [15].
Extension of recording in ABAC of recoveries by Commission services due to control or audit: over €500 million worth of such recoveries was recorded in 2008.
Indicator: More systematic follow-up of DAS errors: Commission services set out in their Annual Activity Reports the follow-up to main findings of the Court and explain differences of opinion. The Commission sends Member States each year [16] a list of observations made and errors found by the Court in their country, seeking information on follow-up and the reasons for the most common errors in structural actions. The follow-up of DAS 2006 errors is included in the Structural Funds Action Plan [17].
Key supporting information
The latest report, on 2006 DAS errors [18], noted that when Member States accept errors identified by the ECA, they report for the most part on recovery of funds or withdrawal of ineligible expenditure.
Indicator: Effectiveness of the recovery process:
Key supporting information
For structural funds, an IAS review evidenced the significant progress made by the Commission report effective recovery of undue payments. The Commission is now able to present an overall table on financial corrections made or in the pipeline, with the number of procedures and amounts broken down by programmes and on the sources of correction. The overview shows that Commission controls are at the starting point of 80% of corrections currently underway. The Commission also carried out verifications [19] of the data for structural actions in 10 Member States in 2008.
A second internal audit provides reasonable assurance on the recovery process in centralised management, with some qualifications relating to the duration of certain procedures. [20]
For the research area, the audit coverage has increased significantly under the multi-annual audit strategy (over 900 audits in total closed for FP6, including 378 in 2007 compared to the Action Plan target of 300), giving the research DGs a much wider appreciation of the nature and extent of errors.
Indicator: Volume of financial corrections: Recoveries are made when justified, and increasing their value is not a target in itself.
Key supporting information
The volume of financial corrections applied by the Commission in the Structural Funds has increased substantially according to provisional figures: in 2008 the total was €1.5 billion, compared with €288 million in 2007. Further evidence of impact is reported in the Structural Funds Action Plan progress report, adopted February 2009 [21].
Action 9: Sharing audit results
Action completed: An audit recording and monitoring tool is fully operational and effective within ABAC for audits principally in centralised direct management.
Impact
Indicator: Use of the audit tool and improved coordination of audits. Improved coordination increases efficiency of audits through making better use of available resources rather than reducing error rates.
Key supporting information
Some 5,000 audits are recorded providing key information on audits of individual beneficiaries and allowing better targeting and coordination. Procedures are in place to ensure systematic exchange of results on common bodies between the Structural Funds DGs. [22]
Actions 4, 10 and 11: Tolerable risk and cost-benefit analysis of controls
Action completed: The Commission provided in its December 2008 Communication on Tolerable Risk [23] the results of Actions 10 and 11 to form a basis for moving forward discussions on tolerable risk.
Impact
Indicator: Progress towards a common understanding of Tolerable Risk. Discussions with the Budgetary Authority are underway. The Commission is fully committed to these.
3.4. Sector-specific gaps
Actions 12 and 12N: Address gaps identified by participating services
Action completed: For Action 12, DGs and services are implementing the core elements of the Action Plan in line with the Gap Assessment – clear descriptions of the control approach, coordinated audit and control according to agreed standards.
Impact
Indicator: Quality of control systems.
Key supporting information
The Court concludes in its 2007 DAS that none of the supervisory and control systems for EU funds is ineffective but in some spending areas these may not succeed in reducing errors to an acceptable level.
Indicator: Error rates in FP6. The Court of Auditors stated that although the new strategy for FP6 represents a sound basis for addressing the problems identified by the Court, potential benefits depend on its full and effective implementation from 2008 onwards. It further noted that the strategy includes several initiatives likely to contribute to more effective operation of this control including the use of common risk criteria and sample selection methods focusing on large beneficiaries.Key supporting information
The cumulative error rate detected by the Commission for FP6 at the end of 2008 was 2.47%. Taking account of the resulting recoveries this is on course for achieving an error rate of less than 2% over the lifetime of FP6.
Action 13: Analyse controls under Shared Management at regional level and the value of existing statements
Action completed: The Commission has improved reporting in the relevant AARs. Better control arrangements are included in 2007-13 legislation.
Impact
Indicator: Quality of Member States' systems. The Structural Funds DGs carry out an annual assessment of each Member State system.
Key supporting information
DGs REGIO and EMPL presented a detailed assessment of Member States’ systems in their 2007 AARs [24]. Systems presenting no material deficiencies in ERDF covered 28% of expenditure plus 11% with "qualified assurance" with moderate impact; for the Cohesion Fund and the ESF the figures were 24%/44% and 10%/38% respectively.
Action 14: Greater guidance for structural funds on managing the risk of error [25]
Action completed: In 2008 the Commission published new guidance documents for managing and certifying authorities.
Impact
Indicator: Member States' assessment against regulatory benchmarks. The Commission has developed a self-assessment tool to facilitate managing authorities' self-assessments against regulatory benchmarks on key elements of internal control. Following 2 pilot studies the tool was modified and will be finalised in January 2009 so impact is not yet visible.
Action 15: Promote ‘Contracts of Confidence’ for Structural Funds [26]
Action completed: 7 Contracts have been signed. Two more contracts should be signed by February 2009. The concept of reliance on work of national audit bodies is now included in 2007-2013 legislation.Impact
Indicator: Single audit approach extended under Contracts of Confidence. Member State systems covered by Contracts of Confidence are considered by the Commission to provide reasonable assurance on the regularity of expenditure, so that the Commission may reduce its own audit work. By creating a benchmark procedure and engaging constructively with the Member States, this initiative has resulted in improvements in national systems.
Key supporting information
DG REGIO has a positive assessment of the systems covered by contracts of confidence which is in line with the ECA’s general evaluation in its 2007 report.
Action 16: Establish common guidelines per policy family
Action completed: The Commission has stepped up guidance and internal coordination in all policy areas.
Impact
Indicator: DGs with clear strategies based on generally accepted auditing and control standards. Commission services, intermediaries and beneficiaries have access to guidance and training on key control aspects such as managing external auditors, sampling and compliance with legislation. In Research, control and audit strategies are underpinned by inter-service groups which ensure a consistent approach on all framework programmes.
Indicator: Level of control awareness and consistency of approach in the Structural Funds. The structural actions DGs have developed closure guidelines for 2000-06 programmes. Extensive training and seminars have been provided to Member States. [27]
Key supporting information
Training seminars for almost all Member State audit authorities on the new regulations in 2007, two seminars in Brussels in 2008 on management verifications and certification function, and closure of programmes.
The structural actions DGs have finalised all relevant guidance for Member States for 2007-13 which will be compiled in the Structural Actions Audit Reference Manual to be issued in 2009.
4. Conclusions
Significant progress has been made in strengthening internal control systems during the mandate period of the current Commission. A part of this positive impact is due to actions launched before 2005, but there is certainly evidence that progress was significantly accelerated with the launch of the Action Plan in early 2006. Likewise, the positive impact of the Action Plan will extend well beyond the current mandate period.
To keep the momentum, further efforts are necessary. The Commission will pursue its efforts, and in line with the original concept of the Action Plan, the Commission will continue to need and call for the help and support of the other Institutions.
In the Commission's view, progress in the following areas is vital to underpin further improvements:
· as set out in the Communication on tolerable risk (COM(2008)866), appropriate targets need to be set in some policy areas to form a basis for a clear judgement on how the Commission is managing risk across its different activities. This will ensure the relevant balance between control costs and error rates;
· simplification of legislation (while providing for cost-effective control) is necessary as complex rules cause errors and increase control costs. The Commission has already proposed some simplifications in structural actions and will consider the scope for possible further proposals; and
· as part of this initiative, the Commission will attach to all relevant future legislative proposals a description of the associated control arrangements.
[1] Opinion No 2/2004: OJ C107/1 of 30.4.2004 (the ‘Single Audit’ Opinion).
[2] COM(2005) 252.
[3] OJ L 196, 27.7.2005, p. 4.
[4] COM(2006) 9 and SEC(2006) 49.
[5] TEC 274
[6] COM(2008) 110.
[7] European Court of Auditors, Annual Report for 2007, Table 2.3.
[8] Actions 2 and 6 are not covered by this report as they were cancelled.
[9] This group of actions included Action 4 on tolerable risk, which is reported in section 3.3 of this Communication along with the related issues of costs and benefits of controls.
[10] ECA Annual Report on 2007, Table 2.1.
[11] Article 44 of the Inter-Institutional Agreement and Article 53 (ter) of the Financial Regulation.
[12] ECA Annual Report on 2007, paragraph 2.20.
[13] ECA Opinion 6/2007.
[14] Dutch EU Trend Report 2008, table 11, p. 52.
[15] ECA Annual Report 2007, paragraph 1.29.
[16] Under Council Regulation (EC, Euratom) No 1605/2002 of 25.6.2002 amended by Council Regulation (EC, Euratom) No 1995/2006 of 13.12.2006.
[17] Action 1.4 of SFs Action Plan - COM(2008) 97.
[18] COM(2008) 112.
[19] Actions 2.3, 6.1 and 6.2 of SFs Action Plan.
[20] Internal Audit Service audit of the recovery process in AIDCO, EAC, INFSO, BUDG, Legal Service and the Education, Audiovisual and Culture Executive Agency.
[21] COM(2009) xxx
[22] Action 2.1 of SFs Action Plan.
[23] COM(2008) 866.
[24] Action 9 of SFs Action Plan.
[25] Actions 2.4 and 5 of SFs Action Plan.
[26] Action 2.5 of SFs Action Plan.
[27] Actions 2.6 and 5 of SFs Action Plan.
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