Annual Activity Report

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1 Ref. Ares(2017) /04/ Annual Activity Report 2. Annexes Directorate-General for Research and Innovation

2 TABLE OF CONTENTS ANNEX 1: STATEMENT OF THE RESOURCES DIRECTOR... 3 ANNEX 2: REPORTING HUMAN RESOURCES, BETTER REGULATION, INFORMATION MANAGEMENT AND EXTERNAL COMMUNICATION... 4 ANNEX 3: FINANCIAL REPORTS DG RTD - FINANCIAL YEAR ANNEX 4: MATERIALITY CRITERIA RESEARCH FRAMEWORK PROGRAMMES COMMON ASPECTS Assessment of the effectiveness of controls Multiannual approach Adequacy of the audit scope RESEARCH FRAMEWORK PROGRAMMES SPECIFIC ASPECTS Seventh Framework programme and the Coal and Steel Research Fund Horizon 2020 Framework Programme ANNEX 5: INTERNAL CONTROL TEMPLATE(S) FOR BUDGET IMPLEMENTATION (ICTS) ANNEX 5a: Grants direct management FP7 and Horizon ANNEX 5b: Indirect entrusted management DG RTD - FP7 and Horizon ANNEX 5c: ICT for InnovFin (the H2020 financial instrument) 41 ANNEX 6: IMPLEMENTATION THROUGH NATIONAL OR INTERNATIONAL PUBLIC-SECTOR BODIES AND BODIES GOVERNED BY PRIVATE LAW WITH A PUBLIC SECTOR MISSION (IF APPLICABLE) Innovative Medicines Initiative (IMI) Innovative Medicines Initiative 2 Joint Undertaking (IMI 2) Clean Sky 47 Clean Sky 2 Joint Undertaking (Clean SKY 2) 48 Bio-based Industries Joint Undertaking (BBI) 48 Fuel Cells and Hydrogen Joint Undertaking (FCH) 49 Fuel Cells and Hydrogen 2 Joint Undertaking (FCH2) EUROSTARS EUROSTARS 2 51 European Metrology Programme for Innovative and Research (EMRP) European Metrology Programme for Innovative and Research (EMPIR) Joint Baltic Sea Research and Development Programme (BONUS) European and Developing Countries Clinical Trial Partnership (EDCTP) European and Developing countries Clinical Trial Partnership (EDCTP2) 54 ANNEX 7: EAMR OF THE UNION DELEGATIONS (IF APPLICABLE) ANNEX 8: DECENTRALISED AGENCIES (IF APPLICABLE) ANNEX 9: EVALUATIONS AND OTHER STUDIES FINALISED OR CANCELLED DURING THE YEAR ANNEX 10: SPECIFIC ANNEXES RELATED TO "FINANCIAL MANAGEMENT" ANNEX 11: SPECIFIC ANNEXES RELATED TO "ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS" ANNEX 12: PERFORMANCE TABLES Impact indicators Result indicators A New Boost for Jobs, Growth and Investment 62 A Connected Digital Single Market 66 A Resilient Energy Union with a Forward-Looking Climate-Change Policy 66 A Stronger Global Actor 69 Output indicators 70 DG RTD AAR 2016 Draft Page 2 of 76

3 ANNEX 1: Statement of the 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 Commission 1, 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 Section 2 of the present AAR and in its annexes is, to the best of my knowledge, accurate and complete. Date: 04/04/2017 [Signed in ARES] Fernández-Cañadas Priscila Director RTD.R (Resources) 1 Communication to the Commission: Clarification of the responsibilities of the key actors in the domain of internal audit and internal control in the Commission; SEC(2003)59 of DG RTD AAR 2016 Draft Page 3 of 76

4 ANNEX 2: Reporting Human Resources, Better Regulation, Information Management and External Communication A. Human Resource Management Objective (definition): The DG deploys effectively its resources in support of the delivery of the Commission's priorities and core business, has a competent and engaged workforce, which is driven by an effective and gender-balanced management and which can deploy its full potential within supportive and healthy working conditions. Main outputs in 2016: Description Indicator Target Achieved value of the indicator Output 1: The DG will perform its annual workload assessment and benchmarking exercise (HR Reporting) in 2016 in order to rebalance the workload of staff according to priorities and with the ultimate goal of achieving an even workload balance among staff. Output 2: The DG will perform an internal Completion of two main deliverables that will support the Director General in his decision on how to optimally distribute the staff reductions across the DG: (A) the Staff reduction targets per Directorate for 2016, as well as the tentative staff reduction targets for 2017; The Staff reduction targets that the DG has to fulfil for 2016 (including the additional 1% redeployment tax imposed at end of 2015) are as follows: (1) Reduction by 79 Establishment Posts (2) Reduction by 21 Contractual Agent Posts (B) Possibly, and depending on the benchmarking results, a list of areas and actions proposed for efficiency improvement through redeployment or restructuring. Completion of one main deliverable: Regular screening comparing the DG's The staff reductions per directorate will depend on the benchmarking analysis undertaken early in The HR Reporting Process will be launched in early January 2016 and results should be known by March/April 2016 This balancing exercise is an ongoing activity Yes Yes The target for 2016 was revised to 82 Establishment Posts and 21 Contractual Agents, and these posts have already been collected and the DG's obligations paid. The 2017 targets were set at 77 establishment Posts and 11 CA and collection has started since July A list of actions to improve the efficiency of the organisation (e.g. UAF restructuring) has been proposed and is being discussed with Senior Management The exercise ensured an even balance of secretarial staff across the units of the DG DG RTD AAR 2016 Draft Page 4 of 76

5 Screening Exercise based on Job Descriptions, for secretarial and support functions Output 3: The DG will assist its staff in making the transition into a policy DG through an updated list of training courses, revised job descriptions and revised recruitment policy Output 4: Launch in 2016 a specialised campaign of talent management for its female AD staff encouraging talented female colleagues to apply for management posts Output 5: Enhance staff physical and mental wellbeing at work Output 6: Enhance Internal Communication and Staff Engagement Units in terms of the percentage of staff occupied in the secretarial and support functions. The target is to ensure that staff is deployed efficiently Two main deliverables: - New courses to be introduced specifically in areas of interest for policy making - Design of standard policy job descriptions for policy officers, policy and/or research assistants, secretarial/back office staff Number of female applications to middle management positions - Lunchtime conferences on issues such as on the benefits of walking, on psychosocial risk, on sleep, the exchange of information etc. -E-learning information sessions on managing stress and developing resilience or office ergonomics. -"Social corners" to be created, as well as additional showers installed - "Staff Seminars" where the latest developments in the DG are shared by management and where staff can express their views throughout the year. End of 2016 for both Yes This is an ongoing effort. Proposals were put forth during the first half of 2016 and discussion on the approach is still ongoing with potential implementation in 2017 Pilot exercise with 12 female colleagues by December 2016 As time and budget restrictions permit, about 3-5 conferences, 2-4 e- learning sessions, one more social corner at COVE and 4 additional showers in ORBAN 2-4 Staff Seminars planned Yes Ongoing since March 2016 for 14 participants; last session of the pilot group scheduled for November For information, out of 104 candidacies for middlemanagement posts at RTD throughout 2016, 31 were women candidates (30%); currently 41 % female middle managers in DG RTD Yes 2 lunchtime conferences ('Sustainable working lives', 'Personal Safety') plus other relevant initiatives such as 'Walk to Work' and 'Office Stretches' Done. 3 'elearning' or equivalent initiatives ('Ergonomics in the workplace' video, 'Managers Toolbox, HR Mini modules on Staff regulations, CV, Interviews and Resilience) Done. Social corner already created. One more to be created in addition! DG RTD Health DAY on 28 September in ORBN with Medical Service. Postponed to additional showers, planned in ORBAN. Yes 3 Staff Seminars already took place in 2016 DG RTD AAR 2016 Draft Page 5 of 76

6 B. Financial Management: Internal control and Risk management Overarching objective: The Authorising Officer by Delegation should have reasonable assurance that resources have been used in accordance with the principles of sound financial management, and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions including prevention, detection, correction and follow-up of fraud and irregularities. Objective 1 : Objective (definition): Effective and reliable internal control system giving the necessary guarantees concerning the legality and the regularity of the underlying transactions Main outputs in 2016: Description Indicator Target Achieved value of the indicator Ex ante controls Number of transactions Not relevant research grants; 1879 administrative; 1830 experts (with contract); 4598 experts (meeting) Total value of transactions Not relevant Not yet verified TTP TTI TTG 90% compliant 31/12/ % compliant 31/12/ % compliant 31/12/ % in time for grants 98% in time for admin 93.6% experts 99% 91% (cumulative performance) 88% for grants signed in 2016 In 2016, a number of grant agreements was signed for a particular type of research project (infrastructures), whit very complex consortia. The delays in the TTG were often requested by the beneficiaries. Those agreements had a strong impact on the yearly performance, Ex post audit plan for grants Implementation of the audit plan 2016 (number of audits results closed) 100% at 31/12/ % 451 audit results closed of the 2016 annual target of 409 Implementation of FP7 audits results Cumulative implementation rate of FP7 audit results (number of cases) 80% 31/12/ % In terms of amounts, this represents 72.43% of the corrections implemented. Implementation of FP7 Cumulative implementation rate of FP7 75% 31/12/ % The cumulative implementation rate was DG RTD AAR 2016 Draft Page 6 of 76

7 extrapolations extrapolations (number of cases) affected by a very high activity in 2016 (1060 new cases entered the workflow and 463 cases were finalised). Objective 2 : Effective and reliable internal control system in line with sound financial management. Main outputs in 2016: Description Indicator Target Achieved value of the indicator Trainings on ex-ante controls (FP7) Trainings on business processes (Horizon 2020) Harmonized and automated financial operations (Horizon 2020) Streamlined ex-ante control functions in the IT system (Sygma) (Horizon 2020) Number of sessions (up to 30 participants) 4 by 31/12/ Number of participants (RTD/Research Family) Harmonized, integrated and automated financial circuits for commitments and payments available in Sygma for all Horizon 2020 Agreement on the business requirements within the implementing services 4000 by 31/12/ Number of participants in H2020 BP trainings in 2016: 3433 (internal) and 8565 (external). Total: This includes external people who followed by web streaming, when available. YES by 31/12/2016 YES All H2020 Grant Management related commitments (L2) and payments are now fully supported by the egrants IT systems in an harmonized way Yes by 31/12/2016 YES The "agreement" has been reached, the ex-ante control strategy was adopted by the Steering Board in December Objective 3: Minimisation of the risk of fraud through application of effective anti-fraud measures, integrated in all activities of the DG, based on the DG's anti-fraud strategy (AFS) aimed at the prevention, detection and reparation of fraud. Main outputs in 2016: Description Indicator Target Achieved value of the indicator Update of DG RTD AFS Yes or NO YES by 31/12/2016 NO Delayed for S DG RTD AAR 2016 Draft Page 7 of 76

8 FAIR Committee Number of meetings 2 by 31/12/ FAIR meetings were held on 16 June 2016 and 24 November 2016 Implementation of the current AF action plan (Research Family level) Estimated state of implementation of the actions (from report to Management) 60 % by 31/12/ % AF awareness raising training sessions Number of participants from RTD 60 by 31/12/ Despite of the dedicated advertising and two "proximity" sessions in CDMA and COVE2 buildings, the attendance hasn't reached the expected level. Number of participants from other implementing Services Cases DG RTD referred to OLAF Number of cases None (All relevant 40 by 31/12/ In 2015, three specific sessions were held for the Joint Undertakings' agents, with more than 100 participants. This probably lowered the overall training needs for cases will be transmitted to OLAF) Cases initiated directly by OLAF Number of cases None (depends entirely on OLAF) 26 C. Better Regulation (only for DGs managing regulatory acquis) Objective (definition): Prepare new policy initiatives and manage the EU's acquis in line with better regulation practices to ensure that EU policy objectives are achieved effectively and efficiently Main outputs in 2016: Description Indicator Target Achieved value of the indicator Commission Communication on the Response to the Report of Adoption by the Commission 19 January 2016 Adopted/19 January 2016 Brussels, COM(2016) 5 : COMMUNICATION FROM THE DG RTD AAR 2016 Draft Page 8 of 76

9 the High Level Expert Group on the Ex Post Evaluation of the Seventh Framework Programme and the Staff Working Document on the expost evaluation of FP7. COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS On the Response to the Report of the High Level Expert Group on the Ex Post Evaluation of the Seventh Framework Programme D. Information management aspects Objective (definition): Data, Information and knowledge management Main outputs in 2016: Description Indicator Target Achieved value of the indicator 1. Setting up a Task Force within DG RTD to prepare a specific Action Plan for implementing the main recommendations of the Reflection paper on data, information and knowledge management at the European Commission (Deffaa's Group report). 2. Identify two pilot activities to allow testing of key processes and methodologies prior to broad roll-out within DG RTD Yes/No Setting up the Task Force Degree of advancement (as a % of the completion of each pilot project) in the implementation of each of the two pilot activities by the end of % for the advancement in the implementation of each of the two pilot activities, as target for this output. Yes Unit RTD.R.5 was dedicated to Knowledge Management and the related resources were transferred to it. A 3-year strategy was elaborated and a governance mechanism was set-up. Yes Several pilot projects were identified and delivered. Most notably for dissemination of Inter- Institutional relations documents, for better management of Directors' Meetings, and for preservation of Missions knowledge. DG RTD AAR 2016 Draft Page 9 of 76

10 E. External communication activities Objective (definition): Increase the direct reach of DG RTD communication actions Main outputs in 2016: Description Indicator Target Achieved value of the indicator Number of unique visitors to Europa and Horizon Magazine websites and newsletters, Social media follows, and key known multipliers. Engagement Indicator 1.2 Fan engagement rate Number of unique visitors to Europa and Horizon Magazine websites and newsletters, Social media follows, and key known multipliers. Baseline: Year end 2015 Target: Year end (increase of 3.0% compared to 2015) Too early to say whether targets set were overly ambitious: target not met. Achieved value of the indicator Facebook (Horizon 2020): % Target not met Facebook (Innovation Union): % 3.63 Target not met Twitter (Horizon 2020): Target not met Twitter (Innovation union): Target not met Annual communication spending (based on estimated commitments): Achieved value of the indicator Baseline (2015): 5.23M Target (2016): 5.24 M 5.36 M Actual commitment slightly higher than forecast DG RTD AAR 2016 Draft Page 10 of 76

11 ANNEX 3: Financial Reports DG RTD - Financial Year 2016 Annex 3 Financial Reports - DG RTD - Financial Year 2016 Table 1 : Commitments Table 2 : Payments Table 3 : Commitments to be settled Table 4 : Balance Sheet Table 5 : Statement of Financial Performance Table 5 Bis: Off Balance Sheet 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 Procedures (excluding Building Contracts) Table 13 : Building Contracts Table 14 : Contracts declared Secret DG RTD AAR 2016 Draft Page 11 of 76

12 Additional comments Tables 1 and 2 include EU, EFTA, third countries' contribution as well as C4 and C5 credits together with commitments that can be implemented in 2017 (N+1) or until the end of H2020. When we take into consideration only the credits authorised by DG RTD that may not be carried forward to the next year (C1), the implementation rates reach 100% for commitments as well as for the payments. Tables 13 and 14 have no data to be reported. DG RTD AAR 2016 Draft Page 12 of 76

TABLE 1: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2016 (in Mio ) Commitment appropriations authorised Commitments made % 1 2 3=2/1 Title 02 Internal market, industry, entrepreneurship and SMEs 02 02

13 TABLE 1: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2016 (in Mio ) Commitment appropriations authorised Commitments made % 1 2 3=2/1 Title 02 Internal market, industry, entrepreneurship and SMEs Horizon Research relating to enterprises ,00 % Total Title ,00% Title 08 Research and innovation Administrative expenditure of the 'Research and 274, , ,93 % innovation' policy area Horizon Research 2925, , ,14 % Euratom Programme - Indirect actions 266, , ,55 % Total Title 08 Research programme of the Research Fund for Coal and Steel 47, , ,87 % 3513, , ,86% Title 15 Education and culture Horizon , , ,10 % Total Title 15 Total DG RTD 0, , ,10% 3516, , ,86 % * 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. DG RTD AAR 2016 Draft Page 13 of 76

08 08 01 TABLE 2: OUTTURN ON PAYMENT APPROPRIATIONS IN 2016 (in Mio ) C hapter Title 08 Research and innovation Administrative expenditure of the 'Research and innovation' policy area P ayment appro

14 TABLE 2: OUTTURN ON PAYMENT APPROPRIATIONS IN 2016 (in Mio ) C hapter Title 08 Research and innovation Administrative expenditure of the 'Research and innovation' policy area P ayment appro priatio n s autho rised * P ayments made % 1 2 3=2/ 1 274, , ,53 % Horizon Research 3312, , ,71 % Euratom Programme - Indirect actions 229, , ,65 % Total Title 08 Research programme of the Research Fund for Coal and Steel 60, , ,27 % 3876, , ,19% Title 15 Education and culture Horizon , , ,20 % Total Title 15 1, , ,20% Title 32 Energy Administrative expenditure in the 'Energy' policy area 0, , ,73 % Total Title 32 0, , ,73% Title XX XX XX 01 22, , ,93 % Total Title XX 22, , ,93% Total DG RTD 3901, , ,24 % * 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). DG RTD AAR 2016 Draft Page 14 of 76

TABLE 3 : BREAKDOWN OF COMMITMENTS TO BE SETTLED AT 31/12/2016 (in Mio ) Chapter Commitments 2016 2016 Commitments to be settled Payments 2016 RAL 2016 % to be settled Commitments to be settled from

15 TABLE 3 : BREAKDOWN OF COMMITMENTS TO BE SETTLED AT 31/12/2016 (in Mio ) Chapter Commitments Commitments to be settled Payments 2016 RAL 2016 % to be settled Commitments to be settled from financial years previous to 2016 Total of commitments to be settled at end of financial year 2016(incl corrections) Total of commitments to be settled at end of financial year 2015 (incl. corrections) 1 2 3=1-2 4=1-2/1 5 6=3+5 7 Title 02 : Internal market, industry, entrepreneurship and SMEs Horizon Research relating to enterprises 3 0, ,00 % 0,00 3,00 0,00 Total Title , ,00% Title 08 : Research and innovation Administrative expenditure of the 'Research and innovation' policy area 273, ,89 22, ,24 % 0,00 22,53 0, Horizon Research 2666, , , ,24 % 3.756, , , Euratom Programme - Indirect actions 209, ,57 77, ,21 % 96,19 174,16 120, Research programme of the Research Fund for Coal and Steel 42, ,49 25, ,98 % 88,56 114,32 118,89 Total Title , , , ,28% 3941, , ,08226 Title 15 : Education and culture Horizon , ,00 0 0,00 % 0,38 0,38 2,97 Total Title 15 0, ,00 0 0,00% 0, , , Title 32 : Energy Administrative expenditure in the 'Energy' policy area 0 0,00 0 0,00 % 0,00 0,00 0,00 Total Title ,00 0 0,00% 0 0 0, Title XX : XX XX ,00 0 0,00 % 0,00 0,00 22,48 Total Title XX 0 0,00 0 0,00% , Total DG RTD 3194, , , ,33 % 3941, , ,52651 The total amount paid indicated in Tables 2, 3 and 4 of the report shows a difference with the Table above, because this latter includes co-delegated funds for which payments were not authorized in RTD (mainly RTD:PMO). DG RTD AAR 2016 Draft Page 15 of 76

16 TABLE 4 : BALANCE SHEET RTD A BALANCE SHEET A.I. NON CURRENT ASSETS A.I.1. Intangible Assets A.I.3. Invstmnts Accntd For Using Equity Meth A.I.4. Non-Current Financial Assets A.I.5. Non-Current Pre-Financing A.I.6. Non-Cur Exch Receiv & Non-Ex Recoverab A.II. CURRENT ASSETS , ,48 0, , , , , , , , A A.II.1. Current Financial Assets A.II.2. Current Pre-Financing A.II.3. Curr Exch Receiv &Non-Ex Recoverables A.II.6. Cash and Cash Equivalents ASSETS P.I. NON CURRENT LIABILITIES , , , , , , , , P P P.I.2. Non-Current Provisions P.III. NET ASSETS/LIABILITIES P.III.1. Reserves P.II. CURRENT LIABILITIES , , , , , , , ,4 P P.II.2. Current Provisions P.II.4. Current Payables P.II.5. Current Accrued Charges &Defrd Income LIABILITIES , , , , , , , NET ASSETS (ASSETS less LIABILITIES) ,26 P.III.2. Accumulated Surplus / Deficit Non-allocated central (surplus)/deficit* TOTAL 0,00 0,00 It should be noted that the balance sheet and statement of financial performance presented in Annex 3 to this Annual Activity Report, represent only the assets, liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as ow n 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 w hose balance sheet and statement of financial performance 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. DG RTD AAR 2016 Draft Page 16 of 76

17 TABLE 5 : STATEMENT OF FINANCIAL PERFORMANCE RTD STATEMENT OF FINANCIAL PERFORMANCE II.1 REVENUES , ,5 II.1.1. NON-EXCHANGE REVENUES , ,8 II RECOVERY OF EXPENSES , ,73 II OTHER NON-EXCHANGE REVENUES , ,08 II.1.2. EXCHANGE REVENUES , ,67 II FINANCIAL INCOME , ,63 II OTHER EXCHANGE REVENUE , ,04 II.2. EXPENSES II.2. EXPENSES II.2.10.OTHER EXPENSES , ,80 II.2.1. EXP IMPLEM BY MEMBER STATES (SHARED -687,43 II.2.2. EXP IMPLEM BY COMMISS&EX.AGENC. (DM) , ,93 II.2.3. EXP IMPL BY OTH EU AGENC&BODIES (IM) , ,87 II.2.5. EXP IMPLEM BY OTHER ENTITIES (IM) , ,54 II.2.6. STAFF AND PENSION COSTS , ,00 II.2.8. FINANCE COSTS , ,83 II.2.9. SHARE NET DEFICIT JOINT VENT & ASSOC ,50 STATEMENT OF FINANCIAL PERFORMANCE , ,99 It should be noted that the balance sheet and statement of financial performance presented in Annex 3 to this Annual Activity Report, represent only the assets, liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as ow n 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 w hose balance sheet and statement of financial performance 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 follow ing this audit. DG RTD AAR 2016 Draft Page 17 of 76

18 TABLE 5bis : OFF BALANCE SHEET RTD OFF BALANCE OB.1. Contingent Assets , ,12 GR for performance 0,00 GR for pre-financing , ,12 OB.2. Contingent Liabilities OB.2.1. CL Guarantees given , ,00 OB.3. Other Significant Disclosures OB.3.2. Comm against app. not yet consumed , ,76 OB.4. Balancing Accounts OB.4. Balancing Accounts , ,64 OFF BALANCE 0,00 0,00 DG RTD AAR 2016 Draft Page 18 of 76

19 TABLE 6: AVERAGE PAYMENT TIMES FOR DG RTD Legal Times Nbr of Maximum Average Average Total Number Payments Nbr of Late Payment Time Percentage Payment Percentage Payment Times of Payments within Time Payments (Days) Times (Days) (Days) Limit ,93 % 14, ,07 % 44, ,21 % 29, ,79 % 51, ,00 % 21, ,00 % 28, ,00 % 66, ,79 % 55, ,21 % 135, ,68 % 53, ,32 % 192 Total Number of Payments Average Net Payment Time Average Gross Payment Time ,57 % 216 3,43 % 28, , , , , , Target Times Nbr of Target Average Average Total Number Payments Nbr of Late Payment Time Percentage Payment Percentage Payment Times of Payments within Payments (Days) Times (Days) (Days) Target Time ,65 % 5, ,35 % 27, ,06 % 21, ,94 % 40, ,00 % 24, ,00 % 59, ,33 % 52, ,67 % 144 Total Number of Payments Average Net Payment Time Average Gross Payment Time ,70 % ,30 % 26, , , , , , Suspensions Average Average Number of Amount of Report Payment % of Total Total Number % of Total Total Paid Suspended Suspended Approval Suspension Number of Payments Amount Amount Payments Payments Suspension Days ,95 % ,65 32,19 % ,75 Late Interest paid in 2016 DG GL Account Description Amount (Eur) RTD Interest on late payment of charges New FR , ,21 DG RTD AAR 2016 Draft Page 19 of 76

20 TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2016 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= =4+5 7= REVENUE FROM INVESTMENTS OR LOANS GRANTED, BANK AND OTHER INTEREST 66044, , , , , ,16 59 OTHER REVENUE ARISING FROM ADMINISTRATIVE MANAGEMENT , , , , CONTRIBUTIONS TO UNION PROGRAMMES , , , , ,33 61 REPAYMENT OF MISCELLANEOUS EXPENDITURE , , , , , , ,51 66 OTHER CONTRIBUTIONS AND REFUNDS , , , , , ,08 90 MISCELLANEOUS REVENUE , , , , , , ,67 Total DG RTD , , , , , , ,75 DG RTD AAR 2016 Draft Page 20 of 76

21 TABLE 8 : RECOVERY OF PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount) INCOME BUDGET RECOVERY ORDERS ISSUED IN 2016 Error Irregularity Total undue payments recovered Total transactions in recovery context(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 , , ,2 50,00% 51,08% , , ,35 50,00% 26,68% , , ,41 50,00% 21,11% , , ,44 100,00% 100,00% , , ,81 95,24% 79,00% , , ,85 94,21% 88,91% , , ,95 81,19% 39,81% , , ,1 45,30% 41,81% , , , ,77 27,47% 17,46% , , ,1 9,68% 4,66% , , , , ,45 100,00% 100,00% No Link , , ,6 93,86% 1,73% Sub-Total , , , ,9 71,45% 21,13% EXPENSES BUDGET INCOME LINES IN INVOICES NON ELIGIBLE IN COST CLAIMS Total transactions in Total undue payments Error Irregularity OLAF Notified recovery context(incl. % Qualified/Total RC recovered non-qualified) Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount , , ,57 40,35% 2,82% , , , ,34 60,88% 33,16% CREDIT NOTES , , ,68 68,52% 38,74% Sub-Total , , , ,6 60,42% 31,85% GRAND TOTAL , , , ,5 63,77% 22,25% DG RTD AAR 2016 Draft Page 21 of 76

22 TABLE 9: AGEING BALANCE OF RECOVERY ORDERS AT 12/31/2016 FOR RTD Number at 1/1/ Number at 12/31/2016 Evolution Open Amount (Eur) at 1/1/ Open Amount (Eur) at 12/31/2016 Evolution ,00 % , ,80 0,00 % 1 0,00 % , ,00 0,00 % -100,00 % ,96-100,00 % 3 0,00 % , ,64 0,00 % 2 0,00 % , ,24 0,00 % 1 0,00 % , ,00 0,00 % 1 0,00 % , ,22-5,70 % 3-25,00 % , ,21-10,94 % 1 0,00 % , ,86 0,00 % 1 0,00 % , ,00 0,00 % 2-33,33 % , ,08-40,85 % 7-22,22 % , ,40-14,51 % 6 0,00 % , ,36-0,81 % 5 0,00 % , ,39-2,07 % 10-16,67 % , ,21-33,02 % 15-34,78 % , ,81-28,14 % 15-42,31 % , ,33-40,95 % 13-75,00 % , ,14-65,53 % , ,54 % , ,96-13,86 % DG RTD AAR 2016 Draft Page 22 of 76

23 TABLE 10 : RECOVERY ORDER WAIVERS IN 2016 >= EUR Waiver Central Key Linked RO Central Key RO Accepted Amount (Eur) LE Account Group Commission Decision ,09 Other Public Bodies ,18 Private Companies ,96 Private Companies Total DG ,23 Number of RO waivers 3 DG RTD AAR 2016 Draft Page 23 of 76

24 TABLE 11 : CENSUS OF NEGOTIATED PROCEDURES - DG RTD Procurement > EUR 60,000 Negotiated Procedure Legal base Number of Procedures Amount ( ) Art (b) ,00 Total 1, ,00 DG RTD AAR 2016 Draft Page 24 of 76

25 TABLE 12 : SUMMARY OF PROCEDURES OF DG RTD EXCLUDING BUILDING CONTRACTS Internal Procedures > 60,000 Procedure Type Count Amount ( ) Internal Exceptional Negotiated Procedure without publication of a contract Proced ures > notice (Art. 134 RAP) ,00 Open Procedure (Art. 104(1) (a) FR) ,00 Open Procedure (Art RAP) ,00 TOTAL ,00 Additional comments The increase of the budget share of negotiation procedures is due to the purchase from DG RTD of guaranteed access rights in the Jules Horowitz Reactor (JHR) for the next 30 years for an amount of 15M. The JHR is being built in the nuclear research centre of the CEA (Commissariat à l'energie Atomique et aux Energies Alternatives) and will be operated in a Consortium gathering European and Third Country partners participating to the investment. The facility has a unique character among similar existing or under construction facilities that are located in all the states signed Agreement on Government Procurement covering the sought technical parameters (characteristics of the neutron flux produced by the reactor and necessary variety of the experimental equipment and irradiation conditions) and is, therefore, the only capable to perform irradiation experiments necessary to carry out implementation of the indirect actions in the frame of the Euratom Research and Training Programme. DG RTD AAR 2016 Draft Page 25 of 76

26 TABLE 13 : BUILDING CONTRACTS Total number of contracts : Total amount : Legal base Contrac t Number Contractor Name Description Amount ( ) No data to be reported DG RTD AAR 2016 Draft Page 26 of 76

27 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 DG RTD AAR 2016 Draft Page 27 of 76

28 ANNEX 4: Materiality criteria DG RTD's expenditure is composed of, in order of importance, directly managed grants, indirectly managed grants and financial instruments and, for less than 8%, other direct spending, mostly administrative. The error rate affecting the payments is estimated yearly and per management system, following a relevant methodology that takes into account the risk associated to the type of expenditure (in terms of probability and final financial impact). Considering that around 80% of the yearly expenditure is related to directly or indirectly managed research grants, and the fact that the research framework programmes' implementing bodies are sharing a common ex-post audit approach, the following section focusses on this specific management system. 1. Research framework programmes common aspects The assessment of the effectiveness of the different programmes' control system is based mainly, but not exclusively, on ex-post audits' results. The effectiveness is expressed in terms of detected and residual error rate, calculated on a representative sample Assessment of the 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 exante 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: where: ResER% (Re per%*( P A)) (Re persys%* E) Re ser% P 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 euros of EC share of funding in the auditable population. In FP7, the population is that of all received cost statements, and the euros amounts those that reflect the EC share included in the costs claimed in each cost statement. DG RTD AAR 2016 Draft Page 28 of 76

29 A E total EC share of all audited amounts, expressed in euro. This will be collected from audit results. total non-audited amounts of all audited beneficiaries. In FP7, this consists of the total EC share, expressed in euro, excluding those beneficiaries for which an extrapolation is ongoing). 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 each FP 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/Horizon 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, 2 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 Multiannual approach The Commission's central services' guidance relating to the quantitative materiality threshold refers to a percentage 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. Notwithstanding the multiannual span of their control strategy, the Director-Generals of the Research DGs (and the Directors of ERCEA, REA, and, for Horizon 2020, EASME and INEA) 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 2 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. DG RTD AAR 2016 Draft Page 29 of 76

30 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 respective common audit strategies, 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 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 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. 2. Research Framework programmes specific aspects The control system of each framework programme is designed in order to achieve the operational and financial control objectives set in their respective legislative base and legal framework. If the effectiveness of those control systems does not reach the expected level, a reservation must be issued in the annual activity report and corrective measures should be taken. Each programme having a different control system, the following section details the considerations leading to the establishment of their respective materiality threshold and the conclusions to draw with regard to the declaration of assurance Seventh Framework programme and the Coal and Steel Research Fund For the Seventh Framework programme and the Coal and Steel Research Fund, the general control objective, following the standard quantitative materiality threshold proposed in the Standing Instructions for AAR, 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 programmes' 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. DG RTD AAR 2016 Draft Page 30 of 76

31 2.2. Horizon 2020 Framework Programme The Commission's proposal for the Regulation establishing H2020 framework programme 3 states that It remains the ultimate objective of the Commission to achieve a residual error rate of less than 2% of total expenditure over the lifetime of the programme, and to that end, it has introduced a number of simplification measures. However, other objectives such as the attractiveness and the success of the EU research policy, international competitiveness, scientific excellent and in particular the costs of controls need to be considered. Taking these elements in balance, it is proposed that the Directorates General charged with the implementation of the research and innovation budget will establish a costeffective internal control system that will give reasonable assurance that the risk of error over the course of the multiannual expenditure period is, on an annual basis, within a range of 2-5 %, with the ultimate aim to achieve a residual level of error as close as possible to 2 % at the closure of the multi-annual programmes, once the financial impact of all audits, correction and recovery measures have been taken into account. Further, it explains also that Horizon 2020 introduces a significant number of important simplification measures that will lower the error rate in all the categories of error. However, [ ] the continuation of a funding model based on the reimbursement of actual costs is the favoured option. A systematic resort to output based funding, flat rates or lump sums appears premature at this stage [ ]. Retaining a system based on the reimbursement of actual costs does however mean that errors will continue to occur. An analysis of errors identified during audits of FP7 suggests that around % of them would be avoided by the simplification measures proposed. The error rate can then be expected to fall by 1.5 %, i.e. from close to 5 % to around 3.5 %, a figure that is referred to in the Commission Communication striking the right balance between the administrative costs of control and the risk of error. The Commission considers therefore that, for research spending under Horizon 2020, a risk of error, on an annual basis, within a range between 2-5 % is a realistic objective taking into account the costs of controls, the simplification measures proposed to reduce the complexity of rules and the related inherent risk associated to the reimbursement of costs of the research project. The ultimate aim for the residual level of error at the closure of the programmes after the financial impact of all audits, correction and recovery measures will have been taken into account is to achieve a level as close as possible to 2 %. In summary, the control system established for Horizon 2020 is designed to achieve a control result in a range of 2-5% detected error rate, which should be as close as possible to 2%, after corrections. Consequently, this range has been considered in the legislation as the control objective set for the framework programme. 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. 3 COM(2011) 809/3 Proposal for a Regulation of the European Parliament and of the Council establishing Horizon 2020 the Framework programme for Research and Innovation ( ), see point 2.2, pp DG RTD AAR 2016 Draft Page 31 of 76

32 ANNEX 5: Internal Control Template(s) for budget implementation (ICTs) ANNEX 5a: Grants direct management FP7 and Horizon 2020 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 submitted; Compliance; Prevention of fraud Main risks It may happen (again) that The 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 and Innovation family and with the 7 years' framework The programme Horizon 2020 implementation (procedures, monitoring arrangements, communication with beneficiaries, budget planning, etc) is not consistent within the Research and Innovation family and with the 7 years' framework Mitigating controls Hierarchical validation within the authorising department Inter-service consultation, including all relevant services Adoption by the Commission Explicit allocation of responsibility. The Common Support Centre in RTD provides all the members of the Family with harmonised procedures, guidance and IT tools. DG RTD centralises the budget planning and the monitoring of the Horizon 2020's budget implementation How to determine coverage, frequency and depth Coverage / Frequency: 100% Depth: All work programmes are thoroughly reviewed at all levels, including for operational and legal aspects. Coverage/ Frequency: 100% Depth All the underlying implementation tools are defined et developed at family level. How to estimate the costs and benefits of controls Costs: estimation of cost of staff involved in the preparation and validation of the annual work programme and calls. 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. Costs: costs of the staff involved in Family coordination activities Benefits: Qualitative benefits: Optimised procedures, common approach on multiple issues (audits, fraud, legal aspects, reporting ); better reporting on the whole programme better management of the programme. 4 Control indicators % of budget "oversubscription" from proposals received 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 4 The mutualisation of the support services represents a quantitative benefit which is certain but not accurately quantifiable in the context of reorganisations, new programme's setting up, general HR offsetting through the Commission DG RTD AAR 2016 Draft Page 32 of 76

Annex 3 Financial Reports - DG PHEA - Financial Year 2017

Annex 3 Financial Reports - DG PHEA - Financial Year 2017 Ref. Ares(2018)1715408-28/03/2018 AAR 2017 Version 2 - Financial Year 2017 Table 1 : Commitments Table 2 : Payments Table 3 : Commitments to be settled Table 4 : Balance Sheet Table 5 : Statement of Financial