ANNEX 1: STATEMENT OF THE RESOURCES DIRECTOR

Transcription

1 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 Parts 2 and 3.1 of the present AAR and in its annexes 2 to 5 is, to the best of my knowledge, accurate and exhaustive. [Signed] Hélène Clark Brussels, 25 March SEC(2003)59 of _final 77

2 ANNEX 2: HUMAN AND FINANCIAL RESOURCES Code ABB Activity ABB Activity Human Resources by ABB activity Establishment Plan posts External Personnel Total European Social Fund Working in Europe Social dialogue and mobility Employment, social solidarity and gender equality European Globalisation Adjustment Fund (EGF) Instrument for Pre-Accession Assistance (IPA) Human resources development 04 AWBL-01 Administrative support for Employment and Social Affairs Directorate-General 04 AWBL-02 Policy strategy and coordination for Employment and Social Affairs Directorate- General Total General remark: the above data rely on the snapshot of Commission personnel actually employed in each DG/ service as of 31/12/2012. These data do not constitute full-time-equivalent units throughout the year Note: Activity 04 AWBL-02 includes in 2012 external service staff (11 AL). _final 78

3 IMPLEMENTATION OF THE GLOBAL ENVELOPE BUDGET LINES CONCERNED: TO (based on information received from BUDG services following the 2013 Budget circular) (IN EUROS) APPROPRIATIONS 2012 (C1) APPROPRIATIONS carried over (C8) BUDGET LINE BUDGET LINE DESCRIPTION AVAILABLE APPROP COMMITMENTS 2012 PAYMENTS 2012 AMOUNTS OF APPROPRIATIONS CARRIED OVER FROM 2011 % IMPLEMENTATION ON APPROPRIATIONS CARRIED OVER FROM % Mission expenses % Representation expenses % Meeting costs % Conference costs % Meetings of committees Studies and consultations Development of management and information systems Further training and management training % % % TOTAL % EUR 1.11 million is carried over (C8) to 2013 mainly to cover for conferences planned for early 2013 (14%), experts reimbursements (58%), missions (14%) and trainings committed in 2012 (14%). _final 79

4 ANNEX 3: DRAFT ANNUAL ACCOUNTS AND FINANCIAL REPORTS Annex 3 Financial Reports - DG - Financial Year 2012 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 _final 80

5 TABLE 1: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2012 (in Mio ) Commitment appropriations authorised Commitments made % 1 2 3=2/ Title 04 Employment and social affairs Administrative expenditure of the `Employment and social 29, , ,88 % affairs policy area European Social Fund 11288, , ,00 % Working in europe Social dialogue and mobility 79, , ,25 % Employment, social solidarity and gender equality 130, , ,32 % European Globalisation Adjustment Fund (EGF) 107, , ,34 % Total Title 04 Instrument for Pre-Accession Assistance (IPA) Human resources development Total DG EMPL 112,15 112,15 100,00 % 11747, , ,71% 11747, , ,71 % * 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). % Outturn on commitment appropriations 120, % 100, % 80, % 60, % 40, % 20, % 0, % _final 81

6 TABLE 2: OUTTURN ON PAYMENT APPROPRIATIONS IN 2012 (in Mio ) Chapter P ayment appropriations authorised * Payments made % Administrative expenditure of the `Employment and social affairs policy area 1 2 3= 2/1 41, , ,67 % European Social Fund 11283, , ,98 % Working in europe Social dialogue and mobility 66, , ,74 % Employment, social solidarity and gender equality 122, , ,72 % European Globalisation Adjustment Fund (EGF) 107, , ,34 % Total Title 04 Title 04 Employment and social affairs Instrument for Pre-Accession Assistance (IPA) Human resources development 59, , ,01 % 11681, , ,57% Total DG EMPL 11681, , ,57 % * 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). ="% Outturn on payment appropriations" 120, % 100, % 80, % 60, % 40, % 20, % 0, % _final 82

7 Chapter TABLE 3 : BREAKDOWN OF COMMITMENTS TO BE SETTLED AT 31/12/2012 (in Mio ) 2012 Commitments to be settled Commitments to be settled from Commitments 2012 Payments 2012 RAL 2012 % to be settled financial years previous to 2012 Total of Total of commitments to commitments to be be settled at end settled at end of financial year of financial year 2012(incl 2011(incl. corrections) corrections) 1 2 3=1-2 4=1-2/1 5 6=3+5 7 Title 04 : Employment and social affairs Administrative expenditure of the `Employment and social affairs policy area 26, ,45 10, ,08 % 0,00 10,77 12, European Social Fund 11288, , , ,05 % , , , Working in europe Social dialogue and mobility 78, ,83 45, ,04 % 32,54 77,95 72, Employment, social solidarity and gender equality 125, ,31 69, ,28 % 50,15 119,75 120, European Globalisation Adjustment Fund (EGF) 82, ,84 0 0,00 % 0,00 0,00 0, Instrument for Pre-Accession Assistance (IPA) Human resources development 112,15 0,00 112,15 100,00 % 248,14 360,29 306,62 Total Title , , , ,52% 18359, , ,50927 Total DG EMPL 11714, , , ,52 % 18359, , ,50927 ="Breakdown of Commitments remaining to be settled (in Mio EUR)" , , , , , , ,00 0, _final 83

8 TABLE 4 : BALANCE SHEET BALANCE SHEET A.I. NON CURRENT ASSETS A. A.I.5. LT Pre-Financing , ,75 A.II. CURRENT ASSETS , ,3 A. A.II.2. Short-term Pre-Financing , ,35 A.II.3. Short-term Receivables , ,95 AS ASSETS P.III. CURRENT LIABILITIES P. P.III.4. Accounts Payable , ,22 LIALIABILITIES NET ASSETS (ASSETS less LIABILITIES) , ,17 P.I.2. Accumulated Surplus / Deficit 0 0 Non-allocated central (surplus)/deficit* , ,2 TOTAL 0,00 0,00 TABLE 5 : ECONOMIC OUTTURN ACCOUNT ECONOMIC OUTTURN ACCOUNT II.1 SURPLUS/ DEF. FROM OPERATING ACTIVT II.1.1. OPERATING REVENUES , ,42 II Own resource and contributions -72,90 II Other operating revenue , ,42 II.1.2. OPERATING EXPENSES II Administrative Expenses , ,36 II Operating Expenses , ,19 II.2. SURPLUS/DEF. NON OPERATING ACTIVIT , ,75 II.2. FINANCIAL OPERATIONS , ,75 II.2.1. Financial revenue , ,54 II.2.2. Financial expenses , ,79 ECONOMIC OUTTURN ACCOUNT , ,38 _final 84

9 TABLE 6: AVERAGE PAYMENT TIMES FOR DG EMPL Legal Times Nbr of Maximum Average Average Total Number of Payments Nbr of Late Payment Percentage Payment Percentage Payment Times Payments within Time Payments Time (Days) Times (Days) (Days) Limit ,77 % 17, ,23 % 42, ,68 % 19, ,32 % 77, ,69 % 27, ,31 % 116, Total Number of Payments Average Payment Time ,18 % ,82 % 26, , , Target Times Nbr of Target Average Average Total Number of Payments Nbr of Late Payment Percentage Payment Percentage Payment Times Payments within Payments Time (Days) Times (Days) (Days) Target Time ,44 % 12, ,56 % 32, ,56 % 17, ,44 % 58, Total Number of Payments Average Payment Time ,28 % ,72 % 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 ,27 % ,80 42,62 % ,11 Late Interest paid in 2012 DG GL Account Description Amount (Eur) DG EMPL Interest on late payment of charges New FR , ,21 _final 85

10 TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2012 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 , , , , ,31 57 OTHER CONTRIBUTIONS AND REFUNDS IN CONNECTION WITH THE ADMINISTRATIVE OPERATION OF THE INSTITUTION 11218, , , , CONTRIBUTIONS TO UNION PROGRAMMES , , ,5 61 REPAYMENT OF MISCELLANEOUS EXPENDITURE , , , , , ,4 65 FINANCIAL CORRECTIONS , , , , , , OTHER CONTRIBUTIONS AND REFUNDS , , , , , , ,92 90 MISCELLANEOUS REVENUE 72,9 0 72,9 72,9 0 72,9 0 Total DG EMPL , , , , , , ,2 _final 86

11 TABLE 8 : RECOVERY OF UNDUE PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount) INCOME BUDGET RECOVERY ORDERS ISSUED IN 2012 Year of Origin (commitment) Error Irregularity OLAF Notified TOTAL Qualified TOTAL RC(incl. non-qualified) % Qualified/Total RC Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount , , ,16 100,00% 100,00% , , , ,17 75,00% 2,00% , , ,83 100,00% 100,00% , , ,23 75,00% 45,69% , , , ,19 37,50% 8,99% , , , ,19 7,84% 0,06% , , ,72 33,33% 0,28% No Link , , ,43 30,43% 3,45% Sub-Total , , , , ,97 22,61% 2,96% EXPENSES BUDGET Error Irregularity OLAF Notified TOTAL Qualified TOTAL RC(incl. non-qualified) % Qualified/Total RC INCOME LINES IN INVOICES NON ELIGIBLE IN COST CLAIMS Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount 1 26, , , , ,04 25,57% 99,63% CREDIT NOTES , , , ,37 20,55% 11,56% Sub-Total , , , ,8 24,00% 98,88% GRAND TOTAL , , , , ,7 23,56% 55,98% _final 87

12 TABLE 9: AGEING BALANCE OF RECOVERY ORDERS AT 31/12/2012 FOR EMPL Number at 01/01/2012 Number at 31/12/2012 Evolution Open Amount (Eur) at 01/01/2012 Open Amount (Eur) at 31/12/2012 Evolution ,00 % , ,27 0,00 % 1 0,00 % , ,71 0,00 % 1 0,00 % , ,29 0,00 % 1 0,00 % , ,07 0,00 % 1 0,00 % , ,37 0,00 % -100,00 % 2.631,20-100,00 % 3 0,00 % , ,27-0,61 % 1-50,00 % , ,87-95,52 % -100,00 % ,25-100,00 % , ,18 % , ,15 869,60 % TABLE 10 : RECOVERY ORDER WAIVERS IN 2012 >= EUR Waiver Central Key Linked RO Central Key RO Accepted Amount (Eur) LE Account Group Commission Decision Comments Total DG Number of RO waivers _final 88

13 TABLE 11 : CENSUS OF NEGOTIATED PROCEDURES - DG - YEAR 2012 Contracts > Negotiated Procedure Legal base Number of Procedures Amount ( ) Art a) 1, Total 1, TABLE 12 : SUMMARY OF PROCEDURES OF DG EXCLUDING BUILDING CONTRACTS Internal procedures > 60, Contract Class Count Amount ( ) Count Amount ( ) Service 29, ,66 13, ,16 TOTAL 29, ,66 13, ,16 Internal procedures > 60, Procedure Type Count Amount ( ) Count Amount ( ) (FR2007) Negotiated Procedure without publication of a contract notice Art. 126 IR 1, , (FR2007) Open Procedure (Art IR) 27, ,66 12, ,16 (FR2012) Open Procedure (Art RAP) 1, TOTAL , ,16 External procedures > 10,000 Contract Class Count Amount ( ) TOTAL External procedures > 10,000 Procedure Type Count Amount ( ) TOTAL _final 89

14 TABLE 13 : BUILDING CONTRACTS Total number of contracts : Total amount : Legal base Contract Number Contractor Name Description Amount ( ) TABLE 14 : CONTRACTS DECLARED SECRET Total Number of Contracts : Total amount : Legal base Contract Number Contractor Name Type of contract Description Amount ( ) _final 90

15 ANNEX 4: MATERIALITY CRITERIA For centralised management The qualitative factors are based on the detection of significant and/or repetitive weaknesses which would be identified through the internal control system within the framework of supervision. Following the conclusions of a Commission Working Group on Materiality (direct management), which has developed relevant criteria and thresholds, a reserve should only be envisaged if the error rate resulting from the annual ex-post audit missions would account for more than 2 % of the payments of the selected files. The level of 2 % is an acceptable indicator due to the fact that the selection of the files to be audited is based on a risk analysis approach in order to select files in the area at risk. For shared and decentralised management Assessment of management and control systems in the Member States and for the programming period All programmes are assessed against audit opinions at national and Commission level based on audits carried out on systems and representative samples of operations. In addition, operational line managers and authorising officers by sub-delegation also assess the level of assurance. The assessment is based on three elements as follows: 1. The first element is the assessment of the functioning of management and control systems carried out by the audit directorate. This assessment is complemented at the Directorate General level taking into account elements received by the operational managers and the regular contacts with regional and national programme authorities. 2. The second element is the projected error rate reported by programme audit authorities in the Annual Control Reports (ACR), based on expenditure for the year preceding the reporting year. The Directorate General assesses the reliability of the projected error rates for each programme, on the basis of all available information and audit results, including on-thespot missions, and uses this information as the best estimate of the possible risk for expenditure in the reporting year. In case the projected error rates are not available, not accurate or found not to be reliable, the audit directorate either recalculates them when it has sufficient information to do so or, alternatively, replaces them by flat rates in line with the results of the assessment of the functioning of management and control systems. This results in an error rate validated by management 2 for each programme for the reporting year. This is the best estimate expressed as a percentage of the value of the interim payments made in the reporting year of expenditure which is not in full conformity with contractual or regulatory provisions. 3. The third element is the consideration of the multi-annual impact of the validated error rates calculated since the beginning of the programming period, on the corresponding interim payments made during that same period, after deduction of the recoveries and withdrawals reported for each year as well as pending recoveries at the end of the reporting year and withdrawals accepted by Certifying Authorities and recorded in their accounts prior to the date of signature the AAR. The application of this third element results in a cumulative residual risk/error rate for each programme, expressed as a percentage of the value of the cumulative interim payments made for the programming period, up to the date of signature of the AAR. This is the DG's best estimate of expenditure which is not in full conformity with contractual or regulatory provisions and which have not been corrected at the date the report is signed. The assessment of the relevant reports, data and other information available requires the application of professional judgement, namely when weighting contradictory information or considering abnormal statistical results. When taking into account reported corrections, the authorising officer by delegation also assesses that they effectively mitigate the risks identified 2 See Annex 1 of the AAR. _final 91

16 and that they result in a reduction in the level of the error that remains uncorrected in the population. Materiality criteria and reservations Materiality can be assessed first at the level of the ABB activity by calculating the weighted average cumulative residual risk/error rate and comparing the result with the 2% materiality threshold. An average cumulative residual risk/error rate higher than 2 % should lead to a reservation, but this would need in any case to be further analysed by operational programme. For that purpose, the Directorate-General assesses each operational programme in order to identify reservations and corrective measures to be applied at this lower level than the ABB activity, in accordance with the legal basis for cohesion policy. At programme level, reservations are made in respect of significant weaknesses in the management and control systems in the Member States where the resulting risk to the Community budget is material. Following the approach set out, reservations are made as a general rule for all programmes for which the cumulative residual risk/error rate exceeds 2%. Exceptions, if any, are clearly reported and explained in the body of the Annual Activity Report. In some cases, reservations may be made at a sub-programme level (priority axis or implementing bodies) when the systemic deficiencies only affect a specific management and control system, not used for the other activities under the same programme 3. In addition, in the event that the monitoring and supervisory controls reveal deficiencies of a qualitative nature (e.g. significant systemic deficiencies or major control failures) which have a significant impact on the reputation of the Commission, a reservation is made on a reputational basis. Estimation of the amount at risk The amount at risk is calculated by applying the validated error rate to the amount of interim payments made during the reporting year for each programme. In case no payments have been made in the year concerned for a programme under reservation, the reservation could still apply, but on a reputational/qualitative basis, rather than on a quantitative one. For transparency purposes, the estimation of the amount at risk is presented by Member State classifying the programmes in four categories levels of assurance in accordance with the assurance they provide as to the legality and regularity of interim payments made during the reporting year: - Reasonable assurance means that there is no material deficiency in key elements of the systems (only minor improvements may be needed in some cases) and the validated error rate and the cumulative residual risk are below 2%; - Reasonable assurance with low risk of irregularities covers programmes with the existence of minor deficiencies in key elements of the systems and/or with a validated error rate below 5% but with a cumulative residual risk below 2%; - Limited assurance with medium risk of irregularities covers programmes with the existence of some deficiencies in key elements of the systems and/or with a validated error rate below 5% and a cumulative residual risk above 2%; - Limited assurance with high risk of irregularities covers programmes with material deficiencies in several key elements of the systems and/or with a validated error rate above 5% and a cumulative residual risk above 2% (see also footnote 2). 3 [In case the risk of error is high (exceeds 5%) and in application of the principle of prudence, the DG would not take into account recoveries and withdrawals implemented on a multiannual basis for the decision to make a reservation]. _final 92

17 ANNEX 5: INTERNAL CONTROL TEMPLATE FOR BUDGET IMPLEMENTATION (ICT) Key figures by management mode Commitments Payments Number of transactions M M Shared , Decentralised Centralised Total Inherent risks by management modes Shared management of the European Social Fund: The ESF operates under shared management in accordance with the Article 53b of the Financial Regulation. Thus the Member States have the primary responsibility to take all measures necessary to ensure that the funds are used in accordance with the applicable rules and principles and to protect the Community's financial interests. However, the Commission retains final responsibility for the implementation of the budget under Article 317 of the Treaty. The major inherent risk relates to the complexity of the operations and activities financed under the ESF, the typology and variety of the recipients targeted by the ESF (involving multiple local partners, often of modest size), and numerous DG EMPL interventions annually. The Commission exercises supervisory controls, mainly by audit of the Member States' management and control systems, including transactions tests at beneficiary level. The multi-annual nature of the system helps to offset this risk, allowing corrections to be made some years after the disbursement of funds by the Member State to the beneficiaries and by the Commission to the Member State. Decentralised management of the pre-accession programmes in: Since 2007, DG EMPL has been in charge of a new financial instrument, IPA Human Resources component. This fund is managed in a decentralised way but with strong similarities to the approach used for the ESF. The inherent risk is related to the ability of the candidate countries to set up and operate the structures and controls necessary for sound management of the appropriations allocated. Centralised management: It involves (a) the attribution of numerous contracts and subsidies for actions, and (b) the payment of numerous operating grants to non-governmental organisations, associations and trade unions. The main inherent risk related to these activities concerns the capacity of (especially) smaller organisations to effectively control expenditure and ensure the transparency on the operations carried out. Internal control framework 1. Control environment DG EMPL manages the ESF and the EGF through shared management, IPA through decentralised management and the internal policies programmes and actions through centralised and joint management of grants and contracts. The annual contributions to Agencies are managed through direct management. Until end 2012, a financial circuit based on BUDG model 1 - decentralised at the level of the Directorates - has been used by the DG to implement the whole budget: the Directors are authorising officers by sub-delegation (AOSD) and they further sub-delegated to their Heads of Units. Initiations and verifications took place within operational units. This organisation model respects the "principle of the 4 eyes" in accordance with the Financial Regulation. The supervision is ensured by the AOSDs, supported by the advices and controls of procedures by the financial unit. The CIAME (DG EMPL's Procurements and Contracts Internal Committee) provides further assurance in the case of calls for tender. For the ESF, technical and 4 As per Annex 3 extracted on 15/03/2013 _final 93

18 legal support is provided by both ESF coordination units, including the provision of manual for operational procedures, internal guidelines and legal interpretation guidance and advise, internal coordination network through the "Coordination and Support Group"; In addition, an accounting cell is in place in the financial unit in order to process accounting expost controls when verifying transactions. Following an accounting risk analysis, the control programme is revised every year. It should be noted that the organisation model has been modified as of for direct and indirect management, with a centralisation in the Finance Unit of financial initiation and verification, whilst maintaining the role of AOSD at operational level. The aim of this change is to optimise the use of human resources in the DG, ensure the presence of back-ups, and harmonise financial and contractual management practices throughout the DG. 2. Planning, programming and reporting process The objectives of the DG are integrated into the Commission Strategic and Programming Process (SPP) through contributions to the Commission Work Programme (CWP) and the Management Plan (MP) in accordance with the Commission requirements for Activity Based Management. For each activity of the DG, specific objectives and performance indicators have been defined, as well as general objectives for the policy area. In their biannual reports, directors ensure a follow-up of the year-to-date implementation of their annual work programme and specific objectives. A synthesis is provided in July to the Policy and Management Board (PMB) of DG EMPL and sent to the Commissioner. In the biannual reports, directors also report on their main problems and risks, as well as on the implementation of the audit recommendations from IAC, IAS and ECA. They also report on the use of the resources allocated to their activity (budget execution, RAL, recovery orders, payment delays ). A scoreboard covering main financial and human resources indicators is communicated monthly to the management. Work programme, budget execution and audit matters are subject to regular meetings between the Commissioner and the DG. 3. Management and control systems Centralised management Selection process DG EMPL fully applies the rules defined in the Financial Regulation for grants and contracts and - uses Commission contract templates; - checks the financial viability of beneficiaries and contractors. Specifically DG EMPL exercises control through the following elements: 1) calls for proposals - implementation of a standard application form for the whole DG; - before publication, a formal opinion is issued by the Financial unit to check if the documents are complete, have been correctly drafted and all the required procedures have been respected; - an evaluation committee is appointed by the AOSD and composed of at least 3 persons representing at least 2 directorates; - the management of the evaluation process has been standardised via the IT application Defis Evaluations; - a formal opinion is issued by the financial unit on the evaluation and selection procedure prior to budgetary and legal commitments; - the publication on Europa of the grants awarded takes place after control by the financial unit. 2) grants given to bodies in a monopoly situation - a formal opinion is issued by the financial unit on the evaluation procedure prior to budgetary and legal commitments 3) joint management actions _final 94

19 Communication and information measures to improve the quality of financial management Detective and corrective controls at initial phases Detective and corrective controls during the final/closure phase Preventive and corrective controls - a formal opinion is issued by the financial unit on the evaluation procedure prior to budgetary and legal commitments 4) calls for tender - the prior Information Notice is checked by the financial unit before publication; - the invitation to tender is sent by the AOSD to the financial unit for verification of the documents and the procedure before publication (required when > ); - opening and evaluation committees are appointed by the AOSD and composed of at least 3 persons representing at least 2 directorates (obligatory: one representative from the financial unit in opening committees) - calls for tender > checked by the CIAME; - negotiated procedures > : prior agreement from financial unit as well as agreement on the evaluation procedure prior to budgetary and legal commitments; - for negotiated procedures > : prior opinion from CIAME and exception formally recorded All financial actors must follow financial training. In addition, specific coaching is provided by the financial unit to address specific needs: - Chairs and members of the evaluation committees for awarding contracts are requested to follow a specific training. - Information sessions and individual coaching are provided by the financial unit to the members of the CIAME. - financial unit function provide guidance and ex ante expertise to operational units particularly to financial officers through general updated manuals and website as well as through ad hoc support on specific questions or problems and individual training to newcomers; - the network of financial coordinators meets once a month to ensure proper communication between the financial unit and the operational directorates; - ad-hoc meetings with beneficiaries, information sessions and guides are provided by the financial unit; - ad-hoc meetings with MS for presidency conferences, information sessions and guides are provided by the financial unit; - publication of call for tenders and for proposal on Europa website. The publication on Europa of the action grants awarded following calls for proposals takes place on the basis of a standard report available in our IT Application Defis Evaluations Interim reports are checked by operational officers to verify how the project is implemented; Financial officers review interim cost claims. - final reports are analysed by operational officers to verify conformity of the implemented actions / deliverables with the contractual provisions; these analyses include cross-checking the final accounts and the final report on the implementation of the action to verify the coherence of the costs declared with the action actually implemented; the assessment of final reports submitted on-line via SWIM is done as of March 2011 via new functionalities in DEFIS Evaluations; - budget information, in the case of calls for proposals, is monitored through the application Budget Versioning; - final cost claims are checked by financial officers to verify the eligibility of the costs, arithmetical checks, conformity with the initial budget, co-financing rate, etc. - if necessary, on the spot checks are carried out prior to payment of the balance (always in case of irregularity/fraud presumption). - the financial and operational verifying agents check all transactions; _final 95

20 and audits (ex-ante and ex-post audits) - the ex-post audit unit carries out audits on the spot to verify the legality and regularity of the amounts declared by the beneficiary in its declaration of expenditure. The audit unit operates to a pre-defined audit strategy and methodology. Its annual work programme is based on a risk analysis approach. 4. Management and control systems Shared management ESF period Negotiation and approval of programmes, including main elements of management and control systems in Member States Preventive and supervisory measures: Compliance assessment of set-up of management and control systems Detective and corrective controls: Primary level verification by managing authority of correctness of expenditure declared from financed operations and their compliance with grant conditions; reporting to the Commission on interim payments and key milestones Member States: Establishment of satisfactory system architecture (Managing Authority, Certifying Authority, Intermediate Bodies and Audit Authority) is a condition of programme approval. Commission: DG EMPL ensured that existing relevant information about weaknesses in the systems was used to improve the systems to avoid recurrence in the programme period. Member States: Compliance Assessment of the management and control systems: MS must submit the description of the systems, the results of an independent assessment of the set-up of the systems and an independent report and opinion on their compliance within 12 months after the approval of each operational programme and, before the submission of the first interim application for payment. Audit Strategy must be provided to the Commission within 9 months after the approval of each operational programme. Commission: The Commission has 2 months counting from the date of submission of the Compliance Assessment to accept or reject the Compliance Assessment. However, the Commission may interrupt this process in order to request additional information or clarification concerning the key elements of the systems (where there are reservations in the opinion or the Commission itself has observations). The processing of the first interim payment can only be carried out when the Compliance Assessment has been accepted by the Commission. Within 3 months of receipt of the Audit Strategy, the Commission provides its opinion (accept/reject) to the Member State. However, in this case also, the Commission may interrupt the analysis process in order to request additional information and/or clarifications from the Member State. Member States: Throughout the implementation period the managing authorities in Member States are required to carry out the following checks (art 60 of Reg 1083/2006): ensure that operations are selected for funding in accordance with the criteria applicable to the operational programme - verify that the co-financed products and services are delivered and that the expenditure declared by the beneficiaries has been incurred and comply with Community and national rules - ensure that there is a system for recording and storing in computerised form accounting record for each operation - ensure that beneficiaries maintain either a separate accounting system or accounting code for all transactions relating to operations - set up procedures to ensure the availability, accuracy and completeness of all documents required regarding expenditure and audits (adequate audit trail); - ensure that the certifying authority receives all necessary information on the procedures and verifications carried out. _final 96

21 Detective and corrective controls : Secondary level verification by certifying authority, including reporting of irregularities and recoveries Supervisory and corrective controls: Audits by the programme audit Authority Supervisory and corrective controls: Audits by the Commission Supervisory and corrective controls: Audits by the European Court of Auditors Member States: Each periodic statement of expenditure is checked and certified as correct by the Certifying Authority (art 61 of Reg 1083/2006). The assurance is based on its own desk checks and, if necessary, onthe-spot-verifications as well as information on checks performed by the managing and audit authorities. Commission: - the financial and operational verifying agents check all transactions Member States: For the period, the Audit Authority in the Member States for each programme provides an annual control report accompanied by an annual audit opinion on the functioning of systems (art 62 of Reg 1083/2006). Finally, the Member States have to submit annually by the 15 th February, an annual summary of the audit results of the previous calendar year. These annual summaries are analysed by DG EMPL and their results are taken into account for the Annual Activity Report. Commission: Throughout the implementation period, and up to three years after the final closure of programmes, DG EMPL's ESF Audit Directorate carries out various types of audits, mainly re-performance audits of the Audit Authorities' Annual Control Reports, system audits and thematic audits (such as Financial Engineering Instruments, Financial Corrections), to confirm assurance on the effective functioning of the systems in the Member States. With a view of informing in a timely manner, a "flash report" of the audit results is sent to the geo-units and to the hierarchy. In case of negative audit results, the interruption of payments is initiated without delays. DG EMPL uses the results of its own audits as well as the results of the national audit bodies and of other Community audits (European Court of Auditors and OLAF) to determine the assurance levels obtained from the management and control systems. If serious irregularities or systems deficiencies are detected, DG EMPL may interrupt the deadline for processing interim payment requests by a Member State for a maximum of 6 months (art. 91 Reg. 1083/2006); the Commission may also suspend payments at OP or priority axis level and then require Member States to correct the system weaknesses detected and the irregular expenditure found. DG EMPL's internal process has been reinforced in 2011 by the creation of the Interruptions-Suspensions-Financial Corrections Committee (ISFCC), chaired by the Deputy Director General. The 2 ESF and the Audit Directors are members of the ISFCC. This committee, which meets biweekly, analyses each case, takes the appropriate decisions and monitors their implementation. If the Member State fails to take the corrective measures, the Commission may impose the financial corrections by a specific decision (art. 99 Reg. 1083/2006), possibly by using extrapolation or flat rates. At any time during the programme implementation period, and up to three years after the final closure of programmes, the European Court of Auditors can carry out substantive testing of a sample of transactions complemented by systems audits at national and Commission level, as part of the audit work performed to support its annual opinion issued on the European Union budget (DAS). The ECA performs regular revisions of its DAS methodology and error rate calculation over the period. In particular, concerning ESF programmes, the ECA verifies that the Commission has ensured proper follow up of its previous recommendations (including financial corrections) and has carried out its supervisory role in a satisfactory manner. _final 97

22 period Detective and corrective controls: Primary level verification by managing authority of correctness of expenditure declared from financed operations and their compliance with grant conditions; reporting to the Commission on interim payments and key milestones Detective and corrective controls: Secondary level verification by paying authority, including reporting of irregularities and recoveries Supervisory and corrective controls: Audits by the programme winding-up and audit Body Supervisory and corrective controls: Audits by the Commission Throughout the implementation period the managing authorities in Member States are required to: Ensure the compliance of projects with selection criteria Ensure that beneficiaries are informed of and understand projects' terms and conditions; Perform desk checks of all expenditure based on supporting documents, including progress reports, etc.; Carry out on-the-spot visits to a significant number of projects selected on a risk based analysis to verify delivery of the project outputs (investment, services), reality and eligibility of expenditure declared; Correct any irregular expenditure and recovery of EU funds as appropriate; Draw up annual reports on implementation as well as a final report summarising the implementation of the entire programme, which are analysed by the Commission. Member States: Each periodic statement of expenditure is checked and certified as correct by the Paying Authority. The assurance is based on its own desk checks and, if necessary, onthe-spot-verifications as well as information on checks performed by the managing and audit authorities. The Paying Authority also monitors and reports information on irregularities and suspected fraud and on recoveries made to the Commission. Commission: - the financial and operational verifying agents check all transactions. The responsible Audit Body in the Member States performs system audits and carries out substantive testing of projects to cover 5% of expenditure at programme closure; it provides findings of systems weaknesses and irregular expenditure to the Managing Authority and to the Paying Authority for correction; it issues an annual control report on the work carried out and conclusions drawn. This report is sent to the Commission and is used as a source of information to determine DG EMPL's Audit Opinion for each programme. Finally, the Member States have to submit by the 15 th February, an annual summary of the audit results of the previous calendar year. These annual summaries are analysed by DG EMPL and their results are taken into account for the Annual Activity Report. Throughout the implementation period and up to three years after the final closure of operation programmes, DG EMPL's ESF Audit Directorate carries out systems audits with limited substantive testing to confirm assurance on the effective functioning of the systems in the Member States. With a view of timely informing the geo-units and the hierarchy of audit results, a system of "flash reports" was created in In case of negative audit results, the interruption of payments is initiated without delays. DG EMPL uses the results of its own audits, of communicated national audits and of other Community audits (European Court of Auditors reports and OLAF reports) to determine the assurance levels obtained from the management and control systems. If serious irregularities or systems deficiencies are detected, the Commission may decide to suspend payments at OP or measure level and then require the concerned Member State to correct the system weaknesses detected and the irregular expenditure found (art. 39(2) Reg. 1260/1999). DG EMPL's internal process has been reinforced in 2011 by the creation of the Interruptions-Suspensions-Financial Corrections Committee (ISFCC), chaired by the Deputy Director _final 98

23 Supervisory and corrective controls: Audits by the European Court of Auditors Corrective controls and audit: Final payment and programme closure General. The 2 ESF and the Audit Directors are members of the ISFCC. This committee, which meets biweekly, analyses each case, takes the appropriate decisions and monitors their implementation. If the Member State fails to take the corrective measures, the Commission may impose the financial corrections by a specific decision (art. 39(3) Reg. 1260/1999), possibly by using extrapolation or flat rates ranging from 2% to 100% in conformity to Guidelines of 2 March 2001 [C(2001)476]. At any time during the programme implementation period, and up to three years after the final closure of programmes, the European Court of Auditors can carry out substantive testing of a sample of transactions complemented by systems audits at national and Commission level, as part of the audit work performed to support its annual opinion issued on the European Union budget (DAS). The ECA performs regular revisions of its DAS methodology and error rate calculation over the period. In particular, concerning ESF programmes, the ECA verifies that the Commission has ensured proper follow up of its previous recommendations (including financial corrections) and has carried out its supervisory role in a satisfactory manner. Member States: at the end of the programme period, an independent winding up person or body in the Member State (Article of Reg. 438/2001) reviews the audit work done and gives its opinion on the expenditure declared from the programmes as a whole ("winding-up declarations"). All negative audit results lead to corresponding financial corrections / communication of irregularities. Supporting documents have to be accessible for audit by DG EMPL and ECA for three years after partial or final closure. DG EMPL: will analyse the compliance and acceptability of all windingup declarations and, where necessary, will ask for further information or additional audit work to be performed. In order to determine the residual level of errors in programmes, DG EMPL plans to audit a number of high risk programmes and projects after closure. In case of negative results, DG EMPL may apply complementary financial corrections (flat rate or based on extrapolation of errors on samples) to correct residual errors. ECA: For three years after final closure, and as part of the audit work performed to support its annual DAS, the ECA may carry out substantive testing of a sample of transactions complemented by system audits at national or Commission level. The ECA may particularly verify that the Commission has ensured proper follow up of its previous recommendations (including financial corrections). 5. Management and control systems Decentralised management IPA HR component Negotiation and approval of programmes, Preventive and supervisory measures: Accreditation and conferral of management powers Candidate countries: Establishment of satisfactory system architecture is a condition for the signature of the framework agreement. Commission: decisions adopting multi-annual programmes shall meet the requirements necessary to constitute financing decisions. Candidate countries: The following bodies and authorities are designated: - a national IPA coordinator - a strategic coordinator - a competent accrediting officer - a national authorising officer - a national fund - an operating structure - an audit authority _final 99

24 Detective and corrective controls: Primary level verification by the national authorising officer Supervisory and corrective controls: Audits by the audit Authority Supervisory and corrective controls: Audits by the Commission Supervisory and The accrediting officer is responsible for the accreditation of the national authorising officer, the national operating structure. Commission: After review of the accreditations and examination of the procedures and structures put in place, the Commission decides to confer management powers. The conferral of management powers lays down the list of ex-ante controls to be performed by the Commission on the tendering of contracts, launch of calls for proposals and the award of grants and contracts. Candidate countries (art of Reg 718/2007): The national authorising officer is responsible of the legality and regularity of the underlying transactions, and responsible for the effective functioning of management and control system. For this purpose, he will, through the operating structure put in place: ensure that operations are selected for funding in accordance with the criteria applicable to the operational programme; - verify that the co-financed products and services are delivered and that the expenditure declared by the beneficiaries has been incurred and comply with Community and national rules; - ensure that there is a system for recording and storing in computerised form accounting record for each operation; - ensure that beneficiaries maintain either a separate accounting system or accounting code for all transactions relating to operations; - set up procedures to ensure the availability, accuracy and completeness of all documents required regarding expenditure and audits (adequate audit trail); - ensure that the certifying authority receives all necessary information on the procedures and verifications carried out. Annually, the national authorising officer provides the Commission with a statement of assurance. Commission: The Delegations in the candidate countries perform the controls on the tendering of contracts, launch of calls and payment claims, and inform the AOSD on the legality and regularity of the transactions. The Audit Authority in the Candidate Countries provides an annual audit opinion on the functioning of systems (art 29 of Reg 718/2007). The annual audit activity report summarises any weaknesses found in the management and control systems or in transactions findings from the audit carried out in accordance with the annual audit work plan. Throughout the implementation period, DG EMPL's ESF Audit Directorate carries out systems audits with limited substantive testing to confirm assurance on the effective functioning of the systems in the Candidate Countries. With a view of informing in a timely manner, a "flash report" of the audit results is sent to the geo-units and to the hierarchy. In case of negative audit results, the interruption of payments is initiated without delays. DG EMPL uses the results of its own audits as well as the results of national audit bodies and of the European Court of Auditors to determine the assurance levels obtained from the management and control systems. DG EMPL requires Candidate Countries to correct any system weaknesses and irregular expenditure found or imposes financial corrections. DG EMPL's internal process has been reinforced in 2011 by the creation of the Interruptions-Suspensions-Financial Corrections Committee (ISFCC), chaired by the Deputy Director General. The 2 ESF and the Audit Directors are members of the ISFCC. This committee, which meets biweekly, analyses each case, takes the appropriate decisions and monitors their implementation. At any time during the implementation period, and for three years after _final 100

25 corrective controls: Audits by the European Court of Auditors final closure, the European Court of Auditors can carry out substantive testing of a sample of transactions complemented by limited system audits, as part of the audit work performed to support the annual opinion issued by the ECA on the European Union budget (DAS). The ECA performs regular revisions of DAS methodology and error rate calculation over the period. The ECA verifies that the Commission has ensured proper follow up of its previous recommendations (including financial corrections). 6. Feedback which enables control activities to be optimised Verification that processes are working as designed Monitoring of performance of externally contracted auditors High level management reporting (e.g. to the Director General) and its role in monitoring problem issues - Annual Internal Control Standards self-assessment: survey by management and synthesis by the Internal Control Coordinator. - Use of information available through biannual reports, IAC reports, quarterly and annual synthesis reports of the CIAME. - Financial coordinators networks. DG EMPL uses external auditors both for ex-post audits in direct management (BUDG framework contract) and for ESF projects in Member States (DG EMPL framework contract). The external auditors are monitored by DG EMPL audit units as a part of their own annual work programmes and coverage of the activity. These units are in charge of defining the missions, giving guidance to external auditors and validation of the audit reports. - Weekly meetings of DG EMPL's management board to inform the participants of all problems and risks which are identified in biannual reports, scoreboard, audits, ESF Identification of Potential Problem (IPP), bi-monthly progress table to ESF PMB on interrupted payments, suspension and financial correction procedures, - Bi-annual reporting to the Commissioner about follow-up of audit recommendations, OLAF cases and relations with the European Court of Auditors. _final 101

26 ANNEX 6 : ACHIEVEMENTS AND INDICATORS BY OBJECTIVE 1.1 Progress towards General Objectives Progress at the level of ABB activities European Social Fund: Support to the Europe 2020 Strategy (ABB Activity 0402) European Globalisation adjustment Fund (ABB Activity 0405) Instrument for Pre-Accession Assistance Human Resources Development (Component IV) (ABB Activity 0406) Employment and Social Solidarity (ABB Activity 0404) Social dialogue and mobility (ABB Activity 0403)

27 1.1 Progress towards General Objectives DG EMPL General Objectives contributing to the Europe 2020 targets GENERAL OBJECTIVES 1 Promote increased participation in the labour market IMPACT INDICATORS Indicators Target (long term) Milestone Latest known results a) i) employment rate (total y) ii) employment rate of women iii) employment rate of older workers Reach 75% by 2020 Reach + 3 p.points by 2013 (basis = 2008) (Q3) i 70% 70.3% 69% 68.6% 68.6% 68.6% ii 62.2% 62.8% 62.5% 62.1% 62.3% Source : Eurostat (t2020_10 ) iii 44.6% 45.6% 46% 46% 47.4% b) % GDP devoted to active labour market expenditure Reach % by 2015 (basis = 2008) Reach + 0,03% by 2013 (basis = 2008) * EU % 0.48% 0.55% EU % 0.47% 0.54% Source: Eurostat (LMP_EXPSUMM) c) % active measures to total labour market expenditure (ratio active/active + passive) Source: Eurostat (LMP_EXPSUMM) Reach + 0.5% by 2015 (basis = 2008) Reach + 0,5 p.points in 2013 * Latest aggregated figure * EU27 28,9% 28,9% 25.3% * Latest aggregated figure. 2 Develop labour mobility, job quality and flexicurity in the European labour market a) Productivity growth i) per working hour ii) per person employed Continuous increase Achieve progress towards positive figures (2013) i) 1.4% -0.3% -1.5% 2.3% 1.2% 1.1% Source: Eurostat (nama_aux_lp) ii) 1.4% -0.6% -2.6% 2.5% 1.3% 0.1% b) % of adult population participating in education and lifelong learning 12,5% in % 9.4% 9.3% 9.1% 8.9% Source: Eurostat (tsiem080 ) 103

28 c) Level of utilization of EURES (job portal for mobility) to search for employment in another Member State (in millions of users) 2015:exceed 5.00 million 2012: exceed 4.5 million d) Incidence of accidents at work (number of accidents/ workers) Source: Eurostat hsw_aw_inasx (until 2007) and hsw_n2_01(eu15 - after 2008) Reach - 8% by 2013 EU (base= (-2.5%) 2004) (-2.6%) (-13.9%) 2741 (-13.7%) 2140 (-32.6%) 3 Promote inclusion, fight against poverty and modernization of social protection e) Number of youth job placements achieved or supported under the Preparatory Action Your First EURES Job (YFEJ) a) Risk of poverty or social exclusion i) total ii) children iii) men iv) women v) population 65+ Source: Eurostat t2020_ : 1000 YFEJ placements By 2020 reduce the total number by 20 million (basis = 2008) 2012 : 2000 YFEJ placements The action will be subject to an evaluation during the course of 2013 (no data available yet) i) 122,7 119,3 115,7 113,7 116,3 119,6 ii) 26,3 25,4 24,9 24,6 25,2 iii) 56,5 54, ,5 53,8 iv) 66,1 64,6 62,7 61,2 61,7 v) 19,9 19,7 19,1 18,1 16,9 b) Effective age of retirement Increase EU Total Source: Eurostat tsiem030 d) Disability-free life expectancy Source: Eurostat tsdph100 Men Women Continuous increase Exceed 2007 average EU Men * Women * *Eurostat estimate 104

29 4 Promote social and economic cohesion a) Number of regions lagging in employment (<55% employment rate) Source: Eurostat tgs00007 Continuous reduction Reduction achieved by 2013 (cohesion report) /271 19/271 23/271 27/271 36/271 b) Difference in employment rates between regions (NUTS II) of the population years (age reference to be adapted to the EU 2020 when new data available) Source: Eurostat tgs c) Difference in primary income of private households between regions Source: Eurostat TGS00036 Continuous reduction of the gap (by increasing the employment rates) Continuous reduction of the gap Reduction achieved by 2013 (cohesion report) % 40.0% 39.4% 38.1% 39.4% Max 79.5% Min 43.7% Max 82.5% Min 42.5% Max 80.2% Min 40.8% Max 70.8% Min 39.9% Max 78.5% Min 39.1% Reduction achieved by * 12.8/1 12.6/1 10.2/1 10.6/1 10.8/1 * latest available figure d) year olds with completed upper secondary education Source: Eurostat tsiir110 In 2015, 85% to have completed upper secondary education Exceed 80% by % 78.4% 78.6% 79% 79.5% 80.0%* 5 Ensure a competent, efficient and flexible organisation able to respond to new political objectives, in particular the Europe 2020 Strategy and to reflect EU' citizens emerging needs a) General indicator: level of citizens' confidence in EU institutions Source: Special Eurobarometer 316 b) Efficiency of structures established to manage new thematic areas Continuous increase Effective contribution of DG EMPL to Europe 2020 Increase achieved by 2013 * Eurostat estimate % 47% 46% Internal reviews in 2012 led to re-organisation of the financial circuits and of two policy Directorates (effective January 2013) 105