C 368/24 Official Journal of the European Union

Transcription

1 C 368/24 Official Journal of the European Union REPORT on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2010, together with the replies of the Joint Undertaking (2011/C 368/04) INTRODUCTION 1. The European Joint Undertaking for ITER ( 1 ) and the Development of Fusion Energy was set up in March 2007 ( 2 ) for a period of 35 years. While the main fusion facilities are to be developed at Cadarache in France, the Joint Undertaking is located in Barcelona. of contributions from the ITER host state (France), the annual membership contributions, voluntary contributions from members other than Euratom, and additional resources to be received under terms approved by the Governing Board. The Court draws attention to the requirement for substantially increased resources for the ITER project (see paragraphs 27-29). 2. The tasks of the Joint Undertaking are ( 3 ): (a) to provide the contribution of Euratom to the ITER International Fusion Energy Organisation ( 4 ); (b) to provide the contribution of Euratom to the Broader Approach Activities (complementary joint fusion research) with Japan for the rapid development of fusion energy; and (c) to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility. 3. The members of the Joint Undertaking are Euratom, represented by the European Commission, the Member States of Euratom and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion and have expressed their wish to become Members (at 31 December 2010: Switzerland). STATEMT OF ASSURANCE 5. Pursuant to the provisions of Article 287(1) of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts ( 5 ) of the European Joint Undertaking for ITER and the Development of Fusion Energy, which comprise the financial statements ( 6 ) and the reports on the implementation of the budget ( 7 ) for the financial year ended 31 December 2010, and the legality and regularity of the transactions underlying those accounts. 6. This Statement of Assurance is addressed to the European Parliament and to the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 ( 8 ). The Director's responsibility 7. As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the Joint Undertaking's Financial Regulation, under his own responsibility and within the limits of the authorised appropriations ( 9 ). The Director is responsible for putting in place ( 10 ) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts ( 11 ) that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular. 4. When the Joint Undertaking was set up, the indicative total resources deemed necessary for the period 2007 to 2041 were million euro. The total contribution from Euratom was set at million euro, of which a maximum of 15 % for administrative expenditure. Other resources consist ( 1 ) ITER: International Thermonuclear Experimental Reactor. ( 2 ) Council Decision 2007/198/Euratom of 27 March 2007 establishing the European Joint Undertaking for ITER and the Development of Fusion Energy and conferring advantages upon it (OJ L 90, , p. 58). ( 3 ) The Annex summarises the Joint Undertaking's competences, activities and available resources. It is presented for information purposes. ( 4 ) The ITER International Fusion Energy Organisation was set up in October 2007 for an initial period of 35 years to implement the ITER project, which aims to demonstrate the scientific and technological feasibility of fusion energy. The Members are Euratom, the People's Republic of China, the Republic of India, Japan, the Republic of Korea, the Russian Federation and the United States of America. ( 5 ) These accounts are accompanied by a report on the budgetary and financial management during the year which gives, inter alia, an account of the rate of implementation of the appropriations with summary information on the transfers of appropriations among the various budget items. ( 6 ) The financial statements include the balance sheet and the economic outturn account, the cash flow table, the statement of changes in net assets and the annex to the financial statements, which includes a description of the main accounting policies and other explanatory information. ( 7 ) The budget implementation reports comprise the budget outturn account and its annex. ( 8 ) OJ L 248, , p. 1. ( 9 ) Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, , p. 72). ( 10 ) Article 38 of Regulation (EC, Euratom) No 2343/2002. ( 11 ) The rules concerning the presentation of the accounts and accounting by EU bodies are laid down in Chapter 1 of Title VII of Regulation (EC, Euratom) No 2343/2002, as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, , p. 23), and are integrated as such in the Financial Regulation of the European Joint Undertaking for ITER and the Development of Fusion Energy.

2 Official Journal of the European Union C 368/25 The Court's responsibility 8. The Court's responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the annual accounts of the Joint Undertaking and the legality and regularity of the transactions underlying them. 9. The Court conducted its audit in accordance with the IFAC and ISSAI ( 12 ) International Auditing Standards and Codes of Ethics. Those standards require the Court to comply with ethical requirements and to plan and perform the audit so as to obtain reasonable assurance as to whether the accounts are free of material misstatement and whether the underlying transactions are legal and regular. 10. The Court's audit involves performing procedures to obtain audit evidence of the amounts and disclosures in the accounts and of the legality and the regularity of the transactions underlying them. The procedures selected, including its assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error, depend on its audit judgement. In making those risk assessments, internal controls relevant to the entity's preparation and presentation of accounts are considered in order to design audit procedures that are appropriate in the circumstances. The Court's audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the accounts. 11. The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. Opinion on the reliability of the accounts 12. In the Court's opinion, the annual accounts of the Joint Undertaking fairly present, in all material respects, its financial position as of 31 December 2010 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation. Opinion on the legality and the regularity of the transactions underlying the accounts 13. In the Court's opinion, the transactions underlying the annual accounts of the Joint Undertaking for ITER and ( 12 ) International Federation of Accountants (IFAC) and International Standards of Supreme Audit Institutions (ISSAI). the Development of Fusion Energy for the financial year ended 31 December 2010 are, in all material respects, legal and regular. 14. The comments which follow do not call the Court's opinions into question. COMMTS ON THE BUDGETARY AND FINANCIAL MANAGEMT Implementation of the budget 15. The final budget included commitment appropriations of 444,1 million euro and payment appropriations of 241,7 million euro. Carry-overs from 2009 amounted to 106,8 million euro in commitment appropriations and 52,2 million euro in payment appropriations (mainly appropriations accruing from the ITER host state and assigned to the ITER construction). The utilisation rate for payment appropriations was only 63,4 % ( 13 ) as a result of the delays in implementing activities and this is also reflected in the high cash balance, which amounted to 78,8 million euro at the end of the year (26,8 % of the available payment appropriations in 2010). Reorganisation of the Joint Undertaking and internal control systems 16. The Court of Auditors reported in its two previous Specific Annual Reports that the Joint Undertaking's internal control systems had not been fully established and implemented as required by its Financial Regulation ( 14 ). Similarly, on 31 May 2010 the Joint Undertaking's Internal Auditor issued a report on the financial circuits which raised concerns about the financial circuits and the separation of duties. 17. In response to this, the Governing Board adopted a management improvement plan in June 2010 and, in October, a proposal to change the organisational structure. The new organisational structure ( 15 ) became operational on 1 January Despite these changes, the responsibility for the financial circuits had still not been fully assigned at the time of the audit (April 2011), since some key posts were still vacant ( 16 ) (e.g. Head of ITER department, Head of Administration and Head of Budget and Finance unit). ( 13 ) 55,8 million euro of payment appropriations were carried over to 2011, and 51,8 million euro of payment appropriations carried over from 2009 were cancelled at the end of the year. ( 14 ) Paragraph 21 of the 2009 report made reference to the reorganisation of the departmental structure of the Joint Undertaking which in the Court's view raised issues concerning the separation of duties between financial and operational activities. ( 15 ) The new organisational structure is oriented towards project management. ( 16 ) It is expected that these posts will be filled during 2011.

3 C 368/26 Official Journal of the European Union IT systems 19. While the financial and accounting systems (ABAC and SAP) used by the Joint Undertaking are owned by the Commission and have been validated by the Accounting Officer, the other important business processes which provide financial information have not yet been validated. As mentioned in the Court's 2009 report ( 17 ), an appropriate tool for the management of the operational contracts (ABAC contracts or similar), integrated with the budget and financial reporting systems, is not yet in place. OTHER MATTERS Grants and procurement 20. The Court tested a sample of nine procurement and six grant award procedures. For three of the nine procurement procedures audited, only one offer had been received by the Joint Undertaking. For the grants, the average number of proposals received was only one per call. While recognising the fact that the Joint Undertaking is operating in a highly specialised industrial area, the Court recommends that it should make further efforts to maximise competition and should follow the value-for-money principle in the call preparation, publication, evaluation and contract management phases. audits of the Joint Undertaking. Although the Financial Regulation of the Joint Undertaking has not yet been amended to include the powers of the Commission's internal auditor ( 19 ), the Commission and the Joint Undertaking have taken action to ensure that the respective operational roles of the Commission's Internal Audit Service and the Joint Undertaking's internal auditing function are clearly defined. Audit Committee of the Joint Undertaking 25. The Court also pointed out in its Opinion No 4/2008 that, in view of the size of the budget and the complexity of the tasks to be performed by the Joint Undertaking, an Audit Committee reporting directly to the Governing Board should be set up. The Court welcomes the decision of the Governing Board to set up an Audit Committee ( 20 ). Host State agreement 26. The host agreement on the site and support, privileges and immunities that was signed between the Kingdom of Spain and the Joint Undertaking on 28 June 2007 states that permanent premises are to be made available to the Joint Undertaking no later than 3 years after the signing of the agreement. At the time of the audit, permanent premises had not been made available to the Joint Undertaking. 21. The controls applied by the Joint Undertaking before payments are made under grant agreements are not sufficiently documented to provide assurance regarding compliance with the financial requirements and the eligibility of the underlying costs ( 18 ). 22. The Court welcomes the fact that the Joint Undertaking has started to develop an ex-post audit strategy, to be implemented in The ex-post audit strategy is a key control aiming to assess the legality and regularity of the underlying transactions and should be put in place as soon as possible. It should also cover grants and operational procurement contracts. Late payment of membership contributions 23. In 2008 and 2009, the Court observed that a number of Members of the Joint Undertaking did not pay their membership contributions within the deadline set by the Governing Board. For 2010, the deadline was 31 May 2010 but only 14 out of the 28 Members paid on time. Commission Internal Audit Service 24. The Court pointed out in its Opinion No 4/2008 that the Financial Regulation of the Joint Undertaking does not refer to the powers of the Commission's internal auditor to perform ( 17 ) Paragraph 20 of the Court's 2009 report. ( 18 ) The Internal Auditor of the Joint Undertaking has also noted that the ex-ante control approach for payments of cost claims is not effective and not well prepared to process cost claims, although the underlying transactions are legal and regular. Status of the financing of the ITER project 27. In May 2010, the Commission issued a communication to the European Parliament and to the Council on the status of the ITER project ( 21 ), in which it estimated that around 1,4 billion euro will be needed to meet the cost increases in the Euratom contribution to ITER in 2012 and In July 2010, the Commission made a proposal to amend the current multiannual financial framework and to meet the additional financial needs for 2012 and 2013 ( 22 ). The European Parliament and the Council did not reach an agreement on this proposal. At the time of the audit (April 2011), the financing of the EU contribution to the ITER project remained unresolved. 29. The Court notes that these developments may significantly affect the activities and the budget of the Joint Undertaking and possibly delay the Euratom contribution to the construction phase of the ITER project. ( 19 ) See the Court's Opinion No 4/2008. ( 20 ) The Audit Committee is initially established for a period of 2 years and is composed of five persons, one of them designated by Euratom. ( 21 ) Communication from the Commission to the European Parliament and to the Council: ITER status and possible way forward, COM(2010) 226 final of 4 May ( 22 ) Proposal for a Decision of the European Parliament and of the Council amending the Interinstitutional Agreement of 17 May 2006 on budgetary discipline and sound financial management as regards the multiannual financial framework, to address additional financing needs of the ITER project, COM(2010) 403 final of 20 July 2010.

4 Official Journal of the European Union C 368/27 This Report was adopted by Chamber IV, headed by Mr Igors LUDBORŽS, Member of the Court of Auditors, in Luxembourg at its meeting of 25 October For the Court of Auditors Vítor Manuel da SILVA CALDEIRA President

5 C 368/28 Official Journal of the European Union ANNEX European Joint Undertaking for ITER and the Development of Fusion Energy (Barcelona) Competences and activities Areas of Union competence deriving from the Treaty (Extracts from Articles 45 and 49 of the Treaty establishing the European Atomic Energy Community) Chapter 5, on Joint Undertakings, of the Treaty establishing the European Atomic Energy Community, and in particular: Article 45: Undertakings which are of fundamental importance to the development of the nuclear industry in the Community may be established as Joint Undertakings within the meaning of this Treaty, in accordance with the following Articles Article 49: Joint Undertakings shall be established by Council decision. Each Joint Undertaking shall have legal personality. Competences of the Joint Undertaking (Council Decision 2007/198/Euratom) Objectives to provide the contribution of the European Atomic Energy Community (Euratom) to the ITER International Fusion Energy Organisation, to provide the contribution of Euratom to Broader Approach Activities with Japan for the rapid realisation of fusion energy, to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility (IFMIF). Tasks oversee preparation of the ITER project site, provide components, equipment, materials and other resources to the ITER Organisation, manage procurement arrangements vis-à-vis the ITER Organisation and, in particular, associated quality assurance procedures, prepare and coordinate Euratom's participation in the scientific and technical exploitation of the ITER Project, coordinate scientific and technological research and development activities in support of Euratom's contribution to the ITER Organisation, provide Euratom's financial contribution to the ITER Organisation, arrange to make human resources available for the ITER Organisation, interface with the ITER Organisation and carry out any other activities in furtherance of the ITER Agreement. Governance 1 Governing Board The Governing Board shall be responsible for the supervision of the Joint Undertaking in the pursuit of its objectives and ensure close collaboration between the Joint Undertaking and its Members in the implementation of its activities. 2 Executive Committee The Executive Committee shall assist the Governing Board in the preparation of its decisions and shall carry out any other tasks which the Governing Board may delegate to it. 3 Scientific Programme Board The Scientific Programme Board shall advise the Governing Board and the Director, as necessary, on the adoption and implementation of the project plan and work programmes.

6 Official Journal of the European Union C 368/29 4 Director The Director shall be the chief executive officer responsible for the day-to-day management of the Joint Undertaking and shall be its legal representative. 5 External Audit Court of Auditors. 6 Internal Audit Established as of 1 July Discharge Authority The European Parliament, on a recommendation from the Council. Resources available to the Joint Undertaking in 2010 Budget 241,70 million euro, of which 93 % funded by Union contribution. Staff at 31 December permanent posts provided for in the establishment plan, of which 185 posts were occupied. Other staff: Seconded National Experts: 6 Contract staff: 84 Local staff: n/a Total staff employed: 275 Allocated to (approximately): Operational activities: 160 Administrative tasks: 60 Mixed tasks: 55 Activities and services provided in 2010 Operational Contracts: 44 awarded for a total value of 826 million euro (42 launched), Source: Information supplied by the Joint Undertaking. ( 1 ) IUA: ITER unit of account. Administrative Contracts: 7 awarded for a total value of 6 million euro (5 launched), Grants: 23 for a total value of 8 million euro (16 launched), Budget Implementation: 99,9 % in commitment appropriations (99,8 % operational and 99 % administrative), 63,4 % in payment appropriations (61,8 % operational and 77 % administrative), Procurement Arrangements: 4 for the ITER project (384,44 kiua ( 1 ) equivalent to 615 million euro) (total of 803,7 out of 1 135,9 kiua or 66 % of all the European in-kind contributions planned), 5 for the Broader Approach Activities (98,4 kbaua equivalent to 66 million euro out of a total of 236,4 kbaua planned for all the European contributions), ITER Credit Awarded: 10,4 kiua (equivalent to 16,6 million euro).

7 C 368/30 Official Journal of the European Union REPLIES OF THE JOINT UNDERTAKING Comments on the budgetary and financial management Reorganisation of the Joint Undertaking and internal control systems Paragraph 16, 17 and 18 Following the management change in February 2010, F4E initiated a major reorganisation in the second half of the same year which focussed on implementation of project based management and reinforcement of the internal control environment. As part of the reorganisation, and in response to the recommendations of the internal auditor's Financial Circuit audit, financial management was strengthened by the review of the financial circuits and the creation of a budget & finance unit in January At the same time, a financial circuit working group was established to document financial procedures, review controls and checklists and issue guidance notes improving the financial management system at F4E. In parallel, an Internal Control Coordinator has been appointed to be responsible for the overall coordination of the control environment at F4E within the Budget and Finance Unit. The reorganisation of F4E management has continued in a steady pace throughout Additional controls have been progressively introduced and vacant management functions have been filled. The new financial circuits have now been fully implemented, periodical management reporting has been established and management systems are becoming fully operational. Taking into account the highly specialised industrial area in which F4E is active, the organisation also applies an ISO based quality assurance system which has been active since Following the need of the organisation, and in order to avoid duplication of effort, QA and IC will be merged into a wider F4E Management system. IT systems Paragraph 19 F4E is fully aware of the deficits in integrating financial and budgetary data with its operational activities. Among others, technical restrictions by the system owner regarding the access to financial data have led to delays in setting up management and reporting tools. This issue has recently been solved with an additional SLA with Budget DG. Additionally, the complexity of the ITER project and subsequently the management of its underlying legal commitments, both administratively and operationally, have led to the delay in establishing one unique Contract Management System. At the preparation of the present replies, a central contract management system was in the process of being adopted by the management and an action plan is being prepared in order to redress encoding backlog and normalise the situation. Other matters Grants and procurement Paragraph 20 F4E deems that the recommendation by the Court is indeed already implemented by the processes and publication strategy in place. It should be noted that in areas where the industry is less specialised F4E has received up to 33 offers in replies to its calls for tender, which clearly shows that the problem does not intrinsically belong to the communication and information methods used by F4E, but rather lies with the specialised nature of the industry as underlined by the Auditor himself. F4E cannot influence the level of expertise available in the market. Paragraph 21 Technical Assessment Reports and Acceptance Notes are signed off and confirm that the costs charged are in compliance with the activities. In addition, financial checks are performed on the costs claimed. F4E does however agree that there is room for improvement as concerns the documentation of the checks performed. This is being addressed by the working group on the internal controls and the procedures are being strengthened.

8 Official Journal of the European Union C 368/31 Late payment of membership contributions Paragraph 23 The statutes of F4E do not provide any other legal means to assure members pay their contribution on time, other than sending reminders. Following the recurrent delays in the payment of membership contributions, the issue was put on the agenda of the Governing Board at the end of May Consequently, measures were approved for interest to be levied on Annual Membership Contribution in the event of late payment. Furthermore, a framework defining the modalities for the interest rates and debit notes was adopted and put in place. Host State agreement Paragraph 26 The Host Agreement signed between Fusion and for Energy and the Kingdom of Spain in 2007 does indeed foresee that Spain will provide F4E with permanent premises no later than 3 years after the signature of the agreement. The Agreement also foresees that in the meantime, and before the final premises are made available, Spain will provide temporary premises. While Spain has not yet provided permanent premises, the Joint Undertaking occupies temporary premises free of cost, as Spain pays for the full cost of the premises (rent and maintenance as foreseen by the Host Agreement, while F4E pays for the tenant's part of the temporary premises). In recent discussions with the F4E Host State, we were informed that Spain is looking for a permanent solution which would normally be presented to F4E for acceptance before the end of Meanwhile, it is important to mention that the current situation has no negative impact on the organisation. Status of the financing of the ITER project Paragraph 27, 28 and 29 In preparation of the ITER Council of July 2010, F4E assessed the feasibility of a revised ITER Baseline (the Baseline) which set the end of the construction phase at November 2019, as well as the resources needed for its implementation. For this purpose, F4E analysed the possible manufacturing paths and assessed the cost and risk implications. The Baseline was approved during the ITER Council meeting; the EU gave its support ad referendum, since the budgetary authority was still to approve and secure the financing of ITER. F4E has carried out its ITER Activities during 2010 according to the Baseline. 95 % of the activities foreseen in F4E's 2010 Work Programme were initiated as planned. In cases where activities were delayed, action was taken to mitigate the delay and to maintain the schedule for first plasma. F4E has continued to carry out its ITER Activities during 2011 according to the Baseline, and good progress has been made on many fronts. At the same time there have been delays on some key EU and non-eu items. In addition the impact of the East Japan earthquake in March has adversely affected the ITER schedule. As a consequence at the recent ITER Council in June, the IO was requested in particular by the EU to form a Special Task Group under the leadership of its Director-General in conjunction with all DAs, to identify mitigation plans for critical path items with a view to limiting these delays to a minimum while staying within the overall capped cost estimate. Irrespective of this reoptimisation of the schedule, the requested additional funds for 2012 and 2013 will be used in particular to support the award of the very large contracts for the main ITER buildings which are still planned to be made in 2012 and The 2012 and 2013 extra budget has been discussed in the meeting of the Budget Committee of the Council on 27 September with the Member States. The presidency is now aiming to present its draft proposal for a mandate to be discussed with the European Parliament at the budgetary trialogue of 19 October to reach an agreement before the ITER Council meeting mid-november which supposes to approve the new baseline.