Annual Activity Report

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BUDG_aar_2011_final

2011

Annual Activity Report

DG BUDGET

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PART 1. POLICY ACHIEVEMENTS

1.1 Achievements for the policy area of DG Budget

by ABB Activities (operational)

1.1.1 ABB Activity: Budget execution, control and discharge

Specific Objective : Main Outputs :

1.1. Budgetary transfers and carry forward procedures

1.2. Produce budget implementation reports

1.3. Monitoring of decentralized agencies

1.4. Follow-up of ECA annual report on budgetary execution, agriculture and structural funds

1.5. Annual report on allocated expenditure

1. Make sure that budgetary

implementation follows forecasts and effective use of resources principles

1.6. Contribute to the Annual Financial Report for 2010

In 2011, 53 DEC transfer proposals (transfers requiring a decision by the Budgetary Authority) have been submitted for decision to the Budgetary Authority, all of which have been approved. 3 INFO transfer proposals (transfers requiring notification to the Budgetary Authority) have been submitted to the Budgetary Authority, none was rejected. The procedure for the carry over of implementation from 2010 to 2011 was adopted on 11/02/2011 (Commission Implementing Regulation (EC) No984/2011) and transmitted to the Budgetary Authority. EUR 250 195 833.50 in commitment appropriations and EUR 622 129 005.55 in payment appropriations were carried over.

Throughout 2011, DG Budget continued the reinforced monitoring of budget implementation. It kept the Budgetary Authority regularly informed on budget implementation, on a weekly basis since April 2011. The information was cross-checked with Budget Forecast Alert and comparison drawn with previous year implementation. It has been very useful to assess end-of-the year needs in connection with global transfers and amending budgets. Regarding the follow-up of the European Court of Auditors (ECA) Annual Report on budgetary execution, agriculture and structural funds, there has been no visit from ECA in 2011. The response to the questions were sent end of April.

The Global Transfer was prepared end September in accordance with the timetable and approved mid-November by the Budgetary Authority without amendments as part of the management of payment shortfall. A second Global Transfer was launched mid-November and approved by the Budgetary Authority in order to fine-tune implementation.

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Three Budget Forecast Alert information notes were presented to the College in 2011, on 28 February, 22 June and 19 October and sent to the Budgetary Authority where they have been discussed as formal agenda points. The Budget Forecast Alert is the process in place since 2006 to monitor and improve budget implementation and the related forecasts minimise budget year-end surpluses.

Every month the evolution of agricultural spending is followed through the EWS (Early Warning System) and the evolution of Cohesion expenditure through the monthly report to the Budgetary Authority. From September, this reporting became more formalised with the examination of the September "révision conjoncturelle" of the EAGF (European Agricultural Guarantee Fund) made in the context of the amending letter and the need to prepare a report on the execution of the Cohesion Policy for the end of September. At the end of the year there were monthly and finally bi-weekly reports on the execution and potential evolution.

The Report on Budgetary and Financial Management was finalised and submitted to the Budgetary Authority and ECA at the same time as the Provisional Annual Accounts, end of March.

Two reports on the budget execution of Pilot Projects (PP)/Preparatory Actions (PA) have been sent to the Budgetary Authority: a report on the execution of the new PA/PP sent in February 2011 and a report on the preliminary projects of the European Parliament (EP) for 2012 sent on 12 July.

The annual report "Analysis of the Budgetary Implementation of the Structural Funds" was published on Europa web-site on 26 May and distributed to Council, EP, ECA and DGs.

As a result of the monthly analysis of the evolution of the execution of the Cohesion Policy, actions were taken in cooperation with DG REGIO and EMPL to ensure execution of payment appropriations even for requests arriving late in December, leading to full execution of all appropriations for operational programmes of the Cohesion Policy.

Regarding the monitoring of decentralised agencies, the working document was delivered with the draft budget (DB) 2012 and welcomed by the Budgetary Authority. Briefings were sent on request to the Cabinet and the DB was presented to the annual meeting of agencies on 30 May and mid-October. The guidelines were ready in due time and endorsed by the Cabinet, incorporating the needed impact of the multiannual staff reduction as far as the budget 2013 is concerned. The assistance given to DGs in case of extension of the mandate of existing agencies has undergone a net increase in preparation of the next programming period. DG Budget has actively participated in the different working groups set up, in order to prepare for a coordinated approach in line with the Multiannual Financial Framework simultaneous commitments to resort more to executive agencies and to reduce staff by 5% over 5 years.

In cooperation with DG HR, DG BUDG regularly informed the Budgetary Authority on progress made on EU 12 recruitment targets, which were met in 2011.

The annual report on allocated expenditure has been incorporated into the annual financial report since the year 2006. The graphic presentation of the allocated expenditure data was significantly modified to increase the user-friendliness. The Annual Financial Report 2010 was presented by Commissioner Lewandowski on 30 September.

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2.1. Coordination of relations with the ECA and the COCOBU

2.2. Supporting the discharge Commissioner in developing and implementing his discharge agenda 2010 - 2014

2.3. Managing and following the discharge procedure

2.4. Providing information on Commission and Member State follow-up to ECA/Parliament and Council recommendations

2.5. Organising an inter-institutional

conference on the discharge

procedure and sound financial management

2.6. Coordinating within deadlines replies to Parliamentary questions 2.7. Coordinating within deadlines replies to National Parliaments

2. Improving other Institutions' assessment of financial management in the Commission

2.8. Enhance the cooperation with the ECA to ensure a more effective and efficient communication about the audit results and actions taken to address the weaknesses

The discharge 2009 discussion in Council went well, allowing the discharge recommendation voted in ECOFIN with no opposition. However, three Member States (NL, SV & UK) abstained and also issued a joint declaration. The European Parliament, following intense contacts between EP Rapporteur Chatzimarkakis and the Commission, granted discharge for the financial year 2009 with large majority on 10 May 2010. The report on the Commission's follow-up on the 2009 EP discharge recommendations was adopted on 14 November 2011.

The contradictory procedure of the Court of Auditors' Annual Report 2010 took place between 21/6 and 2/9/2011. This procedure was lengthy since additional meetings and/or discussions were required for chapters 1 and 3 in September. On 19/10/2011, the Cabinet of Commissioner Šemeta presented to the other Cabinets the state of play of Commission's replies to the Court of Auditors' 2010 Annual Report. Preliminary information was also given to the members of the Audit Progress Committee on 5/10/2011.

The procedure for the 2010 Discharge in the EP: The Court's Annual Report was published in the Official Journal on 10/11/2011 and presented to Parliament (COCOBU) on the same date. The presentation to the EP Plenary and to ECOFIN (Council) took place at

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15/11/2011 and 30/11/2011 respectively. Commissioner Šemeta attended the meetings in COCOBU (10/11/2011) and Plenary (15/11/2011) when President Caldeira presented the Court's Annual Report for 2010. These discussions took place in a positive atmosphere and were well received by the MEPs, in particular the Rapporteur. However, as usual, some critical comments were made. The Commission (both, services and the Commissioner) had also met the newly appointed Rapporteur on 20/09/2011 for an exchange of views on the forthcoming discharge procedure.

In COCOBU, the hearings of "spending" Commissioners started in November with the hearings of Commissioners Hahn, Andor, Cioloş and Šemeta. According to the usual practice, numerous written questions were sent to the Commissioners before the hearings, to which replies were elaborated by the Commission services and reviewed by DG BUDG. The Annual Meeting between the College and the Court of Auditors took place at 16/6/2011 in Brussels. The discussion focused on the 2010 DAS (Declaration of Assurance) exercise and the preparation of the next Multiannual Financial Framework. The meeting provided the opportunity for multiple exchanges on the financial and economic crisis and the recent European initiatives. Both institutions agreed on the common objective of improved financial management and increased focus on the quality of spending and the ensuing European added value.

The number of Special Reports produced by the ECA continued to be on rapid increase, which represents a heavy workload for the DG. For 2011, 18 Special Reports have been received as compared to 16 in 2010. More emphasis has been put on the quality of the drafting and the presentation of the replies, including editing advice. All replies have been sent within the timeframe agreed with the Court. Thanks to a better programming of the work on both sides, initiated by DG BUDG, the contradictory procedures for both, the Annual and the Special Reports, went rather smoothly in 2011.

Contacts with national Supreme Audit Institutions (SAIs) have been steadily maintained in 2011. DG BUDG has contributed to several bilateral meetings between Commissioner Šemeta and national SAIs, notably SAIs from Lithuania, Hungary and Denmark. SAIs from Germany, Denmark and Slovenia have presented to the Commission results of their joint report on the costs of controls in the Cohesion area. In addition, DG BUDG has provided national SAIs with details of all payments made in their countries which can be used to support national risk assessments and audit work. DG BUDG also continued to systematically involve SAIs in the context of the Member States report (see point below) to receive their opinion on current budgetary control and audit issues. While fully respecting independence and national sovereignty, an enhanced cooperation with national SAIs is in the EU stakeholders' interest in order to make best use of existing audit evidence and to obtain more assurance on the use of EU funds in the Member States.

The Commission report on Member States' replies to 2009 Annual Report was adopted on 26/02/2011 and transmitted to EP, Council and ECA. Several Member States provided extensive replies. The report illustrated the improvement of the performances of all actors involved in the management of EU funds in shared management. The report, however, concluded that there was a need for sustained improvement and firm commitment from both, Member States and Commission, in order to ensure even better results.

DG Budget is running the IT application RAD - Recommendations/Actions/Discharge to follow-up requests made by the European Parliament and the Council in the course of the annual budgetary discharge procedure as well as to follow-up the recommendations from ECA. The database contains 3811 requests and recommendations in total. Every year, a further 500 requests and recommendations have to be added and to be followed up by the Commission services. Support has been given to users in order to assure proper utilisation by the Commission services. In 2011, this application was the subject of an audit made by different Commission IACs, and DG BUDG actively accompanied this exercise by providing extensive contributions and by engaging with the services a discussion on the main conclusions and recommendations of the different audit reports. In May 2011, the new SPF

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(Statement of Preliminary Finding) module was launched. Five training courses on how to use the SPF module were organised jointly by DIGIT and BUDG 01. DGs were able to use the module for the first time during the period of the contradictory meetings.

Regarding Parliamentary Questions: 92 'lead DG questions' and 249 'associated DG questions' were attributed to DG BUDG. Replies were sent within the deadline in 98% of the occurrences. The main subjects addressed were:

¾ Transparency of EU expenditure regarding NGOs and other beneficiaries; ¾ The review of the own resources system ;

¾ The contracts (beneficiaries and procedures); ¾ Control on the EU Agencies;

¾ Measures undertaken in the budget in view of the economic crisis; ¾ Infringement penalties imposed on Member States.

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3.1. Efficiently manage the Union's own resources

3.2. Managing VAT recovery and identifying possible areas for simplification

3.3. Control of the Union's traditional own resources

3.4. Treatment of Member State's write-off reports

3.5. Control of the Union's GNI/GDP own resource

3.6. Control of the Union's VAT own resource

3. Efficiently and effectively manage and control the Union's own resources

3.7. Organize ACOR meeting, participating in GNI meetings and reporting

All monthly calls for funds were sent out on time. The call for funds letters for the VAT/GNI balances and the opt-out were also sent on time (mid November 2011), as were all associated recovery orders (RO).

All financial and accounting follow-up of own resources control observations files (call for funds letters for interest due for late payment and accounting actions for outstanding amounts of principal/interest, follow-up and reporting of payments) were processed within the applicable regulatory deadlines.

All budgetary actions for San Marino's reimbursements were executed on time and duly supported by the related accounting actions. The EFTA (European Free Trade Association) call for funds was sent out on time (August 2011).

Regarding the management of infringement cases in the field of own resources, the infringement database has been kept updated. The contribution to the Annual Report on the application of EU law was provided on time. Follow-up has been given to the military cases (in preparation of the closure in January 2012), and all other ongoing cases were treated.

DG Budget has been involved concerning the Balance of Payments Facility (BoP) (e.g. disbursement of BoP loan tranches) and the EFSM (European Financial Stabilisation Mechanism) (e.g. making the mechanism operational), and it manages the potential impact of the two instruments on own resources. Constant monitoring of budgetary risks stemming from existing and new decisions for financial assistance took place during 2011 (including monitoring of BoP & EFSM loan portfolio, as well as current and future transfers/payments by beneficiary Member States). The Service Level Agreement between DG ECFIN and DG Budget on coordination in case of default by a Member State benefitting from an EFSM loan has been signed. All questions from individual Member States and Members of the EP on BoP and EFSM were answered promptly. The budgetary assessment was provided, which was necessary to support ratings by ratings agencies.

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The yearly recovery process (collect and assess invoices, send the annual requests for reimbursement, pilot the maintenance and development of the dedicated IT programme) was managed in 2011. All requests for reimbursement for 2010 have been sent on time. Progress was made on the assessment of alternatives for simplification of the recovery process.

The application of the Protocol on Privileges and Immunities (PPI) was scrutinised in the Member States, and DG Budget replied regularly to questions from other services related to VAT recovery. Regarding the negotiations of PPI application agreements with candidate countries, the final draft agreement was sent to Croatia on 12/05/2011. The agreement with Croatia's signature was received on 05/01/2012. DG Budget also participated in two bilateral meetings with Iceland in March and April 2011.

Traditional Own Resources (TOR) inspections were carried out in the Member States in conformity with the inspection programme for 2011. Only one of the three Joint Audit inspections needed to be postponed to mid-January because of the late submission of the Dutch auditors' audit report. In general, the inspections showed a satisfactory level of compliance of national provisions and practises with European regulations. However, a number of shortcomings or weaknesses were noticed, in particular as far as the control of customs declarations lodged under the local clearance procedure are concerned.

During the second half of 2011, 4 TOR inspections on Binding Tariff Information (BTI)

were completed dedicated to the processes of issuing BTI and the usage of BTI when lodging a customs declaration for import. A total of 28 reports were sent to the Member States during the year, all produced within the legal 3-month time limit.

End of December 2011, 119 follow-up actions on ECA preliminary finding (PF) letters have been taken of which 92 (77.31%) within the self-imposed target deadlines. During 2011, 10 PF-letters were closed which represents one third of all open PF-letters. During 2011, the management of TOR by Member States' authorities was further improved by identifying cases of financial responsibility:

UK Chinese garlic BTI (EUR 27 million): The Reasoned Opinion has been sent in November 2011. Turkish colour TV (over EUR 35 million): A reminder letter was sent to Spain. A reply was sent to UK authorities asking them to make available the amount of £ 5 107 467. The amount was paid in January 2012. Additional information has also been requested to the UK authorities. Italy sent a reply which is under Commission services´ assessment. A reminder letter to Germany will be sent.

DG AGRI: In 2011 DG AGRI has notified DG BUDG of additional 13 cases where 7 Member States made administrative errors in applying the Import tariff quota system (AMIS-System). In all cases follow-up letters have been sent to the Member States.

Anguilla / UK case (over EUR 2 million): UK is considered liable for wrongfully issued EXP certificate by their overseas territory Anguilla which resulted in non-establishment/loss of TOR. l. Since the UK refuses to pay; infringement proceedings will have to be considered. Netherlands Antilles case (EUR 18.2 million): Similar to the Anguilla case, a call for funds has been sent to the Netherlands in January 2012.

"Listing cases": The follow-up of the cases communicated for the years 2008 and 2009 has been closed.. As regards the cases for 2010, 14 Member States have been held financially liable totalling EUR 675 501.80. The letters asking the Member States for the cases of 2011 have been drafted and were sent in January 2012.

TAXUD cases: In 2011 DG TAXUD forwarded cases which Member States had communicated as provided for in Articles 870(2) and 904a(2) of Regulation No 2454/93. In one of them the Member State is considered financially liable for EUR 238 308.85. Two

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cases are being assessed further.

Member States reported 4182 cases of fraud and irregularity via OWNRES with an estimated impact of EUR 281 million.

The "management of administrative errors" clause has already been successfully introduced in the following signed trade agreements: The Stabilisation and Association Agreement (SAA) EU-Albania, SAA EC-Montenegro, SAA EC-Serbia, SAA EC-Bosnia and Herzegovina and European Partnership Agreement (EPA) EU-Cariforum, Stepping stone EPA EC-Central Africa and in the following negotiated (but still to be signed) agreements: EU-Syria Association Agreement, Interim EPA with East and Southern African countries, stepping stone EPA with Ghana and Framework EPA with East African Countries, Andean countries and Central America, Ukraine, South African countries, Central Africa and Pacific countries. The clause is in discussion with India, Malaysia, and the MERCOSUR countries. Representatives from all MS, the European Commission and the European Court of Auditors met in Berlin on 27 and 28 October 2011 for a first ever seminar on TOR inspections. In the workshops, practical ideas were presented for enhancing the preparation and performance of inspections, and to change the Advisory Committee on Own Resources (ACOR) more into a platform for technical discussions on working methods and control standards. At the ACOR meeting of 8 December an action plan for the follow-up of the seminar was presented.

The final version of the thematic report on the customs control strategy in the MS was presented to the MS Customs Director-Generals at the Customs Policy Group on 30 June 2011 and discussed at the ACOR meeting on 7 July 2011.

Concerning the management and examination of the Member States' write-off reports:

A) Cases received on paper:

In 2011, for 131 write-off cases involving EUR 107.67 million, additional information or Member States' requests to review already refused cases were received. In terms of treatment, 245 write-off cases amounting to EUR 152.33 million were analysed in 2011 with the following result:

- 123 cases amounting to EUR 98.94 million were accepted; - 62 cases amounting to EUR 28.10 million were refused;

- 57 cases amounting to EUR 23.52 million required additional information; - 3 cases amounting to EUR 1.77 million were considered as non-appropriate.

B) Cases communicated via the application WOMIS (Write-Off Management and Information System):

In 2011, 140 cases involving EUR 30 million were communicated via WOMIS and 217 cases involving EUR 61.43 million were analysed with the following result:

- 73 cases amounting to EUR 14.14 million were accepted, 43 cases amounting to EUR 21.70 million were refused

- 85 cases amounting to EUR 23.71 million required additional information, - 16 cases amounting to EUR 1.88 million were considered as non-appropriate.

End of 2011 184 cases, including old paper and WOMIS cases, remained open. For 84 cases the assessment is ongoing and for 100 cases the Member States have not yet communicated the additional information requested by the Commission.

In 2011 the WOMIS version 2.0 has been completed and tested. It was put into production on 18 July 2011. It includes the already planned upload possibilities for communications to Member States.

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Regarding the control of the Union's Gross National Income/Gross Domestic Product (GNI/GDP) own resource, timely action was taken by letters issued in June to notify Member States of the lifting of one reservation, the setting of two, and the extension of twenty-five (requests dated 13 March and 26 May). The requests for further changes received on 22 December 2011 will be completed by the end of January 2012.

Regarding the implementation of DG Budget's GNI own resources strategy, draft assessment reports concerning 25 Member States were presented at this year's GNI Committee meetings thus paving the way for the lifting, by the end of January 2012, of many general reservations outstanding for long periods.

DG Budget was represented in the two annual Eurostat GNI meetings in July and October; the internal reports were prepared in accordance with the deadlines.

The annual work programme on VAT (Value Added Tax) inspections was

successfully completed following minor adaptations owing to a reduction in available staff during the first half of the year plus the postponement until April 2012 of the Iceland workshop to allow the country more time to prepare. Nine control reports were published during 2011 – all were issued in time (Slovakia, Austria, Bulgaria, Ireland, Germany, the Netherlands, Romania, Luxembourg and the Czech Republic).

Regarding the reduction of the number of outstanding reservations the target was not met. One reservation has been lifted but progress on the remainder during the second half of the year has been disappointing. No financial consequences are expected from three of the remaining items and the issues of principle have been resolved, but further data or verification is still required to draw the final conclusions. Agreement having also been reached in principle to lift the Italian reservations, the proposed management meeting was postponed. Further data from the earliest years is still required, and has been demanded for the end of January 2012. The management meeting will take place during the first quarter of 2012 if the new data does not entirely resolve the issues. No action is possible to resolve the Sweden item before the infringement procedure is concluded.

Ten inspection reports were discussed at the ACOR meeting in October. All the final versions of the relevant summary documents were dispatched by the end of the year. Four ACOR meetings (forecasts, VAT and two TOR) were organised in accordance with plan. In addition, the ACOR rules of procedure were revised to reflect the new Comitology Regulation and were accepted by the Committee.

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1.1.2 ABB Activity: Accounting

Specific Objective : Main outputs :

1.1. Draw up the budgetary reporting and annual accounts of the Commission, EU and EDF accounts for 2010

1.2. Quality of accounting data improved

1.3. Efficient follow up of the discharge procedure for the accounts

1.4. Completion of ABAC EEAS implementation

1. Ensure a true and fair view of Commission, EDF, EEAS and EU accounts

1.5. Further improve the information quality, completeness and timeliness on the recovery and financial corrections by the Member States in shared management

Annual accounts:

The 2010 EU, Commission, EDPS, EDF and RCAM final accounts were issued in line with the legal deadline. Clean opinions of the Court of Auditors with respect to the reliability of the EU accounts and EDF and of the external auditor of the RCAM were received. The Guarantee Fund 7FC financial statements 2010, were adopted by the Accounting Officer and sent to DG RTD.

The 2011 closure process for all the entities under the responsibility of the Accounting Officer of the Commission, including the EEASis ongoing and on schedule.

Regarding the coordination of the ECA audit on the reliability of the accounts, DG Budget has maintained an excellent communication with the Court of Auditors, all the issues noted by the Court have been discussed with them and solutions have been found and agreed. A significant issue concerning the accounting of the amounts paid to Financial Engineering Instruments was dealt with, together with the Structural Fund DGs. The Court of Auditors has reported no findings related to the reliability of the EDF accounts and so a clean opinion was received.

Quality of the accounting data:

The complete reconciliation of bank accounts for Commission and EDF for 2010

was finalised on time for the closure. The bank circularisation for the DAS has been done. For General budget and EDF nearly all banks sent the confirmations. For delegations the % of answers is of around 60%. No particular exceptions or issues have been registered.

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Monthly and quarterly accounting controls have been implemented for all key processes. The EDF 2010 summary and 2011 control programme has been submitted by DG DEVCO. Regarding the Accounting quality project implementation, all Commission services, DEVCO (EDF) and EEAS were subject to the diagnostic review and the results communicated individually to each of them.

DG Budget has ensured an active and frequent communication with the accounting correspondents, which has been essential for the 2010 closure (e.g. adjustment due to Financial Engineering Instruments). Regarding the regular clearing of prefinancing the communication has been intense, including bilateral meetings, participation in the RUF and the organisation of a specific workshop to discuss on the matter. The communication effort, which will be maintained in the future, has allowed a clear understanding of the objectives sought, the problems that the regular clearing of prefinancing poses to AOD financial services and the best practices for implementation. This has helped to reach a common position and to enhance the effectiveness of the procedure.

DG Budget also ensured a regular and active communication with the Accounting Officers of the other consolidated entities, in particular during the 2010 closure and through its helpdesk for accounting questions and the annual meeting with the Accounting Officers of the Institutions, Agencies and Joint Undertakings

EEAS:

The EEAS went live as an independent institution beginning of January 2011, as planned.

The procedure of closing the 'old' Commission's imprest accounts and opening of new EEAS imprest accounts is ongoing but takes more time than initially foreseen. The process was slowed down considerably from July to September due to staff turnover in the delegations. At the end of the year around 76 delegations have opened the new account (EEAS). For all the other delegations the process is ongoing.

The EEAS treasury architecture is now aligned to the one of the Commission. A procedure for the regular (monthly) replenishment of the EEAS treasury has been put in place and its payment and cash management system now functions in a "routine" mode. All relevant EEAS payment instructions are executed as SEPA compliant.

Financial corrections:

DG BUDG liaised with the DGs (shared management) to ensure that complete, reliable and timely information on financial corrections is available. As of 31/12/2011 the 3 quarterly reports on financial corrections were sent to the COCOBU. Note 6 of the 2010 accounts provided complete and reliable information and it also takes into consideration relevant ECA and Discharge Authority comments.

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2.1. Management of the Commission’s accounting framework and system

2.2. Management of the central budgetary framework

2.3. Commission's Treasury management

2.4. Validation of Local systems 2.5. Early opening of budget lines 2.6. Efficient recovery

2.7. Management of the Legal Entities File and the Bank Accounts File

2.8. Management of EC's EWS and exclusion database

2.9. Payment Deadlines monitored 2. Appropriate execution of

Accountant's tasks

2.10. Pre-financing (mandate)

In October 2011 the 17th_{meeting of the advisory group of experts was held to update} several accounting rules, including the accounting rule on financial instruments. The updated rules were adopted in the 4th quarter of 2011. Additional guidelines for Joint Undertakings have been integrated in the 2011 closure guidance sent in December 2011. The aligning of the EDF accounting rules with the recently adopted EU rules will be done in 2012. The changes to the accounting rules in particular in the area of financial instruments will be incorporated in the accounting manual.

The management of master data and monitoring of the SAM/FI/CO/AA/ECCS systems including data for General budget, EDF, CAM, EDPS, EEAS was completed for 2011.

Regular follow up of the suspense accounts of all the entities under the responsibility of the Accounting Officer of the Commission, and quarterly reporting to the Accounting Officer were completed for 2011. DG Budget is monitoring the situation closely and has recently developed a new more detailed ageing report in SAP which provides a better tool for the follow up of the suspense accounts (both in DG Budget and in the DGs/EEAS).

Concerning the management of central budget structure and central appropriations, all 2011 amending budgets have been duly implemented and all necessary adjustments of structures and appropriations have been done. Inscriptions of RIB appropriations have been made on a regular basis (2/week). All 2011 documents have been treated at year-end.

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Financial Year Transition (2011 to 2012) opened the 2012 budget on 9/12/11 accurately. Regarding the carry forward, the 2010-2011 was achieved, resulting in the availability of the RAL for commitments in the first week of 2011, while the 2011-12 preparation was ongoing at the end of 2011.

The Commissions treasury resources have been managed in compliance with the applicable regulatory framework. No instances have been registered of exception to this principle. Cash resources have always been sufficient to cover for the execution of payments on time and without any delay. In the first half of the year resources have been called up in advance from Member States in order to cover for the very high level of FEAGA payments. The advance was then gradually absorbed until the month of July, when the call for own resources from MS went back to the monthly twelfths. The monitoring of the MS own resources payments, both for the general budget and the EDF, was performed regularly and timely and with a close communication with Direction B and DEVCO (EDF). All issues and exceptions were promptly followed up. No significant issues have been registered in this area in 2011.

Payment operations have run regularly in 2011. All payments for the entities under the responsibility of the Accounting Officer were executed and reconciled without delay. No particular exceptions or issues were registered in the period. Weekly controls have been put in place to monitor the payments delays taken by DG Budget and by our banks. No major delays have been identified. The reconciliation of all payments and receipts is a recurrent and daily task. No significant issues have been registered in this area during 2011.

The InforEuro has been produced on a monthly basis and its web page presentation has been modernised.

Regarding the validation of local systems, the work progressed well. The validation reports for SANCO Follow-up, PMO JSIS, EMPL, AGRI, RELEX Follow-up, REA, OIL restaurants activity, OP sale of publications activity, DEVCO, and RTD Guarantee Fund have been finalised and issued. The validation have been confirmed and a number of issues identified. Recommendations for improvement ( e.g. of procedures, manuals and flows or corrective measures to address issues related to timeliness of recording cost claims and invoices, consistency of data between the local systems and ABAC, suspensions, differences in workflows, etc) have been made which will be followed up in the course of 2012. The work for EGNOS, ELARG, JRC, INFSO and ENER/MOVE is underway and close to finalisation. The validation team will continue to press for further improvements. It will continue its new cycle of re-validation with the aim to focus on specific aspects of the accounting systems where risks exist or important changes are made.

The global report for 2010 was issued as foreseen. It was sent to the Court of Auditors, the Directors of Resources and the IAS.

Concerning the Accountant’s validation of recovery orders, the return rate for recovery orders established by high risk services, for the whole year was 2.4 %, which is in line with statistics previously observed. The total number of bank cashing reconciliations reached almost 10.000, corresponding to some € 127.7 billions which have been matched with the corresponding recovery orders. The open items, which could not yet be reconciled, were in number of 715 (i.e. some € 651,5 million), 260 (36%) of which being more than 6 months old.

Timely evaluation of pending claims and timely record of guarantees was

completed. Contribution on evaluation of claims was provided. The recording of guarantees (ABAC) is an ongoing activity.

Correct and timely issuance of recovery orders for default interest is an ongoing activity; the ROs are issued within the financial year of the cashing

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Concerning the execution of offsetting files the figures confirm the existing trend. A total of 720 files has been handled allowing the closure of 1.045 recovery orders, and the cashing of € 62.4 millions. The analysis of the reactions of debtors and authorising officers continue to show that the offsetting remains very well accepted and that has taken the place of a current financial management tool. Contact points are maintained with some 79 debtors (mainly Member States and International organisations). The purpose is to ensure the payment by bank transfer of the amounts due to the Commission and thus to avoid the offsetting. For the Member States, in total, some € 18.3 millions have been collected as a direct or indirect result of these contacts.

The validations of Legal Entities and Bank accounts are done respecting the deadlines. The number of requests for validation continued to be very high, in particular in the last months of the year. In total about 64.000 bank accounts requests and about 55.000 legal entities requests have been processed in 2011.

The optimisation of the legal entities and bank accounts process is an ongoing project. The main objective of the project is to improve the efficiency, effectiveness of the LE and BA process both at DGs level as well as at DG Budget level by increasing automation and reducing manual work, increasing quality at source, adapting procedures to the risk of processes. Moving to a paperless environment is one aspect of this project.

The number of registered EWS warnings was regularly monitored. Actions were taken to ensure the correct functioning of EWS in the operational DGs. Quarterly statistics on EWS flags are now prepared and sent to the Accounting Officer. The usage of the Central Exclusion Database (CED) by Member States was reviewed and the letters sent to Member States that have not designated the Liaison Points yet. The Vademecum with operational instructions for the use of CED was updated in line with requirements of EDPS, and it has been sent.

Regarding the monitoring of the payment deadlines there is a monthly monitoring of the key indicators, the comparison is made taking previous year as baseline, the previous reporting month and the corresponding period of previous year. Several notes had been sent to the DGs informing them on their performance. Reactions received were treated and replied to, when needed. Some DGs sent action plans for improvement. Overall, the figures show a mixed performance for 2011. By certain measures, for example the average number of days to make a payment, improvements have continued. However, beneficiary often has to wait a long time to receive the payment. Performance improved notably in certain services, while in others additional effort must be done to meet the target deadlines. The issue is given full importance by the ABM Steering Group which in January 2012 endorsed the approach proposed by DG BUDG. In view of the reduced time limits introduced by the new FR, a critical cross-cutting risk was introduced. Monitoring will continue in 2012 and will propose further areas for improvement. The issue of payment deadlines will be raised at least twice a year in the Group of Resource Directors, and, if need be, in the ABM Steering Group.

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3.1. Efficient management and monitoring of security

3.2. Information and training

3.3. Organise User Requirements meetings with the DGs

3.4. The USMs are present in the RUF meetings

3. User support for Corporate financial/accounting system

3.5. Follow up and monitoring of the User Incidents and Problems

Regarding the implementation of Governance Risk Compliancy monitoring, specifically the refinement of the rules set with business experts, is an ongoing activity. All financial high risks are covered (incl. ECFIN), the update of rules set based on non standard SAP-transactions was done as well as the renewal of the standing procedures governing the accesses to SAP by IT-experts to align to SAP/GRC-Implementation.

The electronic security forms in ABAC have been implemented in the autumn release 2011, except for crossed sub-delegations. The crossed sub-delegations are planned for spring 2012.

The monitoring of content and effectiveness of the new structure of ABAC and accounting certification courses, to ensure that it corresponds well to users' needs, has been completed. The pilot courses have been attended and considered adequate. Monitoring the courses will be done by the responsible training Units.

Two ABAC User Committee meetings were organised in 2011 in order to collect user feedback on a number of upcoming features in ABAC: Single view of a file; Appropriation browser; Signing transactions in batch; Integration with Ares; Monitoring of payment delays; Paperless Office & eInvoicing.

The first meeting was held on 21/03/2011 and the second on 1st_{December 2011.}

In each RUF meeting the Head of Unit or a Team Leader of the Unit responsible for User management of financial information systems is present to answer questions on ABAC. Debriefings within the Unit exist, sometimes on paper, sometimes they are communicated in the Team Leader Meetings. In case ABAC issues are pointed out, then they are encoded in the ABAC Issues database to keep track of them.

A new report is developed listing monthly the number of JIRA issues (bug and issues tracking and programme management tool) which are unsolved, created, fixed, the average number of days to fix them, the median of the number of days to fix them and the number implemented in Production. The Scoreboard of DG Budget has the number of open issues, but as from January 2012 other Key Performance Indicators will be added.

A new report is developed to list per USM (User Service Management) team the number of tickets which are open, which are resolved, and which were created by the USM team. The resolved ones are ranked per number of days it took to close them.

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The procedure ABAC Incident Management and Management of USM Functional Mailbox is online since June 2011. A procedure to ensure a better follow up of tickets made for the resolution of SMT (Service Management Tool) incidents was setup. The document is finalised, and has to be implemented by all the USM team.

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4.1. Continuous enhancement of ABAC in line with the Roadmap

4.2. Ensure availability and reliability conform the SLAs

4.3. Strengthen ABAC Project Office 4.4. Prepare the implementation of the re-casted architecture

4. Management and development of the Corporate financial/accounting system

4.5. Gradual Rollout of ABAC SAM across major management centres 4.6. Further roll out of the corporate system across institutions/agencies and Joint Undertakings

Regular review and progress tracking of the Roadmap and associated priorities has been done during 2011. Regular requests of updates were sent around as well as the formalisation of a procedure for adding new projects via approved PIRs (Project Implementation Reports).

The continuous Improvement Program for IT Service management, the

implementation of processes (change management, incident management, improve release & deployment management and service catalogue) have been ongoing. Regarding the improvement of the ABAC Workflow User interface, to avoid possible time-out in certain transactions following on phasing out of Powerbuilder technology, has been delayed due to issues encountered during a first tentative of migration, , which has been postponed in Q1/2012.

Regarding the implementation of ECAS module for authentication in ABAC Workflow, in the frame of the new ABAC architecture project, this action has been postponed to 2013 since the pre-analysis demonstrated that a more profound analysis is required. The ECAS authentication is a pre-condition to further integrate Ares/Hermes with ABAC.

The implementation of Non For Profit Organisation (NFPO) as a new legal entity has been partially completed, ABAC Workflow was upgraded in April 2011, the user guidelines are to be finalised, the Integration NGO/(N)FP indicator in the full review of the LE classification has been completed for the 27 Member States, the second phase (rest of the world) is for 2012 and the analysis is ongoing.

To limit the impact on the ABAC User Community the two releases of ABAC in 2011 (and in the future similarly) were (will) be planned long after the closure (May) and long before the anticipated budget opens (October). DG Budget respects the Service Level Agreement (SLA) that has been set with the User Community and any halting of ABAC during core hours is only accepted by the USM for urgent or risky corrections.

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Concerning the technical management and monitoring of the ABAC system, the SLA objectives (96%) were reached for system availability (99.44%).

Help Desk Statistics : Incident solved within 1 hour (Target 70%) and Incident solved within 4 hours (Target 80%) were met in all quarters outside SAM calls which are complex and time consuming to solve.

Regarding the respect of timing and completion of all the phases (specifications definition, development, functional testing, putting in production) in release management and implementation no major deviation was noted, but it is nonetheless under continuous improvement.

The first step of the Review of the SLA for external entities using ABAC is on track. No particular issues were raised by Units. A version was sent out to all external entities for feedback, the main questions raised by entities relate to the fees payable.

The ABAC Project Office was strengthened through establishing and implementing procedures and tools to ensure that the corporate financial/accounting system stays in line with the evolving business, planning and priorities (roadmap, dashboards and reports). The finalisation of procedures depends on the end result in relation to resources management procedures.

The establishment of DG Budget standards with regard to project and service management (documents, methodology, reports) was completed through the integration of the Commission's standard PM² project methodology adapted to DG Budget's environment, as well as the procedures for Service Management (SCRs) and the definition of the guidelines to define the line between project and service mode.

The definition and implementation strategy of the re-casted architecture was partially completed. Progress was made, the building blocks are defined. A working group was re-launched on the basis of the TOGAF (Open Group Architecture) Framework.

The scope, detailed planning and launch of projects notably on the standardisation of the current landscape were defined and launched:

- Archiving - Paperless finance (including ECAS, Hermes integration, optimisations of LE/BA and Electronic security forms)

- New General ledger and simplification of payment flow - Legal Commitment Kernel

- Proof of Concept on the Architecture

- Pilot project for the Invoicing domain (including e-Invoicing)

- Policy for standardisation of SAP and the role of the SAM platform herein. The owners of local systems are actively collaborating with DG Budget for the implementation of the service oriented architecture (SOA). As a consequence of this facility, local system will be enabled to abandon functionality which is overlapping with ABAC. This will improve data consistency across the full IT landscape and should ultimately reduce maintenance costs of local systems.

From a technical perspective all required infrastructure environment was made available. A specific effort is made to increase the number of virtualised servers.

Regarding the Gradual Rollout of ABAC SAM, the Accounting Officer and the Director General decided to put ABAC SAM in maintenance mode (see section 2.1.2 Major events during the reporting year – IT environment). The most important maintenance items for this year are:

- Accounting quality

- Security management revision

- Fine-tune interface with ABAC Contracts - More reporting

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- Purchasing Flows:

o Automated data Loading features and form updates

- Finance Flows

o Aligning data sets between systems

o Update in accounting checks and controls across systems o Reporting: Invoice history reporting in data warehouse

- Logistics /Tracking

o Update of user roles in system and streamlining the security management of

these roles

o Update forms and partial shipment tracking process

o Reports: Additional reports for GBIs and OIB management to monitor

inventory across all buildings for OIB and OIL

The following Agencies have implemented ABAC in 2011: ACER, BEREC, EASO, EBA, EFSA, EIOPA and ESMA. The Agencies calendar for 2011 has been met. Support for extraction of specific data of an agency from the Datawarehouse was given. The Security conventions are updated. Two meetings with the external entities were organised in 2011, one in April and one in October.

The migration of candidate agencies' bank account data to ABAC LEF/BAF is an ongoing activity. 2-day trainings on treasury matters and payment run and bank reconciliation were delivered in 2011. Support/advice was provided to Institutions (including EP and CoR) and agencies on the preparation of calls for tender for the selection of banks. For LEF/BAF several trainings were delivered to various agencies and some Commission departments. All the trainings received a positive feedback.

Appropriate support on accounting matters to all entities using the ABAC system is a recurrent task. As part of the ongoing support provided by DG Budget all the questions received via the ABAC agencies helpdesk were answered in a timely manner.

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1.1.3 ABB Activity: Promotion of sound financial management

Specific Objectives : Main Outputs :

1.1.Adoption of a new Commission proposal on the Financial Regulation (same output as 3.1)

1.2. Negotiations with the European Parliament and the Council (same output as 3.2)

1.3. Adoption of the Commission delegated Regulation for the Execution Modalities, to be submitted to the approval of EP and Council

1. Revision of the Financial Regulation and Execution Modalities (FR/EM) 3. Implement the Lisbon Treaty

1.4. Information to Commission services on progress (same output as 3.4)

The Commission proposal on the Triennial revision of the Financial Regulation (FR) was adopted on 28 May 2010, accompanied with the working document on the delegated act. However, after months of stalemate with the European Parliament due to the recast format of the revision, and in order to facilitate negotiations, it was decided to replace all pending proposals on the revision of the FR (triennial and Lisbon) with a single one, which also took on board the changes already adopted for the creation of the EEAS. The new Commission proposal was adopted on 22.12.2010.

Negotiations with the EP and the Council have been ongoing through 2011. Coreper adopted a draft Presidency compromise in May 2011 and EP eventually voted its amendments in the October II plenary. Close cooperation as well as technical support was ensured with the Presidency (Council) and the co-rapporteurs (EP) through meetings and exchange of documents. Trialogues with Council and EP were held on a regular and steady basis. Numerous Combud meetings were attended. Non papers were prepared in order to reply to delegations queries and to provide trialogues with further explanations or alternative wordings. Since there have been delays in the procedure resulting from the decision process of the other institutions involved, this action will still be relevant in 2012 until a political compromise between institutions is reached.

The group of experts from the Member States on the delegated act, met for the first time in 2011. At its request the Parliament participated for early informal consultation in order to avoid as much as possible subsequent difficulties with the legislative authority which may delay the entry into force, Since the discussions in the expert group are closely linked to the rhythm of discussions (trialogues) in the legislative procedure leading to the adoption of the revised/new FR, a detailed table could only be sent in January 2012 when the first provisions of the FR were sufficiently stable. Consequently this action is still relevant in 2012.

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For Output 3.3: Adoption of Commission proposal on the revision of the Financial Regulation applicable to the EDF (EEAS related): This adoption has been postponed to 2012 as this proposal can only be prepared on the basis of the final outcome of the negotiation relating to the revision of the Financial Regulation.

BudgWeb is continuously updated with information on the state of play of the adoption process; information is communicated during RUF sessions. Information notes were submitted to GRI at regular intervals (May, July, September and November). An intranet webpage is permanently updated in order to inform services of the latest developments. This process will continue in 2012, until a political agreement between the 2 branches of the legislative authority on the FR is reached.

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2.1. Accurate, up-to-date, user-friendly guidance and information available on BudgWeb

2.2. Guidance and information actively communicated to staff managing the EU budget (RUF/SFC helpdesk)

2.3. Staff trained with the information and skills necessary to manage the EU budget effectively 2.4. Effective assistance given to DGs and Agencies in the adoption and application of the financial rules 2.5. Publication of circulars

2.6. Adoption of Internal Rules

2.7. Preparation of revised guidelines for executive agencies

2.8. Financial Transparency System (FTS)

2.9. Work to assess costs of controls and errors continues in 2011 along with the adaptation of the TRE approach into a "management concept"

2.10. Contribution to the revision of legislative provisions on control – Financial Regulation and future sectorial legislation

2. Promote sound financial

management and conformity with the financial regulations in the

management of the EU Budget

2.11. Adoption of principles and key concepts for simplification and its follow up

A continuous effort throughout 2011 was made to help and train staff managing money in the Commission (and on request Agencies and other Institutions) by providing them accurate, up-to-date user-friendly guidance and information.

A continuous effort has been made during the year 2011 to further improve ownership of the content of BudgWeb by the different DG Budget contributing Units, consequently 110 pages were updated. A total of 743 updates have been published on BudgWeb in 2011. The online feedback form allows BudgWeb users to send a message and inform DG Budget if they have found the information or not. In 2011 we answered 250 messages in addition to the 180 messages received via the "contact" button.

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The RUF (Finance Units Network) has been kept regularly informed on new developments. Upon request of the RUF members the following working groups were created:

¾ Moving towards paperless finance in the Commission (workshops held 24/01/2011 and 12/04/2011 – outcome: results presented at the RUF and published on BudgWeb)

¾ Clearing of pre-financing: how to strike the right balance between accounting quality & efficient + effective grant management? (workshop held 20/05/2011 – outcome provided to BUDG C2 – proposal in preparation)

¾ Preparation of Heads of Finance Unit's away-day (4 members + RUF Chair provided input on desired format and content

The RUF chair sent the conclusions of the following working groups: ¾ on "Audits" to all Directors Generals and IAS

¾ on "Towards Paperless Finance" to the Chairman of the High Level Committee for IT Governance

¾ The RUF had exchanges of best practice followed by discussions in March = E-invoicing applications; April = E-management of framework programme for research by executive agency; May = admissibility of invoices/payment requests; June and September = implementation of EWS

The Expenditure Lifecycle (ELC) payments e-learning module was completed end 2011. The participants of ELC courses from October 2011 onwards will have access to this new module as from February 2012. The need for additional modules will be studied in 2012 according to the feedback received on the existing one and the available resources. The regular course offer of DG Budget concerning procurement, grants and other domains has been running well and is regularly kept up-to-date. Preparatory on a new practical workshop on contract management was completed and the new course will be piloted in March 2012.

Following delays in the adoption of the new Financial Regulation (FR) and Delegated act, the information sessions for financial staff on the main changes foreseen in the revised/new FR/EM is postponed to 2012. Preliminary discussions on this action have been undertaken in 2011 in the training team and with the Unit in charge of the FR revision (permanent monitoring of progress is done by the training team leader).

Effective assistance was given to the DGs and the Agencies in the adoption and application of the financial rules throughout 2011. In total, 2740 Interservice Consultations (ISC) were replied to by DG Budget. Among those SFC (Central Financial Service) was chef de file for 1232 ISC. In particular all proposals for basic acts for the future MFF (Multiannual Financial Framework) were reviewed during the fall regarding their management modes and delivery mechanisms. Together with consultations on annual work programmes mostly, it means that 261 ICS were dealt with by the Unit in charge of procurement and grants, while another 564 direct consultations were treated, excluding those received through the helpdesk. Agreed standards on how to respond to Helpdesk questions were finalised and published in 2010. A regular review of the answers, ensuring consistency, timeliness and correct applications of the standards and procedures has been ongoing during 2011. The so-called "Questions à suivre" are identified and regularly registered on a permanent basis. Discussions are held during weekly Helpdesk meetings. The corresponding actions to be implemented are regularly discussed and agreed with relevant Units (15 cases registered in 2011).

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Concerning the Grants Vademecum an interservice group was set-up. Five meetings took place, the target group, format and presentation were agreed, and the work on chapters is progressing. The principles, submission and evaluation of proposals are almost covered. Conditions of access by third countries to procurement were updated in the Vademecum (VM) in March. The Inter-institutional contract template, the IPR (Intellectual Property Rules) clause and the related guidance notes were updated as part of the update and harmonisation of contract templates. The Guidance note was published following two presentation workshops in October and November, together with the one on framework contracts. All contract templates are now published in all languages.

Regarding the publication of circulars, the Implementation of grants through subcontracting was done and discussed in the Vademecum group. The Reduction of grants (final payment) will be part of the Vademecum. Considering the pace of discussions, it will be dealt with in a meeting in 2012.

Concerning the Internal Rules 2011, the InterService Consultation was launched on 24.03.2011. The Commission decision was adopted on 17.06.2011 (C(2011)4211).

The adoption by the Commission of the revised guidelines in the light of experience and the revised working arrangements agreed with EP, and taking account of the Court of Auditors' opinion and recommendation on executive agencies has been postponed to 2012 due to priority to be given to the Financial Regulation and Implementing Rules revision process. Nevertheless input was received by the Executive Agencies on 05.05.2011. Preparation of externalisation to executive agencies for the next generation of programmes has started and DG BUDG has contributed to this work inter alia as part of the interservice group on externalisation chaired by DG RTD.

Concerning the Financial Transparency System (FTS), the quality of the data was enhanced and a detailed dashboard in the reports was included. The process of manual corrections was more formalised. Final confirmation requested through ARES included a detailed checklist. The commitments of the 10th_{EDF (European Development Fund)} relating to the financial year 2010 have been integrated previous years not yet.

The work to assess costs of controls and errors continues in 2011 along with the adaptation of the TRE (Tolerable Risk of Error) approach into a "management concept". Guidelines on how to provide an estimation of the cost and benefits of controls as well as the expected level of non compliance in the financial statements were issued. They were used to review the post 2013 sectoral proposals. The concept of Tolerable (Residual) Risk of Error as a management tool will be taken forward, on the basis of the final texts adopted under the revised Financial Regulation, so that it can be translated in concrete terms in the Commission's responsibilities for the implementation of the Budget. The Annual Activity Report standing instructions were updated in November. All MFF (Multiannual Financial Framework) sectoral proposals have been screened by the end of 2011.

An inter-services group was set up by DG Budget in agreement with the Secretariat General chaired by the Principal advisor of DG Budget. A screening of sectoral legislation coordinated by the Principal Advisor took place in 2011. The guidelines on simplification of new legal bases and programmes were adopted in June 2011.

Specific input was provided to the Interservices Group "Financial Regulation/Sectoral Legislation" regarding simplification of sectoral rules with a view to reducing the administrative burden on beneficiaries and reducing the scope for legality and regularity error. Also coherence of the sector-specific rules was ensured with the provisions of the general Financial Regulation. All basic acts were treated in InterService Consultation during the fall.

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A guidance document was prepared on "Simplification: options to consider in drafting sectoral legislation" outlining suggestions based on the results of the College seminar of simplification held in January. This document was distributed to the DGs on 28 March and discussed at the GIS (Groupe InterService) "Financial Regulation/Sectoral Legislation" meeting of 11 April 2011.

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4.1. Preparation and adoption of : "Overview" report , synthesis report and conduct the associated Peer Reviews

4.2. Animation of inter-DG networks to promote good practice

4.3. Guidelines/ training on internal control issues

4.4. Other support for internal control

4. Facilitate the implementation of the internal control framework

4.5. Follow-up of Discharge on internal control matters

Input was given throughout the entire Annual Activity Report (AAR) process. Pre-peer reviews took place in January 2011 with DGs having reservations in AAR 2009 followed by Peer reviews and targeted feedback on draft AAR quality to all DGs in March 2011 (in cooperation with the SG). The Overview report was finalised on 28 April 2011 and the Synthesis report was adopted by the Commission on 1st_{June 2011 (COM (2011) 323).} AAR instructions were revised in November 2011 to (1) ensure error rates sufficiently representative; (2) better define the concept of residual risk of error; (3) introduction of internal control objectives; and (4) reporting on anti-fraud strategies.

The Ex Post Control Network (EPCnet) is inactive and has not met during 2011. A new meeting will take place in early 2012 to examine whether to merge it back with ICC net. The Internal Control Coordinators Network (ICCNet) continued its regular meetings in 2011.

Training courses on internal control, risk management, fraud awareness and AAR preparation were defined, prepared and delivered during 2011. The course content as well as the schedule and structure are being revised for 2012.

Developments on risk management and internal control in DGs were monitored throughout the year. Specific risk management guidelines as requested by the DGs and on risk management for procurement have been issued. Those on fraud will be prepared in cooperation with Olaf as foreseen in the anti-fraud action plan (2012). Those on grants will be revised followed by the update of the Vademecum (deadline foreseen June 2013). Complementary guidance on Internal Control Standard (ICS) 8 (registry of exceptions) was prepared at two seminars with the DGs, discussed at the ICCNet meeting and then published in June 2011.

An Interinstitutional framework contract for audits and controls was completed during 2011; the contracts were signed in December 2011. The management of the framework contracts for internal control including advice to DGs and processing of specific contracts has been ongoing.

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The liaison with authorities in Member States concerning the reporting on payments to national SAIs and Finance Ministries, the provision of information and advice on audit and control issues and the maintenance of an overview of annual summaries and national declarations is an ongoing recurrent task. The reporting on payments for 2011 has been completed. The revision of the transmission modalities to prevent misuse of the information is currently ongoing.

Annual Activity Report

2011