Annual Activity Report. Annexes. Employment, Social Affairs and Inclusion

Transcription

1 2013 Annual Activity Report Annexes Employment, Social Affairs and Inclusion 80

2 81

3 ANNEX 1: Statement of the Resources Director I declare that in accordance with the Commission s communication on clarification of the responsibilities of the key actors in the domain of internal audit and internal control in the Commission 1, I have reported my advice and recommendations to the Director- General/Head of Service on the overall state of internal control in the DG/service. I hereby certify that the information provided in Parts 2 and 3 of the present AAR and in its annexes is, to the best of my knowledge, accurate and exhaustive. [Signed] Hélène Clark Brussels, 31 March SEC(2003)59 of

4 ANNEX 2: Human and Financial resources Human Resources by ABB activity Code ABB Activity ABB Activity Establishm ent Plan posts External Personnel Total European Social Fund Working in Europe Social dialogue and mobility Employment and social solidarity European Globalisation Adjustment Fund (EGF) AWBL- 01 Instrument for Pre-Accession Assistance (IPA) Human resources development Administrative support for the Directorate-General for Employment, Social Affairs and Inclusion Total General remark: the above data rely on the snapshot of Commission personnel actually employed in each DG/ service as of 31 December of the reporting year. These data do not necessarily constitute full-time-equivalents throughout the year. Code ABB Activity ABB Activity Administrative expenditure of the `Employment, social affairs and inclusion Financial Resources by ABB activity (EUR Million) implementation of Commitment Appropriations (CA) Operational Administrative expenditure expenditure (1) (2) Total European Social Fund Working in Europe - Social dialogue and mobility Employment and social solidarity European Globalisation Adjustment Fund (EGF) Instrument for Pre-Accession Assistance (IPA) - Human resources development (1) Heading 5 appropriations managed by the DG (global envelope) XX (2) BA lines (XX 01 04) and, when relevant XX and XX Total

5 IMPLEMENTATION OF THE GLOBAL ENVELOPE BUDGET LINES CONCERNED: TO (based on information received from BUDG services following the 2015 Budget circular) (IN EUROS) APPROPRIATIONS 2013 (C1) APPROPRIATIONS carried over (C8) BUDGET LINE BUDGET LINE DESCRIPTION AVAILABLE APPROP COMMITMENTS 2013 PAYMENTS 2013 AMOUNTS OF APPROPRIATIONS CARRIED OVER FROM 2012 % IMPLEMENTATION ON APPROPRIATIONS CARRIED OVER FROM % Mission expenses % Representation expenses % Meeting costs % Conference costs % Meetings committees of % Studies consultations and Development of management and information systems Further training and management training TOTAL % % % 84

6 ANNEX 3: Draft annual accounts and financial reports AAR 2013 Version 2 Annex 3 Financial Reports - DG EMPL - Financial Year 2013 Table 1 : Commitments Table 2 : Payments Table 3 : Commitments to be settled Table 4 : Balance Sheet Table 5 : Economic Outturn Account Table 6 : Average Payment Times Table 7 : Income Table 8 : Recovery of undue Payments Table 9 : Ageing Balance of Recovery Orders Table 10 : Waivers of Recovery Orders Table 11 : Negotiated Procedures (excluding Building Contracts) Table 12 : Summary of Contracts (excluding Building Contracts) Table 13 : Building Contracts Table 14 : Contracts declared Secret 85

7 TABLE 1: OUTTURN ON COMMITMENT APPROPRIATIONS IN 2013 (in Mio ) Commitment appropriations authorised Commitments made % 1 2 3=2/ Title 04 Employment and social affairs Administrative expenditure of the `Employment and social affairs- policy area 28,668 25,683 89,59 % European Social Fund , ,706 96,17 % Working in europe - Social dialogue and mobility 80,724 75,678 93,75 % Employment, social solidarity and gender equality 128, ,639 94,13 % European Globalisation Adjustment Fund (EGF) 98,282 41,541 42,27 % Total Title 04 Instrument for Pre-Accession Assistance (IPA) - Human resources development Total DG EMPL 113, , ,00 % , ,405 95,73% , ,405 95,73 % * Commitment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous commitment appropriations for the period (e.g. % Outturn on commitment appropriations 120, % 100, % 80, % 60, % 40, % 20, % 0, %

8 TABLE 2: OUTTURN ON PAYMENT APPROPRIATIONS IN 2013 (in Mio ) Chapter P ayment appropriations authorised * Payments made % Administrative expenditure of the `Employment and social affairspolicy area 1 2 3= 2/1 39,440 21,915 55,57 % European Social Fund , ,798 99,47 % Working in europe - Social dialogue and mobility 51,667 49,611 96,02 % Employment, social solidarity and gender equality 101,120 96,677 95,61 % European Globalisation Adjustment Fund (EGF) 98,282 41,541 42,27 % Total Title 04 Title 04 Employment and social affairs Instrument for Pre-Accession Assistance (IPA) - Human resources development 65,153 65, ,00 % , ,696 98,91% Total DG EMPL , ,696 98,91 % * Payment appropriations authorised include, in addition to the budget voted by the legislative authority, appropriations carried over from the previous exercise, budget amendments as well as miscellaneous payment appropriations for the period (e.g. internal and external assigned revenue). ="% Outturn on payment appropriations" 120, % 100, % 80, % 60, % 40, % 20, % 0, %

9 Chapter TABLE 3 : BREAKDOWN OF COMMITMENTS TO BE SETTLED AT 31/12/2013 (in Mio ) 2013 Commitments to be settled Commitments to be settled from Commitments 2013 Payments 2013 RAL 2013 % to be settled financial years previous to 2013 Total of Total of commitments to commitments to be be settled at end settled at end of financial year of financial year 2013(incl 2012(incl. corrections) corrections) 1 2 3=1-2 4=1-2/1 5 6=3+5 7 Title 04 : Employment and social affairs Administrative expenditure of the `Employment and social affairs- policy area 25,683 13,535 12,148 0,473 0,000 12,148 10, European Social Fund , , ,143 0, , , , Working in europe - Social dialogue and mobility 75,678 19,016 56,663 0,749 38,731 95,393 77, Employment, social solidarity and gender equality 120,639 44,571 76,068 0,631 65, , , European Globalisation Adjustment Fund (EGF) 41,541 41,541 0,000 0,000 0,000 0,000 0, Instrument for Pre-Accession Assistance (IPA) - Human resources development 113,157 0, ,157 1, , , ,294 Total Title , , ,179 0, , , ,368 Total DG EMPL , , ,179 0, , , ,368 ="Breakdown of Commitments remaining to be settled (in Mio EUR)" , , , , , ,00 0,

10 TABLE 4 : BALANCE SHEET BALANCE SHEET A.I. NON CURRENT ASSETS , ,25 A.I. A.I.5. NON LT CURRENT Pre-Financing ASSETS , ,25 A.II. CURRENT ASSETS , ,34 A.II. A.II.2. CURRENT Short-term ASSETS Pre-Financing , ,07 A.II.3.2. Current Receivables and Recove A.II.3. Current Financial Assets , ,27 0,00 ASSETS , ,59 P.III. CURRENT LIABILITIES , ,24 P.III. P.III.4. CURRENT Accounts LIABILITIES Payable , ,24 LIABILITIES , ,24 NET ASSETS (ASSETS less LIABILITIES) , ,35 P.I.2. Accumulated Surplus / Deficit ,61 0 Non-allocated central (surplus)/deficit* , ,35 TOTAL 0,00 0,00 It should be noted that the balance sheet and economic outturn account presented in Annex 3 to this Annual Activity Report, represent only the (contingent) assets, (contingent) liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be adjusted following this audit. 89

11 ECONOMIC OUTTURN ACCOUNT , ,69 TABLE 5 : ECONOMIC OUTTURN ACCOUNT ECONOMIC OUTTURN ACCOUNT II.1 SURPLUS/ DEF. FROM OPERATING ACTIVT , ,41 II.1.1. OPERATING REVENUES , ,07 II Own resource and contributions -72,90 II Other operating revenue , ,17 II.1.2. OPERATING EXPENSES , ,48 II Administrative Expenses , ,59 II Operating Expenses , ,89 II.2. SURPLUS/DEF. NON OPERATING ACTIVIT , ,72 II.2.1. FINANCIAL OPERATIONS , ,72 II Financial revenue , ,93 II Financial expenses , ,21 ECONOMIC OUTTURN ACCOUNT , ,69 It should be noted that the balance sheet and economic outturn account presented in Annex 3 to this Annual Activity Report, represent only the (contingent) assets, (contingent) liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be It should be noted that the balance sheet and economic outturn account presented in Annex 3 to this Annual Activity Report, represent only the (contingent) assets, (contingent) liabilities, expenses and revenues that are under the control of this Directorate General. Significant amounts such as own resource revenues and cash held in Commission bank accounts are not included in this Directorate General's accounts since they are managed centrally by DG Budget, on whose balance sheet and economic outturn account they appear. Furthermore, since the accumulated result of the Commission is not split amongst the various Directorates General, it can be seen that the balance sheet presented here is not in equilibrium. Additionally, the figures included in tables 4 and 5 are provisional since they are, at this date, still subject to audit by the Court of Auditors. It is thus possible that amounts included in these tables may have to be 90

12 TABLE 6: AVERAGE PAYMENT TIMES FOR DG EMPL Legal Times Nbr of Average Total Number of Payments Nbr of Late Percentage Payment Percentage Payments within Time Payments Times (Days) Limit ,16 % 19, ,84 % 52,93 Maximum Payment Time (Days) Average Payment Times (Days) ,27 % 26, ,73 % 103, ,63 % 23, ,37 % 85, ,65 % 32,36 1 4,35 % 98,00 Total Number of Payments Average Payment Time ,33 % ,67 % 38, ,22 63,93 Target Times Nbr of Average Total Number of Payments Nbr of Late Percentage Payment Percentage Payments within Payments Times (Days) Target Time ,13 % 11, ,87 % 43,12 Target Payment Time (Days) Average Payment Times (Days) ,62 % 18, ,38 % 68,40 Total Number of Payments Average Payment Time ,05 % ,95 % 40, ,06 63,97 Suspensions Average Average Number of Amount of Report Payment % of Total Total Number % of Total Suspended Suspended Total Paid Amount Approval Suspension Number of Payments Amount Payments Payments Suspension Days ,67 % ,67 40,45 % ,37 Late Interest paid in 2013 DG GL Account Description Amount (Eur) EMPL Interest expense on late payment of charges 1 570,92 EMPL Interest on late payment of charges New FR , ,01 91

13 TABLE 7 : SITUATION ON REVENUE AND INCOME IN 2013 Revenue and income recognized Revenue and income cashed from Outstanding Chapter Current year RO Carried over RO Total Current Year RO Carried over RO Total balance 1 2 3= =4+5 7= REVENUE FROM INVESTMENTS OR LOANS GRANTED, BANK AND OTHER INTEREST , , , , , ,09 0,00 57 OTHER CONTRIBUTIONS AND REFUNDS IN CONNECTION WITH THE ADMINISTRATIVE OPERATION OF THE INSTITUTION ,97 0, , ,97 0, ,97 0,00 60 CONTRIBUTIONS TO UNION PROGRAMMES , , , , , , ,00 61 REPAYMENT OF MISCELLANEOUS EXPENDITURE , , , , , , ,79 65 FINANCIAL CORRECTIONS , , , , , , ,44 66 OTHER CONTRIBUTIONS AND REFUNDS , , , , , , ,88 Total DG EMPL , , , , , , ,11 92

14 TABLE 8 : RECOVERY OF UNDUE PAYMENTS (Number of Recovery Contexts and corresponding Transaction Amount) INCOME BUDGET RECOVERY ORDERS ISSUED IN 2013 Year of Origin (commitment) Error Irregularity TOTAL Qualified TOTAL RC(incl. non-qualified) % Qualified/Total RC Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount Nbr RO Amount , , ,42 100,00% 100,00% , , ,04 100,00% 100,00% , , ,00 100,00% 100,00% , , ,36 50,00% 29,88% , , ,97 88,89% 99,88% , , ,35 100,00% 100,00% , , , ,63 12,00% 1,85% , , ,30 4,26% 0,05% , , ,05 8,33% 0,16% No Link , , , ,44 85,19% 96,01% Sub-Total , , , ,52 33,33% 83,06% EXPENSES BUDGET Error Irregularity OLAF Notified TOTAL Qualified TOTAL RC(incl. non-qualified) % Qualified/Total RC INCOME LINES IN INVOICES NON ELIGIBLE IN COST CLAIMS Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount Nbr Amount , , , ,85 18,52% 97,02% CREDIT NOTES , , ,40 14,71% 10,53% Sub-Total , , , ,65 17,44% 96,15% 3 273,40 GRAND TOTAL , , , ,17 24,25% 24,97% 93

15 TABLE 9: AGEING BALANCE OF RECOVERY ORDERS AT 31/12/2013 FOR EMPL Number at 01/01/2013 Number at 31/12/2013 Evolution Open Amount (Eur) at 01/01/2013 Open Amount (Eur) at 31/12/2013 Evolution ,00 % ,27-100,00 % ,00 % ,71-100,00 % ,00 % ,29-100,00 % ,00 % , ,07 0,00 % ,00 % , ,37 0,00 % ,00 % , ,23-0,61 % ,00 % 2.074,87-100,00 % ,00 % ,30-100,00 % , ,11 % , ,11-92,44 % TABLE 10 : RECOVERY ORDER WAIVERS IN 2013 >= EUR Waiver Central Key Linked RO Central Key RO Accepted Amount (Eur) LE Account Group Commission Decision Comments ,29 Private Companies ,27 Member States Total DG ,56 Number of RO waivers 2 TABLE 11 : CENSUS OF NEGOTIATED PROCEDURES - DG EMPL Procurement > EUR 60,000 Negotiated Procedure Legal base Number of Procedures Amount ( ) Art (b) ,00 Total 1, ,00 94

16 TABLE 12 : SUMMARY OF PROCEDURES OF DG EMPL EXCLUDING BUILDING CONTRACTS Internal Procedures > 60,000 Procedure Type Count Amount ( ) Internal Procedur Exceptional Negotiated Procedure without publication of a contract notice es > (Art. 134 RAP) 60, ,00 Open Procedure (Art IR) ,00 Open Procedure (Art RAP) ,90 TOTAL ,90 Additional comments TABLE 13 : BUILDING CONTRACTS Total number of contracts : Total amount : Legal base Contract Number Contractor Name Description Amount ( ) No data to be reported 95

17 TABLE 14 : CONTRACTS DECLARED SECRET Total Number of Contracts : Total amount : Legal base Contract Number Contractor Name Type of contract Description Amount ( ) No data to be reported 96

18 ANNEX 4: Materiality criteria For direct and indirect management The qualitative factors are based on the detection of significant and/or repetitive weaknesses which would be identified through the internal control system within the framework of supervision. Based on Commission agreed principles a reserve is envisaged when the error rate resulting from the annual ex-post audit missions would account for more than 2 % of the payments of the selected files. The level of 2 % is an acceptable indicator due to the fact that the selection of the files to be audited is based on a risk analysis approach in order to select files in the area at risk. For ESF and IPA Assessment of management and control systems in the Member States and for the programming period All programmes are assessed against audit opinions at national and Commission level based on audits carried out on systems and representative samples of operations. In addition, operational line managers and authorising officers by sub-delegation also assess the level of assurance. The assessment is based on three elements as follows: 1. The first element is the assessment of the functioning of management and control systems carried out by the audit directorate. This assessment may take into account results of corrective actions implemented by the Member State in the reporting year. This assessment is complemented at the Directorate General level taking into account elements received by the operational managers and the regular contacts with regional and national programme authorities. 2. The second element is the projected error rate reported by programme audit authorities in the Annual Control Reports (ACR), based on expenditure for the year preceding the reporting year. The Directorate General assesses the reliability of the projected error rates for each programme, on the basis of all available information and audit results, including on-the-spot missions, and uses this information as the best estimate of the possible risk for expenditure in the reporting year. In case the projected error rates are not available, not accurate or found not to be reliable, the audit directorate either recalculates them when it has sufficient information to do so or, alternatively, replaces them by flat rates in line with the results of the assessment of the functioning of management and control systems. This results in an error rate validated by management for each programme for the reporting year. This is the best estimate expressed as a percentage of the value of the interim payments made in the reporting year of expenditure which is not in full conformity with contractual or regulatory provisions. 3. The third element is the consideration of the multi-annual impact of the validated error rates calculated since the beginning of the programming period, on the corresponding interim payments made during that same period, after deduction of the recoveries and withdrawals reported for each year. as well as pending recoveries at the end of the reporting year and withdrawals accepted by Certifying Authorities and recorded in their accounts prior to the date of signature of the AAR. The application of this third element results in a cumulative residual risk/error rate for each programme or where appropriate group of programmes covered by a common management and control system, expressed as a percentage of the value of the cumulative interim payments made for the programming period, up to the date of signature of the AAR. This is the DG's best estimate of expenditure which is not in full conformity with contractual or regulatory provisions and which have not been corrected at the date the report is signed. 97

19 The assessment of the relevant reports, data and other information available requires the application of professional judgement, namely when weighting contradictory information or considering abnormal statistical results. When taking into account reported corrections, the authorising officer by delegation also assesses that they effectively mitigate the risks identified and that they result in a reduction in the level of the error that remains uncorrected in the population. Materiality criteria and reservations As management and controls are considered to be specific to each operational programme, materiality is not assessed and reservations are not decided upon at the level of the ABB activity (or grouping of ABB activities), but rather at the level of operational programmes. For disclosure purposes in the AAR, overall reservations grouping the reservations at programme level are made by programming period. The Directorate-General therefore assesses each operational programme in order to identify reservations and corrective measures to be applied. Where operational programmes have management and control systems in common, they can be grouped for this assessment. At operational programme level, reservations or partial reservations are made in respect of significant weaknesses in the management and control systems in the Member States where the resulting risk to the Community budget is material independently at this stage from any calculation of the cumulative residual risk/error rate. In practice, this means that reservations or partial reservations are made in any case for programmes included in the categories limited assurance with medium risk and limited assurance with high risk (see below). Following the approach set out, reservations are made as a general rule for all programmes for which the validated error rate exceeds or equals 5% 2 and also for all programmes for which the cumulative residual risk/error rate exceeds 2%. Exceptions, if any, are clearly reported and explained in the body of the Annual Activity Report. In some cases, reservations may be made at a sub-programme level (priority axis or implementing bodies) when the systemic deficiencies only affect a specific management and control system, not used for the other activities under the same programme. In addition, in the event that the monitoring and supervisory controls reveal deficiencies of a qualitative nature (e.g. significant systemic deficiencies or major control failures) which have a significant impact on the reputation of the Commission, a reservation is made on a reputational basis. Estimation of the amount at risk The overall amount at risk is calculated by applying the validated error rate to the amount of interim payments made during the reporting year for each programme. The amount at risk for programmes under reservation is calculated on the same basis but only for those programmes under reservation. However for reservation made at subprogramme level, a flat rate depending of the deficiencies identified is applied to the part of payments made on this specific sub-programme during the year. In all cases, no financial corrections are taken into account for the quantification of the reservation as the financial corrections already implemented are mainly linked to expenditure declared in previous years. In case no payments have been made in the year concerned for a programme under reservation, the reservation could still apply, but on a reputational/qualitative basis, rather 2 When the validated error rate is above 5% and the CRR is below 2%, case by case analysis is needed to decide on a reservation 98

20 than on a quantitative one. For transparency purposes, the estimation of the overall amount at risk is presented by Member State classifying the programmes in four categories levels of assurance in accordance with the assurance they provide as to the legality and regularity of interim payments made during the reporting year: - Reasonable assurance means that there is no material deficiency in key elements of the systems (only minor improvements may be needed in some cases) and the validated error rate and the cumulative residual risk are below 2%; - Reasonable assurance with low risk of irregularities covers o programmes with the existence of some deficiencies in key elements of the systems and/or with a validated error rate below 5% but with a cumulative residual risk below 2%; o programmes with a validated error rate above 5 % and a cumulative residual risk below 2 % as a result of implemented financial corrections and if on the basis of professional judgment, the implementation of the action plan has been assessed as satisfactory ; - Limited assurance with medium risk 3 of irregularities covers o programmes with the existence of some deficiencies in key elements of the systems and/or with a validated error rate below 5% and a cumulative residual risk above 2%; o programmes with a validated error rate above 5 % and a cumulative residual risk remaining above 2% or below 2 % as a result of implemented financial corrections but on the basis of professional judgment, the implementation of the action plan has not been assessed as satisfactory yet. - Limited assurance with high risk 3 of irregularities covers o programmes with material deficiencies in several key elements of the systems and/or with a validated error rate above 5% and a cumulative residual risk above 2%. 3 Exceptions duly justified are disclosed in the AAR 99

21 ANNEX 5: Internal Control Templates for budget implementation (ICTs) ESF DG EMPL distinguishes 3 main stages in the implementation of its budget for ESF: (1) Negotiation and assessment/approval of spending proposals; (2) Implementation of operations (Member States): and (3) Monitoring and supervision of the execution, including ex-post control. The table below elaborates, per stage, on the main risks identified and related benefits. DG EMPL estimates that the annual overall Commission costs incurred amounts to approximately 0.19% of total appropriations. This is made up of: - The annual cost of audit work (internal team and outsourced contract) which covers the assessment by the Commission of management and control systems in MS, including analysis of Audit Authorities reports and ACRs, own audit work 4 and drafting of interruption letters. - The annual costs of Commission staff which carries out controls throughout the different design, implementation and monitoring phases. This includes the setting-up of the management and control systems in the Member States, the Commission checks in the designation process (sampling of national designations), the Commission ex-ante checks of the periodic expenditure declarations (financial circuits). Stage 1 Negotiation and assessment/approval of spending proposals: Main control objectives: Ensuring that the Commission (COM) adopts the actions that contribute the most towards the achievement of the policy objectives (effectiveness); Main risks Mitigating controls Coverage frequency and depth Costs and benefits of controls Control indicators The Operational Programmes (OPs) financed do not adequately reflect the policy objectives or priorities. Internal consultation, hierarchical validation at DG-level of each OP. Inter-service consultation (including all relevant DGs) Adoption by Commission Decision, where foreseen by EU law. Coverage / Frequency: 100%. Depth: checklist, guidelines, lists of requirements in the relevant regulatory provisions and reflection of policy objectives and priorities in position papers and CSRs. Overall COM cost: see above Benefits: adopted OPs focus on challenges MS and regions are facing (as identified in European Semester) and have a clear intervention logic, allowing the Commission to evaluate their impact [non-quantifiable individually] Effectiveness: - % of OPs adopted/ approved Efficiency: - average time to adopt/ approve an OP Systems audit, re-performance of annual control reports (ACR), follow-up of audit authorities, closure audits, fact finding audits, etc. Impacted by the time required by Member States to react 100

22 Stage 2 Implementation of operations (Member States): A. Setting up of the systems Main control objectives: ensuring that the management and control systems are adequately designed Main risks Mitigating controls Coverage, frequency and depth Costs/benefits of controls Control indicators The process of designation of national authorities in the Member States (MS) is not effective and, as a result, the management and control systems are not compliant with the applicable rules. Supervision by Commission (for ): - Commission review (and audits) of a sample of national designations - submission of MS Audit Strategies to the Commission (on request) Coverage / Frequency: fixed in sectorspecific rules Depth: verification (desk review + audit missions where necessary) of description of management and control systems communicated by MS. Designation audits are generally done on-the-spot. B. MS controls to prevent, detect and correct errors within the declared certified expenditure Overall COM cost: see above Benefits:(part of) the amounts associated with unreliable systems for which the Commission audit work revealed substantial compliance problems (for ) [not quantifiable] Main control objectives: ensuring that the periodic expenditure declarations submitted to the Commission for each action are legal and regular For : Effectiveness: - % of authorities designated Efficiency: - number of authorities for which serious weaknesses found by designation reviews/audits (% of total checked) Main risks Mitigating controls Coverage, frequency and depth Control indicators Periodic expenditure declarations submitted to the Commission include Management verifications: first level checks by Management Authorities (MA). Coverage: fixed in sector-specific rules Depth: Effectiveness: - weighted average error rate expenditure which is irregular or - management verifications: performance of first-level checks (administrative as reported by the Member Certification, audit opinion and annual non-compliant with EU and/or and on the spot controls). States. report by the relevant authorities national eligibility rules and - certification: additional verification (desk checks and on-the-spot). Efficiency: designated/accredited. legislation. - audit opinion: system audits on the checks already carried out, where - time to lift interruption of necessary with re-performance of on-the-spot checks; where applicable, audits payments 6 of operations (on a statistical basis) and additional substantive testing on expenditure. 6 impacted by the complexity of the issues and the time required by MS to react 101

23 Stage 3 Monitoring and supervision of the execution, including ex-post control Main control objectives: ensuring that the expenditure reimbursed from the EU budget is eligible and regular Main risks Mitigating controls Coverage, frequency and depth Costs/benefits of controls Control indicators The management verifications and subsequent audits/controls by the Member States have failed to detect and correct ineligible costs or calculation errors. The audit work carried out by the audit/certifying authorities is not sufficient to obtain adequate assurance on the submitted declarations. The Commission services have failed to take appropriate measures to safeguard EU funds, based on the information it received. Commission checks of periodic MS expenditure declarations. Commission assessment of management and control systems in the Member States, in particular of work done and/or reported by the Audit Authorities, namely: - assessment of Annual Control Reports / Annual Audit Opinion - calculation of projected error rate - estimation of a residual error rate (RER) - assessment of systems audits reports from AA - assessment of annual summaries - own Commission audits - technical and bilateral meetings with MS Interruptions and suspensions of payments Financial corrections (implemented by MS resulting from Commission audit work) Coverage: verification of information provided in the annual control reports and annual audit opinions. Depth: desk checks and/or on-thespot audits based on risk assessment; verification of the quality and reliability of the information based on Commission s own audit work; validation and where necessary adjusting of error rates reported by MS to calculate a cumulative residual error risk (RER); [at closure: where applicable scrutiny of closure report and closure opinion, if needed with audits on sample of OPS] 102 Overall COM cost: see above Benefits: errors prevented [unquantifiable], errors detected or corrected (amount of financial corrections); the impact of the Commission s adjustments made on the error rates reported by the MS following its own audit work and the total amount of expenditure for which the Commission has assurance Effectiveness: - cumulative residual risk (EU and per MS) - number of programmes with a reported error rate assessed as reliable (unchanged or re-calculated) - Number of interruptions/suspensions of payments - corrections made resulting from Commission audit work (decided and implemented) - % of the expenditure for which the Commission can rely on the work of the AA (based on ACRs unchanged or recalculated error rates) - weighted average error rate after Commission analysis - Commission assessment of reliance on Audit Authorities Efficiency: - overall cost of control/financial management of the Commission checks and assessment (% of total payment appropriations) stages 1 to 3 - % of Commission payments on time - % interruptions of payments notified to MS within 2 months - % suspensions of payments notified to MS within 6 months - Audit coverage of Audit Authorities (cumulative basis)

24 Direct management (grants and procurement) DG EMPL distinguishes 3 main stages in the implementation of its budget under direct management mode: (1) Programming, evaluation, selection and contracting; (2) Monitoring the execution and (3) Ex-post controls. The table below elaborates, per stage, on the main risks identified and related controls. Benefits and costs are covered globally: Benefits: The benefits of controls at the programming stage cannot be quantified. They mainly relate to the relevance and effective implementation of activities in line with the DG's policy objectives and contributing towards the achievement of Europe 2020 Strategy. The deterrent effects of monitoring and controls also bring unquantifiable benefits. At the selection, implementation and monitoring stages, by ensuring compliance with the Financial Rules and the respect of principles for grants and procurement, DG EMPL makes sure that the selected proposals or offers bring the best value for money, i.e. fulfilling performance needs and optimising the use of EU funds and that the underlying operations are legal and regular. DG EMPL considers that the benefits of the controls in place are demonstrated by the error rates being consistently below the materiality threshold. Estimated costs: The estimated annual Commission costs is estimated to be in the range of 2.5 to 5% of DG EMPL total appropriations managed under direct and indirect management modes. The lower limit of the range includes the staff involved in financial advice, initiation, and verification tasks as well as those in charge of the ex-post audits. The upper limit of the range contains in addition a proportion of the operational staff involved in public procurement and grants actions. Their role being primarily to deliver actions in support of political objectives, a differentiation between implementation and control tasks is difficult to establish. In view of this uncertainty, and in the absence of a cost-effective way to define which elements of their tasks are assessed as part of the control chain (as opposed to ensure the adequate implementation of policy objectives), DG EMPL estimated their involvement in the financial workflow at approximately 25% of their time. 103

25 Stage 1: Programming, evaluation, selection and contracting. Main control objectives: Ensuring that the Commission (COM) selects the actions that contribute the most towards the achievement of the policy objectives (effectiveness); that funds are allocated optimally (best value for public money, effectiveness, efficiency, economy) and in compliance (legality & regularity; prevention of fraud). Main risks Grants and procurement: The annual work programme and the subsequent actions do not adequately reflect the policy objectives and priorities and or are incoherent. Budget not optimally allocated. Grants: The evaluation, ranking and selection of proposals is not carried out in accordance with the established procedures, the policy objectives, priorities and/or the essential eligibility, or with the selection and award criteria defined in the annual work programme and subsequent calls for proposals. The beneficiaries, especially smaller organisations, lack the capacity to effectively control expenditure and ensure the transparency on the operations carried out. Grants and procurement: Mitigating controls - Programming of activities (Financing Decision) through a top-down definition of policy priorities. Activities examined centrally by horizontal units (coordination and financial) for compliance, relevance and optimisation (rationalisation/simplification) - Inter-service consultation on Financing Decisions including all relevant DGs - Adoption by the Commission Grants: - implementation of a standard application form for the whole DG; - AOSD supervision and approval of terms of references with the support of adequate guidance (including support from the Financial Advice team) and using the available models - before publication, a formal opinion is issued by the Financial Unit to check if the documents are complete, have been correctly drafted and all the required procedures have been respected; - an evaluation committee is appointed by the AOSD and composed of at least 3 persons representing at least 2 directorates; - the management of the evaluation process has been standardised via the IT application Defis Evaluations; - a formal opinion is issued by the Financial Unit on the evaluation and selection procedure prior to budgetary and legal commitments - validation of beneficiaries (operational and financial viability) and planning of interim and final reports - signature of the grant agreement by the Authorising Officer - the publication on Europa of the grants awarded takes place after control by the Financial Unit. Coverage, frequency and depth Grants and procurement: Coverage/frequency: 100% Grants: Coverage : 100% of proposals are evaluated Costs/benefits of controls See above See above Control indicators Grants and procurement: - Validation of actions in the annual work programme (relevance and compliance) (%) - Budget execution (%) Grants: - Validation of calls for proposals by the Financial Unit prior to publication (%) - Formal opinion given by the Financial Unit before award (%) - Number litigation cases 104

26 Main risks Mitigating controls Coverage, frequency and depth Costs/benefits of controls Control indicators Procurement: Procurement: Procurement: See above Procurement: The best offer/s are not submitted due to the poor definition of the tender specifications The most economically advantageous offer not being selected, due to a biased, inaccurate or unfair evaluation process - AOSD supervision and approval of specifications with the support of adequate guidance and using the available models - Prior Information Notices and invitations to tender are checked for compliance with the Financial Regulation and Financing Decision by the Central Financial Unit before publication - Opening and evaluation committees appointed by the AOSD - Formal advisory opinion by consultative committee CIAME (conformity of procurement rules and application of selection and award criteria) - Formal opinion issued after verification by the Central Financial Unit on the evaluation and selection procedure prior to budgetary and legal commitments (framework contracts with reopening of competition and negotiated procedures) 100% of the specifications are scrutinised. 100% of calls > EUR are scrutinized by the CIAME 100% of calls > EUR are scrutinized by the Financial Unit - Formal opinion given by the Financial Unit (for transactions above EUR ) and the CIAME (for transactions above EUR ) before award - Number of positive opinions given by the CIAME in first instance (%) Stage 2: Monitoring the execution Main control objectives: ensuring that the operational results (deliverables) from the projects are of good value and meet the objectives and conditions (effectiveness & efficiency); ensuring that the related financial operations comply with regulatory and contractual provisions (legality & regularity); prevention of fraud (anti-fraud strategy) Grant/Procurement: Main risks The actions foreseen are not, totally or partially, carried out in accordance with the technical description and requirements foreseen in the agreement/contract and/or the amounts paid exceed that due in accordance with the applicable contractual and regulatory provisions Grant/Procurement: Mitigating controls Operational and financial checks in accordance with the financial circuits. Operation authorisation by the AOSD Grants: Ex ante verification of financial report Coverage, frequency and depth Grants: 100% of projects are controlled (desk review) with 5% being controlled in depth Procurement: 100% of contracts are controlled Costs/benefits of controls See above Grants: Control indicators - Verification of transactions by operational and financial agents (%) - Ex-ante in depth check of final cost claims - sample representing 5% of each call total value (% error) Procurement - Verification of transactions by operational and financial agents 105

27 Stage 3: Ex post controls Main control objectives: Measuring the effectiveness of ex-ante controls by ex-post controls; detect and correct any error or fraud remaining undetected after the implementation ex-ante controls (legality & regularity; anti-fraud strategy); addressing systemic weaknesses in the ex-ante controls, based on the analysis of the findings (sound financial management) Main risks Mitigating controls Coverage, frequency and depth Costs/benefits of controls The ex-ante controls fail to Strategy of ex-post audit : Ex post controls relate only to See above prevent, detect and correct (a) combine risk-based and ad random selection grant aided projects which have erroneous payments or attempted (b) consider operational aspects whenever possible been closed by the Operational fraud. during the on-the-spot audit. Units. Contracts bear no risk to be audited ex-post. Control indicators Grants/procurement: - Cost of control/financial management of the Commission checks and assessment (as a % of total payment appropriations) - Ex-post audits finalised (number) - % amount controlled by ex-post audit vs. total amount - Error rate 106

28 ANNEX 6: Performance information included in evaluations Title of the Evaluation: ABB activity: Type of evaluation: Evaluation of Directive 2002/14/EC (Information and consultation), Directive 98/59 (collective dismissals) and Directive 2001/23 (transfer of undertakings) Employment and Social Solidarity (PROGRESS) Regulatory instrument (R) Summary of performance related findings and recommendations: Part of the FITNESS CHECK exercise. Accountability purpose. Collect evidence to inform future decision making. The results of the evaluation were published in a Staff Working Document, that found that the three I&C directives are broadly fit for purpose being generally relevant, effective, coherent and mutually reinforcing, and that benefits generated are likely outweighing costs. I&C at company level plays an important role in finding solutions to problems including optimal means of maintaining employment and lowering adjustment costs through the use of internal flexibility, and contributes to easing conflicts and promoting a cooperative climate at workplace level. I&C is of crucial importance to develop good practices of anticipation of change and good preparation and management of restructuring; widely observed good practices on anticipation of change and restructuring would greatly contribute to a better application of the I&C Directives and to more effective enforcement of the rights provided for therein. The 'fitness check' brought also to light, however, a number of gaps and shortcomings. A significant share of the workforce is not covered by their scope of application due to the exclusion of smaller SMEs, of public administration and of seafarers. Furthermore, some stakeholders voiced concerns relating to the coherence of the Directives in particular possible inconsistencies as regards different definitions in EU law of the terms 'information' and 'consultation'. The SWD set out a number of possible responses on the basis of good practice of meaningful social dialogue at different levels and by different actors, and pointed to the areas which need further examination and discussion including a possible consolidation/simplification of the three Directives on information and consultation. As a follow up, the Commission announced that it would consider a possible consolidation of the three directives, subject to the results of a consultation of social partners 7. With regard to seafarers, the Commission presented on a proposal for a Directive with a view to lifting the exclusion of seafaring workers from the personal scope of application of a number of EU labour law directives 8. The exclusion of the public administration was, subsequently, discussed within the sectoral social dialogue committee which brings together central government administrations. With regard to SMEs, work is currently under way by Eurofound in this area including on identification of good practice. Further analysis is expected to be carried out on the basis of the results of the 3 rd European Company Survey. Availability of the report on Europa: catid=22 7 See Commission communication on 'Regulatory Fitness and Performance (REFIT): Results and Next Steps' (COM(2013) 685 final) 8 Proposal for a Directive on seafarers amending Directives 2008/94/EC, 2009/38/EC, 2002/14/EC, 98/59/EC and 2001/23/EC, COM(2013) 798 final. 107

29 Title of the Evaluation: Evaluation of Directives 97/81/EC (part time work) and 1999/70/EC (fixed term work) ABB activity: Type of evaluation: Employment and Social Solidarity (PROGRESS) Regulatory instrument (R) Summary of performance related findings and recommendations: Accountability purpose. Collect evidence to inform future decision making, improvement of application of EU law An external independent study finds that the Directives, although adopted in the 90s, are still relevant and provide for a balance between protection of workers, quality of work and flexibility. Explanations are provided regarding limitations in achieving all the original goals of the Directives mainly because of extraneous drivers (in particular business cycles, societal changes, unemployment). The external study contains no recommendations for legislative intervention. A Commission Staff Working Document drawing on and complementing these findings is being prepared to fine-tune Commission' services own conclusions and recommendations for an adoption in 2Q2014. It will support dialogue with stakeholders in and guidance for analysis in MS against the background of the European Semester. The report and SWD will support the infringement policy by the Commission, dialogue with stakeholders in and guidance for analysis of law reforms in MS against the background of the European Semester. Availability of the report on Europa: Not published yet (foreseen adoption date 21 st march 2014) Title of the Evaluation: Evaluation of the European Strategy on safety and health at work ABB activity: Type of evaluation: Employment and Social Solidarity (PROGRESS) Regulatory instrument (R) Summary of performance related findings and recommendations: The purpose was to collect evidence on the implementation of the European strategy on safety and health, which would feed into the Commission's SWD on the evaluation of the strategy. The Health and Safety strategy was relevant and its merit has lied especially in providing a clear policy basis and framework for coordination, and a common sense of direction for many of the actors involved in the OSH policy area. The strategy served as an important policy signal and driver for national action on OSH and also facilitated useful coordination in respect to public health initiatives. However, there remains room for improvement in the integration and coordination between OSH and other policy areas and between the various actors involved at the EU level. In particular, coordination with environmental policy and the important area of the REACH regulation on chemicals and their safe use has been inadequate. Also, the articulation between the strategy implementation and the European social dialogue has been limited and European social partners have felt a limited degree of ownership towards the strategy and have mainly implemented those parts of the strategy which they would have implemented in any case. There are good indications that the 25% target for reducing the incidence rate of accidents at work in the EU-27 has been achieved Specific conclusions can be made with regard to the six objectives (or priority areas) of the H&S Strategy. Objective 1: Legislation: Almost all planned actions have been implemented and the Commission, the ACSH and SLIC have been active with drafting supporting guidance; the exchange of best practices; and preparing the development or revision of legislation. However, the guidance produced has not been sufficiently disseminated and is not sufficiently targeted at SMEs. In addition, in terms of the updating and simplification of the regulatory framework, little substantive progress has been made, and two outstanding gaps remain in relation to the issues of subcontracting and preventive services. 108