Not the law itself: Notice

Address https://gelex.eu/eli/EU/notice/oj/C/2009/310/01@2008-12-31/en

Contents

1. Preamble
2. Table
3. Replies of the Joint Undertaking

Paragraph Page INTRODUCTION … 1-5 2 STATEMENT OF ASSURANCE … 6-15 2 COMMENTS ON BUDGETARY AND FINANCIAL MANAGEMENT … 16 3 Implementation of the budget … 16 3 OTHER MATTERS … 17-27 3 Internal control systems … 17-20 3 Financial Regulation of the Joint Undertaking … 21-23 3 Late payment of membership contributions … 24-25 4 Annual Activity Report … 26-27 4 Table … 5 Replies of the Joint Undertaking … 7 The European Joint Undertaking for ITER and the Development of Fusion Energy was established in March 2007 for a period of 35 years. The members of the Joint Undertaking are the European Atomic Energy Community (Euratom) represented by the European Commission, the Member States of Euratom and other countries which have concluded cooperation agreements with Euratom in the field of controlled nuclear fusion and have expressed their wish to become members (at 31 December 2008: Switzerland). The tasks of the Joint Undertaking are (see, also, the Table):

(a) to provide the contribution of Euratom to the ITER International Fusion Energy Organisation;

(b) to provide the contribution of Euratom to the broader approach activities (complementary joint fusion research activities) with Japan for the rapid realisation of fusion energy;

(c) to prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility.

The indicative total resources for the Joint Undertaking for the period 2007 to 2041 are 9653 million euro. The resources consist of a contribution from Euratom, contributions from France as the State hosting the ITER facilities, the annual membership contributions, voluntary contributions from members other than Euratom and additional resources. The Joint Undertaking started to work autonomously on 18 March 2008. While the main fusion facilities are to be developed at Cadarache in France, the seat of the Joint Undertaking is in Barcelona. Pursuant to the provisions of Article 248 of the Treaty the Court has audited the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy, which comprise the financial statements and the reports on implementation of the budget for the financial year ended 31 December 2008 and the legality and regularity of the transactions underlying those accounts. This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002. As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules of the Joint Undertaking under his own responsibility and within the limits of the authorised appropriations. The Director is responsible for putting in place the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular. The Court's responsibility is to provide, on the basis of its audit, a statement of assurance as to the reliability of the annual accounts of the Joint Undertaking and the legality and regularity of the transactions underlying them. The Court conducted its audit in accordance with the IFAC and ISSAI International Auditing Standards and Codes of Ethics. Those standards require that the Court complies with ethical requirements and plans and performs the audit to obtain reasonable assurance about whether the accounts are free from material misstatement and whether the underlying transactions are legal and regular. The Court's audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and about the legality and the regularity of the transactions underlying them. The procedures selected depend on its audit judgement, including the assessment of the risks of material misstatement of the accounts or of illegal or irregular transactions, whether due to fraud or error. In making those risk assessments internal control relevant to the entity's preparation and presentation of accounts is considered in order to design audit procedures that are appropriate in the circumstances. The Court's audit also includes evaluating the appropriateness of accounting policies used and, the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the accounts. The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below. In the Court's opinion, the Annual Accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy present fairly, in all material respects, its financial position as of 31 December 2008 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation. In the Court's opinion, the transactions underlying the annual accounts of the Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2008 are, in all material respects, legal and regular. The comments which follow do not call the Court's opinions into question. For the year 2008, the budget outturn account showed a surplus of 57,6 million euro, which represents 38 % of the 149,7 million euro accrued revenue. Of this surplus 32,2 million euro were carried over to 2009 and 25,4 million euro has to be repaid to the Commission according to Article 16 of the Financial Regulation of the Joint Undertaking. The underspending mostly relates to delays in the progress of the Euratom fusion programme. The Joint Undertaking is in a start-up phase and has not completely implemented its internal controls and financial information system during 2008. At the end of the year, the underlying business processes had not yet been formalised and had not been validated by the Accounting Officer as required by the Financial Regulation of the Joint Undertaking. In particular, further work is needed in the documentation of IT processes and activities, and the mapping of IT risks. The Joint Undertaking had also not developed a business continuity plan nor a data protection policy in 2008. Article 75 of the Financial Regulation of the Joint Undertaking stipulates that the Joint Undertaking should have an internal auditing service which must comply with relevant international standards. However, at the end of 2008, this important element of the internal control system had not been set up. The Court's testing of a sample of 40 transactions identified several cases where the internal controls had not operated correctly. For example, in six cases, the Joint Undertaking made budget commitments only after it had already entered into legal obligations, contrary to the requirements of Financial Regulation. In one case, the Joint Undertaking awarded a contract through a negotiated procedure without the required publication of a contract notice. The Financial Regulation of the Joint Undertaking was adopted by Decision of the Governing Board on 22 October 2007. On 28 February 2008, the Director of the Joint Undertaking requested the opinion of the Court on the Financial Regulation. The Court issued its Opinion No 4/2008 in October 2008. In its Opinion, the Court noted that the Financial Regulation of the Joint Undertaking is largely based on the principles of the framework Financial Regulation for Community bodies and of the general Financial Regulation. However, the Court identified a number of issues for which it considers that amendments are required in order to strengthen the financial framework of the Joint Undertaking. In particular, the Financial Regulation of the Joint Undertaking should contain more stringent rules on the award of research grants and should also make provision for the audit of the Joint Undertaking by the Internal Audit Service of the Commission, in line with the arrangements in place for the other Community bodies. Within three months of the adoption of the budget, the Joint Undertaking should request its members to pay their annual contributions. Although the budget was adopted in December 2007, the Joint Undertaking only requested payment at the end of May 2008. The members were requested to pay their contributions by July 2008. Only five of the 23 members paid within this deadline. The Joint Undertaking had to issue three reminders and one member had still not paid at the end of 2008. According to Article 14 of the Statutes and Article 43 of the Financial Regulation of the Joint Undertaking, the Director is required to prepare an annual activity report. The report should contain relevant financial and management information, indicating the results of the operations of the Joint Undertaking by reference to the objectives and the timetable set, the risks associated with the operations, the use made of the resources provided and the efficiency and effectiveness of the internal control system. After approval by the Governing Board, the report is to be sent to the European Parliament and the Court of Auditors by 15 June following the end of the financial year. The Court received the Annual Activity Report only in September 2009, three months after the deadline. Although the report provides financial and operational information, it does not meet all the requirements of the applicable regulations. The explanation of the implementation of the work programme does not include a detailed evaluation of the results with respect to the objectives and timetable set. The report does not include an assessment of the efficiency and effectiveness of the internal control system as required by the Financial Regulation. This report was adopted by the Court of Auditors in Luxembourg at its meeting of 22 October 2009. For the Court of Auditors Vítor Manuel da Silva Caldeira President

Table

Source: Information submitted by the Joint Undertaking. Areas of Community competence deriving from the Treaty Competences of the Joint Undertaking as defined in Council Decision 2007/198/Euratom Governance Resources made available to the Joint Undertaking in 2008 (no data for 2007) Main achievements for 2008 Undertakings which are of fundamental importance to the development of the nuclear industry in the Community may be established as Joint Undertakings within the meaning of this Treaty, in accordance with the following Articles. Joint Undertakings shall be established by Council decision. Each Joint Undertaking shall have legal personality. To provide the contribution of the European Atomic Energy Community (Euratom) to the ITER International Fusion Energy Organisation. To provide the contribution of Euratom to broader approach activities with Japan for the rapid realisation of fusion energy. To prepare and coordinate a programme of activities in preparation for the construction of a demonstration fusion reactor and related facilities including the International Fusion Materials Irradiation Facility (IFMIF). Oversee preparation of the ITER project site, provide components, equipment, materials and other resources to the ITER Organisation, manage procurement arrangements vis-à-vis the ITER Organisation and, in particular, associated quality assurance procedures, prepare and coordinate Euratom’s participation in the scientific and technical exploitation of the ITER project, coordinate scientific and technological research and development activities in support of Euratom’s contribution to the ITER Organisation, provide Euratom’s financial contribution to the ITER Organisation, arrange to make human resources available for the ITER Organisation, interface with the ITER Organisation and carry out any other activities in furtherance of the ITER Agreement. Governing Board The Governing Board shall be responsible for the supervision of the Joint Undertaking in the pursuit of its objectives and ensure close collaboration between the Joint Undertaking and its members in the implementation of its activities. Executive Committee The Executive Committee shall assist the Governing Board in the preparation of its decisions and shall carry out any other tasks which the Governing Board may delegate to it. Scientific Programme Board The Scientific Programme Board shall advise the Governing Board and the Director, as necessary, on the adoption and implementation of the project plan and work programmes. Director The Director shall be the chief executive officer responsible for the day-to-day management of the Joint Undertaking and shall be its legal representative. External Audit Court of Auditors. Discharge Authority Parliament on a recommendation of the Council. 149,8 million euro of which 81,5 % funded by Community Contribution. 145 posts in the establishment plan of which 101 occupied at 31.12.2008. 56 other posts (contractual, seconded national experts, employment agency staff). Total staff number: 157 assigned to the following duties:

operational tasks: 102,

administrative and support tasks: 47,

mixed tasks: 8.

11 procurements and 16 grants were launched and 3 procurement arrangements were concluded with the ITER Organisation, a prototype superconductor for the ITER poloidal field coils made of niobium-titanium was successfully tested, sub-scale pre-compression rings tested beyond the values required by ITER, a poloidal sector model of the vacuum vessel was completed, the manufacture of a full-scale shield prototype representative of the blanket module, the mock-ups of the wall facing directly the plasma were successfully tested under a high heat flux, the qualification of the divertor vertical target was achieved, a test facility for the demonstration of the remote handling operations on the divertor was completed, high power tests on the first industrial prototype of the 2 MW coaxial cavity gyrotron, Cadarache site: the area was levelled and the main platform was prepared for excavations and construction. JT-60SA tokamak: a rebaselining exercise was completed whereby cost savings were obtained while maintaining the device performance, IFMIF/EVEDA programme: several design activities were advanced and all major aspects of the accelerator system are now fixed, FERC programme: the interfaces between the building and the supercomputer have been defined and benchmark codes established.

Replies of the Joint Undertaking

F4E considers that the underspending to which the Court refers was inherent to the first year of financial autonomy of F4E from the Commission as well as to the delays in the start-up of the ITER International Organisation and the Euratom fusion programme as a whole. Mechanisms for periodical reporting are being established. As part of the action plan for the internal control standards, additional monitoring and reporting will be identified to tighten even further the controls on budget execution. F4E agrees with the comments of the Court concerning the maturity of its internal control environment during its first operational year. Meanwhile, F4E can confirm that the Internal Auditor took up his duties on 1 July 2009. An Action Plan for the implementation of the internal control standards has been prepared, which also addresses the issues identified as concerns IT, and a working group is being set up which will coordinate, monitor and report on its implementation. Furthermore, a Data Protection Officer has been nominated and the necessary actions have been taken to further develop the Business Continuity and Data Recovery Plan. In this context, F4E has set up a quality assurance system in 2008. An exercise of mapping all underlying business processes is under way. F4E takes note of the comment of the Court concerning the absence of budgetary commitments before entering into legal obligations in six particular cases that derive from the obligations of Euratom under the ITER International Agreement and the Agreement with Japan. These six cases are international multiannual arrangements between F4E and the ITER Organisation or the Japanese Domestic Agency, implementing the abovementioned international obligations of Euratom. In order to address the remarks of the Court on this matter, F4E will seek advice from its members in the Governing Board, in particular Euratom. For these specific Agreements, making a budgetary commitment before entering into these arrangements would have a major impact on the capability of F4E to implement the international obligations of Euratom, as the amount that would need to be committed could exceed the available budget within the current framework programme. F4E agrees with the Court’s comment concerning the single case where a negotiated procedure was initiated with having published a contract notice beforehand. It must be noted however, that it was a measure taken under exceptional circumstances. F4E duly documented its decision to deviate from standard procedures and at the same time established a mitigation plan to minimise any negative impacts. The mitigation plan was successfully implemented and the situation was redressed in the meantime. An internal F4E Working Group has been set up to regularly analyse the necessity to amend the F4E Financial Regulation and its Implementing Rules in order to strengthen the financial framework, while taking into account the particular industrial and institutional environment of F4E. The Working Group will analyse the Court’s comments in view of proposing amendments to the Commission and the Governing Board. F4E agrees with the Court’s comment. However, the cause of the delay in the issue of the request for payment of the annual contributions for 2008 is attributable to the transitional period before F4E became financially autonomous from the Commission on 18 March 2008. F4E agrees with the Court’s comment. However, given that 2008 was the first year for which the F4E members were requested to pay their annual membership contribution, most of the members needed some time to establish internal procedures necessary for authorising the payment of this specific contribution. All F4E members have since paid their 2008 annual membership contributions. During its ninth meeting in March 2009, the Governing Board of F4E reminded all members of the need to pay membership contributions in due time. F4E agrees with the Court’s comments on the delay of the Annual Activity Report (AAR) and the absence of an assessment on the effectiveness and efficiency of the internal control system as well as a detailed evaluation of the results against the objectives and timetable set. The delay is mainly attributable to the fact that a meeting of the F4E Governing Board did not take place before the deadline set out in the F4E Financial Regulation. In addition, the Governing Board did not approve the AAR during its meeting on 9 July but only on 14 September. In order to ensure the timely approval of the AAR in the future, F4E will request a Governing Board meeting in early June and establish a procedure with the Governing Board and its subsidiary bodies to prepare well in advance the decision to approve the AAR and the associated analysis and assessment. Due to the fact that F4E was understaffed and not fully operational during the reporting period, only rudimentary management indicators for the implementation of the Work Programme were available and risk assessments had not yet been carried out. These weaknesses will be addressed by F4E in the next AAR, taking into account that internal reporting processes are being developed and risk assessments prepared for all the major areas of F4E operational activities. An action plan for the implementation of internal control standards has been established and entails, among other things, the launch of a risk-assessment exercise as well as an annual review of the effectiveness and efficiency of the internal control environment. Meanwhile, the internal auditor has been recruited and his audit and consulting services shall contribute to the assurance of the Authorising Officer on the effectiveness of the internal control system and the performance of departments in its implementation.

Versions

1. 2008-12-31