Report on the annual accounts of the Innovative Medicines Initiative Joint Undertaking for the financial year 2013, together with the Joint Undertaking’s replies 2014/C 452/05
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Address https://gelex.eu/eli/EU/notice/oj/C/2014/452/05@2014-10-21/en
Paragraph Page Introduction 1-5 36 Information in support of the statement of assurance 6 36 Statement of assurance 7-15 36 Opinion on the reliability of the accounts 12 37 Basis for a qualified opinion on the legality and regularity of the transactions underlying the accounts 13 37 Qualified opinion on the legality and regularity of the transactions underlying the accounts 14 38 Comments on budgetary and financial management 16-18 38 Implementation of the budget 16-17 38 Calls for proposals 18 38 Other matters 19-27 38 Legal framework 19 38 Internal audit function and the Commission’s Internal Audit Service 20-21 38 Monitoring and reporting of research results 22 39 Conflicts of interest 23 39 Commission’s Second Interim Evaluation 24-25 39 Follow-up of previous observations 26-27 39 The European Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (IMI Joint Undertaking), located in Brussels, was set up in December 2007 for a period of 10 years. The objective of the IMI Joint Undertaking is to significantly improve the efficiency and effectiveness of the drug development process, with the long-term aim that the pharmaceutical sector produces more effective and safer innovative medicines. The founding members of the Joint Undertaking are the European Union, represented by the Commission, and the European Federation of Pharmaceutical Industries and Associations (EFPIA). Any legal entity directly or indirectly supporting research and development in a Member State or in a country associated with the Seventh Framework Programme may apply to become a member of the IMI Joint Undertaking. The maximum EU contribution to the IMI Joint Undertaking, to cover running costs and research activities, is one billion euro to be paid from the budget of the Seventh Framework Programme. The EU and EFPIA, as founding members, are to contribute equally to the running costs, each with an amount not exceeding 4 % of the total EU contribution. Other members are to contribute to the running costs in proportion to their contribution to research activities. The research companies which are members of EFPIA are to contribute to the funding of research activities through in-kind contributions at least equal to the EU financial contribution. The Joint Undertaking started to work autonomously on 16 November 2009. The audit approach taken by the Court comprises analytical audit procedures, testing of transactions at the level of the Joint Undertaking and an assessment of key controls of the supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations. Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU), the Court has audited:
(a) the annual accounts of the IMI Joint Undertaking, which comprise the financial statements and the reports on the implementation of the budget for the financial year ended 31 December 2013; and
(b) the legality and regularity of the transactions underlying those accounts.
In accordance with Articles 33 and 43 of Commission Regulation (EC, Euratom) No 2343/2002, the management is responsible for the preparation and fair presentation of the annual accounts of the Joint Undertaking and the legality and regularity of the underlying transactions.
(a) The management’s responsibilities in respect of the Joint Undertaking’s annual accounts include designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies on the basis of the accounting rules adopted by the Commission’s accounting officer, and making accounting estimates that are reasonable in the circumstances. The Director approves the annual accounts of the Joint Undertaking after its accounting officer has prepared them on the basis of all available information and established a note to accompany the accounts in which he declares, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the Joint Undertaking in all material respects.
(b) The management’s responsibilities in respect of the legality and regularity of the underlying transactions and compliance with the principle of sound financial management consist of designing, implementing and maintaining an effective and efficient internal control system comprising adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used.
The Court’s responsibility is, on the basis of its audit, to provide the European Parliament and the Council with a statement of assurance as to the reliability of the annual accounts and the legality and regularity of the underlying transactions. The Court conducts its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions. These standards require the Court to plan and perform the audit to obtain reasonable assurance as to whether the annual accounts of the Joint Undertaking are free from material misstatement and the underlying transactions are legal and regular. The audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and regularity of the underlying transactions. The procedures selected depend on the auditor’s judgement, which is based on an assessment of the risks of material misstatement of the accounts and material non-compliance by the underlying transactions with the requirements in the legal framework of the European Union, whether due to fraud or error. In assessing these risks, the auditor considers any internal controls relevant to the preparation and fair presentation of the accounts, as well as the supervisory and control systems that are implemented to ensure the legality and regularity of underlying transactions, and designs audit procedures that are appropriate in the circumstances. The audit also entails evaluating the appropriateness of accounting policies, the reasonableness of accounting estimates and the overall presentation of the accounts. The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. In the Court’s opinion, the Joint Undertaking’s annual accounts present fairly, in all material respects, its financial position as at 31 December 2013 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its financial rules and the accounting rules adopted by the Commission’s accounting officer. The Joint Undertaking’s ex post audit strategy was adopted by a Governing Board decision on 14 December 2010 and is a key tool for assessing the legality and regularity of the underlying transactions. As of June 2014, 14 out of 40 ex post audits of the second representative sample had been finalised, covering 3 million euro (11,8 % of the audited population). The detected error rate resulting from these audits is 2,3 %. In the Court’s opinion, except for the effects of the matter described in paragraph 13, the transactions underlying the annual accounts of the Joint Undertaking for the year ended 31 December 2013 are, in all material respects, legal and regular. The comments which follow do not call the Court’s opinions into question. The initial 2013 budget included commitment appropriations amounting to 226 million euro and payment appropriations amounting to 135 million euro. At the end of the year the Governing Board adopted an amending budget that increased commitment appropriations to 255,7 million euro and decreased payment appropriations to 130,6 million euro. The overall implementation rate was 99,5 % for commitment appropriations and 97,5 % for payment appropriations. In the case of operational activities, the implementation rate was 100 % for commitment appropriations and 99 % for payment appropriations. However, the total amount of commitment appropriations was committed at level one, meaning that, while calls for proposals have been launched, no corresponding grant agreements have yet been signed. 2013 was the last year in which calls for proposals could be launched under the FP7 programme. The entire budget for research was committed (970 million euro), along with the requisite matching in-kind contributions from the EFPIA companies (982 million euro). The new Financial Regulation applicable to the general budget of the Union was adopted on 25 October 2012 and took effect on 1 January 2013. However the model financial regulation for public-private partnership bodies referred to in Article 209 of Regulation (EU, Euratom) No 966/2012 did not enter into force until 8 February 2014. The financial rules of the Joint Undertaking were amended on 7 July 2014 to reflect these changes. In accordance with the strategic audit plan for 2012-2014 approved by the Governing Board on 3 November 2011, the Commission’s Internal Audit Service (IAS) carried out an assurance engagement of project management and reporting on operational performance. Additionally, the IAS performed an IT risk assessment of both the IMI Joint Undertaking’s specific IT systems and the common IT infrastructure that the IMI Joint Undertaking shares with the FCH, Clean Sky, ENIAC and ARTEMIS Joint Undertakings. The Seventh Framework Programme (FP7) Decision establishes a monitoring and reporting system related to the protection, dissemination and transfer of the research results. The Joint Undertaking has developed procedures to monitor the protection and dissemination of research results at different stages of the projects. The requirements regarding the general monitoring report on FP7 have been defined, and the data related to the IMI Joint Undertaking’s projects were transferred to the Commission in September 2013 for integration in CORDA. However, this monitoring requires further development in order to comply fully with the provisions of the Decision. The IMI Joint Undertaking has put in place specific measures to prevent conflicts of interest in respect to its Governing Board members, experts and employees. These are included in the rules of procedure of both the Governing Board and the Scientific Committee, and in the documentation on the code of conduct and conflicts of interest in the case of independent experts during evaluation. Furthermore, in April 2013 the Joint Undertaking adopted an updated and comprehensive policy on conflicts of interest for both management and staff. The Commission’s Second Interim Evaluation was carried out from March to July 2013, assessing the IMI Joint Undertaking in terms of relevance, effectiveness, efficiency and research quality. The report, issued on 31 July 2013, was positive about the success of the IMI Joint Undertaking in achieving its objectives. It also highlighted areas where further improvements could be made, in particular as regards communication strategy, the development of additional key performance indicators to quantitatively demonstrate the Joint Undertaking’s impact and socio-economic benefits, optimisation of the organisational structure, and a more flexible funding mechanism. The ex post audit corrections resulting from the first audits of the representative sample were implemented and reflected in the 2013 accounts. However, the validation of the accounting system does not yet cover the implementation of ex post audit results. The methodology for evaluating in-kind contributions was approved by the Governing Board on 11 November 2011. These contributions are validated by way of ex ante certification and ex post audits. In 2013, the remaining eight certified methodologies for in-kind contributions were accepted, bringing the total number of EFPIA companies with certified methodologies to 22. The first three ex post audits covering in-kind contributions were completed during the course of the year, a further ex post audit was initiated and two were in the process of being initiated at the year-end. This Report was adopted by Chamber IV, headed by Mr Milan Martin CVIKL, Member of the Court of Auditors, in Luxembourg at its meeting of 21 October 2014. For the Court of Auditors Vítor Manuel da Silva Caldeira President
ANNEX
(1) support pre-competitive pharmaceutical research and development in the Member States and countries associated with FP7 via a coordinated approach to overcome the identified research bottlenecks in the drug development process, (2) support the implementation of the research priorities as set out by the Research Agenda of the IMI JU, notably by awarding grants following competitive calls for proposals, (3) ensure complementarity with other activities of FP7, (4) be a public-private partnership aiming at increasing research investment in the biopharmaceutical sector in the Members States and countries associated with FP7 by pooling resources and fostering collaboration between the public and private sectors, (5) promote the involvement of small and medium-sized enterprises in its activities, in line with the objectives of FP7. Anx. annex. Source: Information supplied by IMI JU. Areas of Union competence deriving from the Treaty (Extracts from Articles 171 and 172 of the Treaty on the Functioning of the European Union) Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme provides for a Community contribution to the establishment of long-term public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 171 of the Treaty. Council Regulation (EC) No 73/2008 of 20 December 2007 setting up the Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (OJ L 30, 4.2.2008, p. 38) Competences of the Joint Undertaking (Council Regulation (EC) No 73/2008) Objectives The Innovative Medicines Joint Undertaking (IMI JU) shall contribute to the implementation of the Seventh Framework Programme (FP7) and in particular the theme Health of the specific programme Cooperation. It shall have the objective of significantly improving the efficiency and effectiveness of the drug development process with the long-term aim that the pharmaceutical sector produces more effective and safer innovative medicines. In particular it shall: Governance The bodies of the IMI JU are the Governing Board, the Executive Director and the Scientific Committee. The Governing Board is composed of 10 Board members representing equally the two Founding Members of the IMI Joint Undertaking: the European Commission and the European Federation of Pharmaceutical Industries and Associations (EFPIA). The Executive Director is the chief executive responsible for the day-to-day management of the IMI JU in accordance with the decisions of the Governing Board and is supported by an Executive Office. The Scientific Committee is an advisory body to the Governing Board. The Joint Undertaking is also supported by two external advisory bodies: the IMI States Representatives Group and the Stakeholder Forum. Resources available to the Joint Undertaking in 2013 Budget 255 715 919 € for commitments 130 558 622 € for payments Staff as at 31 December 2013 All 36 posts provided for in the establishment plan (29 temporary staff and seven contract staff) were occupied. 80 % of these resources are directly assigned to support operational activities. Activities and services provided in 2013 See Annual Activity Report 2013 of the IMI JU at www.imi.europa.eu
ANNEX Innovative Medicines Joint Undertaking (Brussels) Competences and activities
Source: Information supplied by IMI JU. Areas of Union competence deriving from the Treaty (Extracts from Articles 171 and 172 of the Treaty on the Functioning of the European Union) Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme provides for a Community contribution to the establishment of long-term public-private partnerships in the form of Joint Technology Initiatives which could be implemented through Joint Undertakings within the meaning of Article 171 of the Treaty. Council Regulation (EC) No 73/2008 of 20 December 2007 setting up the Joint Undertaking for the implementation of the Joint Technology Initiative on Innovative Medicines (OJ L 30, 4.2.2008, p. 38) Competences of the Joint Undertaking (Council Regulation (EC) No 73/2008) Objectives The Innovative Medicines Joint Undertaking (IMI JU) shall contribute to the implementation of the Seventh Framework Programme (FP7) and in particular the theme Health of the specific programme Cooperation. It shall have the objective of significantly improving the efficiency and effectiveness of the drug development process with the long-term aim that the pharmaceutical sector produces more effective and safer innovative medicines. In particular it shall: Governance The bodies of the IMI JU are the Governing Board, the Executive Director and the Scientific Committee. The Governing Board is composed of 10 Board members representing equally the two Founding Members of the IMI Joint Undertaking: the European Commission and the European Federation of Pharmaceutical Industries and Associations (EFPIA). The Executive Director is the chief executive responsible for the day-to-day management of the IMI JU in accordance with the decisions of the Governing Board and is supported by an Executive Office. The Scientific Committee is an advisory body to the Governing Board. The Joint Undertaking is also supported by two external advisory bodies: the IMI States Representatives Group and the Stakeholder Forum. Resources available to the Joint Undertaking in 2013 Budget 255 715 919 € for commitments 130 558 622 € for payments Staff as at 31 December 2013 All 36 posts provided for in the establishment plan (29 temporary staff and seven contract staff) were occupied. 80 % of these resources are directly assigned to support operational activities. Activities and services provided in 2013 See Annual Activity Report 2013 of the IMI JU at www.imi.europa.eu (1) support pre-competitive pharmaceutical research and development in the Member States and countries associated with FP7 via a coordinated approach to overcome the identified research bottlenecks in the drug development process, (2) support the implementation of the research priorities as set out by the Research Agenda of the IMI JU, notably by awarding grants following competitive calls for proposals, (3) ensure complementarity with other activities of FP7, (4) be a public-private partnership aiming at increasing research investment in the biopharmaceutical sector in the Members States and countries associated with FP7 by pooling resources and fostering collaboration between the public and private sectors, (5) promote the involvement of small and medium-sized enterprises in its activities, in line with the objectives of FP7.
support pre-competitive pharmaceutical research and development in the Member States and countries associated with FP7 via a coordinated approach to overcome the identified research bottlenecks in the drug development process,
support the implementation of the research priorities as set out by the Research Agenda of the IMI JU, notably by awarding grants following competitive calls for proposals,
ensure complementarity with other activities of FP7,
be a public-private partnership aiming at increasing research investment in the biopharmaceutical sector in the Members States and countries associated with FP7 by pooling resources and fostering collaboration between the public and private sectors,
promote the involvement of small and medium-sized enterprises in its activities, in line with the objectives of FP7.
THE JOINT UNDERTAKING’S REPLIES
IMI welcomes the positive conclusion of the Court on the legality and regularity of all transactions underlying the annual accounts, with the only exception of material errors detected by IMI in 2013 through its own ex post audits of interim payments. All errors detected by IMI from these audits have since been communicated to the audited beneficiaries and the required follow-up actions have been launched. Moreover, findings from the audits that were considered as systematic are being extended to non-audited claims submitted by the same audited beneficiaries in order to pro-actively correct any possible similar errors in other claimed costs that were not covered in the initial audits. In parallel, IMI has continued to take concrete preventive measures to mitigate the risk of future errors in beneficiaries’ cost claims. These have included the organisation of frequent financial workshops for participants that focus on recurrent causes of errors and prevention, as well as the regular updating of IMI’s Financial Guidelines for participants explaining in detail the provisions of the IMI model grant agreement. Furthermore, IMI has carried on implementing an intensive annual programme of ex post audits. These audits have proven to be a highly effective and reliable basis for assessing and monitoring the overall regularity and legality of interim payments on a multiannual basis, and as a basis for detecting and correcting errors found in the audited claims. IMI also maintains close coordination with the European Commission and its agencies involved in the Seventh Framework Programme and shares information on common beneficiaries in order to optimise its audit coverage and effectively mitigate the risks of non-compliance. The registered drop to 2,3 % in the error rate resulting from audits finalised by IMI in 2013 (when compared to the error rate of 5,8 % in 2012) is significant. It also provides a very encouraging early indication that the error rate is being effectively reduced over time through concrete actions and measures. The estimated error rate will, nevertheless, continue to evolve, on a multiannual basis, as more audits are launched and completed. IMI will carry on monitoring closely the evolution of the error rate and the impact of its actions, updating accordingly its ex post audit strategy to reflect latest indications and any new emerging risks. With many projects only starting to generate expenditure, particularly in the case of projects from Call 5, the full impact of IMI’s actions can only be seen in the longer term, once more projects submit cost claims and ex post audits cover a greater part of the total population of beneficiaries. IMI remains committed to managing its funding through a trust-based approach with the participants in the projects whilst ensuring sufficient control and accountability. This balanced approach will also contribute towards ensuring a successful outcome of the IMI projects as many of them are already starting to generate impressive or promising results, in the interest of patients and society at large. An action plan has been developed together with the other Joint Undertakings sharing the common IT infrastructure and is being implemented. The recommendation of the Court to also cover the implementation of ex post audit results in the validation of the accounting system by the Accounting Officer has been addressed through the launch of a follow-up exercise.
IMI welcomes the positive conclusion of the Court on the legality and regularity of all transactions underlying the annual accounts, with the only exception of material errors detected by IMI in 2013 through its own ex post audits of interim payments. All errors detected by IMI from these audits have since been communicated to the audited beneficiaries and the required follow-up actions have been launched. Moreover, findings from the audits that were considered as systematic are being extended to non-audited claims submitted by the same audited beneficiaries in order to pro-actively correct any possible similar errors in other claimed costs that were not covered in the initial audits. In parallel, IMI has continued to take concrete preventive measures to mitigate the risk of future errors in beneficiaries’ cost claims. These have included the organisation of frequent financial workshops for participants that focus on recurrent causes of errors and prevention, as well as the regular updating of IMI’s Financial Guidelines for participants explaining in detail the provisions of the IMI model grant agreement. Furthermore, IMI has carried on implementing an intensive annual programme of ex post audits. These audits have proven to be a highly effective and reliable basis for assessing and monitoring the overall regularity and legality of interim payments on a multiannual basis, and as a basis for detecting and correcting errors found in the audited claims. IMI also maintains close coordination with the European Commission and its agencies involved in the Seventh Framework Programme and shares information on common beneficiaries in order to optimise its audit coverage and effectively mitigate the risks of non-compliance. The registered drop to 2,3 % in the error rate resulting from audits finalised by IMI in 2013 (when compared to the error rate of 5,8 % in 2012) is significant. It also provides a very encouraging early indication that the error rate is being effectively reduced over time through concrete actions and measures. The estimated error rate will, nevertheless, continue to evolve, on a multiannual basis, as more audits are launched and completed. IMI will carry on monitoring closely the evolution of the error rate and the impact of its actions, updating accordingly its ex post audit strategy to reflect latest indications and any new emerging risks. With many projects only starting to generate expenditure, particularly in the case of projects from Call 5, the full impact of IMI’s actions can only be seen in the longer term, once more projects submit cost claims and ex post audits cover a greater part of the total population of beneficiaries. IMI remains committed to managing its funding through a trust-based approach with the participants in the projects whilst ensuring sufficient control and accountability. This balanced approach will also contribute towards ensuring a successful outcome of the IMI projects as many of them are already starting to generate impressive or promising results, in the interest of patients and society at large. An action plan has been developed together with the other Joint Undertakings sharing the common IT infrastructure and is being implemented. The recommendation of the Court to also cover the implementation of ex post audit results in the validation of the accounting system by the Accounting Officer has been addressed through the launch of a follow-up exercise.