2015ec.europa.eu/info/sites/info/files/activity-report-2015-dg-home_may2016_en.pdf · foreword this...

European Commission

2015

Annual Activity Report

DG MIGRATION AND HOME AFFAIRS

Ref. Ares(2016)2256562 - 13/05/2016

Foreword

This report describes the activities of the European Commission's Director-General for Migration and Home Affairs (DG HOME) in 2015.

2015 was an extraordinarily challenging year for the EU in the field of migration and home affairs. During the year, 1.8 million irregular migrants arrived in the European Union. Moreover, the EU was targeted by several large-scale terror attacks. DG HOME played a central role in developing swift policy responses to those challenges. In response to the migration crisis, DG HOME also mobilised emergency funding to support the most affected Member States.

This Annual Activity Report assesses the effectiveness of risk management, control and governance processes in place as well as the effectiveness of the internal control system in its entirety.

In 2015, DG HOME worked as 24/7 service under a strong pressure to propose EU wide policy and legislative measures. My gratitude belongs to all colleagues that worked tirelessly throughout the year.

For more information on the activities of DG HOME, please visit our website:

http://ec.euroDa.eu/dQS/home-affairs/index en.htm

home_aar_2015_final of 64

Table of Contents

INTRODUCTION 4 THE DG IN BRIEF, 4

EXECUTIVE SUMMARY 6

A) POLICY HIGHLIGHTS OF THE YEAR (EXECUTIVE SUMMARY OF SECTION L) В) KEY PERFORMANCE INDICATORS (5 KPIs)

c) KEY CONCLUSIONS ON MANAGEMENT AND INTERNAL CONTROL (EXECUTIVE SUMMARY OF SECTION 2) D) INFORMATION TO THE COMMISSIONER(S)

1. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC

..6

..8 12 12

OBJECTIVES OF THE DG

2. MANAGEMENT AND INTERNAL CONTROL

2.1 CONTROL RESULTS 2.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS 2.3 ASSESSMENT OF THE EFFECTIVENESS OF THE INTERNAL CONTROL SYSTEMS 2.4 CONCLUSIONS AS REGARDS ASSURANCE

22 49 53 55

21

13

3. DECLARATION OF ASSURANCE AND RESERVATIONS 58

ANNEXES

ANNEX 1: STATEMENT OF THE RESOURCES DIRECTOR ANNEX 2: HUMAN AND FINANCIAL RESOURCES ANNEX 3: DRAFT ANNUAL ACCOUNTS AND FINANCIAL REPORTS ANNEX 4: MATERIALITY CRITERIA ANNEX 5: INTERNAL CONTROL TEMPLATE(S) FOR BUDGET IMPLEMENTATION (ICTs) ANNEX 9: EVALUATIONS AND OTHER STUDIES FINALISED OR CANCELLED IN 2015 ANNEX 10: SPECIFIC ANNEXES RELATED TO "MANAGEMENT OF RESOURCES" ANNEX 12: PERFORMANCE TABLES


INTRODUCTION

îf We are the Directorate-General (DG) of the European Commission in charge of the policy area known as "Migration and Home Affairs" (DG HOME thereafter). European Union (EU) Member States are committed to increasing cooperation on cross-border issues, such as asylum, migration, border control, organised crime and terrorism. As part of the European Commission, DG HOME prepares EU-level rules in these policy areas and watches over their application. Our DG is also responsible for funding related projects in EU Member States as well as the projects financed under the Europe for Citizens programme.

In order to achieve its different objectives, DG HOME uses several methods of implementation of financial allocations for its actions in the fields of asylum, migration and integration, internal security and borders. DG HOME works closely together with Member States and Associated Countries (under shared management). For actions carried out at EU level (direct management), DG HOME also cooperates directly with international and civil society organisations via grants and contracts that are awarded through calls for proposals and procurement procedures respectively. At times, calls for experts are also organised to provide opinions and advice on specific topics. DG HOME also supervises the work of two executive agencies: EACEA for the programme Europe for Citizens and REA for the Horizon 2020 programme Secure Societies.

The EU has also established agencies in the area of Migration and Home Affairs to support EU Member States and their citizens in coping with new tasks of specific nature. Each agency has a specific mandate defined in its founding act. Together, the European Agency for the Management of Operational Cooperation at the External Borders (Frontex), European Police Office (Europol), European Police College (Cepol), European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), European Asylum Support Office (EASO) and EU Agency for the Operational Management of large-scale IT systems in the area of freedom, security and justice (eu-LISA) provide information and advice, prepare and take decisions, oversee operations and support policy making. DG HOME pays the subsidies voted by the budgetary authority for the agencies through indirect management. DG HOME has also signed a small number of delegation agreements with international organisations and EU agencies.

In terms of human resources, at the end of 2015, 454 management and staff members were working for DG HOME and 87 for the Shared Resources Directorate (as compared to 322 and 78 respectively for 2014). The increase in staff was partly due to the Juncker reorganisation, and partly due to the need to cope with the increased activity in the context of the migration crisis (see "year in brief"). The average age of staff members in DG HOME is 42,1 years (41,4 for female and 43,4 for male). The proportion of female reaches 60,7% across all grades. The female representativeness is above the average of the Commission for senior managers (42,9 % for DG HOME against 29,0 % for the Commission) and for middle managers (43,8 % for DG HOME against 31,9 % for the Commission).

Year in brief In 2015, the refugee crisis took a new scale, calling on further solidarity between Member States and the EU to respond to immediate needs within a longer term strategy. Moreover, the terrorist attacks perpetrated in different Member States also underlined the need for a reinforced and joint reaction from the EU, whose values are directly under threat, with more cooperation between Member States and at EU level. In this context, it has been DG HOME responsibility to ensure that migration and home affairs policies and


instruments were used for defining responses to unprecedented challenges.

Significant changes took place in DG HOME, which had important consequences from both organisational and budgetary point of view.

From an organisational point of view, year 2015 was marked by the reorganisation of the Commission services decided by President Juncker with effect on 1 January 2015, (joining of Research Security funds, Europe for Citizen funds and Anti-Drugs policy funds) and two internal re-organizations. The first re-organization took place on 1 January 2015 when the policies were organised under three Directorates, the management of the non-research Funds was centralized in a newly created financial Directorate (Migration and Security Funds) and a horizontal Directorate was created, including a new Unit dealing with Legal Affairs. The second re-organization took place on 1st of November 2015, with a move from a fund-based structure to the one based on management mode: one unit was assigned to deal exclusively with files under direct management and two geographical units dealing mainly with shared management. Four other Directorates (Strategy and General Affairs, Migration and Mobility, Migration and protection and Security) complete the organigram. The activities of the operational services are supported by the Shared Resource Directorate (SRD), working for DG HOME and DG Justice and Consumers, which covers personnel, IT as well as budgetary and control matters.

Concerning budget, in order to continue implementation of existing policies and to be able to respond effectively to the new challenges as reflected in the new post-Stockholm communication, the overall resources for Migration and Home Affairs have increased compared to the previous period (2007-13), amounting currently to € 12.9 billion for the 2014-2020 MFF. This increase underlines the importance of this policy area at the EU level and ensures better support for building a more open and secure Europe. In annual terms, both the commitment and payment appropriations of DG HOME increased nearly 60% in 2015.

44 colleagues joined DG HOME following the re-organisation of the Commission services (staff on security research and policy for the security industry, anti-drugs policy and Europe for Citizens). The net impact was a significant increase in the structural staff. Nevertheless, the pressure on human resources stayed critical to deliver on the political priorities set out by the President of the Commission and to respond to the increasing workload caused by the migration/refugee crisis and security, especially in light of the different terrorist attacks in Europe. Therefore the need was identified in September 2015 for DG HOME to be reinforced by 130 full time equivalents (FTE). This request was partly met in the launch of the 'DG HOME Call' with the objective to redeploy 50 colleagues from other services of the Commission to DG HOME. The newly recruited colleagues were assigned to deal with the most urgent and pressing tasks in DG HOME and in particular to set up the new team working on the "hotspots". Along the same line, DG HOME also received additional credits for external staff in 2015.


EXECUTIVE SUMMARY The Annual Activity Report is a management report of the Director-General of DG HOME to the College of Commissioners. It is the main instrument of management accountability within the Commission and constitutes the basis on which the Commission takes its responsibility for the management of resources by reference to the objectives set in the management plan and the efficiency and effectiveness of internal control systems, including an overall assessment of the costs and benefits of controls.

- / Γ »lit? of the year (executiv; sedii

Better managing migration, highlighted among the 10 political priorities of the Commission for the next five years, has been an increasingly pressing challenge in 2015. Responding to the need to save lives and assist front line countries faced with an unprecedented scale of migratory inflows, and to better manage migration in the long term, the Commission presented on 13 May a European Agenda on Migration where it set out a comprehensive approach and identified immediate and long-term measures to implement such approach. This also followed the commitment taken by President Juncker in the political guidelines defined for the College.

The scale of the migratory inflows to the EU -crossings were detected in the EU over 2015 -roll out the European Agenda on Migration:

more than 1.8 million irregular border has required the Commission to rapidly

In May-June, the Commission initiated the setting up of "hotspots", presented an EU Action Plan on return and adopted a proposal for a Council Decision establishing an emergency relocation mechanism for the benefit of Italy and Greece aiming to relocate 40.000 people within a two-year period. This was complemented in September, by a second proposal aiming to relocate 120.000 people within a two-year period, as well as a proposal for a permanent crisis relocation mechanism under the Dublin system. In addition, in December 2015, the Commission also presented a Recommendation for a Voluntary Humanitarian Admission Scheme with Turkey.

On the other hand the sheer scale of the migratory crisis and the rapidly changing security situation within and outside the EU, have made maintaining efficient EU border management more difficult and more complicated, and still - even more necessary. It became clear that the pressure at the EU's external border is so immense that it is impossible for the border management authorities of the individual Member States to cope with it on their own.

In December the Commission adopted a Border package presenting a set of measures to address the challenges that the EU is facing. A key element of this package is the draft Regulation on the European Border and Coast Guard. With this proposal the Commission aims at strengthening the mandate of FRONTEX and providing it with the necessary legal framework and resources to mobilise efforts more quickly and adequately so as to perform effectively in situations when urgent action is needed.

In addition, the EU and its Member States are confronted with increasingly complex security threats, as evidenced in particular by the terrorist attacks that took place in Paris (January, November) and in Copenhagen (February), in addition to the various failed attacks, highlighting the need for further synergies and closer cooperation at all levels to address this reality. The responsibility for ensuring internal security on the


ground is first and foremost with the Member States, however, the cross-border nature of the security challenges the EU and its Member States are confronted with defies the capacity of individual countries to act alone.

These challenges require acting at European level to exploit synergies, foster closer cooperation and increased information exchange between the Member States' law enforcement authorities, the EU institutions and EU Agencies, focusing on where the EU can add value to the action of the Member States. To address them, the Commission adopted on 28 April 2015, a European Agenda on Security identifying shared priorities for the EU and its Member States, as well as concrete actions to increase the level of internal security in the EU and ensure an effective EU response until 2020 against terrorism and radicalisation, organised crime, and cybercrime.

In response to the growing threat from violent radicalisation and foreign terrorist fighters, the Commission has accelerated work to implement the European Security Agenda. It has set up a centre of excellence to support the work of the Radicalisation Awareness Network, established the EU Internet Forum to tackle terrorists' use of the internet, fostered efforts to target the illicit trafficking of firearms and explosives in the EU with a set of new proposals as part of an Action Plan and proposed to strengthen the EU legal framework on investigating and prosecuting terrorism with a proposal for a Directive criminalising preparatory acts (e.g. training and travel abroad for terrorist purposes, aiding or abetting, inciting and attempting terrorist acts).

The Commission also endeavoured to further expand and consolidate EU external relations in the area of Home affairs, including on migration and drugs, through a comprehensive, balanced and human rights-based approach. New bilateral policy dialogues and cooperation frameworks were established with key strategic partners, such as in the area of counterterrorism with Middle East and North African countries or in the area of migration with a number of Sub-Saharan countries that are important countries of origin and/or transit. Following the request from the EU Council, High Level Dialogues on Migration were prepared with a number of priority countries (notably Afghanistan, Pakistan, Bangladesh, Morocco, Algeria, Senegal, Mali, Nigeria, Niger, Ethiopia, Sudan), with a view to promoting cooperation on migration with these countries, including on the return of irregular migrants.

At the same time, existing regional and bilateral dialogues and cooperation frameworks were further strengthened, notably through increased steering and financial support from the EU, as in the case of the Western Balkans, Valletta and EU-Turkey Summits organised by the EU and supported through the setting up of innovative financial mechanisms (EU Trust Funds and grant facilities).


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Three of the five key performance indicators chosen in the Management Plan 2015 to measure the most critical aspects of DG HOME policy performance refer to activities under the 2014-2020 Home Affairs Funds (Asylum, Migration and Integration Fund, and Internal Security Fund):

1. Number of law enforcement officials trained on cross-border-related topics with the help of the Internal Security Fund

2. Number of target group persons who received pre or post return reintegration assistance co-financed by the Asylum, Migration and Integration Fund

3. Number of consular posts equipped, secured and/or enhanced with the help of the Internal Security Fund to ensure the efficient processing of visa applications and provide quality service to visa applicants

However, the information available is partial as it does not yet include Member States' reporting for AMIF and ISF projects under shared management, which will be available after the completion of the first reports in 2016. DG HOME has designed a common monitoring and evaluation framework, to which the Member States have actively contributed. It will be part of the Delegated Regulation on the common monitoring and evaluation framework of AMIF and ISF that should be published by the end of 2016. Based on this framework, Member States will be reporting annually against a set of indicators, thus allowing the DG HOME to monitor the progress of the implementation of the activities funded by AMIF and ISF in each Member State.

As alternatives for indicating the progress made in 2015, data can be provided in the areas covered by the key performance indicators based on other sources as described below.

The remaining two KPIs are the following:

4. Number of mobility partnerships

5. Residual error rate for all DG HOME ABB activities

1. Number of law enforcement officials trained on cross-border-related topics with the help of the Internal Security Fund

As regards the first indicator, the number of law enforcement officials trained by CEPOL was 12.992. With a baseline of 6.019 officials trained in 2012, 10.322 officials trained in 2014, and a target to increase this number each year, the graphic below shows a continuous positive trend.


Number of law enforcement officials trained by CEPOL

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2. Number of target group persons who received pre or post return reintegration assistance co-financed by the Asylum, Migration and Integration Fund

As regards the key performance indicator 2, the data available related to the number of persons that received reintegration assistance under the Return Fund in the period between 2011 and mid 2015 (45.300 persons) in the framework of the Programme "Solidarity and Management of Migration Flows" (SOLID). This information has been reported by Member States in the context of an on-going ex-post evaluation. This represents a significant increase compared to the previous reporting period covering years 2008 - 2010 where Member States had reported 7.636 persons that received reintegration assistance through the Return Fund.

3. Number of consular posts equipped, secured and/or enhanced with the help of the Internal Security Fund to ensure the efficient processing of visa applications and provide quality service to visa applicants

As regards key performance indicator 3, the data are available on the number of visa sections that were renovated/constructed/equipped/connected to the Visa Information System (VIS) with the help of the External Borders Fund in the period between 2011 and mid 2015 (annual programmes 2011-2013). In the context of the on-going ex-post evaluation, Member States reported the following data:

• consulates connected to VIS - 1365 • consulates constructed or renovated - 184 • consulates equipped with security enhancing equipment - 116 • consulates equipped with operating equipment for Schengen visa processing -

1349


4. Number of mobility partnerships

The total number of Mobility Partnership remains the same as in 2014 (8). However, it should be underlined that partner countries of the existing Mobility Partnerships generally continued to be committed to their implementation, as reflected in the organisation of high level meetings for most of them in the course of 2015. In parallel, the negotiations on a new Mobility Partnership with Belarus made good progress and the launch of negotiations with Lebanon is considered. The signature of a Delegation Agreement with ICMPD end of 2015 on a Mobility Partnership Facility will provide additional impetus to the implementation of Mobility Partnerships.

5. Residual error rate for direct and shared management

In 2015 AAR, error rates are not anymore measured and reported at the ABB activity level, but separately for each distinct control system. In this regard, error rates for three activities in particular (direct management - non-research grants; direct management -research grants and shared management) are measured and monitored in a systematic way and reported as KPI 5.

The residual error rates for direct management grants (both research and non-research grants) remained above the materiality criteria of 2%, while the overall residual error rate for shared management is estimated to be well below 2%. In the absence of full historical data (as FP7 activities were joined with DG HOME only from 2015) and for reasons of cost-efficiency, DG HOME has not calculated its own specific residual error rate for FP7, but is using a prudent estimation of the common representative error rate to estimate the impact of the reservation.


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In accordance with the governance statement of the European Commission, (the staff of) DG HOME conducts its operations in compliance with the applicable laws and regulations, working in an open and transparent manner and meeting the expected high level of professional and ethical standards.

The Commission has adopted a set of internal control principles, based on international good practice, aimed to ensure the achievement of policy and operational objectives. The financial regulation requires that the organisational structure and the internal control systems used for the implementation of the budget are set up in accordance with these standards. DG HOME has assessed the internal control systems during the reporting year and has concluded that the internal control principles are implemented and function as intended. Please refer to AAR section 2.3 for further details.

In addition, DG HOME has systematically examined the available control results and indicators, including those aimed to supervise entities to which it has entrusted budget implementation tasks, as well as the observations and recommendations issued by internal auditors and the European Court of Auditors. These elements have been assessed to determine their impact on the management's assurance as regards the achievement of control objectives. Please refer to Section 2 for further details

In conclusion, management has reasonable assurance that, overall, suitable controls are in place and working as intended; risks are being appropriately monitored and mitigated; and necessary improvements and reinforcements are being implemented. The Director General, in his capacity as Authorising Officer by Delegation has signed the Declaration of Assurance albeit qualified by three reservations; two financial reservations concerning direct management (one for research grants and other for non-research grants) and one reputational reservation concerning shared management (European Fund for the Integration of third-country nationals and European Refugees Fund in Germany). The reservations have been issued as a consequence of the change in the methodology for assessing materiality (the assessment is performed now for each control system separately and not at a ABB aggregated level), while the error rates in direct management improved in 2015 and a large number of financial corrections were implemented in the Member States. The impact of the reservations is limited to 0.61% of the payments made in 2015, amounting to 7.37 million.

ci) Information to Ihr v ^TiiibissionerCs)

The main elements of this report and assurance declaration, including the reservations envisaged have been brought to the attention of Commissioner Dimitris Avramopoulos, responsible for migration, home affairs and citizenship.


1. KEY RESULTS AND PROGRESS TOWARDS THE ACHIEVEMENT OF GENERAL AND SPECIFIC OBJECTIVES OF THE DG

2015 has been a critical year for turning political commitments taken by President Juncker on migration and security in his political guidelines of 2014 into policy developments. The achievements of DG HOME in 2015 have therefore been presented in the present report under the flagship of the two key priorities related to security and migration of President Juncker mandate, rather than on the ABB-based structure of the Management Plan 2015. Details on the outputs and the indicators of the Management Plan 2015 are however provided in the performance tables in Annex 12.

Migration and home affairs policies are of shared competence between the EU and Member States. DG HOME activities and the policies developed by the Commission aim at contributing to ensure a high level of security in the EU and an effective management of migration flows as well as the development of a common policy on asylum, border and immigration.

Details on the outputs and the indicators of the Management Plan 2015 are provided in the performance tables in Annex 12. These include data related to the Europe for Citizens Programme. The programme is mainly implemented through the Education, Audiovisual and Culture Executive Agency, which contributed to DG HOME objective of Fostering European citizenship in an effective way, while dealing with an increasing number of applications, notably by using the IT tools introduced in 2014. In 2015, actions under the programme had a focus on awareness of remembrance, common history and values, civic engagement, while also taking into account the situation related to the financial crisis and migration.

An area of justice and fundamental rights based on mutual trust

Contributing to a high level of security in the European Union as part of a broader objective to ensure the EU is an area of justice and fundamental rights based on mutual trust was identified as a priority for this Commission under President Juncker's Political Guidelines. The responsibility for ensuring internal security is first and foremost with the Member States, but cross-border challenges defy the capacity of individual countries to act alone and require EU support to build trust and facilitate operational cooperation and exchange of information. Combatting cross border crime and terrorism is a common European responsibility calling for further action.

Following an intensive work by DG HOME including broad consultations, the Commission adopted on 28 April 2015 a European Agenda on Security, setting out the main actions envisaged by the Commission to ensure an effective EU response to terrorism and security threats in the European Union over the period 2015-2020, as foreseen in the Commission Work Programme for 2015.

The European Agenda on Security prioritises the fight against terrorism, organised crime and cybercrime as interlinked areas with a strong cross-border dimension where EU action can make a real difference. In particular, the Agenda focuses on improving information exchanges and operational cooperation between law enforcement authorities, and between them and the relevant EU Agencies. It also mobilises a number of EU instruments to support actions through training, funding and research and innovation. Finally, the Agenda sets out a number of targeted actions to be taken at EU level, to step up the fight against terrorism, cybercrime as well as organised crime, including by supporting Member States' activities in the prevention of and fight against illicit drugs home_aar_2015_final of 64

trafficking. These actions will support and complement the actions undertaken by the EU Member States at national level, contributing to the objective of a high level of security in the EU.

Efforts made to strengthen the role of Europol and reinforce coordination and operational cooperation between national law enforcement authorities has showed results. As evidenced by the amount of operational messages through Europol systems on organised crime topics (+ 35%), and the number of exchanges between Member States and/or with third countries via FIU.Net (+ 42%), information exchange between law enforcement authorities of the Member States - key for conducing successful investigations and to ensuring a higher level of security within the EU - is evolving positively. The increased role of Europol is also evidenced by the number of accepted contributions to analytical work files, which have significantly increased in the recent years (+ 22%), as well as the number of SIENA cases initiated by Member states, Europol and third parties (+ 91%).

The political agreement reached between the co-legislators on the Commission's proposal for a Europol regulation constitutes a further step forward towards making Europol a hub for information exchange for law enforcement authorities within the EU and to better support their actions.

The tentative agreement found on the Commission's proposal for a Directive on the use of Passenger Names Record data by law enforcement authorities rather than a set of diverging national rules was also a milestone in that respect and should lead to the formal adoption of the Directive in 2016.

Operational cooperation between law enforcement national agencies with the support of EU institutions and bodies has also increased in 2015, as demonstrated by the number of supported Joint investigation Teams and of operational coordinated actions under the European Multidisciplinary Platform against Criminal Threats (541), an EU mechanism for defining common priorities and joining efforts based on shared intelligence. In terms of training and funding, significant efforts were made, even though precise data is not yet available on all indicators reported in Annex 12.

In order to increase information exchange and improve operational cooperation between the Member States' law enforcement authorities, significant progress was also made to step-up the support that EU Agencies can provide to the Member States. The Commission supported the creation, within Europol, of a European Counter Terrorism Centre (ECTC) which became operational on 1st of January 2016. The ECTC brings together existing structures, services and tools available to the Agency to maximise their use. It includes (1) Europol's Focal Point Travellers on foreign terrorist fighters and related terrorist networks, (2) the EU-US Terrorist Financing Tracking Programme (TFTP), (3) FIU.NET, the decentralised computer network supporting Financial Intelligence Units, now embedded in Europol, and (4) Europol's existing capabilities on firearms and explosive devices.

On the other hand, the new CEPOL regulation was adopted, broadening its mandate so that it can better support and develop learning activities for law enforcement officials and adapt its training to this ever-evolving environment. The growing number of law enforcement officers participating in training organised by CEPOL shows how the Agency has consolidated its role on training matters (+ 25%).

The Secure Societies Challenge Programme, managed by DG HOME and the Research Executive Agency (REA), has been used in 2015 to further promote innovation and the development of patent applications in the field of security, taking into consideration ongoing societal transformations and growing global interdependencies and threats. REA managed projects which contributed to DG HOME objective of supporting research which can enhance the resilience of EU society against natural and man-made home_aar_2015_final of 64

disasters, fighting crime and terrorism, improving border security and supporting the Unions external security policies through conflict prevention and peace building.

The growing phenomenon of the foreign terrorist fighters and the attacks in Paris and Copenhagen have confirmed the key importance of preventing radicalisation as part of a broader approach to mitigate terrorism threats, notably by exchanging best practices between Member States. The Commission launched on 1 October 2015 a Radicalisation Awareness Network Centre of Excellence, funded with a budget of €25 million for the next 4 years, which will strengthen the work of the Network to translate the expertise of first line practitioners into policy recommendations to tackle and prevent radicalisation to terrorism and violent extremism.

The increasing use in the recent years by terrorists of the internet and social media has called for a coherent and coordinated European prevention approach to countering terrorism. The Commission therefore launched in December an EU Internet Forum which brings together Interior Ministers from the Member States and representatives from major internet companies. Its goal is to reach a joint, voluntary approach based on a public-private partnership to reduce accessibility to online terrorist material and to empower civil society to challenge and provide narratives online. As part of these efforts, an EU Internet Referral Unit (IRU) was established at Europol in July 2015 to identify terrorist material and refer it to the companies on whose sites the material is hosted. Whilst this is a voluntary approach, in the majority of cases, the material is swiftly removed. The EU IRU also provides operational support to Member States through the provision of analysis.

To support the development of effective counter narratives against terrorist propaganda, the Commission has also supported the EU Syria Strategic Communications Advisory Team (SSCAT) project, with a grant of € 1.000.000, established in January 2015. It aims at developing and exchanging best practices in the area of strategic communication with a view to preventing and countering terrorist crime and violent extremism with a particular focus on terrorist foreign fighters. This network will benefit Member States and the EU beyond the duration of this project.

Victims of terrorism deserve EU solidarity and support. They also have a very prominent role to play in countering radicalisation and their testimonies can provide a crucial contribution. The Commission hosted the European Remembrance Day for Victims of Terrorism on 11 March 2015.

In order to step up the criminal justice response to terrorism, DG HOME accelerated its work to up-date the EU legal framework and adapt it to the evolving terrorist threat that Europe is facing so that the Commission could present without delay its proposal. The proposal for a Directive adopted on 2 December aims at supporting the effective investigation and prosecution of terrorists and to facilitate the cross border exchange of information and cooperation, incorporating the requirements resulting from the Council of Europe Additional Protocol to the Convention on the Prevention of Terrorism, signed by the Commission on behalf of the EU in October.

The Commission also adopted in December an Action Plan to target the illicit trafficking of firearms and explosives in the EU to step up efforts to better detect, investigate and seize firearms, explosives and explosives precursors to be used for criminal and terrorist purposes. Proposals were also made to review the firearms Directive which defines the rules under which private persons can acquire and possess firearms, as well as their transfer to another EU country, and foster deactivation rules.

On cybercrime, one of the key priorities outlined by the European Agenda on Security, DG HOME has placed a particular focus on the implementation of EU legislation by Member States, notably the Directive on Attacks against Information Systems (2013/40/EU) and the Directive 2011/93/EU on combating child sexual abuse and sexual home_aar_2015_final of 64

exploitation and child pornography. DG HOME also continued to work with Member States' Cybercrime Centres of Excellence with a view to set up an EU-wide network to support capacity building in Member States and EU policy development.

On the operational side, the European Cybercrime Centre (EC3), operational since 2013 within Europol to support Member States operations and investigations, coordinated a large number of successful operations, dismantling criminal groups active in creating and disseminating malware, in sharing child sexual abuse images, and in committing noncash payment fraud.

Support was also provided to Member States' activities in fighting illicit drugs and in prevention activities, using the expertise of the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) and Europol, on the basis of the principles expressed in the EU Drug Strategy 2013-2020. Analysis from the EMCDDA and Europol demonstrate that the market for illicit drugs remains the most dynamic of criminal markets, with a more recent trend being the proliferation of new psychoactive substances (IMPS), which are increasingly produced in the EU. As part of measures aiming at reducing drug use and trafficking by banning new psychoactive substances, four Council Implementing decisions as well as one Commission proposal were adopted. Attaining EU objectives depends to a great extent on action taken at national - or regional or local - level by and in the EU Member States. The role of the Civil Society Forum (CSF) in the development of drugs policies has been reinforced.

At international level, the EU continued its long-standing cooperation with third countries in the field of drugs, aiming to tackle drug supply and demand in a balanced way, while also promoting and protecting human rights. Several steps have been taken in 2015 to ensure that the EU will be speaking with one voice at the 2016 United Nation's General Assembly Special Session (UNGASS) on drugs which will be a milestone in the further development of a global drug policy that aims at addressing a phenomenon that affects millions of people worldwide. The most important has been the adoption of an EU Common Position calling for balanced, integrated and evidence-based, as well as a more humane and public health orientated global drug policies.

A new policy on migration

With the number of irregular migrants and of deadly journeys over the Mediterranean reaching new peaks in 2015, the migration crisis has put the spotlight on immediate needs but has also revealed that the collective EU migration policy had fallen short at the same time as it confirmed that Member States cannot individually tackle the migratory pressure. On the basis of the work led by DG HOME, the Commission presented on 13 May a European Agenda on Migration which develops President Juncker's Political Guidelines into a set of initiatives based around four pillars (Reducing the incentives for irregular migration; Border management - saving lives and securing external borders; Europe's duty to protect: a strong common asylum policy; A new policy on legal migration) to manage migration better in all its aspects.

However, the scale of the 2015 migratory inflows to the EU of people in need of international protection required the Commission to quickly adapt to the circumstances. DG HOME prepared three main packages making concrete proposals to translate into practice the key principles of solidarity and a fair sharing of responsibilities between Member States:

• In May-June, the Commission adopted a proposal for a Council Decision establishing an emergency relocation mechanism for the benefit of Italy and Greece aiming to relocate 40.000 people within a two-year period and a Recommendation of 8 June on a European resettlement scheme, and issued guidelines on fingerprinting.


• In September, the Commission adopted the second proposal for a Council Decision establishing an emergency relocation mechanism for the benefit of Italy and Greece aiming to relocate 120, 000 people within a two-year period, a proposal for a permanent crisis relocation mechanism under the Dublin system, and a proposal for a European list of safe countries of origin.

• In December the Commission presented a Recommendation for a Voluntary Humanitarian Admission Scheme with Turkey (formally adopted on 11 January 2016) as well as a proposal for a temporary suspension of Sweden's obligations under the EU relocation mechanism for the period of one year.

The Recommendation for a European resettlement scheme was followed by an agreement by EU Member States and the Dublin associated States (20 July) to resettle 20.504 persons in need of international protection by 8 December 2017. In September, the Council adopted the two proposals for the emergency mechanism. The mechanism aims to relocate 160,000 persons in clear need of international protection from Italy and Greece by 26 September 2017.

These initiatives were accompanied by a substantial increase in the AMIF budget for an amount of € 1.04 billion to support relocation objectives.

By the end of 2015, 2 025 people have been resettled and 272 people relocated. The low numbers in the relocation scheme are partially due to the relative innovative nature of the scheme. A slow start of the system was expected, in view of the need to develop operational procedures and build the capacity of Italy and Greece as well as of the Member States of relocation.

In order to respond to the extraordinary migratory pressure at external borders, the Commission also announced the setting up of the 'hotspot' approach where the European Asylum Support Office, Frontex and Europol will work on the ground with frontline Member States to swiftly identify, register and fingerprint incoming migrants Designed to offer integrated teams, operating in dedicated facilities, 24 hours a day and seven days a week, the 'hotspots' will enable to process much larger numbers than the normal national systems, channelling migrants into the asylum procedure, the return system, or into relocation.

Greek authorities identified five hotspot areas (Lesvos, Leros, Kos, Chios and Samos) and Italy authorities identified six hotspot areas (Lampedusa, Pozzallo, Porto Empedocle/Villa Sikania, Trapani, Augusta and Taranto). In that context, DG HOME has deployed staff in Italy and Greece, in order to improve the close cooperation and coordination between the relevant European agencies (EASO, FRONTEX, EUROPOL and, where necessary, EUROJUST), other Member States, international organisations (UNHCR, IOM) and the respective competent authorities at national, regional and local levels.

DG HOME prepared reports on first achievements in reports adopted by the Commission on 15 December 2015. By the end of 2015, only Moria (on the island of Lesvos) could be considered as an operational hotspot in Greece. Further construction works have started on Leros and Chios. In Italy, two hotspots have opened in Lampedusa and Trapani. Both Italy and Greece have used the possibility to submit projects under AMIF and ISF emergency assistance for the setting up of the hotspots. Initial progress has been achieved in the implementation of the first hotspots, in the deployment of fingerprinting machines, of FRONTEX and EASO experts, in security checks and in the coordination with national authorities notably. However, those developments have only paved the way for the full completion of hotspots which will remain a priority in 2016. The European Council conclusions of 17 December 2015 pointed out that the deficiencies in the functioning of hotspots had to be rapidly addressed.

The European response to the crisis has also required engaging and cooperating with the home_aar_2015_final of 64

international community, combining internal and external policies. Two new Regional Development and Protection Programmes were put in place in North Africa and the Horn of Africa. Priority actions under both programmes were identified and the Commission made available over EUR 75m for their implementation (EUR 15m from AMIF). Protection and asylum also feature high in the Valetta Summit declaration adopted in November 2015.

The EU response has also included a significant increase of the amounts foreseen for the AMIF and ISF (€ 6.9 billion for the two Funds for the 2014-2020 period). To the amount originally planned for 2015 i.e. € 1.017 billion for national programmes, emergency measures and Union actions, additional resources has been added i.e. € 130 million for emergency measures, € 7 million for Regional development programme for Africa and Horn of Africa and € 25 million for resettlement scheme.

In addition, the EU agencies' capacities have been also increased to further assist Member States in managing the crisis and in particular to contribute to the hotspots approach; additional staff (143 posts in total) has been allocated during the year 2015 to Frontex, EASO and Europol and additional operational resources have been allocated to Frontex to joint operations in the Mediterranean Sea.

Throughout the year DG HOME has closely worked with the European Asylum Support Office (EASO) in the different activities performed by the agency to support Member States, with a view to foster a coherent implementation of the Common European Asylum System. EASO has been working on communication/information issues, being actively present at the hotspots, not only providing experts but also daily reports on relocation, guidance and developing tool kits (e.g., vulnerable people) and indicators (reception conditions) which will be delivered in 2016. On the other hand, the Commission intensified its monitoring of the transposition and implementation by the Member States of the asylum acquis to achieve a functional common asylum system and a uniform status for those who are granted international protection thereby reducing divergences that are the heart of many of the CEAS implementation problems (e.g. secondary movements, "asylum shopping"). It adopted in 2015 a total of 51 decisions (letters of formal notice and reasoned opinions) in infringement procedures, carried out several meetings with Member States representatives and several visits.At the same time funds were used to improve the reception and asylum conditions in Member States and support them at improving their capacity to monitor, develop and evaluate their asylum policies.

Looking at economy and efficiency

EASO headquarters are located in Valletta (Malta). The cooperation between the Commission and EASO increased particularly in view of supporting Italy and Greece in the implementation of the emergency relocation mechanism. The increased cooperation between the Commission and EASO also demanded increased contacts which have been carried out via weekly video-conferences, as a way of improving economy and efficiency.

The European Agenda on Migration also identified the fight against migrant smuggling as a priority to prevent the exploitation of migrants by criminal networks and reduce incentives to irregular migration. The cooperation against the smuggling of migrants inside the EU and with third countries was also singled out by the European Agenda on Security as a priority in the fight against organized crime networks. The Commission presented an EU Action Plan against migrant smuggling (2015 - 2020) aimed at a comprehensive approach involving actors and institutions at local, regional, national and international level, which would in particular enhance the capacities of Member States to investigate and prosecute migrant smuggling networks and improve home_aar_2015_final of 64

the gathering and sharing of information.

Another commitment taken with the European Agenda on Migration was to develop a new policy on legal migration by modernising and overhauling the Blue Card scheme, by reprioritising our integration policies, and by maximising the benefits of migration policy to individuals and countries of origin.

In December 2015, a political agreement was found between the two co-legislators on the Commission proposal for a recast Directive on the conditions of entry and residence of third-country nationals for the purposes of research, studies, pupil exchange, remunerated and unremunerated training, voluntary service and au pairing, paving the way for its adoption in 2016. The new Directive will cover all aspects linked to the immigration of the groups concerned, including admission conditions, rights and intra-EU mobility, improving the efficiency of the system. The new rules should also increase the attractiveness of the EU and encouraging students and researchers to stay in the EU. Students who graduated and researchers who finished their research activity will be able to stay for 9 months to look for a job or set up a business. The Commission has also initiated the work on reviewing the Blue Card Directive and launched a public consultation for that purpose.

The scale of the migratory crisis and the rapidly changing security situation within and outside the EU have made maintaining efficient EU border management more difficult in 2015. Securing Europe's external borders is a priority of both the European Agenda on migration and of the European Agenda on Security.

On 15 December the Commission adopted a set of measures to contribute to address the challenges that the EU is currently facing at its external border relating to the migratory crisis and security threats.

A key element of this "border package" prepared by DG HOME is a proposal for a European Border and Coast Guard. With this proposal the Commission aims at strengthening the mandate of FRONTEX and providing it with the necessary legal framework and resources to mobilise efforts more quickly and adequately so as to perform effectively in situations when urgent action is needed. The European Border and Coast Guard would guarantee the implementation of the European integrated border management as a shared responsibility between the EU and its Member States.

Another key element of the package is the proposal for a targeted amendment of the Schengen Borders Code for systematic controls of EU nationals at the external borders, 'including the verification of biometrie information, against relevant databases at external borders of the Schengen area, making full use of technical solutions in order not to hamper the fluidity of the movement' as requested in the Council conclusions of 9 and 20 November 2015. The recent terrorist attacks have demonstrated that EU citizens can also be perpetrators of attacks. Such systematic control will allow for the identification of such persons and for minimising the risks to the internal security of the Schengen area. Effective controls at the external Schengen borders on all persons are also essential for maintaining the internal Schengen area of free movement.

The Commission also adopted the Practical Handbook for implementing and managing the European Border Surveillance System (EUROSUR Handbook), elaborated together with FRONTEX and Member States' experts, and which contains operational and technical guidelines as well as recommendations and best practices. As reported by FRONTEX, the implementation and functioning of those EUROSUR components (in particular the European Situational Picture and the Common Pre-frontier Intelligence Picture, the EUROSUR communication network and the common application of surveillance tools) show that all Member States have made progress in further developing their National Situational Pictures.


Following the completion in 2015 of the pilot test on faster and more secure border-control processes, notably as regards an entry-exit system, the proposals made on border management will be complemented in 2016 with a proposal on smarter borders.

Legal and technical modifications were implemented in the Schengen Information System (SIS II) in order to improve and accelerate information exchange on terrorist suspects and to prevent the departure of foreign fighters. The Commission received very positive feedback from the Member States on the usefulness of the SIS II for law enforcement purposes including combating terrorism and serious and organised crime. The new measures are very effectively used by Member States authorities including state security services. On 13 April 2015 SIS II became operational in the UK. Now 25 EU Member States and 4 Schengen Associated Countries cooperate through the system.

On the other hand the worldwide rollout of the Visa Information System - supported by the External Borders Fund - was completed (November), connecting all consulates in non-EU countries and all external border crossing points of Schengen States. The database will contain all data, including biometrìe, of third country nationals who need a visa to travel to the Schengen area, making fraudulent crossing on the basis of a forged Schengen visa virtually impossible.

2015 was the first year of implementing the new Schengen governance mechanism coordinated by the Commission with missions on the ground led by DG HOME jointly with Member States experts, contributing to the implementation of the Schengen rules. Announced visits were carried out in Austria (Integrated Border Management/ Air Borders), Belgium (Integrated Border Management/Sea Borders and Air/Land Borders), Germany (Integrated Border Management/Sea Borders and Air Borders) and the Netherlands (Integrated Border Management/Sea Borders and Air Borders). Unannounced visits took place in Sweden, Spain, Hungary, Poland and Greece as far as the management of external borders is concerned. As regards the implementation of the Schengen acquis on the absence of border control at the internal borders, unannounced visits were carried out in Latvia (at its internal border with Lithuania and the port of Riga), at the German/French borders and in Switzerland (at its internal border with Italy).

Frontex has coordinated a growing number of joint operations at the borders (25), supporting Member States in their efforts to achieve an efficient, high and uniform level of border control. These included the operations EPN Poseidon Sea and EPN Triton which had their budget tripled according to the European Council recommendations. In the peak season approximately 1,000 officers were deployed per day (EBGT, local staff and crew members) in those operations, as well as numerous aerial, maritime and land means. The operations had participation of up to 26 EU Member States and Schengen Associated Countries and two third countries.

Further efforts have also been carried out to support Member States in implementing fair and effective return strategies, contributing to combat irregular migration, with the adoption and implementation of a Return Action Plan. The Action Plan acknowledges the key role and responsibility of the Member States in implementing EU return policy and develops a concept for stronger interaction on return between them and the EU Agencies, which provide significant support.


2. MANAGEMENT AND INTERNAL CONTROL Assurance is an objective examination of evidence for the purpose of providing an assessment of the effectiveness of risk management, control and governance processes.

This examination is carried out by management, who monitors the functioning of the internal control systems on a continuous basis, and by internal and external auditors. Its results are explicitly documented and reported to the Director-General. The reports produced are:

- the reports by Authorising Officers by Sub-Delegation;

the reports from Authorising Officers in other DGs managing budget appropriations in cross-sub-delegation;

the reports on control results from management/audit authorities in Member States in shared management as well as the result of the Commission supervisory controls on the activities of these bodies;

the reports of the external auditors on control results of traditional agencies in indirect management as well as the result of the Commission supervisory controls on the activities of these bodies;

- the contribution of the Internal Control Coordinator, including the results of internal control monitoring at the DG level;

the results of the ex-post supervision and audit;

the conclusion of the internal auditor on the state of internal control, and the observations and recommendations reported by the Internal Audit Service (IAS);

- the observations and the recommendations reported by the European Court of Auditors (ECA).

These reports result from a systematic analysis of the evidence available. This approach provides sufficient guarantees as to the completeness and reliability of the information reported and results in a complete coverage of the budget delegated to the Director-General of DG HOME.

This section reports the control results and other relevant elements that support management's assurance. It is structured into (2.1) Control results, (2.2) Audit observations and recommendations, (2.3) Effectiveness of the internal control system, and resulting in (2.4) Conclusions as regards assurance.


S-.4 ontrc ! f-sults

This section reports and assesses the elements identified by management that support the assurance on the achievement of the internal control objectives1. The DG's assurance building and materiality criteria are outlined in the AAR Annex 4. Annex 5 outlines the main risks together with the control processes aimed to mitigate them and the indicators used to measure the performance of the control systems.

The main results of the control indicators are reported below, however Annex 10 presents a more complete overview, together with a comparison with the previous year.

The budget managed by DG HOME has been on an upward trend for the last eight years, with a sharp increase registered in 2015 vs 2014 (57% increase in commitment appropriations and 60% in payment appropriations) (see the chart below). In commitment appropriations, DG HOME'S policies were supported by € 1.90 billion representing 0.90% of the EU budget, with a corresponding envelope of €1.23 billion in payment appropriations (commitment and payment appropriations authorised, Annex 3).

2000 1800 1600

1400

1200 1000 800 600

400

200 0

•CA (EUR million) PA (EUR million)

2007 2008 2009 2010 2011 2012 2013 2014 2015

This significant budget increase was partly due to the additional tasks given to the DG in the beginning of 2015 in the context of reorganisation (joining of Research Security funds, Europe for Citizens funds and Anti-Drugs policy funds). However, more significantly, the financial environment of DG HOME in 2015 was impacted by the migration crisis and the subsequent increase in budget appropriations voted by the budgetary authority.

1 Effectiveness, efficiency and economy of operations; reliability of reporting; safeguarding of assets and information; prevention, detection, correction and follow-up of fraud and irregularities; and adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the muitiannual character of programmes as well as the nature of the payments (FR Art 32).


Example 18.03 Asylum and migration;

Щ 96% increase 2015/2014 in voted commitment appropriations

Я115°/о increase 2015/2014 in voted payment appropriations

DG HOME had to manage, in a very short timeframe, significant increases in its available appropriations. This added to the pressure of absorbing the delays registered in 2014 in the start-up of the implementation of shared management funds in 2014-

2020 MFF and of maintaining the pace of closures for the MFF 2007-2013. Nevertheless, DG HOME successfully managed to ensure implementation rates close to 100% for both commitments and payments (99% and 98% respectively). This high increase in financial activity impacted also the structure of the RAL (reste à liquider/open commitments), where the commitments of the current year represents 51% of the total RAL at the end of 2015 (as compared to 10% for 2014 and 35% in 2013).

An overview of the budgetary consumption of DG HOME'S total commitments and payments in 2015 by programme is presented in the table below:

Implementation of commi Imeni appropriations

Implementation of payments appropriations

Programmes

Admin/Support Expenditure 11,31 93% 8,58 61% Asylum arid Migration Fund - Asylum 387,87 98% 147,38 99% Asylum and Migration Fund -Migration 423,09 100% 125,60 100%

Internal Security Fund - Borders 426,22 100% 123,79 100% Internal Security Fund - Police 203,03 100% 59,96 100% Completion EBF/ISEC/CIPS 0,23 4% 181,23 99% Completion EIF/RF/ERF 0,06 1% 139,14 100% Horizon 2020- Security 62.67 97% 19,45 63% Completion FP7- Security 0,01 6% 44,13 98% Drugs Programme 3,00 100% 1,69 99% Completion drug programme 0,00 0% 1,06 100% Europe for Citizens 0,00 0% 0,39 100% Completion Europe for Citizens 0,00 0% 0,50 99% SIS/VIS/Eurodac 21,81 97% 15.04 97% Pilot Projects 1,68 79% 3,24 92% Τ raditional agencies 334,66 99% 332,01 99%

Total 1875.63 99% 1203,19 98%

The DG was responsible for nine ABB activities (four on administrative expenditure and five on operational expenditure) which are managed under three methods of implementation, with the following percentages:

• Shared management (48% of total payments in 2015). Shared management funds were the largest share (65%) of the previous generation of funds Solidarity and Management of Migration Flows (SOLID). This General Programme consisted of four instruments: External Borders Fund (EBF), European Return Fund (RF), European Refugee Fund (ERF) and European Fund for the Integration of third-country nationals (EIF). In 2015, the DG worked for the closures of annual programmes up to the 2012 ones and revision of 2013 APs. The current Home Affairs financial instruments include two Funds: Asylum, Migration and Integration Fund (AMIF) and Internal Security Fund (ISF - Borders and ISF Police), with the largest share of funding also mainly implemented under shared management mode (88% in case of AMIF and 63% in case of ISF). All payments done in 2015


under shared management for AMIF and ISF were pre-financing payments.

• Indirect management (29%). It represents mainly the subsidies voted by the budgetary authority for the traditional agencies. DG HOME acts as a partner DG for six agencies: European Agency for the management of Operational Cooperation at the External Borders (FRONTEX), European Police College (CEPOL), European Police Office (Europol), the European Asylum Support Office (EASO) the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), and European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice (eu-LISA). In 2015, DG HOME started also the implementation of the delegation agreements foreseen under AMIF and ISF annual work programmes for Union Actions with Europol (Empact), eu-LISA (Smart Borders Pilot project) and ICMPD (Mobility Partnership Facility) - implementation has been delegated to those Agencies while DG HOME remains the responsible AOD.

• Direct management (23%). DG HOME implemented the appropriations through grants and procurements.

Under AMIF and ISF, grants are used under "Union Actions" (to respond to specific transnational or particularly innovative initiatives which can be of benefit to the EU as a whole or to specific Union priorities, such as for instance joint processing of asylum applications, joint return operations, law enforcement cooperation) or under "emergency assistance" (direct award to support Member states facing emergency situations).

The Horizon 2020 Societal Challenge "Secure societies - Protecting freedom and security of Europe and its citizens" (together with its predecessor under FP7), implemented also under direct management mode, undertake the research and innovation activities needed to protect the citizens, society and economy as well as our infrastructures and services. Grants vary from modest amounts for academic inquiry and studies to large-scale technology demonstration projects with budgets of €20 million or more.

Other programmes managing grants under direct management were the Drug Policy Initiatives (to help implement the objectives set by the EU Drugs Strategy 2013-2020 and to foster cross-border cooperation and research on drug issues). The funds under the programme Europe for Citizens Programme (contributing to citizens' understanding of the EU, its history and diversity and foster European citizenship and improve conditions for civic and democratic participation at EU level) are implemented through the executive agencies EACEA.

The table below summarizes all payments made by DG HOME in 2015, in terms of activities per each distinct control system, as well as the key indicators (Residual error rates (RER) and cost-efficiency) available for each layer.


Summary of payments, main internal control indicators and reservations, per control system, 2015

Activity Total payments in 2015 (€ million)

Shared management MFF 2007-2013 (22.99%) 276.63

C582.23 million (48.39 %) MFF 2014-2020 (25.40%) 305.59 RER= 0.62%; Cost-efficiency: 1.38% Completeness and reliability of control results: Y

Reservation issued (reputational)

Direct management non research grants C167.12 million (13.89 %)

RER = 2.88%; Cost-efficiency: 3.55% Completeness and reliability of control results: Y

Reservation issued

MFF 2007-2013 (2.65%)

MFF 2014-2020 (11.24%)

31.91

135.21

Direct management research grants

C62.48 million (5.19%)

RER = 4.47%; Cost-efficiency: 5.35% Completeness and reliability of control results: Y Reservation issued

FP7: MFF 2007-2013 (3.67%)

Horizon2020: MFF 2014-2020 (1.53%)

44.13

18.35

Other direct management

€44.26 million (3.68%)

RER estimated <2% Cost-efficiency (procurement): 7.73% Completeness and reliability of control results: Y

No reservation issued

Procurement (2.84%)

Cross subdelegatlons and Service Level agreements (0.67%)

Executive agencies (0.17%)

34.14

8.05

2.07

Indirect management

C347.12 million (28.85%)

RER estimated <2% Cost-efficiency: 0.65% Completeness and reliability of control results: Y

No reservation issued

Traditional agencies (27.59%)

Delegation agreements (1.25%)

332.01

15.10

Total 1 203.19

Overall, reliable and complete control results are available for each control system. The analysis and conclusions of each relevant control category in terms of legality and regularity and cost efficiency is described and explained In details further below under Part 2.1.1 and 2.1.2. Key indicators have been defined for each stage of the relevant control system and presented in details in Annex 10. Three reservations have been issued based on the legality and regularity indicators and detailed in Part 2.4.

Regarding the overall efficiency of controls, a positive conclusion has been reached based


on an overall cost-efficiency indicator of 1.84% (details in Part 2.1.2). Regarding fraud prevention and detection, a chain of actions has been taken in 2015 (Part 2.1.3). In 2015, two cases of suspicion of fraud and irregularities were transferred to OLAF for investigation.

Due to the fact that delegation agreements, administrative arrangements, sub-delegations and contributions to executive agencies are immaterial (total approximately 2% of the total payments of DG HOME), these activities are not detailed further in this AAR.

Coverage of the Internal Control Objective:- and their relate J «ŕ An indicators

I , 1 i' ntrol effectiveness as regards leg, s rj .„-í r . • • •y

DG HOME has set up internal control processes aimed to ensure the adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments concerned.

In line with the instructions of the Central Services of the Commission (BUDG, IAS), in 2015 AAR DG HOME has introduced two major changes to its methodology to determine the materiality level for reservations. The methodology is described in detail in Annex 4.

1. Previously, DG HOME determined the need for a reservation at ABB activity level, thus aggregating the control results and error rates across various expenditure covered by different control approaches within each ABB chapter ("vertical" approach). KPI 5 (residual error rate) reported in former AARs referred to an overall aggregated residual rate, which was compared to the control objective (average cumulative error rate does not exceed 2%), while the results of controls for each different control system were reported in the text of the AAR.

In 2015 AAR however, the materiality is determined for each relevant distinct internal control system across various ABB chapters ("horizontal" approach). The main distinct internal control systems are (a) the management and control systems in the Member States (shared management), (b) direct management - research grants (c) direct management - non-research grants, (d) indirect management and (e) other direct management expenditure. These layers are determined by the differences in the ex-ante and ex-post control approach put in place in DG HOME to control and obtain assurance for each type of expenditure - each control approach is described in more detail throughout Chapter 2 and in Annex 5 (Internal Control Templates).

As a result of this change, a (financial) reservation is considered for each of these control systems separately and not at an aggregated level. The control objective is to ensure that for each system, the residual error remains below 2%.


In 2015 AAR there are three reservations2, compared to zero in 2014 AAR. It needs to be emphasised that the reservations are not due to a worsened situation concerning legality and regularity of expenditure - in fact, the Direct Management error rates have improved compared to the previous years, and concerning Shared Management a large number of financial corrections has been implemented in the Member States, as an evidence of efforts made by DG HOME to address any deficiencies noted in previous years, even though a reservation was not necessarily issued in the AAR due to a different methodology.

2. As a second remark, the methodology to calculate the detected and residual error rates and amounts at risk in shared management was improved. Previously, all payments were considered at risk and DG HOME calculated residual errors for all closed and open Annual Programmes in SOLID funds, which overstated the actual risk (as for many open programmes, financial corrections were implemented before payment). In order to harmonise its approach with other Shared Management DGs (REGIO, EM PL, AGRI), in 2015 AAR residual errors are only considered for the closed Annual Programmes (more details in Annex 4). As a result, the shared management overall residual error rate calculated for 2015 is considerably lower than in previous years.

Methodology is described in detail in Annex 4.

2.1.1.1 Shared management

Materiality criteria and reservations

The main control objective is to ensure that the cumulative residual risk for closed annual programmes for each Member State and each Fund does not exceed 2% of all payments made on a cumulative basis. Where the residual error rate is above 2%, a reservation is made unless the amount at risk was below the 'de minimis' threshold of € 350 000 established in DG HOME'S materiality criteria.

The residual risk of error is estimated in accordance with the methodology explained in Annex 4, by considering the multi-annual impact of the validated error rates and calculated since the beginning of the programming period, after deduction of financial corrections implemented by the Commission. It is expressed as a percentage of the value of the cumulative payments made for the programming period, up to 31 December of the reporting year.

Key control indicators and results reported

The control systems in shared management are grouped around three core processes: 1) negotiation and assessment/approval of spending proposals; 2) implementation of operations (Member States); 3) monitoring and supervision of the execution, closure of annual programmes and ex-post controls.

Different sources of information are used to build up the Director-General's annual declaration of assurance that the resources assigned to the activities have been used for the intended purpose and in accordance with the principle of sound financial management, and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions.

2 Chapter 3: Two reservations for direct management (one for research grants and one for direct management - non-research grants) and two reputational reservations for European Fund for the Integration of third-country nationals and European Refugee Fund in Germany.


The assurance is built on a comprehensive assessment by all parties involved in the management and control of each annual programme. If an internal evaluation of risk is different from the reported error rates, or if financial corrections have been implemented, the residual error rates are replaced by flat rate assessments.

A) 2007-2013 MFF (SOLID Funds)

2015 marked the end of the implementation period of SOLID funds, as the eligibility period ended on 30 June 2015 and the last annual closure reports are due to be submitted in 2016.

Stage 1: Negotiation and assessment/approval of spending programmes

This control stage concerns the adoption by the Commission of the annual and multiannual national programmes. The overall control objective of this stage is to ensure that DG HOME adopts the actions that contribute the most towards the achievements of the policy objectives.

On the previous SOLID funds, there were still 24 revisions to annual programmes received in 2015, which were assessed and approved.

Stage 2: Implementation of programmes

The second stage concerns the setting up of the systems and the controls carried out by the Member States. The overall control objective of this stage is to ensure that the MCSs are adequately designed. Furthermore, the Member States should ensure that the declarations of expenditure submitted to DG HOME are legal and regular.

With regard to the SOLID funds, in 2015 only a few revisions of management and control systems were submitted by Member States and reviewed by DG HOME, as 30 June 2015 marked the end of the eligibility period for SOLID funds.

Regarding the legality and regularity of controls performed by the Member States, DG HOME analysed the opinions of the Audit Authorities in their Annual Audit Reports and the reported error rates.

Since the start of the SOLID Funds, out of 569 Annual Audit Reports due (corresponding to annual programmes 2007 to 2012), all have been received by DG HOME as of end of December 2015; however, for 9 reports, corrections/modifications to the submitted reports are still ongoing. The Audit Authorities gave unqualified opinions for 408 programmes (73% of programmes or 69% of the total amount of payments), qualified opinions for 137 programmes (24% and 24% respectively) and disclaimers or adverse opinions for 15 programmes (3% and 7% respectively). DG HOME validated the opinion in 91% of the cases where an unqualified opinion was issued.

Member States have disclosed error rates below 2% in 446 reports, while the error rates ranged between 2% and 5% for 44 reports and above 5% for 70 reports.


ERF

EIF

В Number of APs for which the AA detected error rate is below 2%

RF

Number of APs for which the AA detected error rate is above 2% but below 5%

s Number of APs for which the AA detected error rate is above 5%

EBF

0 50 100 150 200

DG HOME assessed the reliability and correctness of the total detected error rates reported by the Audit Authorities and validated the error rates reported in the annual audit reports as reliable in 96% of the cases. Then the detected error was analysed to determine whether it can be extended to the non-audited population. One-off irregularities, non-audited population already cleaned by the Responsible Authority or the Certifying Authority, etc. were considered reasons for not extrapolating the error rate.

Stage 3: Monitoring and supervision, closure of annual programmes and ex-post controls

Monitoring and supervision

These controls include the monitoring visits and the systems audits performed for the open programmes.

An intensive monitoring activity took place in 2015 with missions organised in different Member States for the SOLID funds. Thus, 20 missions were performed in relation to monitoring aspects: implementation of the Funds by taking stock of the status of implementation of the Annual Programmes 2012-2013 through projects' visits and discussions with beneficiaries and representatives of the responsible (RA) and/or, certifying (CA) and audit authorities (AA).

Monitoring activity is also carried out through regular exchanges at desk level regarding the programming and the closure, either through mails or in the margin of meetings of the AMIF-ISF Committee (former SOLID Committee). For more significant issues, bilateral meetings are organised in Brussels with the national authorities and the operational units as well as, where necessary, with the audit sector of DG HOME.

For systems under SOLID funds which continue to show medium to high risks, DG HOME carried out combined ex-post controls and system audits to bridge any assurance gaps which may exist but also to identify the measures needed to counter identified weaknesses. Due to the end of programming period, the emphasis was on ex-post controls as detailed below, while one system audit was carried out in 2015.


Assessment of annual summaries

Number of annual summaries submitted (Member States & Associated countries) 31

Annual summary submitted on time 16

Compliance with minimum requirements of Financial Regulation (other than timing of submission) 31

Overall Analysis provided 29

Out of the 31 annual summaries submitted by Member States and Associated countries, 16 were submitted on time (within the deadline of 15 February) and 15 were submitted with delay. All Member States submitted an annual summary.

Two out of the three "associated countries" for the External Border Fund submitted an annual summary, one of them with a delay.

31 annual summaries have complied with the minimum requirements of the Financial Regulation. The majority of them provided the overall analysis.

Nevertheless, having a sound knowledge of the Member States from previous years' audit activities, the Commission accepted all submitted annual summaries.

Two Member States reported each a suspicion of fraud. These two cases are under investigation by national authorities.

The Commission will take these into consideration during the closure of the respective annual programmes and, if applicable, their ex-post audits.

Closures of annual programmes

In 2015 DG HOME received the 2012 Annual Programmes (APs) for closure of SOLID funds, due by 31 March 2015. A general exception note was signed by the Director General of DG HOME covering potential delays in the transmission of 2012 annual programmes closures until 30 April 2015.

130 APs have been closed in 2015, out of which 55 related to the 2007-2011 APs and 75 to the 2012 APs. For the second year in a row, significantly more closures have been processed than received, confirming the positive trend of previous year and allowing the accumulated backlog to decrease. As at the end of 2015, 62 APs remain to be closed, of which 32 relate to APs 2007-20121 and concern problematic programmes, requiring specific treatment and the application of financial corrections. No interruption or suspension of payments has been decided in 2015.


Ex Post Controls

In 2015, DG HOME finalised six ex-post controls of a sample of projects in the Member States (covering two Member States and six Annual Programmes), which led to three suggestions of corrections of Annual Programmes between 0% and 2%, and three set above 5%. Overall, the detected errors following the ex-post controls are set at €1.26 million:

Ex-post audits performed 6 7 Errors detected by ex-post controls (€) 1 257 656 1 874 806

The field work of ex-post controls for other nine funds in five Member States was completed in 2015, for which the final results will be available in 2016.

Annual audit opinion

The validated error rate constitutes the main element to estimate the amount at risk. Other sources of information to build up the annual declaration of assurance are: (i) the results of the Commission's own audit work in 2015 Including the results of ex-post controls on closed programmes, (ii) annual summaries of controls and national declarations; (iii) the opinions of the Units in charge of the management of the programmes and (v) experience from previous years.

Based on the above blocks of information, and as a result of the Commission desk and on the spot audit work detailed under the previous sections, the auditors within DG HOME expressed an audit opinion on the effective functioning of each programme so as to ensure legality and regularity of expenditure paid by the Directorate General in 2015. These audit opinions are transmitted to the operational units concerned as an input for their management opinion which is also formulated for every annual programme.

External Audit Sector Level of Assurance

2% • Reasonable Assurance

15% a4y Limited Assurance

with moderate impact

Limited Assurance with significant impact

49% • No Assurance

Financial corrections - SOLID funds

2015 2014 Ineligible amounts In final costs claims (€ million) 14.86 4.43 Corrections implemented by recoveries (€ million) 8.58 0.59

Total financial corrections (€ million) 23.43 5.02


In 2015, financial corrections were implemented for a total amount of €23.43 million. Such financial corrections aim at restoring a situation where all of the expenditure declared for co-financing from the four Funds would be legal and regular, in line with the applicable rules. As a consequence, even if audit work demonstrated weaknesses in the management and control system implemented by some Member States, the risk for the Fund was reduced to zero if the corrections were implemented.

The details of implemented financial corrections per Member State are available in Annex 10.

Assessment of the functioning of the management and control systems (including best estimate of error)

If an internal evaluation of risk is different from the reported error rates, or if financial corrections have been implemented, the residual error rates are replaced by flat rate assessments. After analysing the error rate reported by the national Audit Authorities, the management of DG HOME applied its judgment for a total of 27% of the annual audit reports covering all four Funds.

Following the evaluation stage and taking into account the cumulative residual risk, the annual programmes are classified into four categories In accordance with the level of assurance that they provide as to the legality and regularity of payments made since the start of the programming period.

The results of the assessment of management and control systems in the annual management opinion per annual programme are presented below, for closed Annual Programs only (more detailed information per Member State is available in Annex 10):

IMPACT on Declaration of Assurance (based on functioning of systems, materiality and legality

and regularity criteria)

Coverage IMPACT on Declaration of Assurance

(based on functioning of systems, materiality and legality and regularity criteria)

TOTAL As % of

Programmes closed at

31.12,2015

Payments to Programmes in question

as % of 2007-2012

payments in the year for closed APs

453 1.622.381.677,11

89.53% 89.60%

2 Reasonable assurance with low risk

Number of programmes 27 5.34% 4.73% 2

Reasonable assurance with low risk Value of payments made 85.625.016,44

5.34% 4.73%

3 Limited assurance with medium risk

Number of programmes 23 4.55% 4.71% 3 Limited assurance

with medium risk Value of payments made 85.319.598,68 4.55% 4.71%

3 17.389.226,37

0.59% 0.96%

506 100% 100%

The assurance is then translated into an amount at risk per annual programme. These amounts are subsequently added up and compared to the total payments for the closed APs per Member State/Fund to obtain a residual error rate for each, and a general assessment per Fund. The overall results are as follows:


Activity /Fund

Amount at risk CO

(cumulative)

Payments made (C) (cumulative)

Residual error rate in the total population (audited

and not audited)

"Gross" error rate

EBF 1.885.189 870.242.669 0.22% 3,37% RF 1.322.881 283.462.344 0.47% 0,68% EIF 4.406.316 354.329.933 1.24% 2,26% ERF 3.654.188 302.680.573 1.21% 3,57% Total 11.268.575 1.810.715.519 0.62% 2,76%

The average residual error rate for all closed annual programmes across all four SOLID funds is 0.62%, well below 2%. Whereas the calculated 'gross' error rate3

is above 2% (2,76%), the low residual error rate is partly due to a significant number of financial corrections implemented in 2015 - more than €23 million - which has lowered the residual risk to the funds where issues with Management and Control systems were identified in the past. For eight Funds in four Member States, the cumulative residual error rate was higher than 2%4. For all those Member States, either a contradictory procedure following an ex-post audit, or financial correction procedures are already on going. The details of the error rates are presented in Annex 10 and considerations of whether a reservation should be issued for these Member States, are detailed in section 2.4.

Further corrective actions are currently being taken for the annual programmes for which the assurance is limited to the extent that the risk for the Fund is estimated to be at 5% minimum of all payments made. In particular, flat rate corrections (between 2% and 25%) are currently being implemented and further ex-post controls will take place in 2016 to better estimate the risk for the Funds of system deficiencies for other annual programmes.

B) MFF 2014-2020 (AMIF/ISF)

Stage 1: Negotiation and assessment/approvai of spending programmes

Contrary to the SOLID funds which consist of Annual Programmes, the AMIF and ISF National Programmes (NP) are multiannual. DG HOME has 58 multiannual NPs of which 31 for ISF and 27 for AMIF. Compared with 2014, there were clear improvements in all areas measured for this stage. The indicators (as detailed in Annex 10) prove that DG

HOME caught up on the delays registered in 2014 on the start-up of the new programmes: in 2015 all 54 national programmes of Member States (including the year end revisions to include the resettlement pledges) were adopted

and the remaining four programmes (under ISF) from the Schengen Associated Countries will be approved following the conclusion of the bilateral agreements with these countries.

100% of MSs National Ì Programmes adopted (93% of all NPs)

3 Adjusted detected error rate after Member States' but before Commission's financial corrections. 4 CZ (EIF, ERF, RF and EBF), FR (EIF), DE (EIF and ERF), PL (RF).


Stage 2: Implementation of programmes

Responsible Authority is designated by the Member State following an audit of an independent audit body. The designation can be either full or provisional; in the latter case, the Responsible Authority needs to address any shortcomings within 12 months. Following the designation notifications to the Commission, DG HOME audit sector proceeds with an assessment of the system through desk review, in some cases also meeting the key representatives of the Responsible, Audit and Designating authority.

The control processes under this stage concerning the setting up of systems, are on track.

At the end of 2015, the Responsible authorities have been designated for 50 out of 58 national programmes. DG HOME started the first assessment of the MCSs, through system review meetings, which were held in 2015 for two Member States (4 funds). In addition, desk reviews of MCSs started for other 23 Funds,

due to be finalised in the beginning of 2016.

DG HOME organized also on 29-30 September 2015 in Brussels the conference "Investing in an Open and Secure Europe". The aim was to emphasise the role of the new Funds In the current political context in the area of migration and home affairs, as well as to prepare the Member States and Schengen Associated Countries for a better implementation of the Funds, with the involvement of key stakeholders. It allowed training and discussions between all relevant stakeholders, including the European Commission, Member States and Schengen Associated Countries (representatives of the Responsible Authority and the Audit Authorities), Migration and Home Affairs Agencies, on the role of funding in supporting the Home Affairs policies and priorities, as well as on practical aspects of the implementation of the Funds.

Stage 3: Monitoring and supervision, closure of annual programmes and ex-post controls

An intensive monitoring activity took place in 2015 with regard also to the new AMIF/ISF funds. 22 missions have been performed in relation to AMIF/ISF, of which 18 visits referred to negotiation/approval of programmes and four visits to monitoring committees meetings. Other 20 monitoring visits focused on assessment of needs or other aspects.

Monitoring activity is also carried out through regular exchanges at desk level regarding the programming and the closure, either through mails or in the margin of meetings of the AMIF-ISF Committee. For more significant issues, bilateral meetings are organised in Brussels with the national authorities and the operational units as well as, where necessary, with the audit sector of DG HOME.

No audits were carried out yet, as the systems in Member States were not yet mature for cost-effective audit work and no accounts have been submitted to the Commission yet.

Whereas the National Programmes of AMIF/ISF are multiannual, the MS submit annually (by 15/02/N+l) a request for annual payment (supported by an annual 'assurance package') which has to be analysed by DG HOME and results in an annual clearance decision by the Commission5 (by 31/05/N+l), In addition to the annual clearance

5 i.e. the (annual) clearance of accounts procedure.

I Designation process on track

į Only four Member States still needed to designate the Responsible Authority at the end of 2015


procedure, conformity clearance and financial corrections by the Commission are possible up to 3 years after the expenditure has been incurred by the Responsible Authority (RA).

The first requests for annual payment have been submitted by the Member States in February 2016, covering the expenditure made since January 2014. However, in this regard, no in-depth analysis is yet available; however, only pre-financing payments were made by DG HOME in 2015 and therefore the residual risk for AMIF-ISF is estimated at 0°/0.

2.1.1.2 Direct management - grants (non-research)

As described in the Internal Control Template for direct management grants (Annex 5), the analysis of the effectiveness of legality and regularity is built around the four main control processes (stages): programming, evaluation and selection of proposals; contracting; monitoring; and ex-post audits. Key indicators have been defined for each stage and presented in details in Annex 10. Materiality is assessed in accordance with Annex 4.

Stage 1: Programming, evaluation and selection of proposais

This stage concerns the preparation and adoption of the annual work programmes, as well as the calls for and evaluation of proposals. The overall control objective of this stage is to ensure that DG HOME selects the proposals that contribute the most towards the achievement of the policy or programme objectives in terms of effectiveness and compliance.

In 2015, the activity performed under this stage was impacted by the development of the emergency assistance under the AMIF/ISF. Thus, the budget available for grants and the

value of projects evaluated in DG HOME almost tripled in 2015 compared to the previous year.

38 emergency assistance grants for a total value of € 163 million were awarded in 2015 for both AMIF and ISF, consuming most of the annual work programmes 2014 and 2015 in a

sole year, and this despite significant reinforcement during the year. The size of the applications has also increased steadily over the year, going from an initial average amount of around € 1 million to sometimes more than € 100 million towards the end of the year.

For the "regular" grant activity (AMIF and ISF Union Actions, Drugs, pilot projects and preparatory actions), the number of grants evaluated and contracted decreased in 2015. 2014 was the last year of contracting for the previous generation of Funds, where the share of direct management was still very high (notably due to CIPS/ISEC now replaced by ISF-Police with a high share of shared management). Hence, 2015 is the first year of AMIF and ISF with smaller amounts available for direct management and annual work programmes focusing more on actions of higher value to respond to specific transnational or particularly innovative initiatives which can be of benefit to the EU as a whole or to specific Union priorities, such as for instance joint processing of asylum applications, joint return operations, law enforcement cooperation.

The effectiveness of controls in this stage is demonstrated both in quantitative and qualitative terms. In quantitative terms, the available budget for grants has been consumed by 82%. In case of "regular" grant activities, the consumption rate is 92%, in range with the previous years' levels. However, for the emergency assistance , the rate is home_aar_2015_final of 64

Budget available for grants:

f 2014: € 77.41 million

2015: П € 261.94 million

79% reflecting the fact that € 43 million of 2015 annual work programme was still not awarded as of 31 December 2015 (but had been largely consumed by mid-January 2016).

In qualitative, terms, the effectiveness of controls was assessed by comparing the average total points of the selected projects with the average points of the total eligible projects. The ratio for 2015 calls was 1.2, showing the positive impact of the evaluation process, the average total points of the selected projects being 20% above the average points of the total eligible projects.

Stage 2: Contracting (conclusion of grant agreements)

The second stage concerns the contract negotiation and signing of the legal commitment. The overall control objective of this stage is the translation of each of the selected

proposal into a legally binding grant agreement.

The achievement of the effectiveness of controls mentioned in Annex 5 as regards legality and regularity is measured by the financial impact of the negotiation and signing process, defined as the reduction (expressed as a percentage) of the value of the grant agreement as a result of the control process. The 2015 average adjustment

to AMIF/ISF grants was 7%.

Following the increase of the share of emergency assistance within the direct management activity, the average grant value increased compared to the previous year four times.

The total amount of grants signed doubled in 2015 as compared to 2014.

The recording of the exceptions and noncompliance events for assessing the effectiveness of controls for the legality and regularity of transactions shows that in 2015 two exceptions were recorded in relation to the contracting phase

for grants (one referring to the extension of the maximum duration and the second one to correct an omission to register a global commitments for pilot projects 2014).

Stage 3: Monitoring

The third stage concerns the management of the project. This stage comprises ex-ante checks of beneficiaries' cost claims and the processing of transactions through DG HOME financial circuits. The overall control objective is to ensure that operational results (deliverables) from the projects are of good value and meets the objectives and that the related financial operations comply with regulatory and contractual provisions.

The effectiveness indicators presented in Annex 10 show a clear positive implementation regarding payments done. One example is the total value of cost claims processed which reached € 110.76 million in 2015, against € 65.26 million in 2014. The % of ineligible amounts found by the controls performed over these claims represented 2.49% of their value.


Total grants signed:

2014 € 79 million;

2015 TP € 228 million

resulting from these controls applied

Average amount of a grant:

¡ 2014 € 0.47 million;

2015 П € 1.89 million

. t . -t - . * ι. - Ł_.. .. . •

Stage 4: Ex-post controls

The fourth stage includes the ex-post audits as well as the recovery of any amounts found to have been paid in excess of the amount due.

The overall control objective of this stage is to detect and correct any error or fraud remaining undetected after the implementation of ex-ante controls.

The main objective in relation to legality and regularity of the underlying transactions for the above expenditure type is to ensure that the estimated residual risk of error is less than 2% at the end of the implementation of the programme.

In addition to the main control objective, the ex-post controls serve other purposes. In particular:

s Detection and correction of any error or fraud remaining undetected after the implementation of ex-ante controls;

s Measuring the effectiveness of ex-ante controls;

s Addressing systematic weaknesses in the ex-ante controls based on the analysis of the findings (sound financial management);

s Ensuring appropriate accounting of the recoveries to be made (reliability of reporting, safeguarding of assets and information),

The strategy implemented in DG HOME aims to detect and correct the most important errors, rather than determining a representative error rate. Such approach is more efficient, resulting in higher returns on investment and dissuasive effect.

In 2015, DG HOME oversaw 38 ex-post controls as foreseen in the annual audit plan. Taking into account controls initiated in 2014, 36 audit reports were finalised in 2015.

Based on the most recent analysis of the main causes and types of most commonly detected errors identified in ex-post audits, five areas of irregularities have been identified:

s Non-compliance with value-for-money principle and procurement procedures: approximately 64% of the errors detected on the spot by ex-post controls;

s Incurred by public bodies: 8% of the errors;

s Costs not foreseen in the grant agreement / budget/ programme guidelines: 7% of the errors;

s Insufficient supporting documents: 7% of the errors;

s Adjustment of indirect costs: 6% of the errors.

Cumulative coverage rates for grants under direct management (research excluded) and the related residual error rates are reported below. The sampling size is considered as adequate in order to extrapolate the cumulative (net) detected error rate to the non-audited population. A detailed explanation of the materiality criteria is set out in annex 4.

The assessment of the residual error rate and amount at risk not detected by the supervisory and ex-ante elements of the internal control is carried out through analysis home_aar_2015_final of 64

of the results of ex-post audits. The table below summarises the results of this analysis done according to the four steps detailed in Annex 4 for 2007-2013 funds.

2.88% 3.64%

* the annual detected error rate is presented in Annex 10. Whereas the detected error rate in 2015 was high -15,2% - due to very high errors related to public procurement in 2 projects, however, after a qualitative analysis and extension of audit sample to other potentially impacted projects, these were not considered representative of the auditable population and taken out of the calculation of cumulative detected and residual error rates.

Cumulative residual error rate for 2007-2013 funds has steadily improved over the last years, however remaining still above 2% at the end of 2015 (2.88%). A consideration whether the declaration of assurance should be qualified with a reservation is detailed in section 2.4.

The main source of errors detected is represented by the fact that programmes managed by DG HOME under the MFF 2007-2013 targeted relatively new policy areas and new beneficiaries who needed to adapt to EU rules. The complexity of the eligibility rules as laid down in the Financial Regulation (based on the reimbursement of actual eligible costs declared by the beneficiaries), the additional complexity of having customised rules per programmes and the big number of beneficiaries and co-beneficiaries added also to the complexity of managing the grants under these programmes.

The different control provisions set out by DG HOME, along with the audit certificates on financial statements (asked more frequently since annual work programme 2011) and ex-post audits, can mitigate these risks to a certain extent, but can never be carried out on 100% of the cost claims received.

The first ex-post audits for 2014-2020 programming period will start in 2016. Therefore, no error rate for this period is available yet.

2.1.1.3 Direct management - research grants (FP7 and Horizon 2020)

With the arrival of a unit from the former DG Enterprise dealing with security research (as part of the President Juncker reorganisation), DG HOME become for the first time responsible for the management of research funds.

The Space and Security research budget was split in 2015 between four Authorising Officers (GROW, HOME, REA and EASME). There is no direct link between some of the security research activities run by DG HOME (work programme, security scrutiny procedure) and REA (publication of the calls, submission). There are however some


activities which both HOME and REA cover, such as the evaluation of proposals and the preparation and management of grants. The share of budget and projects to be managed is done after the security scrutiny procedure, which generally leads to a ratio of 1/3 for DG HOME and 2/3 for REA. The analysis below refers to the budget implemented by DG HOME solely.

It should be noted that most of the activities for managing research funds are implemented using IT tools common to all DGs Research family which implement already many internal controls.

Controls are carried out during the entire process of the Framework Programmes implementation in order to guarantee that the selected projects comply with the call conditions, that EU funding goes to the best proposals and that the costs claimed by the beneficiaries as well as the payments are in line with the legal framework.

In principle, the general control objective for FP7 is to ensure that the residual error rate for financial transactions does not exceed a cumulative level of 2% by the end of the programme implementation. However, the Commission has recently underlined that an overemphasis with regard to this target can have negative effects in terms of policy attractiveness and international competitiveness. Rather than focusing on a single legality and regularity indicator, the key aim should be to achieve a good balance between legality and regularity and the achievement of policy objectives, between trust and control.

As regards H2020, the error rate will, in line with the Financial Statement accompanying the proposal for H2020, remain in the range of 2% to 5%. One may anticipate a residual error rate as close as possible to the 2% threshold, but not necessarily below it.

As for other direct management grants, the analysis of the effectiveness of legality and regularity is built around the four main control processes (stages): programming, evaluation and selection of proposals; contracting; monitoring; and ex-post. Key indicators have been defined for each stage and presented in details in Annex 10. Materiality is assessed in accordance with Annex 4.

Since the submission of proposals for FP7 was closed in 2013, the two first stages concern H2020 proposals exclusively. The third stage concerns mainly FP7 since no final payments have been processed yet for H2020 projects. The fourth stage concerns FP7 projects only.

Stage 1: Programming, evaluation and selection of proposals

The first stage concerns the preparation of the calls and the evaluation of the submitted proposals. The overall control objective at this stage is to ensure a high quality evaluation which results in the selection of the best projects to achieve the operational objectives set out in the specific work programmes adopted by the Parliament and the Council.

The preparation of the Work Programme is under responsibility of DG HOME. The coherence of the Work Programme is done at unit level with the help of a Security Research inter-service group regarding the link with policy objectives and then validated and voted by the H2020/SC7 programme committee. Additional controls are done at DG RTD level for compliance with the DG's research family requirement, in particular budget information.

The eligibility and admissibility of proposals for all calls is done by REA during the evaluation process, DG HOME being also involved during the evaluation process on some home_aar_2015_final of 64

specific policy related aspects.

Following the evaluation of the 2014 Call for proposals of the H2020 Secure Societies Challenge, DG HOME selected 33 security research projects for funding. 27 projects are under the management of the Research Executive Agency (REA). DG HOME is managing only those six projects which are classified, for a total amount of €31.7 million. This is slightly less than the usual average of 1/3 for DG HOME and 2/3 for REA. These projects address a wide range of areas, from airport security to critical infrastructure protection and the training of first responders.

On 13 October 2015, the Commission adopted the 2016-2017 Horizon 2020 Secure Societies Work programme. This work programme has a total budget of € 380 million and covers areas such as Disaster Resilience, Fight against crime and terrorism, Border and External Security.

Stage 2: Contracting (conclusion of grant agreements)

Based on the specificities of research related calls, where the specific rules of H2020 apply, there is no quantitative adjustment of budget before signature of contract ('no negotiation' approach). This approach allows for a reduction of the time required for the grant agreement signature as compared to FP7. Considering the highly competitive nature of the calls, the risk of compromising on quality remains limited. The assessment of the project budget is done in previous stages, as an evaluation criterion. Therefore, this data could not be captured as a quantifiable data but only as non-quantifiable result of controls performed.

Six grants have been signed by DG HOME in 2015, for a total EC contribution of EUR 41.9 million.

Stage 3: Monitoring

The third stage relates to the execution of the grant agreement and the supervision of the project management. This stage comprises ex-ante checks of beneficiaries' cost claims and the processing of transactions through DG HOME financial circuits. The overall control objective is to ensure that operational results (deliverables) from the projects are of good value and meets the objectives and that the related financial operations comply with regulatory and contractual provisions.

Under FP7, certificates on financial statements are required for claims of more than €375,000 while, under H2020 these certificates are required only for final payments when the total EU contribution claimed exceeds €375,000. So far, such certificates have been provided for FP7 projects only, since no final payments have been processed for H2020 projects.

The effectiveness indicators presented in Annex 10 show that in 2015 € 62.48 million was paid in relation to 69 grants agreements signed in 2015 or earlier. The % of ineligible amounts found by the controls performed over these claims represented 0.11% of their value. At the moment when the payment is authorised, the Commission does not intend and is not able to fully control, for every payment, that the amount paid is accurate and in compliance with the applicable legal and contractual provisions. That would require the Research DGs to add a huge administrative burden onto participants, and would be impossible with the human resources available. Instead, and in line with recommendations by the European Parliament and the Council, the Research DGs operate a trust-based system of controls before payment, with limited substantive controls. Instead it bases its main assurance on in-depth checks carried out on a sample of beneficiaries after costs have been incurred and declared.


Stage 4: Ex-post controls

The Research DGs have defined and implemented a common strategy, the key elements of which are the ex-post audit strategy and the recovery of any amounts found to have been paid in excess of the amount due. These elements are intended to provide reasonable assurance on the legality and regularity of expenditure on a multi-annual basis by systematically detecting and correcting errors. They complement the ex-ante controls embedded in the Research FPs' management processes.

Since 2007, the research services have adopted a Common Audit Strategy to ensure the legality and regularity of expenditure on a multi-annual basis including detecting and correcting systematic errors. The audits examine only interim and final claims by beneficiaries. Transactions related to pre-financing are not included in the population subject to audit. Because of its multi-annual nature, the effectiveness of the control strategy can only be fully measured and assessed in the final stages of the Framework Programme, once the ex-post control strategy has been fully implemented and systematic errors have been detected and corrected.

Since 2012, a Common Representative audit Sample (CRaS) is used by the Research Family DGs to identify the common errors across the whole of FP7 operations. This sample was instrumental in lowering the audit burden on large beneficiaries who, before the implementation of this new approach, would have been audited by several Commission services.

Based on the results of these ex-post audits, recovery orders are issued to follow up the implementation of the audit results. In addition, liquidated damages are applied and the systematic errors detected during the audits are extrapolated to the other non-audited projects of the beneficiaries concerned.

For FP7, materiality is assessed in accordance with Annex 4 of this AAR. The Common Representative Error Rate (CRaS) from the Common Representative audit Sample, based on 298 results, is 4.47%. In the absence of full historical data (as FP7 activities were joined with DG HOME only from 2015) and for reasons of cost-efficiency, DG HOME has not calculated its own specific residual error rate, but is using a prudent estimation of the CRaS to estimate the impact of the reservation.

Taking into account the FP6 experience, and the need to balance legality and regularity with other objectives such as the attractiveness and the success of EU research policy, international competitiveness, scientific excellence, the wish to encourage participation of SMEs and the costs of controls, it is not expected that by the end of the programming period the residual error rate will be below the materiality threshold defined in Annex 4 'Materiality Criteria'. For that reason, the research family maintains the reservation for FP7.

The analysis of the errors found during the controls shows that nearly all significant errors relate to staff costs and indirect costs incorrectly declared by grant beneficiaries as eligible. In order to prevent the repetition of these errors in future cost declarations, beneficiaries are informed about the correct way to calculate these costs and about the most frequent errors committed when calculating them. In addition, exhaustive guidance is publicly available on the CORDIS website. Certifying auditors who are found to have signed unqualified audit certificates for erroneous amounts of eligible costs are also directly informed about their errors and are invited to consult the available information in order to avoid similar errors in the future.

The audit results are implemented through audit adjustments in cost claim, recovery orders and by extrapolations. home_aar_2015_final of 64

The ex-post audit strategy for H2020 was approved in January 2016 and the first ex-post audits on H2020 projects should take place in 2017. Therefore, no error rate for H2020 is available yet.

However, the H2020 rules have been significantly simplified, compared to FP7, in order to address the main errors made under FP7 and to reduce the risk of irregularities. The major simplifications are the following:

• The introduction, per project, of a single funding rate of up to 100% of the total eligible costs;

• The introduction of a single flat rate of 25% for indirect costs (as under FP7, a large number of errors were made in the calculation of the actual indirect costs);

• A wider acceptance of average personnel costs; • A simplified system for recording the time spent on a project since time sheets are

no longer required for researchers working exclusively on a project.

As a result, the overall level of risk of H2020 is expected to be lower than under FP7.

2.1.1.4 Direct management - procurement

The control system for direct management procurement is grouped around three core processes: procurement procedures, financial operations, and supervisory measures.

Stage 1: Procurement procedure

The first stage concerns the calls for and evaluation of tenders, starting from the moment of planning and needs assessment until the selection of suppliers - the award decision. The overall control objective at this stage is to ensure that DG HOME selects the proposal that contributes the most towards the achievement of the policy or programme objectives in terms of effectiveness and compliance.

The procurement activity expanded in 2015, mainly in terms of total value of contracts signed (196 contracts signed in 2016 in total value of €55.16 million, versus 166 contracts in total value of €35.02 million 2014).

Six open procedures with a total value of € 72.35 million and one restricted procedure with a value of € 5 million have been submitted to the HOME Procurement Committee (HPC) in 2015. All procurement procedures (€ 77.35 million) were finalized in 2015. The average number of bids per tender was eight. This result has ensured competition and reasonable comparison of bids even in specialised topics. All files analysed by the Committee received a favourable opinion. There was also one negotiated procedure submitted to the HPC in 2015 in relation to additional activities for the European Migration Network (EMN) (€ 0.24 million).

There is one exception recorded by the control system, in relation to the use of mission expenditure under global envelope and one non-compliance event (award decision without ex-ante verification).

The lack of redress procedures testifies the robustness of the tendering process and assurance with respect to the effectiveness of the internal control system, including a good definition and clarity of the terms of reference.


Stage 2: Financial operations

The second stage concerns the management of the contracts and payments made. This stage comprises ex-ante checks of beneficiaries' cost claims and the processing of transactions through DG HOME'S financial circuits. The overall control objective is to ensure that operational results (deliverables) from the projects are of good value and meets the objectives and that the related financial operations comply with regulatory and contractual provisions.

The amounts of payments made slightly increased in 2015 as compared to 2014, reaching € 34.14 million. Two exceptions were recorded for payments made in relation to non-respect of budget annuality for payments made to experts. One non-compliance event was also registered in relation to a pre-financing paid twice.

Stage 3: Supervisory measures

Based on the methodology described in Annex 4, no ex-post controls were performed for contracts. The audit findings signalled by the other internal or external auditors are duly taken into account for the assessment of assurance in relation to procurement transactions (please see details in 2.2) and the residual error is estimated to be below 2%. As the Court of Auditors has estimated the overall error rate in the procurement implemented by the European Commission at 0,5%6, this has been used as the best estimate of the possible amount at risk in chapter 2.1.1.4.

2.1.1.5 Indirect management - decentralized agencies

DG HOME acts as partner DG for six agencies which received budget implementation tasks from the legislative authorities. The Internal Control Template (ICT) on indirect management in Annex 5 details the applicable supervision and reporting activities. The assurance described below refers to (i) the administrative part of the agencies' subsidy as well as on (ii) their operational transactions.

Stage 1: Operations: monitoring, supervision and reporting

The overall control objective of this stage is to ensure that DG HOME is timely and fully informed of any relevant management issues encountered by the agency, in order to mitigate any potential financial and/or reputational impacts.

Commission takes part in the governance of the agencies by participating as a member in the Management Boards, when the governing rules allow for this. Membership rules are laid down by the founding regulations of each agency. Agencies' Boards always include representatives from each Member State and generally one or two Commission's representative, each with one voting right.

However, the Commission's representation on the Management Board is not the only way to reflect the particular responsibility that the Commission holds in implementing EU legislation. DG HOME ensures the following monitoring activities:

Source: 2015/C 373/01 Annual report of the Court of Auditors on the implementation of the budget concerning the financial year 2014. "Estimated level of error for Chapter 9: Administration" (p.284).


- Monitorina of the agencies' poliev activities:

The operational units for particular policies are involved in numerous contacts at working level, coordination meetings, providing opinions on annual work programme, draft budget, staff policy plan and monitoring of their implementation.

- Budgetary monitorino:

The agencies have full responsibility for the implementation of their budget, DG HOME being responsible for the regular payment of the contributions established by the Budgetary Authority. Memoranda of Understanding were signed with each agency, clarifying the conditions for the payment of the EU subsidy by the Commission and allowing the parent DG to access ABAC data of agencies for budget implementation purposes.

At the closure of the financial year, agencies provide their budget outturn calculations to the Commission. They contain an estimation of the amount to be paid back to the Commission. After the final closure, the partner DG will claim its reimbursement from the agency.

Finally, the Commission provides assistance to the agencies with regard to the application of the financial regulations, but also through the use of different Commission tools and services (ABAC, Medical Service, recruitment via EPSO, training, PMO). This is done by other DGs.

Stage 2: Commission's contribution

The control objective is to ensure that all elements of the payment request is fully assessed before paying the contribution or decide to suspend or interrupt payments.

Memoranda of Understanding were signed with all six mentioned agencies clarifying the conditions for the payment of the EU subsidy by the Commission.

Due to their particular field of operations (dramatic increase of migrations flows), Frontex, EASO and Europol were under specific pressure during all 2015, requesting and receiving reinforcements in terms of commitment and payment appropriations. Additional staff (143 posts in total) has been allocated during the year 2015 to the three agencies and additional operational resources have been allocated to Frontex to joint operations in the Mediterranean Sea.

The table below summarizes the details on DG HOME'S contributions in relation to traditional agencies:

Implementation of commitment Implementation of payment Heading 3a: Freedom, security

and justice* appropriations

MC %

appropriations

M€ %

Frontex 133.53 100% 133.53 100% EASO 15.45 94% 13.10 94% Europol 94.86 97% 94.86 97% Cepol 8.47 97% 8.47 97% EMCDDA 14,79 99% 14,79 99% Eu-LISA 67.56 100% 67.26 100%

Total 334.66 99% 332.01 99%


Stage 3: audit, evaluations and discharge

Information regarding the use of the assigned resources by the agencies is provided by the Court of Auditors and Internal Audit Service. The IAS acts as the internal auditor for the agencies, while the European Court of Auditors gives yearly a statement of assurance as to the reliability of the annual accounts of the agency and the legality and regularity of the transactions underlying them. Based on these, the European Parliament grants discharge directly to the agencies.

Court of Auditors 'reports for 2014

In its 2014 reports issued for each traditional agency, the Court of Auditors concluded that the accounts of all agencies provide true and fair view and the transactions underlying the accounts are legal and regular.

Audits performed by Internai Audit Service (IAS)

DG HOME'S representatives in the management Boards of the Agencies have not been informed of any critical Issues arising from audits performed by the IAS or other assurance providers that would be very significant from a reputational perspective.

The relevant information provided by the agencies in relation to the issues identified as a result of the Commission's involvement in the Management Boards of the agencies and the results of DG HOME'S supervision arrangements are deemed reliable and assessed as sufficient to draw the reasonable assurance conclusion.

2.1.1.6 Overall conclusion on effectiveness of controls as regards legality and regularity

The table below provides an overview of the weighted average error rate for the annual expenditure by using the best estimate of the potential error rate for each of the constituent parts of the budget managed by the DG. For shared management, the cumulative detected error rate (Gross error rate) is based on the annual error rates reported by audit authorities, adjusted by the corrections validated by certifying authorities and, where necessary, by DG HOME estimation, as explained in Chapter 2.1.1.1. With regard to the amount under risk for the research grants, the applied error rate corresponds to the detected error rate of the Common Representative Audit Sample (Chapter 2.1.1.3). With regard to the direct management non-research grants, the cumulative detected error rate is based on the results of audits carried out by DG HOME (Chapter 2.1.1.2).

For other activities either a range between 0% and 1.99 % is applied as they were not covered by audits in 2015, or an alternative reliable estimation was used where available (Court of Auditors). These activities are not considered risk-prone and it is estimated that the error rate is below the materiality threshold.

For DG HOME, the estimated overall amount at risk7 for the 2015 payments made is estimated as a range between €24.6 and 31.8 million. This is the AOD's

In order to calculate the weighted average error rate (AER) for the total annual expenditure in the reporting year, detected, estimated or proxy error rates have been used (not the RER).


best, conservative estimation of the amount of expenditure authorised during the year (€1 203 million) not in conformity with the applicable contractual and regulatory provisions at the time the payment is made.

The estimated amount at risk is higher than in 2014 (EUR 14.86 million) for two reasons: (1) Change of methodology for estimation: for other activities, which in 2014 were assumed to be 0% risk, a range or alternative source estimation is used, (2) Payments made in 2015 increased almost 60% compared to 2014. This increase does not have any impact on the error rate, however the calculated amount at risk is higher.

This expenditure will be subsequently subject to ex-post controls and a sizeable proportion of the underlying error will be detected and corrected in successive years. The conservatively estimated future corrections8 for those 2015 payments made are €22.7 million. This is the amount of errors that the DG conservatively estimates to identify and correct from controls that it will implement in successive years.

For the estimation of a corrective capacity of the DG, the data on 4-year average (2012-2015) recoveries is taken as the best estimation of a corrective capacity of the DG, in line with the methodology set by the central services of the Commission9.

2015 DG HOME -Activity

2015 payments

Erro (rar

r rate ige)*

Amount at risk (range)

Shared management: 582,225,134 2.76% 16,069,414 16,069,414

Direct management: ι Research grants 62,478,513 4.47% 2,792,790 2,792,790 Non-research grants 167,124,196 3.36% 5,615,373 5,615,373

Contribution to executive agency 2,067,000 0.00% 1.99% 0 41,133

Procurement * 34,135,461 0.50% 170,677 170,677

Subdelegations and service level agreements 8,047,507 0.00% 1.99% 0 160,145

Indirect management: Traditional agencies 332,015,000 0.00% 1.99% 0 6,607,099 Delegation agreements 15,099,550 0.00% 1.99% 0 300,481 Total 1,203,192,361 2.04% 2.63% 24,648,254 31,757,112

* CoA reported error rate for procurement in the latest DAS.

8 This estimate is based on past performance, namely on the average recoveries and financial corrections (ARC) implemented since 2012 and applied to the payments of the year.

9 DG HOME uses a 4-year average instead of a 6-year average, as it is considered to be more representative of the current corrective capacity. 2010 and 2011 recovery figures are not representative for all years, due to big corrections done for Schengen Facility.


2.1.2 Efficiency and Cost-effectiveness

Based on an assessment of the most relevant key indicators and control results, DG HOME has assessed the cost-effectiveness and the efficiency of the control system and reached a positive conclusion.

Regarding the cost-effectiveness of controls, the conclusion was reached on the basis of an estimation of costs of control over the value of the related funds, in the form of indicators and their evolution over time for each distinct control system described in Annex 5. Details are presented in Annex 10. As a general overview, the total costs of controls performed in 2015 in DG HOME were estimated at € 22.19 million, representing 1.84% of total payments made in the year. This shows a clear improvement in the costs efficiency of controls in DG HOME in 2015, both for the total costs and per each control system individually (€ 19.27 million total costs representing 2.54% in 2014). Due to the significant increase in payments made by DG HOME in 2015 which was not backed up by a similar significant increase in staff, the cost efficiency has improved for each control system. Significant efficiency gains for shared management, direct management grants and procurement activities stemmed also from the reorganisations carried out in 2015 by streamlining financial processes in one Directorate, reviewing financial circuits and aligning similar processes in one Unit.

The costs estimated under shared management mode do not include costs incurred by the Member States. DG HOME is nevertheless considering taking into account these costs for future reporting.

The share of costs for each control system in the total payments in the year is summarized below:

РЯНИВВВННШ^Ш ' 2015 . 2014

Costs/payments Control system Costs (M€) Payments (M€) Costs/payments (%) (%)

Shared management 8,01 582,23 1,38% 2,21% Direct - grants non-research 5,93 167,12 3,55% 6,22% Direct - grants research 3,34 62,48 5,35% na

Direct procurement 2,64 34,14 7,73% 9,38% Indirect management 2,27 347,12 0,65% 0,69% Other na 10,1 na na

•' Total 22,19 1203,19 1,84% 2,54%

Regarding the efficiency of controls; DG HOME assessed it based on "time-to" indicators, measuring the time spent to complete a specific procedure. The general statistics at the level of all payments performed in the DG show that 10.37% of all payments have been made later than the legal times, slightly increasing from 8.47% in 2014. This corresponded to an average of 33 days needed in 2015 to make a payment, against 28 days in 2014. This has to be put in perspective with the increase of payments made both in numbers and in amounts, without parallel increase of resources (notably in grants and procurements).


Looking at each distinct control system, one can notice a clear improvement in DG HOME'S efficiency of its control processes performed under shared management mode. It is worth mentioning that during 2015 DG HOME managed to catch up on the delays registered in 2014 on the start-up of the new programmes AMIF/ISF, while keeping the pace with closures of the old SOLID programmes.

Time-to adopt national programmes: ÒI69 days (98 days in 2014)

Time-to-pay pre-financings: 31 days (83 days in 2014)

Time-to-close : 80 days (292 days in 2014)

Under direct management grants, the indicators on efficiency of controls (time-to-grants) deteriorated especially in relation to signatures of grants and payments stage. There are several important reasons which impacted on the level of the indicators for grants (other than research). One of the main reasons is the increase of the AMIF-ISF budget, notably through emergency assistance following the migration crisis which put pressure on the general granting activity of the DG while comparatively fewer resources were allocated to direct management than in 2014. Further analysis showed that another reason for delays is represented by the successful open calls under 2014 Annual Work Programmes having received many applications. In parallel, the number of cost claims treated increased substantially, reflecting the closure of grants awarded by the end of MFF 2007-2013 where important calls for proposals had been programmed. The increase in closure is expected to continue in 2016.

Time-to-inform (non-research grants): il 112 days (142 days in 2014, 180 days foreseen by Art. 128.2 (a) of the FR)

Time-to-grant* (non-research grants): Я 95 days in 2015 (40 days in 2014, 90 days foreseen by Art. 128.2 (b) of the FR)

Time-to grant* for research grants: 245 days (not available for 2014; H2020 regulation: 8 months deadline foreseen by the Rules of Participation article 20)

Time-to-pay (all grants): Я 48 days (29 days in 2014)

* for non-research grants the time-to-grant includes only the period from the award to the signature of grants, while in case of research grants the time-to-grant includes also the time-to-inform.

In relation to direct management procurement, the average number of days necessary to process a payment slightly increased to 18 days (from 14 days in 2014), while for payments of subsidies to traditional agencies, the time to pay decreased to 13 days.

Procurement: Time-to-pay: Я 18 days (14 days in 2014)

Traditional agencies: time-to-pay:ill3 days (16 days in 2014)

DG HOME used the possibility foreseen in FR art 66.2 to differentiate the frequency and/or the intensity of the DG's controls - in view of the different risk-profiles among its current and future transactions and of the cost-effectiveness of its existing and any alternative controls. In order to improve and simplify the way in which EU funding is delivered, the number of financial instruments has been reduced under the new MFF compared to the previous financial framework. More flexible rules for implementation will also allow for a faster and more effective response to challenges in all areas of Home home_aar_2015_final of 64

Affairs policies. For Funds under shared management, a system of results-driven, multi-annual programming is applied, replacing the previously annual approach. Moreover, funds previously implemented directly by the Commission (CIPS/ISEC) have been shifted towards shared implementation by Member States (under ISF Police).

DG HOME revised also its internal financial circuits, through two internal re-organizations. The first re-organization took place on 1 January 2015 when the management of the 2007-2013 MFF funds (SOLID) and the new MFF 2014-2020 funds (AMIF and ISF) was centralized in a newly created financial Directorate (Migration and Security Funds) created as part of the reorganisation of the DG to align it with the priorities of the Juncker Commission. The second re-organization took place on 1st of November 2015, with a move from a fund-based structure to one based on management mode. Accordingly, one unit was created to deal exclusively with files under direct and indirect management and two geographical units under shared management.

Based on the above available information assessed as being complete and reliable and considering that the total costs of controls are less than 2% of payments made, DG HOME could reach a positive conclusion with regard to the cost-effectiveness and the efficiency of its entire control system, despite the deterioration in the efficiency of controls under direct management.

2.1,3 Fraud prevention and detection

DG HOME has developed and implemented its own anti-fraud strategy since 2012, elaborated on the basis of the methodology provided by OLAF.

In principle, the controls aimed at preventing and detecting fraud are different from those intended to ensure the legality and regularity of the transactions (the unintentional errors). However, during 2015 specific anti-fraud related actions were carried out in DG HOME:

• the risk of fraud was integrated in the risk assessment,

• selection of fraud risk/based audits are a basis of the external audit plan,

• update of internal procedures on EWS,

• awareness in the area of anti-fraud and ethics is raised through maintanining updated information in the intranet,

• attendance to FPDnet meetings.

During 2015 two cases of suspicious of fraud and irregularities were transmitted to OLAF for investigation.

2=2 Audit observations asid ¡^wfiivìerìdatìoris

This section reports and assesses the observations, opinions and conclusions reported by auditors in their reports as well as the opinion of the Internal Auditor on the state of control, which could have a material impact on the achievement of the internal control objectives, and therefore on assurance, together with any management measures taken in response to the audit recommendations. home_aar_2015_final of 64

This section reports and assesses the observations and conclusions reported by auditors which could have a material impact on the achievement of the internal control objectives, and therefore on assurance, together with any management measures taken in response to the audit recommendations.

DG HOME is audited every year by both internal and external independent auditors: the Commission internal audit service (IAS) and the European Court of Auditors (ECA).

• Summary of the IAS audit recommendations issued during the year

During the reference period, the Internal Audit Service completed two audits (Audit on DG HOME'S Preparedness for 2014-2020 legislation in shared Management (ISF and AMIF) and a multi DG audit on the objective setting process in the context of the Management Plans) and launched a new audit on coordination and working arrangements with EU Regulatory Agencies and Bodies, with DG HOME among the audited DGs.

All four recommendations stemming from audit on DG HOME'S Preparedness for 2014-2020 legislation in shared Management were accepted and the action plan, considered as satisfactory by the IAS, is being implemented. Three of the recommendations are rated as very important. They relate to (1) the Assessment and Approval of National Programs (NPs) - The audit concluded that the delays noted in the adoption of NPs10 may have a knock-on effect on the implementation phase which could put at risk the achievement of policy objectives; (2) the designation of Responsible Authorities (RAs) - the IAS identified certain gaps in the draft procedure for reviewing the designation procedure and observed delays in the designation of RAs in the Member States; and (3) the need to have an overall control strategy - In the absence of this, the auditors concluded that there is a risk of control overlaps or gaps. This could impact on the DG's ability to obtain reasonable assurance on the proper use of the new funds due to unreliable Audit Authorities (AA), insufficient coverage of high risks and/or insufficient audit resources.

The recommendations are already partially implemented, with the remaining actions (notably the finalisation of control strategy and methodology for the reliance on Audit Authorities) planned to be finalised by mid-2016. It should be noted that in spite of DG HOME efforts to support Member States in designating their Responsible Authorities, as of year-end eight designations were still pending. This could be worrying for the Member States concerned, taking into account that if there is no RA designated all the expenditure incurred in 2015 will have to be borne by the country concerned since they are not eligible for ED funding. However, as DG HOME will not reimburse the expenditure to non-designated RA, there is no assurance risk to the Commission.

From audit on the objective setting process in the context of the Management Plans (MPs) three very important recommendations were issued by the IAS. They relate to (1) process of setting objectives and indicators in the MP - the IAS found an overall high number of indicators, which may hamper the usefulness of the MP as a management tool, and lack of formalisation and documentation of the quality review process, (2) quality of objectives and Indicators, which need improvement, and (3) monitoring of DG's objectives/reporting arrangements, where the IAS noted that a lack of reliable information on indicators may hamper the DG's ability to monitor and consistently present the progress towards achieving its objectives.

10 By end of December, 54 NPs, out of a total of 58 had been adopted, corresponding to a 93% completion rate.


DG HOME prepared an action plan to address the IAS recommendations which has been deemed to be satisfactory to mitigate the risks identified for the accepted recommendations. However, DG HOME partially rejected two recommendations. The rejected aspects related to the insufficient existence of procedures and guidance at the beginning of the MP exercise for which DG HOME considers that the modalities for complementing the central services instructions, and notably the need for more detailed additional internal guidelines/instructions, would need to be assessed against their necessity and proportionality; and secondly, to the need to prepare a mid-term overview report to the management demonstrating the progress towards the achievement of the objectives in the MP for which DG HOME considers that making two reports a year is an excessive burden considering the current context in which DG HOME operates. The preparation of the Annual Activity Report in the first quarter of each year is already a tool to assess the state of play.

As regards the implementation of recommendations issued in previous years, IAS closed the remaining open recommendation from audit on Control Strategy in DG HOME (2012) with the revision of the Ex-post Audit Strategy for the SOLID funds.

In conclusion, the internal audit service stated in their annual opinion on the state of control of the DG ("IAS limited conclusion") that the internal control systems audited were overall working satisfactorily although a number of very important findings remain to be addressed in line with the agreed action plans as mentioned above.

• Summary of the European Court of Auditors findings

The Court of Auditors examined the financial management (legality & regularity of transactions, reliability of control systems) in its Annual Report for 2014 (published in November 2015). Chapter 1 (where DG HOME was exceptionally included only for 2014 DAS) does not include any reference to issues in relation to DG HOME. Nevertheless, the Court issued five statements of preliminary findings, which will be followed up by DG HOME where appropriate. With regard to the Court's finding mentioned in its 2013 Annual Report (references to some ineligible costs in relation to External Borders Fund in Spain), DG HOME reopened the 2009 annual programme for Spain and applied a financial correction on the action at stake.

Starting 2015 discharge procedure, the Court changed the structure of its Annual Report, creating a new chapter for MFF Heading 3 "Security and citizenship", where DG HOME will be included (apart from the Security research strand). In this framework, the Court performed substantive testing of transactions together with a system audit in DG HOME in relation to its direct and shared management funds, for which the procedure for communication and assessing the preliminary results is now ongoing.

Apart from the yearly audit, the Court of Auditors did not publish in 2015 any performance audit in relation to Migration and Home Affairs area. Several performance audits are in their preliminary stages to be started in 2016, according to the Court of Auditors audit plan (in relation to areas as refugees' crisis, fight against terrorism). One performance audit touching on external migration spending in specific third countries areas has been finalized by the Court and published on 17 March 2016 (Special Report 9/2016 "EU external migration spending in Southern Mediterranean and Eastern Neighbourhood countries until 2014"). This special report concerned several DGs (DEVCO, NEAR, E EAS and DG HOME as associated DG). As explicitly stated by the ECA in the report itself, this report is not about EU migration policies and is also not about how the EU addressed the current migration crisis. It is about migration-related assistance/projects provided in the past in a few neighbouring countries under two external cooperation instruments (Development Cooperation Instrument (DCI) thematic programme and European Neighbourhood and Partnership Instrument (ENPI)). The Court made a number of recommendations relating to: clarify objectives, develop, expand and


improve the performance measurement framework and focus available financial resources on clearly defined and quantified target priorities; develop an appropriate coding in the Commission's information systems; improve project preparation and selection; further consolidate the link between development and migration; strengthen the capacities of EU delegations on migration issues and seek the development of a funding overview. The Commission accepted most of the recommendations made in this special report and it already started to implement them.


- .5' 'sessment of tl· ectiveness of the internal control systems The Commission has adopted a set of internal control standards, based on international good practice, aimed to ensure the achievement of policy and operational objectives. In addition, as regards financial management, compliance with these standards is a compulsory requirement.

DG Migration and Home Affairs has put in place the organisational structure and the internal control systems suited to the achievement of the policy and control objectives, in accordance with the standards and having due regard to the risks associated with the environment in which it operates.

DG HOME annually assesses the effectiveness of its key internal control systems, including the processes carried out by implementing bodies in accordance with the applicable Commission guidance. The assessment relies on a number of monitoring measures and sources of information including:

• Desk reviews on particular aspects of compliance with the baseline requirements of the Internal Control Standards and reviews of exceptions and non-compliance events with the Internal Control Standards (ICS). The results of the desks reviews pointed out to full compliance with all the ICS in 2015. Regarding the systemic registration of exceptions and non-compliance events and analysis of causes behind them. 14 exceptions and one non-compliance events were recorded in 2015, as compared to 63 exceptions and non-compliance events in 2014. The underlying causes behind these exceptions and weaknesses have been analysed and corrective and alternative mitigating controls have been implemented when necessary

• Results of the 2015 internal control management assessment, in accordance with ICS 15, by means of the self-assessment tool11 (iCAT survey, please see details below);

• Results of the relevant audits performed or followed up by the Internal Audit Service which concluded that the internal control systems audited are overall working satisfactorily although a number of very important findings remain to be addressed. The Court of Auditors' findings were of minor nature and therefore do not undermine the effectiveness of the internal control system in place. For details please referto part 2.2.

• The annual risk management exercise performed in the context of the Management Plan; one critical risk was registered in relation to the relocation scheme and the hotspots approach. The controls put already in place by DG HOME and the action plan containing mitigation actions are assessed by the management as sufficient and do not undermine the effectiveness of the internal control system in place.

• The Authorising Officers by Sub-Delegation Reports and declaration of assurance (for details please see part 2.1).

11 The ¡CAT survey is launched every end of the year with the collaboration of DG Budget.


This analysis had enabled the Internal Control Coordinator to report on the state of internal control and his recommendations to the Director-General. There is satisfactory evidence that the processes and procedures in place control the main risks by providing a reasonable assurance that the key objectives are met and that the activities are carried out as intended.

The outcome of the ¡CAT survey (Internal Control Self-Assessment Tool) is one of the sources of information on the measure of the effectiveness of Internal Control Standards.

This year's focus was on the following five Internal Control Standards: ICS 3 "Staff allocation and mobility", ICS 5 "Objectives and Performance Indicators", ICS 7 "Operational Structure", ICS 10 "Business Continuity" and ICS 11 "Document management". The participation rates were 29% of the staff and 56% of the management, covering approximately 31% of the total population and judged sufficient to be representative.

The five standards evaluated were considered as effectively implemented as the overall satisfaction rate was 63.25%. Nevertheless, the exercise signalled that the effectiveness in the implementation of ICS 5 "Objectives and performance indicators" could be improved. The assessment disclosed negative opinions directly related to the usefulness of the management reports for monitoring the policy objectives and of the DG's performance indicators. Given the fast changing context in which DG HOME is operating and the difficulty in finding meaningful indicators the standard was previously prioritised but the actions planned are to be implemented in 2016. In order to foster the use and utility of the two main management tools (the Management Plan and the Annual Activity Report) the coordination unit will increase the DG's quantitative performance indicators in the management plan and facilitate the management and monitoring of the DG's activities by measuring the progress of the key performance indicators under the guidance of senior managers.

In addition, the audit recommendations stemming from a multi-DG audit on "Objective setting process in the context of preparation of the Management Plans" where DG HOME was one of the auditees showed weaknesses in the process for setting objectives and indicators in the Management plan, the quality of these and in the monitoring of the DG's objectives.

The above weaknesses concern only partly one ICS, for which improvement measures have been launched and overall, based on other elements as highlighted above, there are no indications that the internal control standards would be deficient.

In conclusion, the internal control standards are effectively implemented and functioning. In addition, DG Migration and Home Affairs has been taking measures to further improve the effectiveness of its internal control systems in the area of "Objectives and Performance Indicators".


í onclusions ;<< insurance This section reviews the assessment of the elements reported above (in Sections 2.1, 2.2 and 2.3) and draws conclusions supporting the declaration of assurance and whether it should be qualified with reservations.

The information reported in Section 2 stems from the results of management and auditor monitoring, based on the results of the self-assessment, ex-post controls, the observations of the Internal Audit Service, lessons learnt from the reports of the Court of Auditors as well as information received from other authorising officers in cases of crossed sub-delegations or delegation agreements.

These reports result from a systematic analysis of the evidence available. This approach provides sufficient guarantees as to the completeness and reliability of the information reported and results in a comprehensive coverage of the budget allocated to the Director-General of DG HOME.

The key arguments for the assurance are listed below:

• Overall, reliable and complete control results are available for each control system, indicating positive results in terms of effectiveness, legality and regularity, cost-effectiveness and efficiency (except for the high error rates in some areas, as explained below).

• Full compliance with the Internal Control Standards; weaknesses are known and addressed;

• No critical issues highlighted by internal or external auditors;

• The estimated overall amount at risk for the 2015 payments made is estimated as a range between €21.9 and 29.0 million. This is the AOD's best, conservative estimation of the amount of expenditure authorised during the year (€ 1 203 million) not in conformity with the applicable contractual and regulatory provisions at the time the payment is made. This expenditure will be subsequently subject to ex-post and a sizeable proportion of the underlying error will be detected and corrected in successive years. The conservatively estimated future corrections for those 2015 payments made are €22.7 million. This is the amount of errors that the DG conservatively estimates to identify and correct from controls that it will implement in successive years.

• No major issues pointed out by the Authorizing Officers by Sub-delegations in their reports except for the below reservations. No issues pointed out in relation to indirect management.

Change of methodology for determining materiality level for reservations

Previously, DG HOME determined the need for a reservation at ABB activity level, thus aggregating the control results and error rates across various expenditure covered by different control approaches within each ABB line ("vertical" approach). In 2015 AAR however, the materiality is determined for each relevant distinct internal control system across various ABB activities ("horizontal" approach).

As a result of this change, a reservation is considered for each of these control systems separately and not at an aggregated level. The control objective is to ensure that for each system, the residual error remains below 2%.

The residual risk was analysed for each distinct control system, as detailed in section 2.1,


and following the change in methodology applied on assessing its materiality, the results of each were analysed separately to determine its impact on assurance and a need to issue a reservation:

• In case of funds implemented under shared management mode, while the overall shared management residual error rate remained well below 2%, the cumulative residual error rate was higher than 2% for eight Funds in four member states. However, for six of them the residual amount at risk remained below the de minimis threshold (see Annex 4 for more details). As a result, only two funds (EIF and ERF in Germany) are subject to a reservation, due to the fact that during an ongoing ex-post audit, significant errors and system deficiencies were identified. The reservation issued for these two Funds which have a similar internal control system, has no financial impact as no payments to these Funds were made in 2015 - therefore the reservation is reputational.

• For FP7, the representative error rate from the Common Representative audit Sample is 4.47%. The research family maintains the reservation for FP7 as taking into account the FP6 experience and the need to balance legality and regularity with other objectives such as the attractiveness and the success of EU research policy, international competitiveness, scientific excellence, the wish to encourage participation of SMEs and the costs of controls, it is not expected that by the end of the programming period the residual error rate will be below the materiality threshold defined in Annex 4 'Materiality Criteria'.

• In case of non-research grants, the estimated multiannual residual error rate for the grants directly managed by DG HOME (non-research grants) for 2015 is 2.88%.

It needs to be emphasised that the new reservations are related to changes of methodology and not due to a worsened situation concerning legality and regularity of expenditure - in fact, the Direct Management error rates have improved compared to the previous years, and concerning Shared Management, a large number of financial corrections has been implemented in the Member States, as an evidence of efforts made by DG HOME to address any deficiencies noted in previous years, even though a reservation was not necessarily issued in the AAR due to a different methodology.

Overall Conclusion

In conclusion, management has reasonable assurance that, overall, suitable controls are in place and working as intended; risks are being appropriately monitored and mitigated; and necessary improvements and reinforcements are being implemented. The Director General, in his capacity as Authorising Officer by Delegation has signed the Declaration of Assurance, albeit qualified by the below reservations:

Reservation concerning the rate of the residual error with regard to the accuracy of costs claims in the 7th Research Framework Programme (FP7);

Reservation regarding the financial risk corresponding to the residual error rate in the non-audited population of grants in the programmes managed under the budget chapter 18 02 (Internal Security) and 18 03 (Asylum and Migration);


Reputational Reservation concerning the management and control systems for the period 2007-2013 for Germany - European Refugee Fund and European Fund for the integration of third-country nationals - closed Annual Programmes up to year 2011;

The combined financial impact of the reservations on the assurance is assessed at 0.61% of the payments made by DG HOME in 2015, amounting to 7.37 million.


l', f Ê.Í.-Í hliziiΤ,Ο-Я· -,Vr '^^'Ч^ДЬ=>]4Г

I, the undersigned,

Director-General of General Directorate of Migration and Home Affairs

In my capacity as authorising officer by delegation

Declare that the information contained in this report gives a true and fair view12.

State that I have reasonable assurance that the resources assigned to the activities described in this report have been used for their intended purpose and in accordance with the principles of sound financial management, and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions.

This reasonable assurance is based on my own judgement and on the information at my disposal, such as the results of the self-assessment, ex-post controls, the opinion of the Internal Auditor on the state of control and the lessons learnt from the reports of the Court of Auditors for years prior to the year of this declaration.

Confirm that I am not aware of anything not reported here which could harm the interests of the institution.

However the following reservations should be noted:

Reservation concerning the rate of the residual error with regard to the accuracy of costs claims in the 7th Research Framework Programme (FP7);

Reservation regarding the financial risk corresponding to the residual error rate in the non-audited population of grants in the programmes managed under the budget chapters 18 02 (Internal Security) and 18 03 (Asylum and Migration);

Reputational Reservation concerning the management and control systems for the period 2007-2013 for Germany - European Refugee Fund and European Fund for the integration of third-country nationals - closed Annual Programmes up to year 2011.

12 True and fair in this context means a reliable, complete and correct view on the state of affairs in the DG/Executive Agency.

Brussels, ļ 2 MAI 2016

Matthias Ruete


Reservation 1

DG Migration and Home Affairs

Title of the reservation, including its scope

Reservation concerning the rate of the residual error with regard to the accuracy of cost claims in the 7th Research Framework Programme (FP7).

Domain Research and other Internal Policies, direct management of grants under the 7th Research Framework Programme (FP7).

ABB activity and amount affected (="scope")

02 04 - "Horizon 2020 - Research relating to enterprises", payments outturn in 2015 for FP7 grants: € 44 million.

Reason for the reservation

At the end of 2015, the residual error rate is not below the materiality threshold foreseen for the multi-annual period.

Materiality criterion/criteria

The materiality criterion is the cumulative residual error rate, i.e. the level of errors that remain undetected and uncorrected, by the end of the management cycle.

The control objective is to ensure that the residual error rate on the overall population is below 2% at the end of the management cycle. As long as the residual error rate is not (yet) below 2% at the end of a reporting year within the FP's management lifecycle, a reservation would (still) be made.

Quantification

of the impact

(= actual exposure")

The research family's Representative Error Rate for 2015 is 4.47%

The maximum impact is a prudent estimation and calculated by multiplying the Representative Error Rate (4.47%) by the sum of FP7 payments based on cost statements actually processed in 2015 and FP7 pre-financings cleared in 2015 (€ 102 million). The estimated impact in 2015 is € 4.58 million.

Impact on the assurance

Legality and regularity of the affected transactions, i.e. only payments made against cost claims (interim payments and payments of balance). The assurance is affected within the scope of the quantified budgetary impact, which represents maximum 0.38 % of payments made by DG HOME in 2015.

Responsibility for the weakness

The Legislative Authorities for the complexity of the underlying rules as laid down in the basic acts, the Commission services for the management and control systems in place, and the beneficiaries and certifying auditors for the correctness of cost claims and audit certificates.

Responsibility for the corrective action

Within these limits the remedial action of the services of the Commission is carried out through audit campaigns and the full and timely implementation of audit results as well as by better informing the beneficiaries and certifying auditors.

The main corrective actions, as set out in the common FP7 audit!


strategy, consist of exhaustive auditing of the biggest participants, coverage of an additional sample of beneficiaries randomly selected according to international audit standards and the performance of targeted audits in case of identified specific risks.

In addition, the implementation of the audit results on systematic errors to non-audited projects and the application of liquidated damages, in case the beneficiary fails to implement audit results on these systematic errors, provide for an additional extension of audit coverage.

The remaining scope to reduce errors will be addressed in particular through the following actions:

- continuing on-going efforts to give guidance and feedback to the participants and certifying auditors to prevent errors occurring;

- continuing control and audit work in order to further reduce the FP7 residual error rate

The possibilities to simplify the FP7 rules have been exhausted but the simplification measures introduced in 2011 should continue to have a positive impact on the error rate.


Reservation 2

DG Migration and Home Affairs Title of the

reservation, including its

scope

Financial risk corresponding to the residual error rate in the non-audited population of grants in the programmes managed by DG Migration and Home Affairs (non-research grants)

Domain Centralised direct management - grants (2007-2013 proqrammes) ABB activity and amount affected

(="scope")

18 02 - Internal Security, 18 03 - Asylum and Migration and 33 03 -Justice. Total payments related to directly managed grants (2007-2013 programmes) in 2015: € 31.9 million.


At the end of 2015, the residual error rate is not below the materiality threshold.


The materiality criterion is the cumulative residual error rate, i.e. the level of errors that remain undetected and uncorrected, by the end of the management cycle. The control objective is to ensure that the residual error rate on the overall population is below 2% at the end of the management cycle

Quantification of the impact


The estimated multiannual residual error rate for DG HOME directly managed grants (except research) for 2015 is 2.88%. The maximum impact is calculated by multiplying the multiannual residual error rate by the sum of direct management payments based on cost statements actually processed and pre-financings cleared in 2015 (€ 97.1 million). The estimated impact in 2015 is € 2.79 million


Legality and regularity of the affected transactions, i.e. only payments made against cost claims (interim payments and payments of balance). The assurance is affected within the scope of the quantified budgetary impact, which represents which represents 0.23 % of payments made by DG HOME in 2015.

Responsibility for the

weakness

The main reason for errors are: - the fact that Programmes managed by DG HOME under the MFF 2007-2013 targeted relatively new policy areas and new beneficiaries who needed to adapt to EU rules. - the complexity of the eligibility rules as laid down in the Financial Regulation, based on the reimbursement of actual eligible costs declared by the beneficiaries; - the additional complexity of having customised rules per programmes -the fact that there are hundreds of beneficiaries and co-beneficiaries, and not all can be fully controlled.

The different control provisions set out by DG HOME, along with the audit certificates on financial statements (asked more frequently since annual work programme 2011) and ex-post audits, can mitigate these risks to a certain extent, but can never be carried out on 100% of the cost claims received.


corrective action

The possibilities to simplify the grant rules have been exhausted, although there is some evidence that the simplification measures introduced since the implementation of annual work programme 2009 (mainly the use of the same model of cost claims across all programmes and the rationalisation of the eligibility rules) have had a positive impact on error rate. The remaining scope to reduce errors will be addressed in particular through the following actions: 1) Continuing the on-going efforts to give guidance and feedback to the participants and certifying auditors to prevent errors occurring; 2) Maintain the (high)rate of projects audited in the population at risk The ex-post audit plan for 2016 foresees 39 audits of grants. This will


allow reaching audit coverage of more than 20% of the auditable population for MFF 2007-2013, which will have a direct impact on the reduction of the residual amount at risk at the end of the management cycle. 3) Improve the general implementation and management of the programmes

- Reorganisation of the management of the Funds within DG HOME: new Directorate created in 2015, and internal reorganisation of this Directorate as from 01.11.2015. A new unit is now fully in charge of all direct management programmes under the predecessors of AMIF and ISF.

- Streamline and harmonise procedures regarding monitoring and final payment.

- Simplification of financial circuits - More frequent (systematic in certain programme) request for audit

certificates accompanying the cost claim


Reservation 3

DG Migration and Home Affairs

Title of the reservation, including its

scope

Reputational Reservations concerning the management and control systems for the period 2007-2013 for;

• Germany - European Refugee Fund - closed Annual Programmes up to year 2011

• Germany - European Fund for the integration of third-country nationals - closed Annual Programmes up to year 2011

Domain ERF/EIF are carried out under "Shared management Responsibility" under DG Migration and Home Affairs 2007-2013 programmes

ABB activity and amount affected

(="scope")

18.03 Asylum and Migration. Payments in 2015 linked to the programmes in reservation: Euro 0


Draft audit report by the Commission services has revealed serious deficiencies in management and control systems for these programmes.


The materiality criterion is the cumulative residual error rate, i.e. the level of errors that remain undetected and uncorrected, by the end of the management cycle, at a Member State level. The control objective is to ensure that the residual error rate at the level of the specific Member State and Fund is below 2% at the end of the management cycle.

Where the residual error rate was above 2%, a reservation was made unless the amount at risk was below the de minimis threshold of €350,000 established in DG HOME'S materiality criteria (Annex 4)

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 than on a quantitative one.

Quantification of the impact


Yearly payments are not directly impacted (as no payments in 2015 made to the funds/Member State under reservation).


DG HOME has not been able to obtain reasonable assurance that key elements of the management and control systems of the programmes concerned functioned effectively, so as to provide reasonable assurance that statements of expenditure are correct and that the underlying transactions are legal and regular. Financial impact will be mitigated through financial corrections applied to past expenditure statements.


weakness

The expenditure concerned is under shared management in which the Member State is primarily responsible for implementing the management and control systems. Therefore, the designated national authorities of the programmes concerned are responsible for undertaking corrective measures. The Commission supervises the national authorities in this respect (monitoring of execution of the remedial measures).



corrective action

At Commission level: The reservation is due to the ex-post audit carried out by the audit sector of DG HOME which is still not finalised and currently at contradictory procedure with the Member State. Therefore the final amount of irregular expenditure may differ from the amount used to calculate the amount at risk. In addition system related findings may be issued. Upon the receipt of the final report, the errors will be analysed and financially corrected. In addition recommendations to the responsible authority for the implementation of the AMIF (subsequent programme period 2014-2020) will be issued.


2015ec.europa.eu/info/sites/info/files/activity-report-2015-dg-home_may2016_en.pdf · foreword this...

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