EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Europaudvalget 2016-17
EUU Alm.del Bilag 195
Offentligt

DECEMBER 2016

N°

European Court of Auditors

Journal

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Past editions of the Journal can be found on:

ECA’s website: http://eca.europa.eu/en/Pages/Journal.aspx

PRODUCTION

Rédacteur en chef / Editor in Chief : Rosmarie Carotti

Tél. / tel.: 00352 4398 - 45506 - e-mail : [email protected]

Mise en page, diffusion / Layout, distribution : Direction de la Présidence - Directorate of the Presidency

Photos : Reproduction interdite / Reproduction prohibited

The contents of the interviews and the articles are the sole responsibility of the interviewees and

authors and do not necessarily reflect the opinion of the European Court of Auditors

Cover photos:

- A high-level ECA conference on EU Financial Instruments

From left to right: Pier Luigi Gilibert, Chief Executive, European Investment Fund;

Ingeborg Gräßle, Member of the European Parliament, Chair of the Budgetary Control Committee;

Klaus-Heiner Lehne, ECA President;

Iliana Ivanova, Dean of Chamber II, ECA Member;

Nicholas Martyn, Deputy Director-General for Policy, Compliance and Performance,

DG Regional and Urban Policy, European Commission

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

TABLE OF CONTENTS

EU Financial Instruments

A high-level ECA conference organised by Iliana Ivanova, ECA Member and dean of

Chamber II, and introduced by Klaus-Heiner Lehne, ECA President

By Rosmarie Carotti

Commission’s governance needs an update

By Lazaros S. Lazarou, ECA Member

In memory of Jan O. Karlsson (1 June 1939 – 19 September 2016)

By Eduardo Ruiz Garcia, Secretary-General

More cooperation needed to audit energy and climate policies effectively

Contact Committee, Bratislava, 20-21 October 2016

By Radek Majer, Assistant to Liaison Officer

Questions to Karol Mitrik, President of the Supreme Audit Office of the

Slovak Republic

Reflections around the Special Report N° 23/2016

“EU support to Maritime Transport : ... In troubled waters"

By Luc T' Joen, senior administrator in Chamber II

Two recent audits on key control mechanisms of EU support to farmers

By Kristian Sniter, private office of Nikolaos Milionis

Experiences from presenting AR 2015 to stakeholders in Slovenia

By Samo Jereb, ECA Member

Presentation of the 2015 ECA Annual Report in Cyprus

By Andreas Antoniades, former head of private office of Lazaros S. Lazarou

Two Special Reports on water quality related issues (Danube river basin) presented to

water professionals at international conferences

By Marion Colonerus, principal manager

FOCUS

- Special reports Nos 29 & 31/2016

Chamber IV looking to the future

By the Private Office of Baudilio Tomé Muguruza, Dean of Chamber IV

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

EU Financial Instruments

By Rosmarie Carotti

A high-level ECA conference organised by Iliana Ivanova, ECA Member and dean of Chamber II,

and introduced by Klaus-Heiner Lehne, ECA President

15 November 2016

From left to right: Pier Luigi Gilibert, Chief Executive, European Investment Fund;

Ingeborg Gräßle, Member of the European Parliament, Chair of the Budgetary Control Committee;

Klaus-Heiner Lehne, ECA President;

Iliana Ivanova, Dean of Chamber II, ECA Member;

Nicholas Martyn, Deputy Director-General for Policy, Compliance and Performance, DG Regional and Urban Policy, European Commission

The ECA high-level Conference on Financial Instruments, held in Luxembourg on Tuesday 15 November, brought

together a broad spectrum of representatives from the public and private sector to consider how financial

instruments can best be used to provide financial support from the EU budget.

The conference drew on the conclusions of the recent ECA Special Report – “Implementing the EU budget through

financial instruments – lessons to be learnt from the 2007-2013 programme period" and on the ECA’s opinion on

the EFSI. It offered a platform for exchanges of views and ideas between high-level experts from the EU institutions,

practitioners and other public and private stakeholders. The conference included a morning panel, which

discussed the topic from a global perspective, followed by four sessions in the afternoon where experts debated the

different aspects relating to financial instruments at an in-depth technical level. They are described below. Active

participation was encouraged from those attending. Those participating remotely via webstreaming were able to

submit their comments and questions.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Role of financial instruments for the implementation of the EU budget. A better way to provide

financial support from the EU?

Moderator:

Mark Rogerson,

ECA Spokesperson

Panellists:

Ingeborg Grässle,

Member of the European Parliament, Chair of the Budgetary Control Committee

Pier Luigi Gilibert,

Chief Executive of the European Investment Fund

Vazil Hudák,

Vice-President, European Investment Bank

Nicholas Martyn,

Deputy Director-General for Policy, Compliance and Performance, DG Regional and Urban

Policy, European Commission

Iliana Ivanova,

Dean of Chamber II, Member of the European Court of Auditors

For anyone interested in the EU budget, financial

instruments matter very much. They can help

mobilise additional public and private money. By

allowing the re-use of the same funds several times

they provide revolving financial support.

Financial instruments are increasingly used to

provide support from the European Union budget

in the form of loans, guarantees and equity

investments. They differ from grants, which are a

subsidy the beneficiary is not expected to pay back.

Blending loans and grants together has become

common practice in international development

finance. Should financial instruments be used

together with other support tools in order to create

a better mix and impact?

The need for public intervention and investment

stems from the existence of market failures and the

current difficult economic and political situation

in Europe. The EFSI (European Fund for Strategic

Investments) and the SME initiative are good

examples of the EU’s response to these challenges.

In recent years the ECA has produced a number of

special reports on financial instruments, and has a

section dedicated to their use in its annual report.

In the ECA’s opinion, financial instruments have the

potential to be useful and effective. However there

are a number of weaknesses in the legal 2014-2020

framework covering them. Further tailoring of the

regulatory framework is necessary.

There is great diversity on what can be addressed

through financial instruments. While the assessment

of the ECA is that financial instruments have a useful

role to play, critical voices wonder whether the

Commission was not too naïve in its enthusiasm for

their use and their capability to leverage. Financial

instruments need to be targeted and are not

appropriate for all situations. Investors are also often

reluctant to use them because the rules are too

complex and the incentives are insufficient.

The Commission could do more. Local and national

authorities need to be involved to a greater extent

in promoting their use. And there is a lot to be done

in terms of clarifying, simplifying, standardising,

educating and evaluating. And much will depend

on how the new instruments are implemented in

practice on the ground.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

EU Financial Instruments

continued

Leverage of private capital: How can financial instruments be more successful in attracting private

sector capital?

Moderator:

Tony Murphy,

Head of Private Office of Iliana Ivanova,

Panellists:

Sophie Barbier,

Director of the European Affairs Division, Caisse des Dépôts France

Fabio D'Aversa,

Partner, PwC Luxembourg

Roger Havenith,

Deputy Chief Executive, European Investment Fund

Patrycja Wolińska-Bartkiewicz,

Managing Director for EU Funds, Bank Gospodarstwa Krajowego Poland

The aim is to act in the highly risky financial gap

market, and leverage investment in projects with

significant investment needs. But how to attract

private capital?

Private capital wants to earn from investment, and

the public sector wants to teach how to invest in

the future without public money. Both should learn

from each other.

Financial instruments have to be made as attractive

as possible. But sometimes private capital is

not interested in public money because of the

administrative burden it entails. There also is the

complexity of assessing and reporting. Investors are

not at ease with such hybrid models.

There is a need for a common definition of leverage

of private/public funds. Leverage can be defined as

the ratio total finance mobilised/EU contribution,

but in practice the financial instruments lack a

common methodology. It is difficult to establish

leverage ex-ante or define added value.

The debate comes at the right time. Financial

instruments were not successful in leveraging

private funds says the ECA in its special report on

the 2007-2013 programme period. To attract more

private capital, a predictable legal framework, a

single rule book, streamlining towards a single audit

concept and good communication are needed.

Standardisation and more technical assistance

might help investors and local authorities.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Revolving effect: How to ensure that financial instruments are effectively re-used?

Moderator:

Niels-Erik Brokopp,

Principal Manager, ECA

Panellists:

Giorgio Chiarion Casoni,

Head of Unit for Financing of climate change, infrastructure policies and Euratom, DG for

Economic and Financial Affairs, European Commission

Frank Lee,

Head of Financial Instruments Advisory, European Investment Bank

Kenroy Quellenec-Reid,

Financial Engineering Manager, European Programmes Unit, Greater London Authority UK

Revolving means to re-use the same funds over

different investment cycles. But the revolving

nature of a financial instrument is not an end to

itself.

The funds set up both at national and regional

level in the 2007-2013 period have not created the

desired multiplier effect due to delays in setting up

the instruments. They performed poorly in ensuring

the funds were used multiple times. The revolving

effect remains an aspiration only for the new 2014-

2020 programme period, some voices said.

A common rule book might be useful to ensure that

financial instruments are used effectively and have

a revolving effect. The permanently changing rules

in a relatively stable market on the other hand are

seen as a major obstacle.

Leverage and revolving also contradict themselves

to a certain extent. The market sets up an

investment fund only once. The gains go to the

investors who may decide to re-invest them in the

project. This gives flexibility. The EU should work as

closely as possible with the market and make sure

that rules do not become a straight-jacket.

Management fees and costs: How to implement financial instruments at a reasonable cost?

Moderator:

Martin Weber,

Director of Chamber II, European Court of Auditors

Panellists:

Luigi Amati,

Co-founder and CEO, META Italy

Christoph Kuhn,

Director of Mandate Management Department, European Investment Bank

Nicholas Martyn,

Deputy Director-General for Policy, Compliance and Performance, DG Regional and Urban Policy,

European Commission

Audrius Zabotka, Director

General of INVEGA (Lithuania) and Member of the Board of AECM

Speakers and panellists then discussed the question

of whether financial instruments are too costly.

There is no single answer to that question; it is a

matter of design and experience. However most of

the instruments become too costly if they want to

combine high leverage with good auditability. But

compared to grants which have the same effects,

financial instruments remain cheaper.

How to fix the costs at the right level? Here lies

the friction between public accountability and the

financial markets. The Commission is trying to fix

overall caps and build in performance elements. It

hopes to use the experience from the 2014-2020

period for improving the future.

The type and number of fees depends on the

instrument. To lower the costs there is need for

standardisation. And it is easier for the Commission

to exert its influence when the funds are managed

centrally.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

EU Financial Instruments

continued

EFSI and SMEs Initiative: The way forward for financial instruments

Moderator:

Mark Rogerson,

ECA Spokesperson

Panellists:

Hubert Cottogni,

Deputy Director, Head of Mandate Management, European Investment Fund

Lucia Cusmano,

Senior Economist, SMEs and Local Development, OECD

Merete Clausen,

Head of Unit for Financing on innovation, competitiveness and employment policies, DG Economic

and Financial Affairs, European Commission

Mihails Kozlovs,

ECA Member

Iliyana Tsanova,

Deputy Managing Director, European Fund for Strategic Investments

On 14 September 2016 the ECA published its opinion

on the Commission’s proposal for EFSI 2, and came

to the conclusion that it is too soon to move to this

second phase. However, the Commission feels the

need for a clear signal that EFSI will continue, as the

results will only be felt by the economies only years

after the investment is made.

An independent assessment came to the conclusion

that EFSI is vital for mobilising additional funds

and also increases the willingness of the EIB to take

risks. The SME Initiative - which is a joint financial

instrument of the European Commission and the EIB

Group and which aims to stimulate SME financing by

providing partial risk cover for SME loan portfolios

of originating financial institutions - is particularly

successful.

It was however said that there is need for more

technical support to the market and for preparing

legislative proposals for the post-2020 period. The

scaling up of EFSI is seen by some experts as an

important signal to the market about continuity,

although they share the concerns expressed by the

ECA on weaknesses in monitoring and capacity.

Conclusion

The EU budget is of limited size and is unlikely to

increase significantly in the near future. On the

other hand, there are demands to finance the

EU’s new priorities. There is a general agreement

between all stakeholders - EP, EIB, EIF (European

Investment Fund) and Commission - on the

importance of the use of financial instruments.

But concerning the EFSI 2 the ECA prefers to

warn early rather than report ex-post on what

could have been implemented better. In order to

contribute further, the ECA is planning to conduct

a performance audit on the EFSI and to publish a

special report on this topic in the first half of 2018.

There were 180 participants on the spot and 400 followed

via webstreaming

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Commission’s governance needs an update

By Lazaros S. Lazarou, ECA Member

Getting governance right is a priority

At the publication on 18 October of the special

report on Commission’s governance I explained

that

getting governance right is a priority in the

public and the private sector. The Commission’s

current governance is functional, but it is in need of an

update. The Commission needs to be a role model in

governance, at the forefront of developments in best

practice.

Report completed in 9 months

The work on this special report started mid-

December 2015 and Chamber V adopted the report

on 20 September. The work focussed on audit,

financial management and control.

Best practice

We assessed the Commission’s governance against

best practice. We used the CIPFA/IFAC framework

Good Governance in the Public Sector

as our main

benchmark. We also selected international and

public bodies we found to be at the forefront.

Examples included the audit committees of the

World Food Programme, European Investment

Bank, World Bank Group and United Nation and the

reporting in the US 2015 financial report and the

2014 Comptes de l’État of France.

From the executive summary

I. In the wake of the resignation of the Santer

Commission and in response to the report of the

Committee of Independent Experts, in March

2000, the Commission approved the ‘Reforming

the Commission’ White Paper, intended to

modernise the governance of the Commission.

The reforms proposed covered setting priorities

and allocating resources; changing human

resource policy; and overhauling audit, financial

management and control. The White Paper and

the report of the Committee of Independent

Experts continue to influence decision-making

and governance in the Commission to this day.

III. While the rules and structures set up by the

Commission largely reflected best practice at

the time, best practice has continued to evolve.

We thus examined the current governance

arrangements at the Commission with a focus

on audit, financial management and control to

see whether they are in line with best practice

and whether they still meet the needs of the

institution.

IV. Best practice has continued to evolve since

the 2000 reforms. Although some action

has

been taken, we conclude that in several areas the

Commission diverges from, or does not meet in

full best practice set out in standards or put in

place by the international and public bodies we

selected as benchmarks.

Including the publication alongside the

accrual based EU accounts of the financial

statement discussion and analysis, reporting on

performance (resulting in 2015 in an integration

with reporting on management in the annual

management and performance report) and the

transition to the updated 2013 COSO internal

control – integrated framework

1 Chartered Institute of Public Finance and Accountancy

(CIPFA)/International Federation of Accountants (IFAC),

“International Framework: Good Governance in the Public

Sector”, 2014.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Commission’s governance needs an update

continued

Comply or explain

We found that Commission governance could be

improved. Our first recommendation is that the

Commission should comply with best practice or

if it chooses not to do so, explain the reasons. The

second recommendation listed specific updates

to be made including earlier publication of the

accounts together with other reports in a single

accountability report (or suite of reports). It further

asked the Commission to publish an estimate of the

level of error based on a consistent methodology

and recommended to turn the Commission’s audit

progress committee into an audit committee.

The audit team

I led the audit team and was supported by my

private office staff, Chamber V’s Director Peter

Welch and Principal Manager Mariusz Pomienski.

Bogna Kuczynska was Head of Task working

together with a number of auditors, most but not

all being included in the picture below.

A graph can say more than a thousand words

The special report used a number of graphs,

tables and text boxes to illustrate the points

made. Amongst these was the figure on

accountability in the Commission, on which

the Commission replied that it considers that

overall political responsibility encompasses

accountability for the work of its services.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

In memory of Jan O. Karlsson

(1 June 1939 – 19 September 2016)

By Eduardo Ruiz Garcia, Secretary-General

English revised by Mark Smith

Jan O. Karlsson passed away in September. He was

the first Swedish Member of the European Court of

Auditors and served as the institution’s President

between 1999 and 2001.

Before and after his time at the Court, Jan was very

much involved in Sweden’s political and cultural life.

He was one of the so-called “Palme boys”, the inner

circle of the charismatic Swedish Prime Minister

of the late 1970s. At that time, Jan was young and

full of hope: a committed Scandinavian social

democrat, as he remained until the very end of his

life.

Jan held several posts in his long political career.

Before he joined the Court, he was Secretary of

State for Finance, and after he left Luxembourg he

also served as Minister for Migration and Minister

for Foreign Affairs. Jan loved those times and liked

to reminisce about all the struggles, discussions

and meetings he was part of, and about the

dignitaries and world leaders he had met. He was

deeply marked, as most young Swedish politicians

of the time were, by the terrible and unexpected

assassination of Olof Palme in a street in Stockholm.

Years later, he experienced tragedy again when his

colleague in government, Anna Lindh, the Minister

for Foreign Affairs, was stabbed and killed in a

department store in the capital.

Jan arrived at the Court in 1996 and was assigned

to Group III, the precursor to what we now know

as Chambers III and IV. His Private Office premises

had not been fitted out yet and, for a while, Jan’s

office was in a corridor with other staff. He would

often take the time to walk around and see people

in their offices, and always had a smile, a kind word

or a thoughtful question. In those days, it was very

unusual for senior staff to be so informal, and Jan’s

warmth and openness came as a pleasant surprise.

This was his approach until he left the Court,

and he was instrumental in making it part of the

institution’s management style. At times impulsive,

his open and direct approach sometimes caused

him problems, but he was always ready to apologise

and regain people’s trust and confidence. One of his

most notorious “inappropriate statements” came

during the second Iraq war when, as Minister for

Foreign Affairs, he described George W. Bush as a

“cowboy”. In this instance, despite the media storm,

he did not apologise. He later told me the amusing

story of a taxi driver who refused to take payment

when he realised that his client was Mr Jan O.

Karlsson, a firm opponent of Bush!

Between 1996 and 1998, Jan was the reporting

Member for the development cooperation audit.

It was a difficult period for EU external policy,

marked by the wars in the former Yugoslavia

and the Great Lakes area. The Court was very

active and responsive in the face of events and

produced a good series of special reports, notably

on the EU’s administration of Mostar, as well as

on Humanitarian Aid, support for the Palestinian

election, and post-apartheid South Africa. One

special report, on the MED Programmes (an

innovative facility launched by the Commission

to foster decentralised cooperation), had a

major impact. In it, the Court criticised poor

administration and questionable practices. The

report cited a particular company, ISMERI, as having

a conflict of interests. The company subsequently

took the matter to the Court of Justice, and

this give rise to the famous case-law that is still

relevant for our work today. The report on the

MED Programmes was also one of the factors that

led to the resignation of the Santer Commission,

and subsequently precipitated the reform of the

Commission’s financial governance in the early

2000s.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Commission’s governance needs an update

continued

Jan was elected President of the Court in 1999, a

difficult period when relations with the European

Parliament were very strained. Things started badly:

the Preliminary Observations of the 1998 Annual

Report were leaked to the press and broadcast

on German TV a few weeks before the formal

presentation in Strasbourg. The President of the

Parliament cancelled the presentation in Plenary

and stopped the Court from using the press-

conference facilities. The meeting in the Budgetary

Control Committee was noisy and hostile, and

concluded acrimoniously. All Court staff involved

in the event were extremely concerned and found

themselves in an impasse; only Jan could see a clear

solution, and he duly invited journalists for coffee in

the Parliament’s Press Bar, where he explained the

contents of the Annual Report and the results of our

work. Later on, relations with the Parliament were

progressively restored, thanks largely to Jan’s

savoir

faire

and highly developed soft skills.

Presiding over the Court was not an easy job;

meetings were scheduled to last for a day and a half,

and often ended after 8 in the evening. All reports

were adopted at the Court meetings; the Audit

Groups had a largely preparatory role and could

take hardly any decisions. Every administrative

matter - however minor - was dealt with by the

Court, there being no Administrative Committee at

the time. However, Jan was a fighter and, although

sometimes frustrated - like many other Members

and staff - by the institution’s bureaucracy, he never

gave up and transmitted his enthusiasm to all of us.

Jan also promoted change at the Court on several

fronts. For the first time, the Court discussed

Communication Policy and adopted an Annual

Activity Report; it also made progress on defining

audit methodology and introducing IT tools (the

first version of ASSYST was designed at that time).

A single Audit Group was created to coordinate

work on the Statement of Assurance, methodology

and quality assurance. Measures were also taken to

limit the Court’s silo-like structure. However, most

of these measures were not actually implemented

and the process of change was largely unsuccessful.

Many of these issues would later find themselves

back on the Court’s agenda; some of the reforms

recently implemented echo ideas that had been

outlined at the time, such as Chambers, pools of

auditors, the Court’s broad-ranging Annual Work

Programme and ‘quick’ special reports.

Jan left the Court when his term as President ended,

but he never lost interest in the institution. A few

years after he left, he published a controversial

article on the governance of the Court with Mr

Tobisson, another former Swedish Member. They

proposed that a structure similar to the one at the

EIB should be applied at the Court.

Early in September, a few days before his death,

I called Jan. Our conversation was a sad one, as

we discussed his illness and the

caisse de maladie.

However, when I mentioned the upcoming election

of the President of the Court, Jan’s mood suddenly

changed: I could hear he was very interested and

his voice was bright again, as his eyes often were,

too, when he was interested in something. Full of

curiosity, he asked me: “Who are the candidates?”

His funeral took place on 19 October in the Katarina

church in Södermalm, a bastion of working-class

social democrats in the south of Stockholm, an area

that Jan loved and where he was loved in return.

The church was crowded with all sorts of people: his

wife, sons, grandsons and other family members, as

well as politicians (former

Prime Ministers, ministers

and senior officials),

musicians and artists,

people involved in finance

and migration, and Palme’s

widow and son. All ages

were represented, united

in their friendship for Jan:

a fitting testament to his

life. Six participants were

chosen to transport the

coffin to the hearse.

Rest in peace, Jan. We will

remember you as a man full

of enthusiasm, curiosity and

interest in so many aspects

of life!

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

More cooperation needed to audit

energy and climate policies effectively

Contact Committee, Bratislava, 20-21 October 2016

By Radek Majer, Assistant to Liaison Officer

The United Nations and the European Union keep

sustainable energy and climate action in their sights

and all stakeholders - governments, civil and private

sectors - can and should contribute to achieving

the objectives set out for 2020, 2030 and 2050.

Auditors are not an exception. The national SAIs

and the ECA have, since 2012, carried out around

230 relevant audits on this area and recognise

that through their audit and review work they can

significantly contribute to a better implementation

of the policies in question. The Contact Committee

addressed this topic at its 2016 meeting in

Bratislava.

The ECA is one of the four

EU SAIs that consider

energy and climate a top

audit priority – it published

nearly fifty reports on these

topics since 2010, and seven

further publications are

due by the end of 2017. Phil

Wynn Owen, ECA Member,

presented the ongoing

Phil Wynn Owen,

work on the ECA’s landscape

ECA Member

review of EU energy and

climate and, in this context, emphasised the

importance of SAIs discussing relevant audit risks,

challenges and opportunities. To this end, the ECA

will organise a seminar in January 2017 to address

these issues. EC Vice-president Šefčovič appreciated

the ECA’s work on the landscape review in his

(pre-

recorded)

welcome address to the participants and

invited national SAIs to give prominence to this

issue.

The French SAI addressed several topics related

to EU energy policy and presented the audit

work done in France in this context. French

representatives echoed the ECA’s call for more

cooperation, suggesting that this could notably

concern audit programming, sharing information

about audit methodologies and identifying

comparable indicators for future audit work.

The topics discussed included audits of energy

efficiency and savings in public buildings. Recent

audits carried out by the Danish, Portuguese and

Czech SAIs show that the implementation of energy

efficiency programmes is not satisfactory and

more efforts, including additional investments, are

needed to meet targets. The Contact Committee

agreed that its Network for Europe 2020 Strategy

Audit will include the topic in its activities.

The challenges of implementing national energy

policies and securing the supply of energy were

another topic on the list, with experience shared

by the German, Polish and Swedish SAIs. Ladislav

Balko, ECA Member, recalled the main findings of

the ECA’s audit of EU spending on renewable energy

(SR 06/2014).

The Contact Committee concluded that only by

working together can SAIs effectively address these

cross-cutting issues and contribute to meeting

the targets set out by the EU and the COP 21 Paris

Climate Change Agreement, to which their Member

States have committed. It also recognised that

in addition to topics where a significant amount

of audit work was already done (such as energy

efficiency, renewable energy and energy security),

more work could still be done in the field of

innovations in the field of energy, the integration

of European energy markets, greenhouse gas

emissions and adapting to climate change.

In the ensuing

sessions, the Contact

Committee took note

of the work carried

out by its working

bodies. This included

a presentation by ECA

President Klaus-Heiner

Lehne of an assessment

carried out under the

ECA’s leadership on

the strengths and

Klaus-Heiner Lehne, President

weaknesses of the

Contact Committee

cooperation framework. The Contact Committee

agreed to this proposed recommendations and

the way forward for increasing its effectiveness.

SAIs also agreed to work together to update the

relevant audit guidelines and checklists for public

procurement audit.

The Dutch SAI presented its ongoing audit work

on labelling products with the CE (conformité

européenne) mark. Given that this issue concerns

consumer protection, which stands high on the

EU agenda, the ECA will see how it can usefully

contribute to this work. The Latvian SAI made a

presentation of its audit of the transfer of port

activities from Riga city centre.

The next Contact Committee meeting will be

organised and hosted by the ECA in October 2017.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Questions to Karol Mitrik, President of

the Supreme Audit Office of the Slovak

Republic

Karol Mitrik, President of the Supreme Audit Office of the Slovak Republic

Q.: Dear President, the main topic of this year’s

Contact Committee meeting was the European

energy union and issues related to climate. What

motivated the choice of this topic and what is its

significance for Slovakia?

Answer:

We selected this topic for the 2016

Contact Committee seminar because we wanted

to highlight the importance of the issues of energy

union and climate, and enable public auditors to

share their experience from audits carried out by

their Supreme Audit Institutions (SAIs). And since

this is a supranational issue, we also wanted to

emphasise the need for cooperation.

It is becoming increasingly clear that the European

energy system faces an urgent need to secure safe,

sustainable, affordable and competitive energy

for all citizens. Excessive reliance on a limited

number of supply sources (especially of natural gas)

exposes countries to risks in case of supply cut-

offs. It is, therefore, important that we decrease our

dependence on fossil fuels and curb greenhouse

gas emissions. Both households and enterprises

show growing interest in affordable energies and

competitive prices.

A study by Cambridge Econometrics, a British

consulting company, points to an increased

dependence of the European Union on oil imports

for the last 15 years. In 2015 oil imports cost the EU

€ 215 billion. And Slovakia is the most vulnerable

country. Among the EU countries, it is most in

danger of having its oil supply suspended. However,

the group of five most jeopardised countries also

includes its neighbours – Hungary, the Czech

Republic and Poland – together with Greece.

The study results also assert that 53% of energy

consumed in the EU is imported. Some countries

import all of their gas from one supplier.

Diversification of sources and suppliers of energy

is the key means of increasing our energy security.

Concerning diversification, work is under way on

the Southern Gas Corridor, on a strategy for an

improved use of the potential of liquefied natural

gas and gas storage facilities, as well as on building

liquid gas hubs with multiple suppliers in Central

and Eastern Europe and the Mediterranean.

The selection of the Contact Committee topic was

also motivated by the fact that interconnectedness

of Member States in terms of energy is crucial for

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

cross-border power exchange since their individual

energy mixes often complement one another. A

changing electricity market – and in particular the

growing share of renewable energy – requires,

in my opinion, a market structure which enables

coordination of capacities at regional level, storage

and more flexible response on the demand side,

which will allow consumers to better participate

in markets and facilitate cross-border energy

exchange.

We can see that investments in the energy

performance of buildings are one of the most

beneficial for citizens and industry. Heating and

cooling continue to be the largest consumer of

energy in Europe. The Commission will, therefore,

review directives on energy efficiency and

energy performance of buildings to create an

administrative framework for future progress in

increasing the energy performance of buildings.

Based on practical experience from Member States,

it will support methods for facilitating access

to available financing for increasing the energy

efficiency of buildings.

The main objective of the EU policy concerning

climate change is the reduction of domestic

greenhouse gas emissions by at least 40% by

2030 compared with 1990 levels. Achieving the

goal of cutting down on emissions by at least

40% has several energy-related, economic and

environmental benefits, such as a decrease in fossil

fuel consumption, air pollution and the extent

to which our economy is exposed to fuel supply

uncertainty and high import costs.

The European Union is still the absolute leader

in the fight against climate change, which is also

demonstrated by the swift ratification of the Paris

Agreement at EU-level during the Slovak Presidency

of the Council of the EU and the depositing of

ratification instruments on 5/10/2016 at the UN

Headquarters in New York.

It follows that the issues of energy and climate

present critical strategic challenges for the EU and

its Member States. Relevant European and national

authorities should respond to these challenges, and

through their audit activities so should national SAIs

and the European Court of Auditors.

Only by means of cooperation can SAIs address

these important cross-cutting issues in the most

effective way. Through their work, knowledge and

experience, public auditors can make a relevant

contribution to meet the targets of the EU energy

and climate strategy and the COP 21 Paris Climate

Change Agreement.

Q: The Investment Plan for Europe, which

Slovakia has decided to support with € 400

million, prioritises energy, the environment and

sectors promoting efficient use of resources. Is

the implementation of such projects planned in

Slovakia in the near future and do you expect

that they will be the subject of audit by your

Institution?

Answer:

The economic crisis has caused a rapid

drop in investments everywhere in Europe. I believe

that in order to reverse this negative trend and

steer Europe towards economic recovery, joint

and coordinated effort at the EU-level is necessary.

The Commission defined an approach based on

three pillars: structural reforms, fiscal responsibility

and initiating investments for sustainable growth.

The Investment Plan for Europe is central to

this strategy. During 2015, the EU adopted an

operational framework for the European Fund for

Strategic Investments which should mobilise € 315

billion of investments.

To leverage additional investments, the European

fund for Strategic Investments was created in

cooperation with the European Investment Bank

(EIB), owned by all EU Member States and focused

on investments in a wide range of areas, including

infrastructure, energy, research and innovation,

broadband connection and education.

Unlike the European funds, the Investment Plan is

distinctive in that there is no set geographical or

sectoral focus for its funding. According to the most

recent information, so far three projects have been

approved for Slovakia – a ring road D4/R7 around

Bratislava and two guarantee schemes for small and

medium-sized enterprises provided by the ČSOB

bank. From a long-term perspective, the Slovak

SAI does not exclude the possibility of auditing the

implementation of the D4/R7 road ring project,

since it has started only recently. The Slovak SAI

audited the project preparation in the spring of this

year.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Questions to Karol Mitrik, President of the Supreme Audit

Office of the Slovak Republic

continued

Q.: The Contact Committee has agreed to

increase the efficiency of its work. Which steps

do you consider particularly important in this

regard?

Answer:

As I see it, efficiency needs to increase in

two ways – in the internal operation of the Contact

Committee as well as outwards, because in this fast-

changing time, we must respond in a flexible way to

emerging situations that require our attention.

One significant activity of the Contact Committee

recently has been the work of the task force for

assessing the Contact Committee cooperation

framework. The task force processed the results of

a survey aimed at cooperation within the Contact

Committee and drafted a detailed report including

an assessment of the Contact Committee’s

strengths and weaknesses. These results served as

a valuable basis for relevant recommendations for

improving the efficiency of the Contact Committee’s

work.

A proposal presented by the task force to allow any

member of the Contact Committee (member SAI)

to initiate at any time during the year a new activity

is particularly important for making the operation

more efficient and speeding up the activity within

the Committee. With this flexible arrangement it

will not be necessary to wait until the next annual

meeting of the Committee and approval of the

proposed activity. Results and outputs of these

activities, which would be communicated to liaison

officers on a regular basis, would subsequently

be put forward for consideration to the Contact

Committee, which would determine further action.

Regarding the external aspect of our functioning,

it is, in my opinion, very important to more

actively exploit information provided under the

Early Warning Mechanism. Wherever possible

and appropriate, we need to find ways to adopt a

common position within the Contact Committee

and its application in relevant bodies and

institutions.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Reflections around the Special Report

N° 23/2016 “EU support to Maritime

Transport : ... In troubled waters »

By Luc T' Joen, senior administrator in Chamber II

This article provides interesting background reading to the recently published special report on maritime

transport, as well as some particular insights and reflections of the head of this audit task.

1. The EU maritime sector is certainly important but, in global terms, a small player

The more than 1 200 commercial seaports, dotted along some 70 000 km of coastline in 23 of the 28 EU

Member States, transport 400 million passengers per year and handle 75% of Europe's cargo trade with non-

member countries (3.8 billion tonnes in 2014). Nevertheless, the EU ports, when looking at the global picture

and assessing the statistics on port throughput in the world, both for cargo (in tonnes) and container traffic

(in TEUs), are small compared to eg. South Asian ports (see the top 20 of the world port ranking 2014 of the

World Shipping Council website below).

WORLD PORT RANKINGS - 2014

TOTAL CARGO VOLUME

TONS, 000s

RANK PORT

Shanghai

Singapore

Guangzhou

Qingdao

Port Hedland

Tianjin

Rotterdam

Ningbo

Dalian

Busan

Hong Kong

Qinhuangdao

South Louisiana

Port Kelang

Houston

Nagoya

Antwerp

Shenzhen

Xiamen

Dampier

COUNTRY

China

Singapore

China

Australia

China

Netherlands

China

South Korea

China

United States

Malaysia

United States

Japan

Belgium

China

Australia

MEASURE

Metric Tons

Freight Tons

Metric Tons

Revenue Tons

Metric Tons

Freight Tons

Metric Tons

TONS

678 376

581 268

500 975

465 055

446 922

445 780

444 733

429 912

337 366

335 411

297 737

261 702

242 578

217 289

212 561

207 621

199 012

192 093

184 604

172 802

RANK PORT

Shanghai

Singapore

Shenzhen

Hong Kong

Ningbo

Busan

Qingdao

Guangzhou

Dubai Ports

Tianjin

Rotterdam

Port Kelang

Kaohsiung

Dalian

Hamburg

Antwerp

Xiamen

Los Angeles

Tanjung Pelepas

Long Beach

CONTAINER TRAFFIC

TEUs (Twenty-Foot Equivalent Units), 000s

COUNTRY

China

Singapore

China

South Korea

China

United Arab Emirates

China

Netherlands

Malaysia

Taiwan

China

Germany

Belgium

China

United States

Malasyia

United States

TEUs

35 286

33 869

23 798

22 374

19 450

18 423

16 624

16 160

14 750

14 050

12 453

10 736

10 593

10 128

9 729

9 136

8 572

8 340

7 897

6 821

While historically (up to and including the nineties),

European ports were very important. The situation

then changed quite rapidly: the biggest EU port

(Rotterdam) is now only number 7 by cargo

volume and is not even in the top ten for container

transhipment. For cargo, only Antwerp is next to

Rotterdam in the top 20 as an EU port. Whereas

for container traffic, only Hamburg and Antwerp

can demonstrate their presence in the same

ranking. In other words, industrial globalisation

and containerisation have made Shanghai and

Singapore and other Chinese ports leaders in port

activities in the world. So, let’s perhaps stay modest

in assessing the EU's importance.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Reflections around the Special Report N° 23/2016

“EU support to Maritime Transport : ... In troubled waters »

continued

2. Weaknesses in planning ahead, as there is no

such thing as an “EU Ministry of Transport”

Since 2000, € 6.8 billion of EU co-financing and

€ 10.1 billion of EU guaranteed EIB loans have been

invested in EU port infrastructures. This was done

mainly via the structural funds schemes (European

regional development Fund and the Cohesion

Fund) and the direct spending mechanism of the

Trans-European Network for transport (“TEN-T”)

funding.

This supposes a strong focus on long term strategic

development of port capacity, and transnational

planning of transport streams to make it work in

a coherent way across the continent. The reality is

different, unfortunately.

Planning is still done in each Member State, and is

obviously national. As Commission Vice-President

Siim Kallas once indicated,

the EU transport

network is a “patchwork” of different national

schemes,

and there is no entity at European level

which oversees and effectively coordinates this

planning. Member states took care of their national

port planning themselves, and the EU is supposed

to support investment projects deemed necessary

by them.

The Commission’s DG MOVE only came in 2013

with a long term plan linking the transport

policy objectives to a funding mechanism (the

Connecting Europe facility, “CEF”) for the 2014-

2020 period, and only for that same period. An

“ex-ante conditionality” rule in the policy provisions

on cohesion spending requires Member States to

present a coherent long term transport plan to

get further EU co-financing. However, this plan

has shortcomings as it foresees to connect an

unrealistic high number of 104 core ports by 2030

(which in infrastructure building terms is basically

“tomorrow”) to the network, and some vital

waterways are not included.

3. Ignorance on capacity and needs, and a policy

of “let’s build quays and wait for ships to come”

A basic principle of good spending would be to

assess the real need for investments by looking

at what is the available capacity, what is the use

made of it, and what realistic future growth can

be expected using robust and reliable data. The

European Commission neither knows the current

capacity of EU ports nor the use made of it and, as

observed above, has no say in the Member States

long term port planning: it has no right of scrutiny

or a say on prioritisation on the Member States’

transport plans and can only try to influence the

priority setting by Member States by offering to

co-finance part of certain investments. While an EU

“Port Observatory” was in discussion for some time,

there is no body involved managing this sector

by channelling the various funding streams to

real capacity needs (the idea seems to be banned

because of discussions on who should be “in” or

“out”).

Data on port capacity at individual port level

are scarce and carefully hidden, even to the

Commission. Attempts to gather such data through

an EU-paid research project “Portopia” (budget

allocated of € 4.2 million, 70% EU contribution)

with port data collected on a voluntary basis are

unsuccessful until now because of low participation.

The reason invoked for this is that ports consider

that too much transparency would allow

competitors to gain from this. So, with the help of

an expert, we calculated ourselves the capacity of

the individual ports audited (as we are famous for

counting..).

A first striking finding of our audit was that some

of the visited port authorities did not even know

themselves what their available port capacity

was: there was a general lack of accurate capacity

estimation by ports: 7 out of 16 audited ports with

container traffic did not have aggregated capacity

data available, in the sense of how much container

traffic (in TEUs) they can handle on a yearly basis. A

second observation is that there is underestimation

of the real container capacity for those ports that

do have such aggregated capacity data available: 7

out of 9 ports had declared a lower capacity than

the ECA calculated capacity for containers. Due to

this lack of capacity estimation, half of the container

terminals invested in, had utilization rates of less

than 35%, and only four ports had utilization rates

of 50% or more.

2014 data from the OECD-ITF indicate that there

is a lot of spare capacity available for container

transhipment in ports all over Europe: the

container terminal utilisation rate was 50.5% in the

Scandinavia & Baltic region; 56.4% in North West

Europe; 61.3% in East Mediterranean & Black Sea

regions, and 62.7% in West Mediterranean. On top

of that, the future use of this capacity should go

down in most parts: while the capacity utilisation

rates for the West Mediterranean region and North

West Europe are expected to remain stable, the

rates of Scandinavia. Baltic ports will fall further to

a level of 30% and to a 50% utilisation for the East

Mediterranean & Black Sea region. At such levels,

there is huge overcapacity and many ports and

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

terminals in these regions will struggle to attract

cargo and see their volumes decline.

So, while some of the individual ports do not

know their capacity and others underestimate

this capacity, they still were able to convince

policymakers that additional capacity is

nevertheless needed and EU and national money

has been paid out after delivery of the new

infrastructure (output based payments) which is

now waiting for enough ships to come to make the

investments successful.

4. The special report is hard hitting on risks

of waste, but also supports the Commission’s

transport policy objectives and the new

cohesion policy provisions

While we clearly acknowledged that port

infrastructures are built for many decades, we

concluded that there is a high risk of waste for € 97

million because the newly audited infrastructures

were not in use or heavily underused for many years

after the works ended. In addition, we revisited in

2015 three empty ports and two not connected

port projects audited in 2010 (SR4/2012) to assess

the evolution. Two of the three empty ones

were still quasi empty in 2015, and the two not

connected ports in 2010 were still not connected

in 2015. This gives up to some € 400 million of EU

funding not well spent. Last but not least, delays in

delivering the works, cost overruns, missing links

and heavy bureaucracy were again noticed.

Given all these facts above (absence of robust

planning; absence of knowledge on capacity

available and still needed), in the past the ECA

had already, found that EU funding support was

used to finance unused or heavily underused port

quays. Special Report N° 4/2012 on EU support

to seaports infrastructure investments audited in

2010 concluded that only 18% (or less than 1 euro

out of 5 invested) of a randomly selected sample

of 27 port projects in 9 regions of 4 Member States

(€ 726 million EU money audited) was effective.

Several empty ports were observed, and half of the

money invested for port quays built was affected by

absent connections to the network (missing links).

A similar finding of risky and wasteful spending

was observed in the current report: out of 37 newly

audited projects involving more than € 1 billion of

EU funding, 7 were not completed (€ 524 million),

and out of the 30 completed projects, only 18 were

used as intended, and 12 were empty or heavily

underused (see figure above).

Various reasons can explain the waste: the need to

spend allocated money before the deadline, even

if there are no good projects (giving back money to

Brussels looks odd); absence of quality cost-benefit

analysis, sometimes established after the events

with flawed economic analysis and little effort to

estimate a realistic future demand; loss of project

ownership due to heavy bureaucracy; political

influencing of earlier made choices; high intra

port competition; the “volatility” of the shipping

business; sudden changes in geopolitical context,

or in commercial strategies in neighbouring non

EU-countries and, of course, the financial crisis.

However, not all we saw was bad: the report also

quoted good projects (eg dredging an access

channel to improve the port entry in a Swedish

port lead to bigger ships and more cargo attracted;

building a road to better connect the city to a port

in Poland lead to an increase in safety and less

noise for the local inhabitants). These cases do not

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Reflections around the Special Report N° 23/2016

“EU support to Maritime Transport : ... In troubled waters »

continued

concern inner port infrastructures, but connections

to ports, and this is exactly the positive message

and the way forward provided by the EU transport

policy objectives: CEF will give priority to improving

the connections for core ports. Unfortunately,

EU funding for port infrastructures can still also

be provided through other policy provisions: for

example, cohesion policy amounts can still fund

port investments without setting transport policy

objectives to be met.

5. Co-operation between ports? No, thank you,

in many cases

While co-operation could be a way to avoid

difficulties when faced with fierce competition

from neighbouring ports handling similar cargo

streams for similar hinterlands, the search for

synergies is very low. In the literature assessed

during the study, we came across a few cases where

port co-operation seems to work properly (eg.

Copenhagen-Malmö), but in many cases observed

that such cooperation is mostly limited to joint

marketing efforts to reduce costs. But this very

quickly transforms into “competition”: after the

common marketing initiative to attract customers

and cargo to the group of ports, individual ports

have fierce fights to have the cargo coming to their

port rather than to the neighbouring port. This was

observed on many occasions and many examples

were provided in the report.

By not working together, the positive effects of

possible synergies are lost. While competition

indeed brings a lot of advantages it must be

recognised that there are simply too many ports

asking for too much money for too little traffic. In

other words, if “the cake is big enough, everybody

will have a piece”. As we know it is not big enough

(there

is too little cargo for too many ports

”), there

are “losers” in the game, and EU-money spent in

these ports is spent ineffectively.

6. Clear language is important, ... but sometimes

hard to implement

“Be clear in what your message is”, is a basic

requirement for all auditors. But it is not always

easy to apply the “plain language” requirements

to get the message spread inside the sector,

loud and clear. For example, in our report, we

found a lot of ineffective spending because many

neighbouring ports were investing in similar

infrastructures at the same time without a robust

overall needs assessment to see whether there is

a real and sufficient demand. This situation lead to

unsustainable investments in ports as shipping lines

can, relatively easily, swap from one port of call to

another if better conditions (prices, connections,

cargo treatment times, slot allocations, ...) are

offered next door (“footloose”

investments).

The

report gave the following example of massive public

spending in many ports the West Med area (see

below) to highlight the phenomenon:

1 A recent quote from OECD-ITF expert M. O. Merk on the EU

port’s system

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

The fact that one port, or port operator lost a

subsequent volume of traffic to a competing port or

port operator, is commonly called “cannibalisation”

in the EU port jargon. However, you will not find

this (particularly strong) word in our special report:

after a fierce Chamber debate, it was decided to opt

for a more neutral wording to avoid meaningless

“maneater” interpretations. Nevertheless, it did not

hamper the Commission to use it a few times in

their replies to our report.

7. Should public money be put into port

infrastructures and superstructures after all?

While in the UK, the larger ports are fully privatised,

the vast majority of port authorities in Europe

are publicly owned. There are different models of

port management but the most common one (the

‘landlord’ model) implies that the port authority

owns the basic infrastructure and leases it out to

port operators (by means of a concession), while

retaining all regulatory functions. Port operations

are run by private companies, which provide

and maintain their own superstructures, which

include buildings, cranes and other cargo-handling

equipment at the terminals. Currently, a lot of

public (national and EU) funding is provided to

support ports in their infrastructure needs: € 17

billion was provided as EU support in the form of

grants and loans to port investments since 2000

to add to the national public money. While the

overall -public and private- investment in port

infrastructure is estimated to be at least € 7.5 billion

per year.

While the usual reason for investing in ports is that

they create jobs (Eurostat reported an estimation

that 3 million people are directly and indirectly

employed by ports in the EU, and the OECD

estimated that each additional million tonnes of

cargo passing through ports leads to the creation

of around 300 additional jobs at and around these

ports), here again, at Commission level, DG MOVE

has very limited information and data available

on job creation by the ports activity. There is little

willingness or ability at the level of the Member

States and port authorities to invest substantial

financial and human resources to develop yearly

and detailed indicators on employment and

creation of value added.

Much of the money invested goes to one, rather

small but important, component of the overall cargo

streams: container transhipment (which is only

around 20% of the total throughput of a port): € 3,5

billion of EU co-financing was invested for adding

container transhipment capacity and adequate

connections, next to more than € 4 billion of EIB

loans, largely covering the same type of operations.

We also found that EU co-financing was provided to

“user-specific” superstructures (in Poland and Spain)

although this is the normal business of the private

operators. The reasons for this was that there were

no clear Commission rules on the treatment of such

superstructures, that the case has been submitted

to the Commission for state aid checks, and that the

regional policy goals of creating jobs did not forbid

this type of expenditure. Even if it would be compliant

with the current non-clear rules, this does not make it

yet a sound case for putting EU money into...

The economic rationale behind all this may be that

financing port infrastructures and superstructures

provides major shipping lines with economies of

scale. This has a direct positive economic effect of

reducing the cost of transporting goods for society,

this is discounted in the price charged to the final

consumer. However, the mega ships also bring along

substantial costs for the same society as new and/

or bigger infrastructures and superstructures in- and

outside ports are needed to cope with the effective

and efficient treatment of containers: the dredging

of fairways, access channels and turning basins;

new or increasing and strengthening existing quays

and berth infrastructure; increasing storage areas;

improving and upgrading rail, road and river accesses,

as well as building multimodal terminals. These are all

on the public support “wish-list” of the ports.

If this would be a profitable business, the private

companies would do the investments themselves.

If they refrain from doing those, under which

conditions should the public continue to do these

investments instead?

The ECA kept the door open, but recommended to

reduce the scope for future funding in those cases

where we saw waste and unneeded expenditure.

The ECA also suggested to opt for more repayable

instruments using CEF, next to increasing the

transparency in the rules in order to achieve a

level playing field and equal competitive positions

everywhere.

As a conclusion, this special report was hard hitting, and gave the Commission and the Member States the

direction towards a more effective, efficient and transparent way of spending (a lot of ) EU money, supporting

the Commission’s attempts to prioritise investments to connect ports but suggesting also to refrain from

certain future investments, and to tackle inefficiency and ineffectiveness with all legal means available.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Two recent audits on key control

mechanisms of EU support to farmers

By Kristian Sniter, private office of Nikolaos Milionis

of agricultural land but its management could be

further improved.

We identified some weaknesses in LPIS processes

affecting the Member States’ ability to reliably check

the eligibility of land. While LPIS ortho‑imagery was

mostly up‑to‑date, photo‑interpretation was not

always reliable or conclusive. In addition, Member

States did not analyse the cost‑effectiveness of

their LPISs in order to better design the related

checks.

We found that Member States had made progress

in upgrading their LPISs to meet the new 2014-2020

CAP requirements. However, LPISs had not yet been

completely adapted for greening. Some efforts by

the Commission to simplify the CAP had had mixed

results.

Through improved LPIS‑related guidance, regular

audits and follow‑up of Member States’ action

plans and financial corrections, the Commission’s

performance of its monitoring role had improved.

However, the reliability of the yearly quality

assessment exercise on the effectiveness of the

LPISs in the Member States was undermined

by weaknesses in the applied methodology

and insufficient checks and follow‑up by the

Commission.

We issued recommendations to further improve the

functioning of LPIS. In particular, we encouraged

the Member States to develop and set up a

framework for assessing the cost of running and

updating of their LPISs. As the error rates are close

to the materiality threshold of 2% and as the cost of

additional controls are high, Member States must

be in a position to assess the cost-effectiveness of

their controls, in order to better design them. This

information on costs is also key to the Commission

and other stakeholders when considering future

policy developments, their controllability and their

implementation costs.

Making cross compliance more effective and

achieving simplification remains challenging

The objectives of cross-compliance are to

contribute to the development of sustainable

agriculture and to make the CAP more compatible

with the expectations of society. Non-compliance

levels can reach high levels in certain areas up to

around 25%. We concluded that the information

As the main fund implementing the Common

Agricultural Policy (CAP), the European Agricultural

Guarantee Fund (EAGF) subsidises farmers based

on the area of land at their disposal for an amount

of approximately 45.5 billion euros in 2015. They

must follow new “greening” practices in favour of

crop diversification, the protection of permanent

grassland and of ecological focus areas. Cross-

compliance also links most CAP payments to

farmers’ compliance with basic rules for the

environment, food safety, animal health and

welfare, and good agricultural and environmental

conditions.

The Court has published late October two Special

Reports on key control mechanisms that ensure

correctness of EU payments and check compliance

with cross-compliance obligations. Special Report

No 25/2016 assessed the Land Parcel Identification

System (LPIS) – an IT system based on aerial or

satellite photographs recording all agricultural

parcels in the Member States. Special Report No

26/2016 examined whether the cross-compliance

management and control system were effective and

to which extent simplification had been achieved.

LPIS: a useful tool that can be further improved

The Court’s Statement of Assurance (SoA) estimated

the level of error for the European Agricultural

Guarantee Fund (EAGF) at 2.2 % in 2015. Nearly

all errors were area‑related. Over recent years our

SoA results showed that action plans and financial

corrections addressed LPIS shortcomings in the

Member States affected. We concluded that the

LPIS is a useful tool for determining the eligibility

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

available did not allow the Commission to assess

adequately the effectiveness of cross‑compliance.

Despite the changes introduced for the CAP for

the period 2014–2020, the cross‑compliance

management and control system could still be

simplified.

The performance indicators used by the

Commission gave a partial view of the effectiveness

of cross‑compliance. Furthermore, the Commission

did not analyse the reasons for the infringements

and the means of addressing them.

The changes in the CAP for the period

2014–2020 somewhat reduced the number of

cross‑compliance rules, by removing requirements

which were not sufficiently relevant to the

farming activity. However, control procedures

remained complex and the costs of implementing

cross‑compliance were not sufficiently quantified.

We recommended that the Commission should

improve the set of indicators used to assess the

performance of cross‑compliance, in particular

by taking better into account farmers’ levels of

compliance. The Commission should also improve

the sharing of the information on cross‑compliance

related infringements between its services in order

to help them to identify the reasons for breaches

and to take appropriate measures to address

them. For the CAP post-2020, the Commission

should propose adapting the rules regarding

cross‑compliance on‑the‑spot checks. This would

allow a more effective targeting of key control

points.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Experiences from presenting AR 2015

to stakeholders in Slovenia

By Samo Jereb, ECA Member

Samo Jereb, ECA Member and Dr. Milan Brglez,

President of Slovenian National Assembly

I have presented many audit reports from the Court

of Auditors of the Republic of Slovenia (COARS) to

stakeholders before, but at the end of October and

beginning of November 2016 I presented an audit

report from European Court of Auditors (ECA) for

the first time. The major issue affecting the level of

stakeholders’ interest originates from the fact that

in ECA audit of 2015, we audited just 12 cases in

Slovenia, and no quantifiable errors were found.

Since all European institutions must increase

awareness of their work in the Member states in

order to regain the trust of citizens, I proposed to

have presentations to all bodies involved in budget

management. Even though my predecessors had

managed to open doors for our AR presentation

with such stakeholders I was nevertheless

positively surprised at their willingness to hear

our presentation. I presented our AR 2015 to the

following (in chronological order):

- President of National Council of the

Republic of Slovenia (presentation to the

National Council as a whole will take place

later),

- President of National Assembly,

- First deputy president and Supreme State

Auditor responsible for auditing the budget

at COARS,

- Government of the Republic of Slovenia on

their session,

- broad group of representatives of Ministry

of finance,

Advisor to the President of the Republic of

Slovenia on Economic and Social Issues,

- Working bodies of National Assembly

(Committee on EU Affairs and Committee

for Public Finance Control on common

session).

I was also invited as a guest speaker to the Faculty

of Economics at the University of Ljubljana. I

presented the work of ECA and also used the

opportunity to present the major findings from

AR 2015 to students on a post graduate course on

“Auditing”.

One of the important stakeholders remained

without a presentation – the media. From my past

experience in COARS I learned that the media

generally follows the principle that “bad news is

good news”. So there was no press conference

organized since, in Slovenia, no quantifiable

errors were found. Even after the presentations

to the above mentioned stakeholders there were

opportunities for journalists to ask questions, but

there was practically no media interest in the AR

2015.

One of the important discussions was connected

with timing of the publication of AR 2015. The

ECA managed to issue the AR one month earlier

than before, so it was issued at almost the same

time as report from COARS on the execution of

Slovene budget. This provides an opportunity

for the working bodies of national assembly to

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

discuss both reports at the same time to get a

broader picture when deliberating each report.

There are still some operational obstacles to having

both reports at the same session of the working

bodies, and some hesitations to do so regarding

differences in reporting from COARS and ECA

especially regarding (not) publishing error rate. But

we concluded that it would be beneficial to the

Members of parliament and other stakeholders that

they deal with both reports at the same time.

The common questions from stakeholders

ranged from issues connected with results based

budgeting, to why the error rate remains so

high and what the European Commission (EC)

is doing to improve internal controls to lower

the error rate. Also there were many questions

about the persistence of the errors regarding

financing farmland areas and financing activities

without having any underlying documents from

the beneficiaries. This was always followed by

the question what has been done about it and

especially what has ECA done about it. In my view

we need to shift the focus of our presentation

of AR 2015 from reporting about the error rate

to the recommendations that were given to the

auditee. At least, as a response to such questions,

we should link our findings directly with our

recommendations. It is interesting to hear that for

more than two decades our opinion on budget

expenditures is qualified but the important

question is how to proceed to make it better.

One of the important concerns for the stakeholders

in Slovenia were financial instruments, since there

is increasing concern that using so many financial

instruments is difficult to manage and poses great

risk to the future budgets. There is a fear that we

may be facing a new economic crisis because of

the use of financial instruments (especially EFSI),

so they wanted to know whether the ECA had

warned the Commission about those risks and the

need to ensure that the risks are well managed and

mitigated.

Even though Brexit has not yet begun, stakeholders

wanted to know whether the ECA has started to

audit the Commission’s preparations for Brexit.

Specifically how the Commission and the 27 MS will

negotiate the process and what the consequences

will be to the EU budget for the other MS after one

of the major contributors leaves.

Regarding my previous experience at COARS,

the stakeholders wanted to know what the

differences are between ECA and COARS. Since

audit approaches are quite similar the debate

was mostly about annual work plan and whether

it should be made public, as it is in ECA, or secret

as it is in COARS. There was also some interest in

the differences in appointment procedures for

members of ECA.

I used this opportunity also to present to all

stakeholders a list of the special reports published

in 2016 and the special reports expected to be

published in future months. I pointed out some of

the most interesting reports from Slovene point of

view. I hope that I have raised some interest with

them also for our special reports so that we can

present more often in Slovenia and I hope that our

special reports will be more interesting also for

media.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Presentation of the 2015 ECA Annual

Report in Cyprus

By Andreas Antoniades, former head of private office of Lazaros S. Lazarou

Our annual report constitutes a useful tool in implementing the European and national

budgets, for the Republic of Cyprus Government and the House of Representatives.

Lazaros S. Lazarou, ECA Member responsible for the

annual report, presented our 2015 annual report in

Cyprus, from 14 to 18 October 2016. He presented

the key findings and messages of the 2015 annual

report, our contribution in addressing the current

challenges to the European project by performing

high quality financial compliance, as well as audits

of results achieved, and EU financial and budgetary

matters concerning Cyprus. Furthermore, he made

a briefing on our special reports on governance at

the European Commission

and on excessive deficit

procedures

Lazaros S. Lazarou met with Nicos Anastasiades,

President of the Republic of Cyprus, and he

presented our annual report to him.

He also met with Demetris Syllouris, President

of the House of Representatives, and presented

the annual report in a joint meeting of the

Parliamentary Committees on Development Plans

and Public Expenditure Control (Public Accounts

Audit Committee), on Financial and Budgetary

Affairs and on Foreign and European Affairs. The

meeting was chaired by the President of the House

of Representatives for half an hour when he passed

the baton to the Chairman of the Public Accounts

Audit Committee.

Lazaros S. Lazarou presenting our annual report to Mr

Demetris Syllouris, President of the House of Representatives

“I

express my high appreciation for the work of

Lazaros S. Lazarou at the ECA“,

the President of the

House of Representatives said.

1 Special report No 27/2016: Governance at the European

Commission — best practice?

2 Special report No 10/2016: Further improvements needed to

ensure effective implementation of the excessive deficit procedure

Lazaros S. Lazarou and Zacharias Koulias, Chair of the Public

Accounts Audit Committee, making press statements at the

House of Representatives

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

In the context of his visit in Cyprus, Lazaros S. Lazarou had meetings with Harris Georgiades, Minister of

Finance, the Auditor General, the Accountant General, and heads or representatives and staff of national

authorities responsible for the management and audit of EU funds.

The presentation of our 2015 annual report received extensive media coverage in the Cyprus national news

agency, the press and television. Lazaros S. Lazarou was invited to be a guest on the main news broadcast of

one of the most popular TV stations in Cyprus (ANT1 TV).

TV studio – “ANT1 NEWS”, main news

broadcast of 18 October 2016

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Two Special Reports on water quality

related issues (Danube river basin)

presented to water professionals at

international conferences

By Marion Colonerus, principal manager

Also technical reports have their audience

Early October I had the opportunity to present Special Report 2/2015

‘EU-funding of urban waste water

treatment plants in the Danube river basin: further efforts needed in helping Member States to achieve EU waste

water policy objectives’

at a World Water Congress.

This World Water Congress and Exhibition

was organised by the International Water Association (IWA) and

took place from 9 to 14 October 2016. The Conference was centred around five thematic tracks: (1) water

and waste water processes and treatments, (2) enabling progress with good governance, sustainable finance

and ICT, (3) water quality, safety and human health, (4) recharting the course of water, (5) cities, utilities and

industries leading change.

There were more than 4 500

participants present at the congress.

Over 130 sessions and workshops

were organised where papers

selected by IWA were presented.

www.iwa-network.org/event/world-water-congress-exhibition-2016/

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

In total IWA had received around 1 500 papers as a result of its call for papers2. The IWA Committee selected

around 30% for oral presentation at the Congress. I participated in this call by preparing a paper on Special

Report 2/2015. As the paper passed the selection procedure I was given the opportunity to present the

content of the Special Report at one of the sessions.

The presentation was surrounded by more

technical, research-related presentations,

also to give the audience another

perspective on issues related to waste

water treatment plants

Source: Congress programme

Considering the subjects discussed at the Congress, our Special Report 2/2015 captured well the most

important issues currently discussed by water professionals around the world.

An IWA Specialist Group on diffuse pollution

and eutrophication also used the opportunity of the Congress

to organise a meeting. There I could inform the participants about Special Report 23/2015

‘Water quality in

the Danube river basin: progress in implementing the water framework directive but still some way to go’

and

Special Report 3/2016 on

‘Combating eutrophication in the Baltic Sea: further and more effective action needed’.

Indeed for both reports diffuse pollution was one of the main issues addressed.

As a result I was invited as plenary speaker at the IWA Regional Conference on Diffuse Pollution and

Catchment Management

which took place in Dublin from 23 to 27 October 2016. I was given one hour to

present our audit conclusions which were well received by the audience.

Conclusion

Technical reports have their audience and their conclusions and recommendations can be a useful

contribution for experts, in this case water professionals, who can influence politicians and public opinion in

their aim to place water on the global political agenda.

2 Papers (4 pages following an IWA template) were to be submitted a year before the Congress. Once selected a further paper (8 pages) was

to be submitted.

3 Pollution caused by a variety of activities for which there is no specific point of discharge. For example agriculture is a key source of

diffuse pollution.

www.dpcm2016.com

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

FOCUS

Focus

Single Supervisory Mechanism - Good start but further

improvements neede

n 2012, EU leaders decided that euro-area banks were to be brought under

supervision of the Single Supervisory Mechanism (SSM), in which the pivotal

role would be played by the ECB, but national competent authorities would also

have to perform many functions. This report examines how the ECB set up the

SSM how it has organized its work, and which challenges it faces.

We found that a complex supervisory structure was put in place relatively

quickly but the complexity of the new system is a challenge especially since

the new mechanism remains too heavily dependent on the resources of

the national supervisors. Thus, despite its overall responsibility, the ECB has

insufficient control over some important aspects of banking supervision.

The information provided by the ECB was however not enough for the ECA

to fully assess whether the ECB is managing efficiently the SSM in the areas of

governance, off-site supervision and on-site inspections.

This report was published on 18 November 2016 and is available on our website

www.eca.europa.eu.

Special report

N°29/2016

Special Report

N°/2016

Spending at least one euro in every five from the EU budget on

climate action: ambitious work underway, but at serious risk of

falling short

In order to respond to climate change and the associated substantial

investment needs, the EU has agreed that at least 20% of its budget for

2014-2020 should be spent on climate-related action. We found that ambitious

work was underway and that, overall, progress had been made.

However, there is a serious risk that the 20% target will not be met without

more effort. The implementation of the target has led to more, and better-

focused, climate action funding in the European Regional Development

Fund and the Cohesion Fund. In the European Social Fund, and in the areas

of agriculture, rural development and fisheries, however, there has been no

significant shift towards climate action.

This report was published on 21 November 2016 and is available on our website

www.eca.europa.eu.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Chamber IV looking to the future

By the Private Office of Baudilio Tomé Muguruza, Dean of Chamber IV

On Friday 7th October, Chamber IV held a successful Annual Seminar, in an event that brought a twist to

usual proceedings. The seminar represented an opportunity to bring colleagues together and report on the

latest work of the Chamber. This year, with the reform in mind, the aim was to break down barriers and foster

an open exchange of ideas about the work and future of the Chamber and the Court.

The event began with welcomes by Tomé Muguruza, Dean of Chamber IV, and the ECA President Lehne.

Then, the Director Mark Crisp gave his speech on the outlook for the Chamber and the challenges it faces

after the reform.

The centrepiece of the seminar was the World Café, organised to challenge all staff to critically consider the

Chamber and Court’s work on a range of issues in an open-minded and relaxed environment. To accomplish

this, several ‘round tables’ of eight people were set up in the room, each with a permanent host who posed a

single question related to the Chamber and Court’s work.

After 15 minutes at each table, the staff switched tables, leaving the host and their question and moving

to another. Numerous issues were covered, each drawing interesting ideas from Chamber IV staff, some of

which are included below.

How can the Court improve the perception of the EU by its citizens?

•

Increase emphasis on positive examples found in investigations,

while maintaining balance.

Explain better the error rate to avoid confusion.

Explicitly highlight what might be fraud, but also that error does

not mean corruption or fraud.

Highlight comparisons with Member State examples

Others argued that this is not for the Court to assume this function.

How can we make our special reports more interesting and relevant to readers?

•

Involve staff from communication and translation more.

Measure usage and readership to assess how to better target products.

‘Citizen Hotline’ or a post-report discussion online with comments

sections and ‘TripAdvisor’-style ratings.

E-link all underlying documents.

Increased usage of video content.

Presentation of reports specialised and creative, or timed to coincide

with other conferences or events.

Target citizens or target experts and then differentiate by type of client.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Chamber IV looking to the future

continued

How much certainty do we need in an ever changing world?

•

A vote showed an even split between those who favour certainty,

and those who do not.

Preferences depend mainly on personality and responsibilities

(age!)

Certainty helps with both professional and personal long-term

decisions.

Total uncertainty was undesirable as a base level is required to

create or exploit uncertainty and freedom in other areas of life.

Certainty as facilitator of progress vs. certainty as a cause of

stagnation.

“Certainty is important, but not too much, otherwise life would be

boring.”

How will Brexit affect the Court’s work?

•

We may lose important staff (Directors and Principal Managers).

The working language of the Court will remain English, but others

might become more prominent.

UK plays an important role in research and other sectors.

It’s a blow to the EU project, which should stimulate change.

The Court should try to be balanced with its messages to help foster

a positive view of the Union.

Perhaps more work will be done by the SAIs in future.

Others argued that there will be no impact whatsoever.

What is the dark side of teamwork?

•

Relations between team mates:

Personal problems/conflicts

Dominant or passive members (free riders)

Lack of individual recognition

Different levels of motivation

Direction:

Lack of leadership, or leadership skills in the group

Composition of the team

Lack of stability in team members

How can we make the Court a better place to work?

•

Increase in social activities e.g. for newcomers to meet colleagues who

share interests and more promotion of existing sports team.

Improvement in communication as all staff highlighted it was difficult to

stay updated.

Other important points included:

Closer and more structured mentoring for recent, especially young,

arrivals.

A focus on using less paper rather than taking bins away.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

How can we work better together?

Improve communication among the team members through:

•

Personal/direct interaction

The better and quicker sharing of information

Willingness to cooperate

Clear definition of roles and responsibilities (too early to measure

impact of reform on roles)

The use of tools such as Subject Briefs

How can the DAS work and the Annual Report be improved?

•

Make the one-line purpose of the AR understandable to all, rather

than requiring qualifications.

Error rate wording and conclusions too complex, leading to frequent

misunderstanding that reflects negatively on the Court, the EU, and

the Member States.

A return to ‘integrated audits’ using performance and compliance

together to create dynamic reports.

Alter the focus away from the ‘transaction approach’.

Using the potential of data more e.g. data mining, IT systems in

creating and checking accounts/reports/transactions.

For the last part of the session, all the staff in the Chamber participated in a teambuilding exercise, where

success depended on their ability to be creative and determined while working together against the clock

towards a common goal.

Overall, this year’s Chamber IV Seminar was a very positive event with plenty of teamwork and communication

between colleagues, as emphasised by Mr Šadžius’ closing remarks.

We are looking forward the next year’s Seminar, which will be held on Friday, 6

October 2017.

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

Reproduction is authorised provided the source is acknowledged/Reproduction autorisée

à condition de mentionner la source

EUU, Alm.del - 2016-17 - Bilag 195: Rapport fra Den Europæiske Revisionsret december 2016

ISSN 1831-449X

Main Contents

A HIGH-LEVEL ECA CONFERENCE ON EU FINANCIAL INSTRUMENTS

COMMISSION’S GOVERNANCE NEEDS AN UPDATE

THE CONTACT COMMITTEE, BRATISLAVA AND QUESTIONS TO KAROL MITRIK,

PRESIDENT OF THE SUPREME AUDIT OFFICE OF THE SLOVAK REPUBLIC

“EU SUPPORT TO MARITIME TRANSPORT : ... IN TROUBLED WATERS»

TWO RECENT AUDITS ON KEY CONTROL MECHANISMS OF EU SUPPORT TO FARMERS

PRESENTATION OF THE 2015 ECA ANNUAL REPORT IN SLOVENIA AND CYPRUS

For more information

European Court of Auditors

12, rue Alcide De Gasperi

1615 Luxembourg

LUXEMBOURG

[email protected]

eca.europa.eu

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