Changes from report parliamentary committee draft to report parliamentary committee draft

Removed31. Remarks that the Court considers the risk to the legality and regularity of payments underlying the agencies’ accounts overall to be medium, varying from low to high for specific budget titles; notes that the Court considers the risk for Title I (Staff Expenditure) to be generally low, for Title II (Administrative Expenditure) to be medium, and for Title III (Operational Expenditure) to be low to high, depending on the agency in question and the nature of its operational expenditure; points out that the Court considers the risk as regards Title III similar to the risk of Title II, but since there are far higher amounts at stake under Title III, the impact is considered to be higher;

Removed32. Notes that the Court, for the sixth year in a row, considers the risk to sound financial management to be medium and primarily associated with public procurement procedures that did not ensure that the best possible value for money was achieved;

Removed33. Notes that the Court considers the risk to budget management to be low, with the Court’s audit showing high carryovers of committed appropriations;

Removed34. Notes that, according to the Court’s report, the prevalent issues across the agencies were: i) Public procurement weaknesses, which remained the largest source of irregular payments; ii) Budgetary management challenges, such as excessive carryovers and late payments; iii) Internal control weaknesses, particularly in ensuring compliance with financial regulations and procedural guidelines;

RemovedOverview of the audit results

Removed35. Notes that the Court issued an unqualified audit opinion on the reliability of the accounts of all agencies; notes that the Court issued an unqualified opinion on the legality and regularity of the revenue underlying the accounts for all agencies; observes, however, that while an unqualified opinion on the legality and regularity of the payments underlying the accounts was issued for most agencies, exceptions were noted for four agencies: the European Institute of Innovation and Technology (EIT), the European Labour Authority (ELA), the European Union Agency for Cybersecurity (ENISA), and the European Union Agency for the Operational Management of Large-Scale IT Systems (eu-LISA);

Removed36. Observes that, for the EIT, the qualification concerns irregular grant payments, where EIT conducted ex post verification on a sample of 174 cost items; notes that EIT rejected costs related to 27 cost items and that the Court identified three additional cost items for which EIT could not provide evidence that beneficiaries met essential grant agreement conditions, resulting in an estimated total of EUR 12,2 million in irregular grant payments, corresponding to an estimated error rate of 3,4 %; notes that the EIT disputes one of the errors reported by the Court, affecting three cost items, which, in its opinion are eligible; notes furthermore that according to EIT, without this case, the estimated error rate reported by the Court would be below the 2 % materiality threshold, leading to a clean audit opinion on the legality and regularity of EIT’s payments;

Removed37. Acknowledges that, concerning ELA, the qualification relates to payments amounting to EUR 1,6 million in 2023, representing 3,8 % of the total payment appropriations available; notes that this amount includes EUR 1,3 million related to a contract deemed irregular in the 2022 audit report due to the awarded value exceeding the established maximum contract limit, and EUR 0,3 million associated with deficiencies in ex ante checks on contract implementation; takes note of ELA reply’s explaining that the irregular contract ended on February 2024, and was replaced by a new framework agreement established in November 2023; is aware of ELA’s decision to continue with the irregular contract temporarily to mitigate risks, protect its reputation, and ensure uninterrupted service delivery, allowing it to maintain consistent operations and fulfil planned activities until the new agreement took effect;

Removed38. Notes that, for ENISA, the qualification relates to irregular payments of EUR 1,8 million made in 2023, representing 4,1 % of the total payment appropriations available in 2023; recalls that in August 2022, ENISA received an additional EUR 15 million in its budget to provide enhanced cybersecurity support to member states following Russia's invasion of Ukraine; further notes that in September 2022, ENISA initiated a procurement procedure with 28 lots and subsequently signed 28 separate framework contracts worth EUR 14,4 million; is aware that in early 2023, the management board made an exception to temporarily deviate from its financial regulations to meet revised cybersecurity support requests from member states; takes note that according to ENISA’s reply, the Management Board’s decision constituted an exception (limited in time and scope) to respond to a particular exceptional situation in an extremely difficult international context; notes that this exception was duly registered as per application of ENISA's Internal Control Framework and accordingly reported in the 2023 Consolidated Annual Activity Report;

Removed39. Observes that, for eu-LISA, the qualification concerns irregular payments totalling EUR 12,6 million made in 2023, representing 3,2 % of total payment appropriations available including EUR 2,7 million for contracts audited in 2023 and EUR 9,9 million for contracts assessed as irregular in the 2022 audit report;

Removed40. Notes with concern the recurrence of a qualified opinion on the legality and regularity of eu-LISA’s payments, reflecting persistent issues raised by the Court in previous reports since 2020; takes note of the Court’s observation that most of the contracts affected by error have either expired or been terminated by eu- LISA in 2023;

Removed41. Observes that the basis for a qualified opinion (eu-LISA) in 2023 included the following irregularities:

Removed– framework Contract Irregularity: notes that eu-LISA made significant changes in some pricing elements of the financial offers of two tenderers, going beyond the corrections allowed under Article 151 of the Financial, directly affecting the tender’s outcome, with related payments totalling EUR 2,7 million in 2023

Removed– unjustified Negotiated Procedure: further notes the irregular payment of EUR 7,7 million connected to a framework contract awarded via a negotiated procedure without proper justification, contravening procurement standards;

Removed– unauthorised Contract Amendment: observes that payments amounting to EUR 1,8 million were classified as irregular following an unauthorized amendment that increased the value of a fixed-price contract by EUR 3,6 million;

Removed– non-compliance with Framework Contract Terms: notes with concern that payments of the framework contract for maintaining shared infrastructure totalling EUR 0,4 million were irregular, as the specific contract deviated from the framework contract;

Removed42. Expresses deep concern over the recurrence of procurement issues that result in a qualified opinion for the fourth year in a row and urges eu-LISA to take immediate corrective action to address and prevent these problems in future financial management and procurement practices, ensuring full compliance with the Financial Regulation;

Removed43. Notes that the Court, during the hearing, acknowledged that despite the opinion issued for 2023 (eu-LISA), the identified faults are being addressed and improvements have been noted;

Removed44. Insists that although the Financial Regulation does not set ceilings for carryovers, recurrent and excessive levels of carryovers undermine the budgetary principle of annuality and are indicative of structural issues in the budget process and implementation cycle; notes that in 14 Agencies (ENISA, Eurofound, EIGE, eu-LISA, EMA, EUSPA, ELA, FRA, EFCA, ECDC, EU-OSHA, ACER, Frontex and ESA) the level of carryovers affecting all budget titles combined is higher than 15 %; notes that in the case of Frontex and ESA, carryovers reach more than 40 % and 50 % respectively;

Removed45. Recalls that the regulatory framework mandates that agencies make payments within specific deadlines; notes that any failure to meet these deadlines may result in creditors being entitled to late-payment interest; observes that, for the year 2023, the Court reports that while the total amount of late-payment interest incurred was considered immaterial, it is noteworthy that nine agencies (ACER, ECDC, EEA, EUDA, ENISA, ERA, EU-OSHA, Eurojust, and Frontex) frequently failed to meet their payment deadlines; asks the agencies in question to ensure adherence to legal time limits for payments; highlights that although the amount of late-payment interest incurred was minor, the high frequency of delayed payments may negatively impact the agencies’ reputations;

Removed46. Highlights that the Court issued ‘emphasis of matter’ paragraphs to underline a matter presented or disclosed in the accounts which is of such importance that it is fundamental to the understanding of the accounts or the underlying revenue or payments; further notes that, for the 2023 financial year, the Court used ‘emphasis of matter’ paragraphs for the following agencies that are part of this resolution: CdT, EBA, EIT, EMA, ERA, ESMA, Eurojust, eu-LISA and Frontex;

Removed47. Recalls that CdT provides disclosures in its financial statements on the decline in operating revenue, which has negatively affected its economic outcome;

Removed48. Draws attention to disclosures in the annual accounts of ERA and Eurojust regarding the implementation of SUMMA; notes that, throughout 2023, technical issues continued to contribute to a rise in late payments (50 % in 2023) and instances of non-compliance in Eurojust; notes that ERA experienced technical issues during the first trimester, though substantial improvements were made in comparison with 2022;

Removed49. Notes that the accounts of ESMA and the EBA include a disclosure of uncertainty regarding the outcome of a lawsuit; takes note that ESMA was formally notified of a legal case related to a joint procurement procedure where apart from ESMA, three other EU agencies participated (EBA, EIOPA and ERA); is aware that the procedure resulted in a framework contract worth EUR 40,2 million, and by the end of 2023, ESMA and EBA had signed specific contracts totalling in ESMA EUR 2 185 226 and EUR 6 306 786 in the case of EBA;

Removed50. Is concerned that the applicant is seeking annulment of a tender decision and monetary compensation ranging from EUR 400 000 to EUR 3,5 million; notes that due to the early stage of the proceedings, the management of both ESMA and EBA are unable to provide a reliable estimate of potential costs resulting from the case;

Removed51. Draws attention to the disclosure in ESMA’s accounts of an impairment of EUR 368 300, corresponding to outstanding fees from third-country supervised entities; notes that the impairment is linked to the fact that the European Market Infrastructure Regulation (EMIR) does not provide ESMA with an effective mechanism for enforcing the collection of outstanding fees from outside the Union; welcomes that the recent co-legislators’ agreement to amend the regulation (EMIR 3) introduced the possibility for ESMA to withdraw recognition from third-country supervised entities that do not pay their fees;

Removed52. Notes that the EBA’s accounts include disclosures on the significant impacts of the Digital Operational Resilience Act (DORA) and the Markets in Crypto-assets Regulation (MiCAR) as regards the unfunded resources needed to set up the related tasks and implement an appropriate oversight and supervisory policy that took place in 2023 before fee collection could start; takes note that EBA had to reallocate resources to these preparatory activities;

Removed53. Takes note that the EIT’s accounts disclose assumptions that were used to estimate operational costs (grant expenses), which are accrued and presented in the balance sheet as a decreasing item of pre-financing assets; recalls that grant expense accrual is a significant estimate that inevitably entails uncertainty;

Removed54. Notes that EMA provides significant disclosures in its annual accounts relating to its former London premises and the uncertainties created by the fact that the subtenant´s parent company has filed for bankruptcy; notes with concern that EMA could be held liable for the entire amount remaining payable under the head lease; is aware that the maximum amount, including a council tax liability, that will be payable by EMA if the premises remain vacant for the remainder of the lease, is EUR 550 million; notes that EMA is currently renegotiating the sublease conditions with the group’s UK branch and as part of these renegotiations, EMA has agreed to a deferral of rental payments for the first two quarters of 2024 and a reduction in the subtenant’s rent from 1 January 2024; notes that in this connection EMA has made a provision for onerous contract in the amount of EUR 131,4 million; takes note that the Agency´s subtenant has met its contractual obligations for the year 2023, with rental payments covering the period up to 31 December 2023;

Removed55. Observes that the accounts of eu-LISA include a disclosure regarding the financial situation of a key contractor with two active framework contracts; notes that eu-LISA has two active framework contracts with a contractor that is a member of a consortium and that this contractor replaced its parent company in the contracts and is responsible for implementing and maintaining the Entry Exit System and providing services under the Transversal Operations Framework Lot 1; takes note that the outstanding contracted amounts are EUR 97,5 million and EUR 41 million respectively; notes that in order to address potential risks related to the financial viability of the parent company, eu-LISA closely monitors the contractor's financial health using independent risk assessment tools and direct queries; notes that additionally, eu-LISA regularly assesses the progress of Assets under Development (AuDs) to ensure no adverse impacts on their mandate and are proactive in managing and mitigating risks associated with supply chain disruptions within the limits of the financial rule;

Removed56. Recalls the recurrent different approaches of Frontex and the Court regarding the calculation of contributions from Schengen Associated Countries (SAC) to Frontex’s budget; takes note that the Court considers Frontex’s interpretation to be flawed, leading to the SAC contributing around EUR 3,5 million (7 %) less to Frontex’s budget than the size of their economies, in relation to the economy of the Union, would dictate; takes note that the accounting officer ad interim examined the situation and, similar to the MB, considers that there is no need for Frontex to revise the current calculation methodology concerning the contribution of the SAC to the budget of Frontex; takes note of Frontex's follow-up report to the 2022 discharge report which states that the agency does not intend to change the methodology used for these calculations; asks the Agency to report back to the discharge authority with a detailed explanation of the methodology used in these calculations;

RemovedPerformance

Removed57. Notes that the Common Approach on decentralised agencies introduces the concept of Key Performance Indicators (KPIs) aimed at improving performance tracking for the agencies;

Removed58. Notes, in addition, that according to the roadmap developed by the Commission, the KPIs should be developed concerning the work of both the agency and its Director; notes, moreover, that the Commission also proposed that templates be developed for the annual work programme or the evaluation;

Removed59. Points out that, according to the Roadmap, KIPs should be developed on an annual basis by the agencies and the Commission and therefore change year-to-year, making tracking the performance of the agency over a longer period difficult as some KPIs might not be followed over several years;

Removed60. Underlines that the Commission’s guidelines for the KPIs for Directors of EU decentralised agencies focus entirely on the performance of Directors of the agencies, i.e., mainly related to budget and human resources management and are not used to giving an assessment of the results or of the efficiency and effectiveness of the operations under the agencies’ mandates;

Removed61. Stresses, moreover, that, because there is no standard approach for presenting the KPIs in the Annual Activity Reports (AARs) of the agencies, it is difficult to have an overview of the status of the performance of each agency;

Removed62. Underlines that, based on Court’s conclusions, the KPIs do not contribute to tracking the performance of the agencies in terms of operations and financial and human resources management;

Removed63. Notes that budget monitoring efforts during the financial year 2023 resulted in a budget implementation rate of current year commitment appropriations averaging above 97 %, with the exceptions of CdT and ELA, which had rates of 89,55 % and 93,72 % respectively; notes that the agencies exhibiting the lowest execution rate of current year payment appropriations are as follows, listed in ascending order along with their respective percentages: ESA at 47,61 %, Frontex at 55,37 %, EU-OSHA at 68,83 %, ACER at 70,69 % and ECDC at 71,79 %;

RemovedProcurement

Removed64. Notes with concern that public procurement weaknesses remain the largest source of irregular payments; highlights that the Court made 38 observations on public procurement weaknesses in 2023 (compared to 41 in 2022 and 28 in 2021);

Removed65. Notes that, according to the Court, 13 of the observations on weaknesses leading to irregular payments in 2023 refer to irregularities detected and mentioned in previous audits; notes that for the remaining 25 observations, nine impacted payments and the other 16 did not lead to irregular payments in 2023; notes that the observations of the year that did not affect payments relate to the agencies ACER, EBA, eu-LISA, ESMA, EMSA, ENISA, ERA, EIGE, ECDC, EEA, EUDA, EUAA, and CEPOL; takes note of the Agencies replies and calls on them to take measures to correct the weaknesses detected and report back to the discharge authority on the actions taken to address them;

Removed66. Draws attention to the nine observations of the year made by the Court that affect payments; notes that in the case of ENISA, eu-LISA, as well as for ELA, the irregularities detected, along with those identified in previous audits that resulted in payments in 2023 (only for eu-LISA and ELA), form the basis for a qualified opinion by the Court and have been described under heading “Overview of the audit results” of this resolution;

Removed67. Observes that the remaining observations of the year affecting payments refer to CdT, EIGE, EFCA, ERA, and EU-OSHA with one observation per agency, with the exception of the latter agency which has two; notes that the reason for the observation as well as the agencies’ reply for the Court’s observation have the following breakdown:

Removed– In the case of CdT the observation refers to the incorrect use of direct award procedure instead of the launch of competitive procedure based on an estimate of future costs, resulting in irregular payments under these contracts totalling EUR 25 800 in 2023; takes note of CdT’s reply that it will organize simplified competitive procedures for maintenance services exceeding EUR 1 000;

Removed– In the case of ERA the observation is related to the signature of a specific contract without a reopening of competition as required by the framework contract which led to a total of EUR 254 400 of payments in connection with this contract; notes ERA’s reply that as from 2024, the agency has started to apply its own reopening of competition for the services in scope;

Removed– EIGE’s observation refers to incorrect application of ex ante checks, exceeding the ceiling of the framework contract, and incorrect application of daily rates which resulted in EUR 76 500 in irregular payments; notes that EIGE will ensure proper implementation of interinstitutional framework contracts with attention to HR-related contracts;

Removed– EFCA used an interinstitutional framework contract for the provision of travel arrangements beyond its scope for acquiring event organization services and the associated 2023 payments of EUR 257 300 were irregular; notes that according to EFCA, the agency encountered unexpected situations leading to procedural delays and will develop as corrective action, a contingency plan to mitigate the impact of unexpected events;

Removed– EU-OSHA has two observations:

Removed1) Irregularities in awarding three negotiated procedures with a single economic operator, without the publication of a contract notice that according to the Court did not meet the conditions set out in point 11.1(c) of Annex I to the Financial Regulation and led to EUR 67 100 in irregular payments in 2023; takes note of EU-OSHA’s reply that it was in a situation of extreme urgency and had no other viable options to ensure business continuity;

Removed2) Two directly awarded contracts resulted in irregular payments of EUR 29 700; notes that these contracts should have been combined into a single competitive procedure since they were for nearly identical services, contravening Article 160 of the financial regulation, which prohibits the splitting of contracts; notes that EU-OSHA will improve the documentation of its market prospections and explore alternative procurement tools;

Removed68. Echoes the Court’s recommendation that, when implementing framework contracts, the agencies concerned should only use specific contracts to procure goods or services covered by the associated framework contract; further echoes the Court’s recommendation that the agencies concerned should also ensure that they comply with the rules given in the Financial Regulation for modifying existing contracts, that specific contracts define the prices quantities and delivery times and that contract implementation is subject to adequate checks relating to these key elements;

Removed69. Recalls the importance for all procurement procedures to ensure fair competition between tenderers and to procure goods and services at the best price, respecting the principles of transparency, proportionality, equal treatment and non-discrimination;

Removed70. Insists on the need to strengthen procurement cooperation between EUAN and the European Commission;

RemovedStaffing policy, gender equality, inclusion, conflict of interest and fraud prevention

Removed71. Notes that, in 2023, the 33 decentralised agencies reported that they employ a total of 10 580 members of staff (compared to 10 146 in 2022), comprising officials, temporary agents, contract agents and seconded national experts (SNEs), representing an increase of 4,27 % compared to 2022;

Removed72. Notes that cases of burnout (in total 25) were registered in 6 agencies, namely EASA (five cases), EEA (four cases), EFCA (one case), EFSA (two cases), EMA (ten cases) and Europol (three cases); notes however, that not all agencies, including such as ECDC, ECHA, EMSA, ENISA, ERA, FRA, Frontex, collect data related to cases of burnout due to data protection; expresses its concern about medical data not being collected as these are important to follow the mental wellbeing of the agencies’ staff; urges the agencies to take further measures to prevent cases of burnout; notes that overtime was taken by several employees in 19 agencies in 2022 (13 in 2021); notes in particular that a high number of employees have taken overtime in EFSA (81 % of staff) and Eurofound (97 % of staff);

Removed73. Notes with concern that, in 2023, the staff turnover rate was more than 5 % in 18 out of 33 agencies (namely Cedefop, CEPOL, EBA, EFCA, EIGE, EIOPA, EIT, ELA, EUDA, ETF, EUAA, eu-LISA, Eurofound, Eurojust, Europol, EUSPA), and that three of them exceeded the 10 % rate (namely BEREC, CdT, Eurojust); commends the agencies that have taken targeted measures to prevent high staff turnover rates; highlights the importance for all agencies to implement measures with a view to improving talent management and retention; counts on EUAN to be a forum for its member agencies with regard to exchanging good practices and, where possible, joining forces in this regard;

Removed74. Highlights that geographical balance is still a challenge for several agencies for which considerable percentages of their overall staff are nationals of the Member State where the agencies are located;

Removed75. Recalls that the Agencies located in countries with relatively low correction coefficient are facing continuous challenges in attracting skilled and geographically diverse staff;