Sittings · Document

DRAFT REPORT (2023/2176(DEC)) 2023-12-15

On discharge in respect of the implementation of the budget of the Europe’s Rail Joint Undertaking for the financial year 2022

Committee on Budgetary Control · Rapporteur: Jozef Mihál

PR_DEC_JointUndertakings

1. PROPOSAL FOR A EUROPEAN PARLIAMENT DECISION

on discharge in respect of the implementation of the budget of the Europe’s Rail Joint Undertaking for the financial year 2022

(2023/2176(DEC))

– having regard to the final annual accounts of the Europe’s Rail Joint Undertaking for the financial year 2022,

– having regard to the Court of Auditors’ annual report on the EU Joint Undertakings for the financial year 2022, together with the Joint Undertakings’ replies,

– having regard to the statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions provided by the Court of Auditors for the financial year 2022, pursuant to Article 287 of the Treaty on the Functioning of the European Union,

– having regard to the Council’s recommendation of February 2024 on discharge to be given to the Joint Undertaking in respect of the implementation of the budget for the financial year 2022 (00000/2024 – C90000/2024),

– having regard to Article 319 of the Treaty on the Functioning of the European Union,

– having regard to Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012, and in particular Article 71 thereof,

– having regard to Council Regulation (EU) 2021/2085 of 19 November 2021 establishing the Joint Undertakings under Horizon Europe and repealing Regulations (EC) No 219/2007, (EU) No 557/2014, (EU) No 558/2014, (EU) No 559/2014, (EU) No 560/2014, (EU) No 561/2014 and (EU) No 642/2014, and in particular Article 26 thereof,

– having regard to Commission Delegated Regulation (EU) 2019/887 of 13 March 2019 on the model financial regulation for public-private partnership bodies referred to in Article 71 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council,

– having regard to Rule 100 of and Annex V to its Rules of Procedure,

– having regard to the opinions of the Committee on Transport and

– having regard to the report of the Committee on Budgetary Control (A90000/2024),

1. Grants the Interim Executive Director of the Europe’s Rail Joint Undertaking discharge in respect of the implementation of the Joint Undertaking’s budget for the financial year 2022 / Postpones its decision on granting the Interim Executive Director of the Europe’s Rail Joint Undertaking discharge in respect of the implementation of the Joint Undertaking’s budget for the financial year 2022;

2. Sets out its observations in the resolution below;

3. Instructs its President to forward this decision and the resolution forming an integral part of it to the Interim Executive Director of the Europe’s Rail Joint Undertaking, the Council, the Commission and the Court of Auditors, and to arrange for their publication in the Official Journal of the European Union (L series).

2. PROPOSAL FOR A EUROPEAN PARLIAMENT DECISION

on the closure of the accounts of the Europe’s Rail Joint Undertaking for the financial year 2022

(2023/2176(DEC))

– having regard to the final annual accounts of the Europe’s Rail Joint Undertaking for the financial year 2022,

– having regard to the Court of Auditors’ annual report on the EU Joint Undertakings for the financial year 2022, together with the Joint Undertakings’ replies,

– having regard to Article 319 of the Treaty on the Functioning of the European Union,

– having regard to Rule 100 of and Annex V to its Rules of Procedure,

– having regard to the opinions of the Committee on Transport and Tourism and the Committee on Industry, Research and Energy,

– having regard to the report of the Committee on Budgetary Control (A90000/2024),

1. Approves the closure of the accounts of the Europe’s Rail Joint Undertaking for the financial year 2022 / Postpones the closure of the accounts of the Europe’s Rail Joint Undertaking for the financial year 2022;

2. Instructs its President to forward this decision to the Interim Executive Director of the Europe’s Rail Joint Undertaking, the Council, the Commission and the Court of Auditors, and to arrange for its publication in the Official Journal of the European Union (L series).

3. MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

with observations forming an integral part of the decision on discharge in respect of the implementation of the budget of the Europe’s Rail Joint Undertaking for the financial year 2022

(2023/2176(DEC))

– having regard to its decision on discharge in respect of the implementation of the budget of the Europe’s Rail Joint Undertaking for the financial year 2022,

– having regard to Rule 100 of and Annex V to its Rules of Procedure,

– having regard to the opinions of the Committee on Transport and Tourism and the Committee on Industry, Research and Energy,

– having regard to the report of the Committee on Budgetary Control (A90000/2024),

A. whereas EU-Rail Joint Undertaking (EU-Rail JU) was established by Council Regulation (EU) 2021/2085 of 19 November 2021 establishing the Joint Undertakings under Horizon Europe and repealing Regulations (EC) No 219/2007, (EU) No 557/2014, (EU) No 558/2014, (EU) No 559/2014, (EU) No 560/2014, (EU) No 561/2014 and (EU) No 642/2014 which entered into force on 30 November 2021;

B. whereas, in accordance with Article 174(6) of the SBA, EU-Rail Joint Undertaking is the legal and universal successor in respect of all contracts, including employment contracts and grant agreements, liabilities and acquired property of the Shift2Rail Joint Undertaking which it replaced and succeeded;

C. whereas EU-Rail JU is a public-private partnership for research and innovation in the railway sector; whereas its founding members are the EU, represented by the Commission, and rail industry partners, including rail equipment manufacturers, railway companies, infrastructure managers, and research centres;

D. whereas, to increase transparency, the Joint Undertaking should disclose in its annual accounts, relevant information regarding members’ contributions at programme level; whereas, for each programme under which they operate, the Joint Undertaking should present per member category up to the year-end, all relevant information including the legal contribution targets set for the respective programme, the volume of contributions received, and the volume of legal commitments;

General

1. Notes, from the report of the Court of Auditor’s (the ‘Court’s report’) on the annual accounts of the Joint Undertaking for the financial year 2022, that the annual accounts present fairly, in all material respects, the financial position of the Joint Undertaking on 31 December 2022, the results of its operations, its cash flows, and the changes in net assets for the year then ended, in accordance with its Financial Regulation and with accounting rules adopted by the Commission’s accounting officer; notes, furthermore, from the Court’s report that the underlying transactions to the accounts are, in all material respects, legal and regular;

2. Acknowledges, from Joint Undertaking’s Consolidated Annual Activity Report that 2022 was an ambitious and successful year achieving the ramp up phase of the Europe’s Rail Joint Undertaking and its Programme which are now fully operational, including Innovation Pillar, System Pillar and, soon, the Deployment Group; notes, at the same time, that 2022 was a pivotal year for the innovation programmes of Shift2Rail;

3. Takes note that all the technical demonstrators have either already demonstrated results of the work that has been ongoing since the launch of the programme or are gearing towards final preparation steps for demonstrations to happen in 2023;

4. Notes that, during 2022, the Founding Members have been working together to operationalise their commitment to the JU submitting major proposals to the Call 2022-1, that following an open, transparent and independent assessment resulted in 6 Flagship Projects covering Phase 1 of the EU-Rail Programme; notes that these projects were operational by the end of 2022; notes, in addition, that, in parallel, the System Pillar was funded following a major call for tender;

5. Notes, moreover, that 2022 was marked also for the consistent implementation of a system approach to rail evolution, driven by the European Commission – DG MOVE policy, where EU-Rail represents the research and innovation arm length and European Union Agency for Railways (ERA) the key system authority for European Rail Traffic Management System (ERTMS) and telematics applications, creating the opportunity for the European rail industry to bring forward its views and ambitions with “one voice” with the expectation for a systemic and coherent approach at institutional level;

Budgetary and financial management

6. Notes from the JU’s report on Budgetary and Financial Management 2021, that as a result of three budget amendments, the EU-Rail JU’s adopted budget amounted to EUR 171.4 million in commitment appropriations and EUR 180.8 million in payment appropriations;

7. Is aware that the changes in the size of the JU’s budget largely depend on the implementation phase of the multiannual research and innovation programmes, notes that, in 2022, the JU started with the implementation of the Horizon Europe programme, and therefore, the 2022 budget includes the commitment budget for the first Horizon Europe calls planned for 2022, and the payment budget for the related pre-financing payments;

8. Notes that, at the year-end 2022, the JU had implemented 100% of its commitment appropriations made available in its active budget (Titles 1 to 3); notes, in addition, that the payment appropriations were implemented up to 79.1% of the active funds (respectively 79% of implementation when compared to the full JU budget including Title 4);

9. Notes, that, by means of the Governing Board (GB) Decision 08/2021 of 25 November, the S2R GB adopted the initial Annual Work Plan and Budget for 2022, which continued to apply to EU-Rail by means of adoption by the EU-Rail Governing Board of the so-called “omnibus decision”; notes that, by the time of such adoption, the budget appropriations included in the Budget 2022 were not foreseen to cover the full financial year 2022, but to ensure the running of the activities till the launch of the new partnership, the Europe’s Rail Joint Undertaking, and to ensure the necessary business continuity of the activities;

10. Notes that, as regards Administrative Costs, the implementation rate in commitment appropriations was 100% and in payment appropriations was 84% (95% in 2021); notes that the JU justified this decrease with the fact that the JU could only expect to reach its full staffing by the end of the year at the earliest;

11. Notes that the implementation rate of the Operational Budget in commitment appropriations was 100% and 79% in payment appropriations (84% in 2021); understands that the implementation rate also includes EUR 76.000 relating to Expert Evaluators which are managed by the REA Services;

12. Notes that the amount (EUR 41.1 million) under Title 5 - Unused appropriations not required in current year - established to support a transparent implementation of JU Financial Rules’ Article 6.5, the so-called n+3 rule - will be reactivated in the future year budget(s) and used first;

13. Notes, from the Court’s observations, that the amounts of contributions recognised per member category (EU and private members) differ significantly from each other; understands that this is because EU cash contributions are validated and recognised when paid to the JU at the beginning of the project implementation, but members’ in-kind contributions are only recognised after validation of the costs incurred and declared for project implementation;

14. Is concerned that the gap between the recognised amount of cash contributions on the one hand and in-kind contributions on the other hand, was addressed in a suboptimal way in the JU’s 2022 annual accounts by not providing information on the JU members’ legal commitments at year end, in terms of signed grant agreements and contracts; welcomes the Joint Undertaking’s commitment to address this observation in the next year’s (2023) annual accounts;

15. Notes, regarding the implementation of the Horizon 2020 programme, that, at the end of 2022, the JU had fully committed the maximum EU operational contribution of EUR 384.5 million for signed grant agreements and contracts under the Horizon 2020 programme; notes, moreover, that of this committed amount, around EUR 68.2 million (or 18 %) remains to be paid in the coming years for projects yet to be completed;

16. Notes, with satisfaction, that the private members had legally committed to provide in-kind contributions to the JU’s operational activities of EUR 320.7 million, and in-kind contributions to additional activities of EUR 244 million or 123.7 % of the minimum target of EUR 456.5 million, and that these committed amounts were reported at the end of 2022;

17. Notes, still for Horizon 2020 activities, that the JU received no new operational commitment appropriations as the JU had finished its last call for proposals by the end of 2021; notes that the implementation rate for the operational payment appropriations, including operational unused and reallocated appropriations, fell to 47 % (2021: 61 %); understands that, according to the JU, this was due to the rising costs and delivery problems faced by beneficiaries arising from the COVID-19 crisis and the war in Ukraine and that, as a consequence, the duration of most Horizon 2020 projects had to be prolonged and final payments postponed to 2023;

18. Notes, for the implementation of the Horizon Europe programme, that, in 2022, the Commission made cash contributions of EUR 108.9 million; notes that the JU successfully closed the first two calls under the Horizon Europe programme, and almost fully used the operational contribution part of EUR 107.5 million for pre-financing the first grant agreements concluded under the programme;

Procurement and staff

19. Notes, with regard to the implementation of procurement activities, that the JU has complied with the principles of the EU Financial Regulation and the guidance provided in the European Commission Procurement Vademecum, this resulting in the implementation of activities obtaining the best value for money; notes that the values established for the different procurement procedures, which are below any materiality level considering the total value of the R&I activities and the Programme, result from the collective knowledge of involved staff and their experience in previous private and public organizations;

20. Notes that, in 2022, for open procedures, the JU continued using the e-tendering and the e-submission platforms available from the TED e-Tendering website and accessible on the Funding and Tenders Opportunities portal54; notes that, in the context of the eProcurement strategy, in 2022, EU-Rail started the on-boarding process of the Public Procurement Management Tool (PPMT), the tool that will replace TED e-notices and e-tendering;

21. Notes that, during 2022 several guidance documents and templates for procurement procedures continued to be updated by the Chief Legal Officer (i.e.: calendar, tender specifications, opening and evaluation of tenders, award procedures for low value contracts, etc.) to adapt them to JU needs and to the DG BUDG recommendations, in particular to the e-submission procedure;

22. Notes that, in 2022, the JU conducted an open tender procedure: Europe’s Rail System Pillar (3 lots) – framework services contracts for the provision of services to EU-Rail in the fields of System Pillar; notes that the awarded total amount is EUR 45 million with EUR 4 million awarded to lot 1, EUR 37 million awarded to lot 2 and EUR 4 million awarded to lot 3;

23. Notes that Title 1 and Title 2 of the budget were executed up to 100%, with Title 1 (Staff Expenditure) being used mainly for staff salaries; notes that, during the year, the JU also made use of external support to fill the gaps until the recruitments of staff are finalised and to cope with the workload related to the JU activities;

24. Notes that, at the end of 2022, 28 posts were filled;

25. Notes that the current EU-Rail Staff Establishment Plan was adopted by the Governing Board on 1 March 2022, introducing Temporary Agent positions in relation to the new role of the JU in the System Pillar and to further strengthen the support to policy activities with its integrated R&I Programme;

26. Notes that, according to the Staff Establishment Plan, EU-Rail shall be staffed with 29 staff members including 2 Seconded National Experts; notes that, in 2022, most of the vacant posts were being progressively filled, while having no staff members leaving, the JU still experienced some temporary leaves; notes that to fill temporary gaps or long-term absences, the JU also made use of external competencies and expertise to achieve its operational activities, as well as of temporary outsourcing of some administrative tasks;

Management and control systems

27. Acknowledges that, for Horizon 2020 and Horizon Europe expenditure, the Common Audit Service of the Commission’s DG RTD is responsible for the ex-post audits; notes that, for Horizon 2020 expenditure (clearings and final payments), the JU reported a representative error rate of 2.2 % and a residual error rate of 1.3 %70;

28. Notes, that for the Horizon Europe programme, ex-post audits have yet to be carried out, as the first interim payments are only expected in 2024;

29. Notes that, to assess the operational payment controls of the JU, the Court audited randomly sampled Horizon 2020 payments made in 2022, at the level of the final beneficiaries; notes that, for one case, the Court found and quantified a serious error resulting from over claimed personnel cost because the beneficiary considered indirect costs in the calculation basis of the cost centres’ unit cost rates; notes that such costs are, however, covered by the 25 % flat rate for indirect costs;

30. Notes that , while the EU-Rail Joint Undertaking performed on an ad-hoc basis risk-based ex-ante controls on risky projects, it had not yet implemented a structured risk-based approach to ex-ante controls by the end of 2022; notes, in particular, that the JU had not aligned ex-ante controls to the high-risk factors identified by targeted risk assessments and that it had not developed internal practical guidance on how to implement a risk-based monitoring, including instructions on how staff should use the risk management module available in COMPASS;

31. Consequently, the EU-Rail did not ensure a complete and harmonised assessment of their relevant project and beneficiary-related risks, which may result in inefficient and/or ineffective ex-ante controls increasing the risk of co-financing ineligible costs, non-achievement of project objectives, project delays or even project failures;

32. Echoes the Court call for action that EU-Rail should implement a structured risk-based approach to ex-ante controls covering relevant project and beneficiary-related risks; agrees, moreover, that EU-Rail, should develop internal, practical guidance on how to implement a risk-based monitoring at the level of projects and beneficiaries, and how staff should use the risk management module available in COMPASS;

33. Notes that the EU-Rail Joint Undertaking showed weaknesses in the use of the reinforced monitoring tool; agrees that the Joint Undertaking should ensure that all reinforced monitoring actions are accompanied by specific control actions targeting the identified risks, and that they are followed-up at pre-defined deadline;

34. Notes that the Joint Undertaking would like to underline that the risk of errors in Horizon 2020 grant payments was highly mitigated by the use of lump-sums;

35. Notes, in particular, that the EU-Rail JU ensured reasonable lump sums by using financial experts during the call evaluation procedures and carefully investigated and negotiated all cost items questioned by the financial experts during the grant agreement preparation phase, in accordance with Commission Decision C(2017) 7151 of 27 October 2017 on authorising the use of reimbursement on the basis of a lump sum for the eligible costs of actions under the Horizon 2020 Framework Programme;

36. Notes, with satisfaction, that the Joint undertaking, while having embedded procedures for the ex-ante identification of high-risk factors for Horizon 2020 grant agreements, it recognises that these procedures could be better aligned with the Commission guidance on risk-based ex-ante controls;

Follow-up of previous years’ observations

37. Notes that “observations” in the Joint Undertakings specific annual reports are in fact “not timed recommendations” by the Court; notes that ECA annually follows-up on those observations by assessing their status as “open” or “closed”;

38. Notes that, as regards the (two) Court’s observations for 2021, one is still open- it concerned the low implementation rate for the JU’s 2021 operational payment budget available, including operational unused and reallocated appropriations (fell to 61 % (2020: 76 %));

39. Notes that this situation was mainly caused by the poor quality of the beneficiaries’ technical reports and the need of additional evidence confirming the achievement of the project results and the fact that the delay of a single beneficiary affects the payment of the whole lump-sum amount;

40. Appreciates that, in 2022, the JU developed an action plan to improve the beneficiaries’ financial reporting, which is important in particular for reimbursements on the basis of a lump-sum for the eligible costs of actions where the delay of a single beneficiary affects the payment of the whole lump-sum amount.