Sittings · Document

DRAFT REPORT (2023/2179(DEC)) 2023-12-15

On discharge in respect of the implementation of the budget of the Innovative Health Initiative Joint Undertaking for the financial year 2022

Committee on Budgetary Control · Rapporteur: Michal Wiezik

PR_DEC_JointUndertakings

1. PROPOSAL FOR A EUROPEAN PARLIAMENT DECISION

on discharge in respect of the implementation of the budget of the Innovative Health Initiative Joint Undertaking for the financial year 2022

(2023/2179(DEC))

– having regard to the final annual accounts of the Innovative Health Initiative 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 report of the Committee on Budgetary Control (A90000/2024),

1. Grants the Acting Executive Director of the Innovative Health Initiative 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 Acting Executive Director of the Innovative Health Initiative 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 Innovative Health Initiative 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 Innovative Health Initiative Joint Undertaking for the financial year 2022

(2023/2179(DEC))

– having regard to the final annual accounts of the Innovative Health Initiative 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 report of the Committee on Budgetary Control (A90000/2024),

1. Approves the closure of the accounts of the Innovative Health Initiative Joint Undertaking for the financial year 2022 / Postpones the closure of the accounts of the Innovative Health Initiative Joint Undertaking for the financial year 2022;

2. Instructs its President to forward this decision to the Acting Executive Director of the Innovative Health Initiative 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 Innovative Health Initiative Joint Undertaking for the financial year 2022

(2023/2179(DEC))

– having regard to its decision on discharge in respect of the implementation of the budget of the Innovative Health Initiative 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 report of the Committee on Budgetary Control (A90000/2024),

A. whereas the Innovative Health Initiative (IHI) JU, located in Brussels, was set up in November 2021 under the Horizon Europe programme for the period ending on 31 December 2031; whereas the IHI JU replaced and succeeded the Innovative Medicines Initiative JU, that was set up in December 2007 under the Seventh Research Framework Programme (FP7) for a period of ten years (IMI 1) and extended in May 2014 under the Horizon 2020 programme for a period until 31 December 2024 (IMI 2);

B. whereas the IHI Joint Undertaking is a public-private partnership focusing on interdisciplinary, sustainable, and patient-centric health research and innovation; whereas its founding members are the EU, represented by the Commission, and the European industry associations COCIR, European Federation of Pharmaceutical Industries and Associations including Vaccines Europe, EuropaBio, and MedTech Europe;

C. 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;

Budgetary and financial management

1. Notes that, according to the report of the Court of Auditors (the ‘Court’s report’), the accounts of the IHI Joint Undertaking for the year ended in 31 December 2022 present fairly, in all material respects, the financial position of the IHI Joint Undertaking at 31 December 2022, the results of its operations, its cash flows, and the changes in its net assets for the year that ended, in accordance with its Financial Regulation and with accounting rules adopted by the Commission’s accounting officer; highlights, moreover, the fact that, according to the Court’s report, the transaction underlying the accounts are legal and regular in all material respects;

2. Notes that the IHI available budget for 2022 was EUR 272.4 million in commitment appropriations (EUR 11.0 million in 2021) and EUR 174.8 million in payment appropriations (EUR 210.4 in 2021);

3. Notes that the budget execution of the commitment appropriations and the payment appropriations reached 96.60% (75,91% in 2021) and 86.25% (95,39% in 2021) respectively;

4. Notes 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;

5. Notes that in the JU 2022 annual accounts, the amounts of contributions recognised per member category (EU and private members) differ significantly from each other; notes 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; notes 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;

6. Notes that the JU has not yet completed the implementation of the FP7 programme;

7. Notes, in this regard, that at the end of 2022, the JU had fully committed the maximum EU operational contributions of EUR 966 million for signed grant agreements under the that programme; notes, ten years after the end of the FP7 programme, around EUR 44.9 million (or 5 %) still remains to be paid for projects yet to be completed;

8. Notes, moreover, that the private members had legally committed to provide in-kind contributions of EUR 914.2 million or 94.6 % of the minimum operational target of EUR 966 million and that, of this committed amount, they reported EUR 831.9 million (or 86 % of the target) at the end of 2022;

9. Notes, as regards Horizon 2020, that Members’ legal commitments are at the level of their contribution targets;

10. Notes, in this regards, that at the end of 2022, the JU had committed EUR 1 452.1 million (or 91 %) of the maximum EU operational contribution of EUR 1 595.4 million for signed grant agreements under the Horizon 2020 programme; notes, in addition, that of this committed amount, around EUR 484.8 million (or 33.4 %) remains to be paid in the coming years for projects yet to be completed; notes, furthermore, that private members and associated partners had legally committed to provide in-kind contributions of EUR 1 499.4 million (or 94 %) of the minimum target of EUR 1 595.4 million and that, of this committed amount, they reported EUR 1 078.9 million (or 67.6 % of the target) at the end of 2022;

11. Notes that, according to the JU, the lower achievement rates are partly explained by the long project duration required by the nature of the JU-specific research area and the large scale of global consortia implementing projects;

12. Notes that, for Horizon 2022 activities the JU received no new operational commitment appropriations, as the it had finished its last call for proposals by the end of 2020; notes that the implementation rate for the operational payment appropriations was at the level of 87% (96% in 2021);

13. Agrees with the Court that the JU should establish a time-scheduled action plan for finalising the implementation of projects approved under previous MFFs;

14. Notes, as regards implementation of the Horizon Europe programme that, in 2022, the Commission only made cash contributions of EUR 1.4 million to the administrative costs of the JU; notes that the JU did not request cash contributions for its Horizon Europe activities, as the two first calls launched in 2022 under Horizon Europe will only be finished in 2023;

Procurement and staff

15. Notes that the majority of IHI’s contractual commitments in 2022 were concluded on the basis of existing multiannual framework contracts (FWCs); notes, in addition, that in terms of volume, the FWCs used most were in the field of IT, human resources, and audit services; welcomes the fact that several of the framework contracts in question are interinstitutional, thus minimising the administrative burden and ensuring economies of scale;

16. Notes from the Consolidated annual activity report 2022 that IHI JU launched two tender procedures in 2022 outside existing FWCs with a value exceeding EUR 15 000;

17. Notes that all procedures were administered in compliance with the IHI JU Financial Rules and the European Union Financial Regulations to ensure fair competition amongst economic operators, and the most sound and efficient use of IHI JU funds;

18. Notes that the staff establishment plan (SEP) allows for 39 temporary agents, 15 contract agents and 1 Seconded National Expert (SNE), in total 55 staff members; notes that, on 31/12/2022, there were 49 positions occupied: 36 out of 39 temporary agents (92.30%), 11 out of 15 contract agents (73.30%) and 0 out of 1 seconded national experts (0%);

19. Notes, as regards gender balance, that around 65% of staff are women;

Management and control systems

20. Notes that, FP7 expenditure, the JU performed ex-post audits, whilst for Horizon 2020 and Horizon Europe expenditure, the Common Audit Service of the Commission’s DG RTD was responsible for the ex-post audits;

21. Notes that the JU reported a representative error rate of 2.1 % and a residual error rate of 0.8 % for its FP7 expenditure, and a representative error rate of 2.7 % and a residual error rate of 0.9 % for its Horizon 2020 expenditure (clearings and final payments);

22. 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;

23. 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 the Court found no errors or control weaknesses at the JU beneficiaries sampled;

24. Notes that, at the end of 2022, IHI had developed and implemented a complete risk-based approach to ex-ante controls in line with the CIC guidance, considering the JU-specific risk circumstances; notes, to this end, that the JU identified the most relevant risk criteria and designed, based on them, a risk-based monitoring approach; notes that such an approach allowed the JU to assess the risk level of each project and beneficiary during the main phases of project implementation, such as grant agreement preparation, grant agreement amendment, reporting, and payment;

25. Notes, in this respect, that the JU also drew up internal guidelines on its risk-based approach and trained and guided its staff on applying it properly and consistently;

26. Appreciates that IHI developed a risk-based approach to ex-post audit with the aim to reduce its error rate by better targeted sample to detect the most error-prone beneficiaries and thus, strengthening the cleaning effect of their ex-post audits. This is an important positive change in ex-post audit approach as the Commission internal control framework for Horizon Europe grants does not allow for establishing JU specific representative samples and consequently, to calculate specific representative and residual error rates for JUs;

27. Notes that the Court found that Joint Undertakings with a well-developed risk-based ex-post audit approach have a residual error rate below the average of the JUs without such an approach due to the systematic identification and audit of the riskiest beneficiaries;

Follow-up of previous years’ observations

28. 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”;

29. Notes that the Joint Undertaking has taken corrective action to address the 2021 Court’s observation related to part of the employer’s contributions to the EU pension scheme.