Directorate-General for Internal Policies of the Union Directorate for Budgetary Affairs Secretariat of the Committee on Budgetary Control

Brussels, 22 April 2016

Draft Report on the fact-finding mission of the Budgetary Control Committee to Berlin, Mecklenburg-Western Pomerania, Hamburg 3 - 5 November 2015 (As endorsed by CONTon XXXXXXXX, the report was not voted)

B-1047 Brussels - Tel +32 2 28 43379 - Fax 0032 2 28 44907 F-67070 Strasbourg - Tel +33 3 88 1 72257 - Fax 0033 3 88 1 79976 Conclusions  The effectiveness of the 's Committee on Budgetary Control political efforts can be further increased if it stays in regular contact with its national counterparts.  The current own-resource system is complex and would benefit from simplification.  The CONT delegation fully supported the findings in the Special Report 11/2013 on Gross National Income (GNI) data issued by the European Court of Auditors (ECA).  The German "VAT gap" (the difference between the theoretical tax liability according to the tax law and the actual revenue collected) is estimated at 11,2 % in 2013; the percentage amounts to EUR 24,873 million.  Financial engineering instruments are an attractive source of finance in a competitive business environment  European legislation in the area of structural funds is often considered to be too complex and unclear.  Cooperation between different national and European bodies working on security risk analysis in trade has proven very important.

Recommendations  National parliaments should be encouraged to support national declarations for the implementation of European funds with the view to establishing a single audit chain.  National parliaments should support the European Parliament's endeavour to hold the Council to account.  A more accountable, transparent, simple financing system of the EU budget needs to be established.  The CONT delegation reiterated its demands on GNI data as voted in the 2013 Commission discharge resolution.  Member States should increase their administrative cooperation in EUROFISC  The use of Intermediate Bodies (IB) and multitude of different instruments should be avoided as they increase the risk of error.  Management (MA) and Audit Authorities (AA) should be asked for concrete proposals which legal provisions should be simplified (Done by letter from the Chair to the respective MAs and AAs).  OLAF should strengthen its coordinating role in the cooperation between different national and European bodies working on security risk analysis in trade

2 1) Introduction In its 2013 Commission discharge report1 the European Parliament (EP), based on reports from the European Court of Auditors (ECA)2, observed that "6. Issues a reservation concerning the way Member States' GNI contributions have been calculated due to deficiencies as regards the Commission’s verification of data; recalls that the Court of Auditors concludes that the Commission's verification of GNI data was not sufficiently structured and focused; (...) 58. Demands that the Commission to ensure that Eurostat's and Member States' data are identical, as the indicator of GNI represents the key benchmark not only for Union revenue but also for expenditure; 59. Recalls the criticism formulated by the Court of Auditors in its Annual Report for 2012 as regards the lack of effectiveness of the Commission's verification of GNI data (see Annual Report for 2012, point 2.41); stresses that the prolonged use of general reservations and the excessive duration of the verification cycle of GNI data used for own resources can lead to budgetary uncertainty, as has been highlighted by the discussions between the Member States about the draft amending budget No 6 to the general budget 20141; 60. Regrets the fact that certain Member States did not anticipate that it will result in an increase of their budgetary contribution, despite the fact that they were aware of the changes in the statistical methodology to calculate the GNI contribution since spring 2014; Against the backdrop of these observations the Committee on Budgetary Control (CONT) decided to have a closer look at the calculation, collection and management of own resources in Germany. CONT also decided that, while in Germany, the delegation should verify which measures German authorities had taken to improve the implementation of structural funds previously under reservation in the Annual Activity Reports (AAR) of the Commission's directorates general. In this context it is noteworthy to recall Parliament's view as expressed in the 2013 Commission discharge report: "184. Regrets that faulty first-level-checks by national management and control systems remained a prime source of errors; is deeply concerned by the fact that Member States seem to be less scrupulous when spending Union funds compared to the way they spend their national budget while they have an important responsibility on implementing correctly and lawfully the Union budget when they are responsible for the management of Union funds; (...)" The fact-finding mission took place from 3 to 5 November 2015 and followed the programme as outlined in the annexe. The delegation met with Members of the German discussed the calculation, collection and management of own resources with the Federal Ministry of Finance and the regional authorities in Hamburg and verified the implementation of selected operational programmes of structural funds in Berlin, Mecklenburg-Western Pomerania and Hamburg.

1 P8_TA(2015)0118, adopted on 29 April 2015 2 See the ECA Annual Report 2012 point 2.41 and also the ECA Special Report (SR) 11/2013

3 2) Background 2,1) Own resources3 Article 311 of the Treaty on the functioning of the European Union states that “the Union shall provide itself with the means necessary to attain its objectives and carry through its policies. Without prejudice of other revenue, the budget shall be financed wholly from own resources”. In addition, article 323 makes clear “the European Parliament, the Council and the Commission shall ensure that the financial means are made available to allow the Union to fulfil its legal obligations in respect of third parties”. Traditional own resources consist of custom duties, agricultural duties and sugar and isoglucose levies which result directly from the existence of a unified customs area and are collected by Member States. Moreover, the Member States are authorized to retain a share of the collected amount as collection costs, for the 2014-2020 period this share will amount to 20% as opposed to 25% during the 2007-2013 period. VAT-based own resource is a complex calculation based on a theoretical harmonised VAT base statistically computed for each Member State. Currently, the VAT base is not fully harmonised across Member States as derogations continue to exist and different types of VAT rates are present. Therefore, this VAT resource is not levied directly on the final consumers (who actually bear the VAT burden) but on the net VAT revenue collected, corrected and adjusted in order to obtain a harmonised VAT base. In other words, this resource comes from national budgets. Moreover, the capping mechanism in place on this resource (currently 50% of GNI) directly transforms it into a GNI-based resource for the Member State concerned (e.g. in 2014: five Member States were concerned). GNI-based own resource is a fixed percentage of Member States' GNI. Initially created to play the role of balancing the EU budget, this resource has grown to represent more than two thirds of the total revenue, around 74% in 2013. Gross national income (GNI) data are macroeconomic aggregates resulting from Member States statistical computation. Computation includes a large number of different components to be measured using the best available statistical sources and methods. Computation of the GNI for the own resource purpose have to comply with the requirements of the European System of National Accounts (ESA95). The European Commission is in charge of the verification of the GNI data provided by Member States in order to ensure that their contributions to the EU budget are correct. Even though the GNI own resource is a balancing resource, any overstatement or understatement of the GNI of a particular Member States will directly affect the respective contributions of the other Member States. Finally, other revenue, which is not called own resources, comes from fines to companies breaching EU competition law or other EU laws, contributions of non-EU countries to specific EU programmes and taxes on EU staff.

3 Policy Department Budgetary Affairs, Control challenges in the EU’s own resources system, April 2015, p 1-2

4 EU resources in % of total EU resources 2014

Finally, other revenue, which is not called own resources, comes from fines to companies breaching EU competition law or other EU laws, contributions of non-EU countries to specific EU programmes and taxes on EU staff.

Source: European Commission - EU Budget 2014 - Financial Report

2,2) Structural funds programmes for the regions of Berlin and Mecklenburg-Western Pomerania Further down you will find the global figures on structural fund allocations in Berlin and Mecklenburg-Western Pomerania: European Regional Development Fund (ERDF) Operational Programme for Berlin 2007-20134: The main objective of the programme is to improve the international competitiveness of the city and its enterprises. In particular, the programme intends to create 11,200 jobs and provide support for 1,080 business start-ups and 550 R&D projects. The Programme has been divided into the following priorities: 1. Promotion of business competitiveness and start-ups 2. Innovation and knowledge-based economy 3. Integrated urban development 4. The environment 5. Technical assistance Total OP budget: EUR 1 700 744 230 Total EU contribution (from ERDF): EUR 875 589 810

4 http://ec.europa.eu/regional_policy/en/atlas/programmes/2007-2013/germany/operational-programme- berlin

5 The European Social Fund (ESF) Operational Programme for Berlin, Germany, 2007- 20135: The ESF programme for Berlin aims to boost the competitiveness of Berlin’s economy and help increase the employment rate. The Programme has been divided into the following priorities: 1. Improving the adaptability of workers and enterprises. 2. Improving human capital. 3. Improving access to employment and social inclusion of disadvantaged groups Total OP budget: EUR 671 952 062 Total EU contribution (ESF): EUR 335 976 031

ERDF Operational Programme for Mecklenburg-Western-Pomerania6: The primary objective of the programme is a sustainable increase in economic growth in Mecklenburg-Western Pomerania. The aims of the operational programme include creating 9,160 jobs (of which 1,160 in research and development), safeguarding 22,640 jobs and promoting 15 business/research cooperation projects. Mecklenburg-Vorpommern's ERDF operational programme for 2007-2013 is structured according to the following priorities: 1. Promoting innovation, research and development, education and training 2. Increasing the competitiveness and flexibility of SMEs in particular 3. Improving the investment framework conditions for SMEs in particular 4: Development and extension of infrastructure for sustainable growth 5. Technical assistance Total OP budget: EUR 1 461 893 890 Total EU contribution (ERDF): EUR 1 252 420 390

ESF Operational programme for Mecklenburg-Vorpommern, Germany, 2007-20137: The ESF programme for Mecklenburg-Vorpommern aims to boost the competitiveness of the region's economy and help increase the employment rate. The Programme has been divided into the following priorities: 1. Improving the adaptability of workers and enterprises. 2. Improving human capital. 3. Improving access to employment and social inclusion of disadvantaged groups

5 http://ec.europa.eu/employment_social/esf/docs/berlin_en.pdf 6 http://ec.europa.eu/regional_policy/en/atlas/programmes/2007-2013/germany/operational-programme- mecklenburgvorpommern 7 http://www.europa- mv.de/cms2/Europamv_prod/Europamv/de/eufoerderinstrumente/Europaeische_Fonds_in_Mecklenburg- Vorpommern/Foerderperiode_2007-2013/index.jsp

6 4. Technical assistance Total OP budget: EUR 556 631 284 Total EU contribution (ESF): EUR 417 473 463

3) Committee on Affairs of the European Union: The Follow-up to the European Parliament's Discharge Procedures In the German Bundestag the CONT delegation met with representatives from the Committee on Affairs of the European Union and also with Chair of the Audit-Subcommittee.

(CONT delegation in the German Bundestag welcomed by , Chairman oft he Committee on Affairs oft he European Union) The CONT delegation explained briefly the purpose of the visit. It underlined its concern, in the area of structural funds implementation, about the only partially effective national management and control systems (MCS) and deficient first-level checks, based on annual reports from the European Court of Auditors (ECA)8 and the European Parliament's discharge resolutions9. Germany would be no exception. The delegation therefore drew the attention of the colleagues from the Bundestag to the possibility of signing a national declaration10 at the appropriate national political level with the view to sharing responsibility for sound financial management of EU funds. If the national authorities shouldered more responsibility they would also contribute to establishing a single audit chain. The Chair of the Committee on Affairs of the European Union, Gunther KRICHBAUM, pointed to the horizontal, European policy orientated responsibilities of his committee. He considered the Committee on Affairs of the European Union to be at the central stage as far as concerns cooperation between the European Union and the Bundestag.

8 The 2013 ECA annual report can be found here: http://www.eca.europa.eu/en/Pages/AR_2013.aspx 9 The 2013 Commission discharge resolution is quoted as an example: P8_TA-PROV(2015)0118, 29 April 2015 10 COM(2014) 688 final, 28 October 2014

7 The Chair of the Audit-Subcommittee, Barbara HAGEDORN, explained the tasks and functioning of the subcommittee. As a subcommittee of the Committee of Budgets it would prepare the discharge decision of the German Bundestag on the basis of the annual report of the Federal Court of Auditors. Barbara HAGEDORN also reported from a mission to the Czech Republic where best practices were exchanged. Subsequently, Gunther KRICHBAUM enquired about the state-of-affairs as regards the Council discharge. The Head of the CONT delegation, Ingeborg GRÄßLE, emphasised that the Council discharge had now been denied six times in a row and regretted to say that the Council would not modify its position, i. e. concentrating exclusively on considering the Commission discharge. When the meeting drew to a close both sides highlighted the importance of regular contacts between national and European parliamentarians. Ingeborg GRÄßLE also asked for support with regard to introducing national declarations and holding the Council to account.

4) Calculation, collection and management of own resources11 The CONT delegation visit continued in the Federal Ministry of Finance which is responsible for collecting and managing own resources. The calculation of own resources is provided by the Federal Statistical Office12, which was also in attendance.

(Centre: , Parliamentary Secretary of State) Eva-Maria MEYER and Dirk-Heiner KRANEN briefly depicted the own resource system from the German perspective. Germany funded EUR 29,13 billion (21,9%) to the EU budget of EUR 144 billion in 2014. The speakers recalled that in Germany traditional own resources (TOR) contributed 11%, value-added tax (VAT) 13% and the Gross National Income (GNI) 76% to the German payment. They underlined that the main advantage of the current system would be the absence of any financing gap, as the level of expenses agreed would determine the amount of money to be collected. GNI resources would compensate the amount which could not be collected from TOR and VAT resources.

11 Policy Department Budgetary Affairs, Control challenges in the EU’s own resources system, April 2015 12 https://www.destatis.de/EN/Homepage.html

8 Ever since the United Kingdom was granted a reduction of its financial contributions to the EU budget in the mid 1980 a number of rebates are in place for other net contributors to the EU budget. The speakers pointed out that Germany would be in favour of abolishing VAT as own resource.

(CONT delegation in the Federal Ministry of Finance

5) Fight against VAT Fraud The fight against VAT fraud falls under the competence of national tax administrations. Since the Commission does not have data or statistics on carousel frauds, it launched a study to quantify and analyse the "VAT gap" in the EU-27 Member States. The VAT gap is defined as the difference between the theoretical tax liability according to the tax law and the actual revenue collected. It does not refer only to VAT losses due to VAT fraud, but is an indicator of the effectiveness of VAT enforcement and compliance measures, as it provides an estimate of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations. According to the study, Germany’s average VAT gap amounted to 11.2% in 2013, compared to 10.6% in 2012. The VAT total tax liability in Germany was estimated at EUR 221,878 million in 2013 (EUR 216,984 million in 2012) of which EUR 197,005 million were collected (EUR 194,034 million in 2012). In 2013 the VAT gap amounted to EUR 24,873 million. The average VAT gap for the EU-26 group stood at 12.3% in 2012 and 13.9% in 2013. Michael VELLEN, from the Federal Ministry of Finance, underlined the important role played by EUROFISC, a mechanism provided for Member States to enhance their administrative cooperation in combating organised VAT fraud and especially carousel fraud. In addition, the VAT Information Exchange Service (VIES) would allow verifying VAT numbers. Finally he pointed out that Germany would already use the "VAT reverse charge mechanism" successfully in a number of areas13.

13 European Commission, Assessment of the application and impact of the optional ‘Reverse Charge

9 The CONT delegation observed that Germany could play a more proactive role in EUROFISC, that the application of the VAT reverse charge mechanism would imply a certain time delay and raised the question about limiting cash payments to have a better control of financial transactions. They also asked about the role of the KdF (Kreditanstalt für Wiederaufbau) Development Bank. Over lunch Jens SPAHN, Parliamentary Secretary of State in the Federal Ministry of Finance, joined the discussion which resulted in a broader debate. The CONT delegation raised questions about the possibility of issuing a national declaration covering the implementation of EU funds in Germany, the growing GNI contribution to the EU budget, the often important gap between payment and commitment appropriation levels which, in the past, led to shortfall of financial means at the end of a year, the fact that without the possibility to levy taxes the European Parliament's budgetary responsibilities would remain incomplete, and the lack of financial flexibility under the Multi-annual Financial Framework (MFF)The Secretary of State pointed out that the KFW Development Bank is an independent financial institution. He was of the opinion that cash payments as such should not be regarded in a negative light. He appeared reluctant to grant the European Parliament competences in the area of taxes. He highlighted the fact that the EU did not incur debts. He said that EU budget appropriations should be reallocated when attending to the refugee crisis. He made reference to Minister SCHÄUBLE's speech during a conference on "EU budget focussed on results" on 22 September 201514.

6) Getting the GNI data right: the ECA Special Report (SR) n° 11/2013

(Jördis KLÜGEL, Ministry of Finance, Albert BRAAKMANN, German National Statistical Office, Martin LEUVERING, Ministry of Finance)

Mechanism’ within the EU VAT system, November 2014, p. 121 14 http://www.bundesfinanzministerium.de/Content/EN/Reden/2015/2015-09-28-keynote-eu-budget- focused-on-results.html

10 The early afternoon session opened with a presentation by Albert BRAAKMANN from the German National Statistical Office. He explained in detail the guiding principles of his work, the national accounts system, the gross national income, and the gross domestic product. This background presentation was followed by an outline of the findings in the ECA SR, introduced by Milan Martin CVIKL, Member of the European Court of Auditors and Dean of Chamber IV: Revenue, Research and Internal Policies, and European Union's Institutions and Bodies. The ECA SR 11/2013 on the GNI15 data called for shorter, more focused verification of GNI figures and improved reporting and coordination regarding results, so that the GNI system becomes ever more reliable in its contribution to the calculation of EU revenues. The long verification process and the excessive use of general reservation by the Commission mean that Member States’ GNI data is subject to corrections more than ten years after the year concerned. The European Parliament pinpointed this issue in in the 2013 Commission discharge. The Parliament issued a reservation concerning the way Member States' GNI contributions have been calculated due to deficiencies16 as regards the Commission’s verification of data ; recalled that the Court of Auditors concluded that the Commission's verification of GNI data was not sufficiently structured and focused. The European Parliament urged the Commission to:  "shorten the duration of its verification cycle of the GNI data used for own resources to a maximum four years, if needed, in launching infringement proceedings and/or in imposing strict delay to lift the reservations;  limit the use of general reservations to exceptional cases where there are significant risks that the financial interests of the Union are not protected: i.e. when a Member State carries out a major revision during the verification cycle or at irregular intervals;  draft an action plan to remedy the deficiencies detected by the Court of Auditors in its Special Report No 11/2013 and to report on it to Parliament and the Court of Auditors by the end of June 2015;  put in place and closely monitor a detailed action plan with clear targets to address the problems in the compilation of Greece's national accounts" Following the two presentations a discussion ensued about the length of adaptation procedures, monitoring and reporting. The CONT delegation enquired about the impact of the state structure with numerous statistical Länder offices and how "soft economic data" like youth unemployment would be taken into consideration. In the end the CONT delegation endorsed the Court's analysis and reiterated its demands as voted in the 2013 Commission discharge resolution.

15 GNI is GDP minus primary income (including compensation of employees, taxes and subsidies on production and imports, and property income) payable by resident unis to non-resident units plus primary income receivable by resident units from non-resident units. Gross Domestic Product (GDP) is the sum of the production activity of resident producer units in the economic territory, i.e. the sum of final uses of goods and services by resident institutional units (actual consumption and gross capital formation) plus exports and minus imports of goods and service (expenditure approach). 16 See Court of Auditors' Special Report No 11/2013, point 93 to 97

11 7) Berlin Adlershof Science and Technology Park

Facts and Figures (as of 31/12/2015) Area: 4.2 km² (1,038 acres) Employees: 15,996 Companies: 1,013 Scientific Institutions: 16 Science and Technology Park Companies: 510 Employees: 6,134 New arrivals: 60 companies Total revenues: 766 million EUR (excluding subsidies) Non-university research institutions Number: 10 Employees: 1,680 Budgets: Core funding: 134 million EUR Third party funding: 49 million EUR Humboldt-Universität zu Berlin Number of institutes: 6 (Computer Sciences, Mathematics, Chemistry, Physics, Geography and Psychology) Employees: 1,055 Students: 6,524 Budgets: Core funding: 49 million EUR Third party funding: 31 million EUR Media City Companies: 140 Employees 1,977 (including freelancers) Revenues: 209.1 million EUR (excluding subsidies)

Commercial businesses and services Companies and facilities: 363 Employees: 5,150 Revenues and budgets: 638.5 million EUR (excluding subsidies)

In the Adlershof the CONT delegation was welcomed by Matthias KOLLATZ-AHNEN, Minister of Finance in Berlin, Peter STRUNK, Executive Manager Public Relations, WISTA- Management GmbH and Kezban SARITAS, Director of the Centre for Photovoltaics and Renewable Energy.

12 (CONT delegation in the Adlershof and Peter STRUNK, Executive Manager Communication / Public Relation Wista-Management) For 2007 to 2013 funding period, the federal state of Berlin received just over EUR 875 million from the European Fund for Regional Development to stimulate investment in research and development and structurally relevant start-ups, support measures to cut carbon emissions, and encourage integrated urban development. The co-financing amounted to EUR 825 million. The Adlershof is often quoted as an example where public start-up funding triggered private investments and where positive economic effects spilled over into the region.

Adlershof: From providing infrastructure to attracting private investments 1991 - 2005 2006-2012 Total

Mio € % Mio € % Mio € %

Investment in 503 35 167 21 670 30 infrastructure

Investment in scientific 427 30 10 1 437 20 institutes

Investment WISTA 290 20 72 9 362 16 management

Private investments 198 14 541 68 738 33

Total 1 417 790 2 207

A study prepared by the German Institute for Economic Research (DIW) in 2011 showed that the technology park, media city and business park of the Adlershof development area together represented one of the most dynamic growth locations in Berlin. The principal conclusions were:

13  Over EUR 1 billion of gross value added was generated directly in Adlershof in 2010. In addition to that a further EUR 740 million in gross value added in other parts of Berlin was indirectly triggered by Adlershof;  In 2010, over 14,000 people were employed in Adlershof. For every employed person in Adlershof there was another employed person in other parts of Berlin who depended on the former, so that the overall effect was just below 28,000 employed persons.  In 2010, Adlershof triggered EUR 340 million of tax revenue. Around EUR180 million of which remained in the state of Berlin.

(Matthias KOLLATZ-AHNEN, Minister of Finance, Berlin, Kezban SARITAS, Head of the Centre for Photovoltaic) During the discussion Minister KOLLATZ-AHNEN emphasised the success of the Adlershof- initiative in generating private entrepreneurship. He also underlined the usefulness of financial engineering instruments in that context which accounted for more than 11 % already and which he intended to double. He regretted the complexity of European legal provisions.

8) Implementation of structural funds in Berlin Afterwards the CONT delegation enquired what measures the ESF Management Authority (MA) in Berlin had taken to remedy the shortcomings which the European Commission had found in 2014 in the implementation of some ESF programmes.

14 Pierre TRIANTAPHYLLIDES, Head of the Management Authority Berlin, and Klaus-Peter SCHMIDT, ESF Fund Manager indicated two specific problems:  during the financing period 2007-2013 existed a high number (23) of intermediate bodies (IB), and  the high number of different instruments (50). However, by mid-2014 the Commission, the MA and the Audit Authority (AA) had agreed on an action plan which was put in place over seven month. After having carried out a system audit in mid-June 2015 assessing the management and control system's structure, efficiency and effectiveness, DG EMPL auditors saw a clear definition, allocation and separation of functions between and within the MA/IBs) and also an adequate information and strategy to provide guidance to beneficiaries. Furthermore the management verifications had improved. The audit report of 17 June 2015 stated that the management and control system were efficient and conformed to the applicable regulations. As a consequence the pre-suspension of financing was lifted by the end of June.

9) Implementation of structural funds in Mecklenburg-Vorpommern On 4 November the CONT delegation met with the MA and AA of Mecklenburg-Vorpommern in Schwerin.

(CONT delegation in the State Chancellery) n the Annual Activity Reports 2014 of DG REGIO and DG EMPL two programmes were under full reservation. During November 2013 the Commission carried out an audit mission in Mecklenburg- Vorpommern where it found deficiencies in the functioning of the management and control system of the ERDF programme implemented by the region. At the level of the managing authority (MA) the Commission auditors identified deficiencies in the public procurement verifications and discovered double financing of expenditure. The weaknesses in public procurement procedures at MA level included the lack of verification of the legality of codicils to original contracts and of compliance with the deadlines on publicity of tendered contracts.

15 Furthermore, the audit authority did not detect public procurement errors either; it neither quantified these errors in the audit reports, nor did it draw adequate conclusions with regard to the functioning of the management and control system in the annual control report sent to the Commission. In addition, most of the audit authority staff worked on temporary contracts. DG REGIO verified the remedial measures put in place during an audit mission in September 2015. The situation had improved substantially but the effectiveness of some measures still needed testing. Payments resumed in 2016.

(Heike POLZIN, Minister of Finance in Mecklenburg-Vorpommern and representatives from the Management and Audit Authorities) Eva-Maria FLICK, Head of the ERDF MA in the Ministry of Economics and Markus KRACK, Head of the ERDF AA admitted that errors had been committed. They saw the complexity and a lack of clarity of the applicable legal provisions as the main source of errors. They insisted that everything would be done to prevent the same kind of errors from occurring again. In particular they pointed to further vocational training, better check lists and a further improved audit methodology. In the area of ESF DG EMPL had identified deficiencies at the second-level audit controls. A new Auditing Authority and Certifying Authority had therefore taken up work. A fact-finding mission yielded sufficient assurances that the new system was working. The Commission auditors were of the opinion that the assessment of the OP could be upgraded to "qualified with moderate impact". The current error-rate remains high, but is caused by a single project and the calculation of staff costs therein. Following the analysis of the Annual Control Report 2014 DG EMPL concluded no further follow-up would be required. As a result, the interruption of payments was lifted. Eberhard MESSMANN, Head of the ESF MA in the Ministry of Economics and Dirk HENGSTENBERG, Head of the ESF AA explained, with regard to the single project still under scrutiny, that an error had been committed in the invoicing of teaching hours. In future, a flat-rate would be used. However, they stressed that the MA would seek prior authorisation for applying the flat-rate. Given that complex and unclear rules were frequently mentioned as prime source for errors when implementing structural funds, the CONT delegation called on Minister Heike POLZIN to send a letter to CONT with concrete proposals how the legislation could be improved. The Minister agreed to do so.

16 In her letter of 23 November 2015 the Minister pointed to the following weaknesses:  complex European and national public procurement provisions,  use of imprecise legal terminology which leaves room for interpretation,  public procurement provisions should pay more attention to the practical requirement of acquisitions,  problems arising from court rulings modifying legal provisions,  the new regulation has created more, not less administrative burden,  financial risks stemming from the application of the simplified cost option, After the debate the Members of the European Parliament were invited for lunch by Christian FRENZEL, Secretary of State and the Head of the Sate Chancellery. The meeting with the MA and AA of Mecklenburg-Vorpommern was wound up by a press conference

10) Centre for Education and Vocational Training (SAZ), Schwerin After the political discussions the CONT delegation visited the Centre for Education and Vocational Training. For more than 20 years the Centre provides professional orientation and vocational training for approximately 250 young people every year. It employs 47 experts, mainly the areas of plastic materials, metal works, industrial automation and commercial training. The Centre is a certified partner organisation for more than 200 companies, mainly for industry in Northern Germany. During the 2007-2013 financing period the Centre received funding from the ERDF and ESF amounting to EUR 2,14 million (ERDF: EUR 468783, ESF: EUR 1,67 million)

(Guided tour of the Centre for Education and Vocational Training)

11) Selected Aspects of the Implementation of Structural Funds in Hamburg and the Hamburg port The following day the CONT delegation met with representatives of the Hamburg Senate (government). Payments for the "Operational Programme for Hamburg of 2007-2013 ESF" had been interrupted as DG EMPL did not consider the work of the AA as reliable.

17 The "Operational Programme for Hamburg of 2007-2013 ESF" aimed at creating and securing employment as well as preventing social exclusion. Hamburg used ESF funds to improve the career prospects of its young people, to provide assistance in qualifying for employment opportunities, and to support the social inclusion of disadvantaged people in working life. In addition, training programmes aimed at equipping job-seekers and workers with the skills to change careers; and transnational actions will promote mobility and innovation. (Representatives from the Senate of Hamburg) The ESF programme had a total volume of EUR 181.167.983 million with an ESF financial allocation amounting to EUR 91.152.890 million.

Operational Programme of ESF 2007- OP Value Share of co- 2013 in Hamburg total financing budget rate ESF-OP total 91,152,890 € 50% Priority axis A: Improving adaptability 22,788,222 24.99% 50% and competitiveness Priority axis B: Improving human 31,903,512 35% 50% resources Priority axis C: Improving access to 29,401,647 32.25% 50% employment Priority axis D: Technical assistance 3,646,116 4% 50% Priority axis E: Transnational measures 3,413,393 3.74% 60%

The reservation in the Annual Activity Report of DG EMPL was exclusively based on the work of the audit authority with regard to their determination of the sampling population. The representatives of the MA and AA were of the opinion that the overlap of two financing periods represented an additional administrative burden for the bodies concerned, in particular as in November 2015 the Commission still had not put all information at the disposal of its partners. They also pointed out that Hamburg did not use any intermediate bodies. Furthermore, they observed that the academic community was less interested in using ERDF financial assistance. The representative of the AA confirmed that the question concerning the sampling population persisted but that both sides are working on resolving the problem. Later in the morning Peter KELLER and Harald HÄRING from the Customs Criminal Investigation Office presented the work of their office. In 2014 the office opened 620 investigations, they estimated the financial damage to own resources caused by fraudulent behaviour to be approximately EUR 74 million.

18 For the work of the office the European security risk analysis is very important. It would require a smooth administrative cooperation between different national and European bodies working in that area. Afterwards they gave examples of how such cooperation worked in practice.

(Peter KELLER, & Harald HÄRING from the Customs Criminal Investigation Office)

12) Visit of the Port of Hamburg At the end of the fact-finding mission the CONT delegation visited the port of Hamburg, one of Europe's most important harbours.

In Hamburg as a universal port growth in bulk cargo throughput was maintained in 2015. In this important handling segment, total volume of 45.5 million tons represented growth of 5.8% compared to the previous year. In 2015 container handling represented 8.8 million TEU (20- ft standard containers) but did not reach previous year’s total, falling by 9.3%. The downturn in seaborne container throughput was primarily attributable to lower trade volumes with China, Russia and Poland. In total, 800,000 fewer containers (TEU) handled for these especially important trading partners in 2015.

* * *

19 Annex 1 Brussels, 6 November 2015

Fact-finding mission of the Budgetary Control Committee (CONT) to Germany Berlin, Mecklenburg-Western Pomerania, Hamburg

3 - 5 November 2015

DRAFT PROGRAMME "Calculation, collection and management of own resources in Germany and also the implementation of structural funds in Berlin and Mecklenburg-Western Pomerania”

Official Members of the delegation17: 1. Ms Ingeborg GRÄßLE (EPP, DE), Chair

2. Ms Inés AYALA SENDER (S&D, ES) 3. Mr Andrey NOVAKOV (EPP, BG) 4. Mr Marco VALLI (EFDD, IT) 5. Mr Derek VAUGHAN (S&D, UK), (arrival Tuesday, 3. November 2015, 11.15 h)

Accompanying members (out of quota) 1. Ms (S&D, DE), Schwerin only 2. Mr Joachim ZELLER (EPP, DE), Berlin only

17 According to the standing Bureau decisions CONT is entitled to send 25 members on a delegation visit per year. According to the d'Hondt calculation method the political groups are entitled to the following quota (this calculation was made prior to the creation of the "Europe of Nations and Freedom" Group): EPP 9, S&D 8, ECR 3, ALDE 2, GUE/NGL 1, GREENS/EFA 1, EFDD 1. In September another CONT delegation will go to Greece. According to the latest programme version (22 September 2015) the political groups intend to send the following number of members on this mission: EPP 3 (+ Chair), S&D 3, ECR 1, GREENS/EFA 1. The number of members travelling to Greece will have to be deducted from the available quota for the mission to Germany.

20 CONT Secretariat 1. Mr Christian EHLERS (EP mobile: +32-2-498-981393) 2. Ms Rita SIPOS (EP mobile: +32-498-983593)

Advisors of Political Groups 1. Ms Codruta-Liliana FILIP (S&D) 2. Ms Barbara GATTO (EFDD) 3. Mr Balazs SZECHY (EPP)

Commission 1. Mr Franz-Peter VEITS, DG EMPL 2. Ms Marcela BUZOI, DG REGIO, Control and audit I (until Wednesday lunch time)

European Court of Auditors 1. Mr Milan Martin CVIKL, Member of the Court, Dean of Chamber IV: Revenue, research and internal policies, and European Union's institutions and bodies (Berlin only) 2. Mr Alberto GASPERONI, auditor (Berlin only)

In attendance 1. Ms , Federal Ministry of Finance 2. Ms Sonja HAERTEL, Desk Officer for Economic Affairs and Regional Policy, Office of the Land Berlin in Brussels (Berlin Adlershof only)

Interpreters18 1. Ms Astrid KNOKE-JEREMIAH - Team leader 2. Ms Cordula PLUTZ 3. Ms Fenella DODD 4. Mr Peter Anders SHEPPERSON 5. Mr Hans-Werner MÜHLE 6. Ms Ines RIECKEN-CHAVARRIA 7. Mr Bernard WALTHER, (technician, valise) Languages covered19 DE, EN, ES

18 1. Language arrangements shall be determined in accordance with Rule 158(3) and (4) of the Rules of Procedure, subject to confirmation by members of their attendance, by the Thursday of the second week preceding the meeting in question.

2. For missions undertaken during weeks set aside for external parliamentary activities, active interpretation shall be provided in up to five languages from the committee or delegation language profile. 19 See footnote 2.

21 European Parliament Information Office Frank PIPLAT, European Parliament Information Office, Berlin Unter den Linden 78, D-10117 Berlin, Tel.: +49 (030) 2280 - 1000

European Commission Representation Richard KÜHNEL, Representation of the European Commission, Berlin Unter den Linden 78, D-10117 Berlin, Tel.: +49 (030) 2280 - 2000

Federal Ministry of Finance Dirk H. KRANEN, HoU, Budget and Finances of the European Union, Federal Ministry of Finance Petra HINZ, Federal Ministry of Finance

Accommodation and transport during the mission Park Inn by Radisson, Tunnel Alexanderplatz. 7, 10178 Berlin, tel.: +49 30 23890 Lindner Hotel Am Michel, Neanderstraße 20, 20459 Hamburg, Tel.: +49 40 3070670

Upon arrival in Berlin a bus will be at the disposal of the delegation for the duration of the mission.

* * * * *

Speakers who intend to give a presentation and dispose of a written text are kindly requested to make their text available in advance to the CONT secretariat for the benefit of the interpreters. Thank you very much for your cooperation!

Tuesday, 3 November 2015

8.20 h Arrival of the delegation in Berlin Tegel airport, bus transfer 9.30 h Committee on Affairs of the European Union: The Follow-up to the European Parliament's Discharge Procedures (German Bundestag, Jakob-Kaiser Building, Dorothenstraße 100, D-10117 Berlin, meeting room 6.114) Mr Gunther KRICHBAUM, CDU, Chair Mr Heinz-Joachim BARCHMANN, SPD, Deputy Chair Ms Gabriele GRONEBERG, SPD Ms , SPD, Chair of the Audit Sub-Committee 10.30 h Departure for the Federal Ministry of Finance 10.45 h Calculation, collection and management of own resources (Federal Ministry of Finance, Wilhelmstraße 97, 10117 Berlin, Tel.: 03018/682-0)

22 Ms Eva-Maria MEYER, Head of Directorate Representative of the Federal Ministry of Finance,

Mr Dirk-Heiner KRANEN, Head of Division, Representative of the Federal Ministry of Finance, Fight against VAT fraud Michael VELLEN Representative of the Federal Ministry of Finance

12.00 h Lunch debate Member States "National Declarations" and the European Parliament's Discharge Procedure (Federal Ministry of Finance, Wilhelmstraße 97, 10117 Berlin, Tel.: 03018/682-0)

Mr Jens SPAHN, Parliamentary Secretary of State

13.30 h Getting the Gross Nation Income (GNI) Data right: European Court of Auditors Special Report No 11/2013 (Federal Ministry of Finance) Mr Dirk-Heiner KRANEN, Head of Division, Representative of the Federal Ministry of Finance Mr Albert BRAAKMANN, Director Representative of the German National Statistical Office Mr Milan Martin CVIKL, Member of the Court, Dean of Chamber IV: Revenue, research and internal policies, and European Union's institutions and bodies

15.00 h Departure for Berlin-Adlershof, Science- and Technology Park http://www.adlershof.de/en/homepage/ (Rudower Chaussee 24, 12489 Berlin)

15.45 h Berlin-Adlershof, Science- and Technology Park http://www.adlershof.de/en/homepage/

Centre for Photovoltaics and renewable energy (ZPV) (Johann-Hittdorf-Str. 8, 12489 Berlin)

Mr Matthias KOLLATZ-AHNEN, Minister of Finance, Berlin

Mr Peter STRUNK, Head of Public Relations, WISTA- MANAGENENT GMBH

Ms Kezban SARITAS, Director of the Centre for Photovoltaics and renewable energy

short visit, explanations in English

23 16.15 h (Hans-Grade-Saal, Forum Adlershof, Rudower Chaussee 24, D- 12489 Berlin)

Welcome Mr Matthias KOLLATZ-AHNEN, Minister of Finance, Berlin

Ms Hella DUNGER-LÖPER, Permanent Secretary for European Affairs, Berlin Senate Chancellery

Mr Roland SILLMANN, CEO, WISTA-MANAGENENT GMBH, Science and Technology Park Berlin Adlershof

Mr Gerald BIELFELDT, WISTA-MANAGENENT GMBH

17.00 h The Operational Programme "Berlin" 2007 - 2013, 2014-2020

The importance of Cohesion Policy for Berlin – achievements and future targets

Mr Matthias KOLLATZ-AHNEN, Minister of Finance, Berlin

Mr Pierre TRIANTAPHYLLIDES, Head of the Management Authority Berlin

Mr Klaus-Peter SCHMIDT, ESF Fund Manager ERDF: OP2007DE162PO004, ESF: 2007DE05PO003 (under reservation),

18.30 h End of the visit and return to the hotel

Evening free evening

Wednesday,4 November 2015 8.00 h Bus transfer from Berlin to Schwerin

24 11.00 h ERDF and ESF Operational Programmes in Mecklenburg-Western Pomerania" 2007-2013, (State Chancellery, Schloßstr. 2 - 4, 19053 Schwerin)

Ms Heike POLZIN, Minister of Finance

Ms Andrea HERRMANNSEN, Head of the department for Europe and international affairs in the Chancellery

Mr Michael MATTNER, Head of the management authority for EDRF, ESF and EAFRD in the Chancellery

Ms Eva-Maria FLICK, Head of the ERDF management authority in the Ministry of Economics, Construction and Tourism

Mr Eberhard MESSMANN, Head of the ESF management authority in the Ministry of Economics, Construction and Tourism

Mr Markus KRACK, Head of the ERDF Audit Authority

Mr Dirk HENGSTENBERG, Head of the ESF Audit Authority OP ERDF 2007DE161PO003, full reservation in 2013, OP ESF 2007DE051PO002, full reservation in 2014

12.30 h Lunch upon invitation of Mr Christian FRENZEL, Secretary of State, Head of the State Chancellery (MEPs only)

14.00 h Press conference (tbc) (LPK MV e.V., Lennéstr. 1 (Schloß), 19053 Schwerin)

15.00 h Centre for Education Vocational Training (SAZ, Ziegeleiweg 7, 19057 Schwerin)

Mr Gerd POLOSKI, managing director

16.30 h Bus transfer from Schwerin to Hamburg

19.00 h Reception offered by the Hamburg Government (Senate) (Hamburg Museum, Holstenwall 24, 20355 Hamburg)

25 Thursday, 5 November 2015

8.00 h Departure from the hotel

8.30 h Selected aspects of the implementation of structural funds in Hamburg

The role of European Public Sector Accounting Standards (EPSAS) (LIG, Landesbetrieb Immobilienmanagement und Grundvermögen der Freien und Hansestadt Hamburg, Millerntorplatz 1, 20359 Hamburg)

Torsten DOMROES, Head of Unit, Ministry of Finance, Hamburg

Stefan HERMS, Director General Senate Chancellery

Julia FRIEDLAND, Ministry of Economic Affairs, Transport and Innovation

Martin WEBER, Ministry of Labour, Social Affairs, Family and Integration

Christoph FRANK, Deputy Director Hanse Office, Brussels

Anja BOUDON, Policy Officer – Economic affairs, Hanse-Office, Brussels

10.00h Collection an management of traditional own resources in the Hamburg port

Rudolf ERB, Director, Central Department,of the Federal Fiscal Authority, office North Germany

Michael SCHRADER, Head of the main customs office, Hamburg harbour

Peter KELLER, Head of Division Customs criminal investigation office, Cologne,

Harald HÄRING, Customs criminal investigation office, Cologne

Petra HINZ, Federal Ministry of Finance

Karola BRETSCHNEIDER, Federal Ministry of Finance

12.00 h Press conference

26 12.30 h Rickmer-Rickmers (Restaurant) (St. Pauli Landungsbrücken Ponton 1a / Fiete-Schmidt-Anleger · 20359 Hamburg)

14.00 h Visit of the port

- 16.00 h

17.00 h Arrival at Hamburg airport and end of the delegation visit

27