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Brussels, 18 November 2003

Court of Auditors annual report 2002 : Commission welcomes acknowledgment of reform starting to take effect

The European Court of auditors presented on 17 November its annual report for 2002 to the budget control committee of the European Parliament. In this report the Court strongly supports the Commission's reform efforts, both in terms of financial management and accounting aspects. The Court commends that the necessary legal provisions have now been taken, and acknowledges that the implementation is well on its way but is an ongoing process whereby longstanding practices have to be changed. This serves as major encouragement for the Commission and will duly be taken into account in ongoing efforts to improve. Budget Commissioner Michaele Schreyer welcomed this report : “I am very pleased by the recognition of our reform efforts. The Court is and has been one of our most important partners in the improvement of the financial management, a major aspect of the Prodi Commission's reform efforts.

Statement of assurance

The statement of assurance looks at the legality and regularity of the underlying transactions and at the reliability of the Community accounts.

For 2002 the Court of Auditors once again delivered a positive statement of assurance for transactions in respect of revenue, commitments, and administrative expenditure. For the first time in the year before enlargement the Court has not found any material errors in pre-accession aid. This means that in all these areas the transactions are, taken as a whole, legal and regular. The same is declared by the Court as regards the accounts established by the Commission. The Court furthermore gives positive assurance concerning the European Development Funds, though it expresses reserves concerning the management by local beneficiaries.

However the Court cannot provide this assurance in respect of the other payments, such as agricultural expenditure, structural funds, internal policies and external actions. Most of these funds, around 80 % of the budget, are managed in a decentralised way by the Member States. This does not imply that, in the programmes in which the Court found errors taxpayers' money was mismanaged, but the Court observes that it cannot have positive assurance as to the final use of community funds by all the end beneficiaries.

Cooperation with Member States

Consequently, the Court addresses the complication created by management of the EU funds via the member states and encourages the Commission to further improve cooperation. For instance in the area of structural funds the Commission has concentrated resources on auditing the control systems put in place in the member states and will continue to strive for harmonising procedures and clarify the roles. The Commission will issue by end-March 2004 a report summarising the Member States' replies to the ECA annual report for 2002.

The accounts

The Court considers that the accounts give a reliable reflection of the Communities' revenue and expenditure and of the financial situation at the end of the year2002, comply with the Financial Regulation and with the accounting principles as explained in the notes to the accounts.

During 2002 the Commission made major advances in its modernisation of the accounting system. A project for the transition to full accrual accounting by 2005 was decided in December 2002, and the project is fully on track. This project will address the Courts comments on the balance sheet, which today is still established using information from outside the general double entry book-keeping accounting system. The Court assists the Commission as an observer in its Committee for setting of accrual accounting based on internationally agreed standards. To support this project, the Commission is developing in parallel the necessary functionalities in its computer systems. The Commission's target for introducing accrual accounting is 2005, as set in the financial regulation. The Court considers this overly ambitious, but the Commission is firmly committed to respect the deadline.

The Commission's reform

The Court states that the progress in the 'regulatory' aspects of the Commission's reform is satisfactory and lists achievements such as the adoption of the financial regulation and its implementing procedures. Furthermore it recognises the utility of the activity-based management and has used the declarations in the directors' general annual activity reports as a source of assurance on sound financial management.

The Commission has already and will take further measures to deepen these reform steps, for instance in the area of its internal control standards, of activity based management for the allocation of resources and for work planning, and of the presentation of the annual activity reports. But the Court also acknowledges that the implementation of the reform is an ongoing procedure that does not take full effect from one day to the other, and the Commission is grateful for this realistic assessment and takes it as an encouragement.

In the area of financial management, the Commission has made good progress in reducing outstanding commitments and funds to be recovered. For the first time the Court introduced a chapter on implementation of the budget. The surplus remaining in the budget after closure of the accounts has been reduced from 15 to 7.4 billion in 2002.

The Court's methodology

The Commission welcomes the 2002 annual report as giving a very balanced, realistic and nuanced picture of the strength and weaknesses of the different aspects of budget management: expenditure categories, revenues and implementation performance. For establishing the report the Court has examined the quality of control systems, has carried out special enquiries , has sampled transactions as well as using the annual declarations made by the Directors general in their annual activity reports. The methodical control of the systems put in place will certainly assist the Commission to improve its management overall. The analysis by the Court has been strengthened as concerns qualitative aspects and the Commission is particularly interested in any recommendation from the Court on progress indicators and definitions of benchmarks, as these fit in with the approach used in Commission's Reform.


This annual report serves as a basis for the discharge procedure, whereby the European Parliament, acting on a recommendation by the Council, clears the Commission and other institutions for the management of the budget.

The Commission is committed to appropriately follow-up on the Court's recommendations. An action plan covering 96 recommendations made by the Court will be prepared to this effect for the end of 2003.

See also the Memo/03/231: 2003 ECA annual report 2002 : frequently asked questions

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