Brussels, 16 November 2004
The European Court of Auditors' Annual Report for the financial year 2003 once again finds that the consolidated annual accounts and their accompanying notes faithfully reflect the revenue and expenditure of the Communities as well as their financial situation at the end of 2003. One remaining reserve is being remedied in the new accountancy system modernisation for 2005. The Court notes progress in the reform of the Commission’s control systems and also gives a clean bill of health on commitments, on the management of the Own Resources, on administrative expenditure and on the European Development Fund. The Court found shortcomings in some payments made in other fields and calls for greater efforts to apply the supervisory systems and controls in an effective manner so as to improve the handling of the risks regarding legality and regularity. The Commission agrees that the operation of the control systems can be further improved, but considers that these systems offer on the whole a reasonable balance between the cost of operating the checks, and the benefit in reducing the risk of waste and error that these procedures bring. The Commission takes up the Court’s recommendation for further strengthening the recovery from Member States which fail to properly control funds paid out under the CAP and structural funds. These funds, managed by Member States, account for 80% of the EC budget. Finally, the Commission welcomes the Court’s gradual shift to a new methodology for drawing up its statement of assurance going beyond a check on a limited sample of payments to encompass assessments of the quality of the control systems in place, as described, for example, in the annual activity reports of Directors-General.
The ECA states its opinion that the Communities' accounts for the 2003 year complied with the regulatory requirements and with the accounting principles and rules in force, and that they faithfully reflect the revenue and expenditure of the Communities for the year and their financial position at the year end. While in the past the Court included some reservations only one was kept for the year 2003 concerning in particular the full recording of advance payments as assets of the EU. This question will be solved when the Commission brings in the accrual accounting system for the budgetary year 2005.
Payments to beneficiaries
The Commission welcomes the fact that the Court was again able to give a declaration of assurance for commitments and administrative expenditure, as well as in the European Development Fund, and for the supervision of revenue.
“As Commissioner on Budget I’m in particular very pleased that the Court assessed the supervisory systems and controls of the own resources for which the Directorate general for Budget is responsible as “working well”.” Commissioner Michaele Schreyer said. “I’m satisfied that in fields of my portfolio – the accounting and the own resources – the Court again could give positive statements of assurance.”
Concerning errors in the “underlying transactions” (i.e actual payments) in other fields, the Commission shares the views of the Court expressed in its opinion n° 2/2004, that "zero risk of irregularity is neither realistic nor economic", and ..."The type and intensity of checking within internal control systems would be set with reference to the cost and benefits. Any control system is a trade-off between the cost of operating the defined intensity of checks on the one hand, and the benefit these procedures bring on the other" Nevertheless the Commission agrees with the Court that the new approach in the internal control and supervisory system the Commission has set up with its comprehensive administrative reform must be strictly implemented and completed where necessary.
As regards operations which originate outside its services, the Commission points out that its budget is exposed to the risk of error by the nature of the aid schemes financed by the Community throughout the EU and in other parts of the world. The Commission endeavours to limit this risk when designing the aid schemes, and through its supervisory systems and controls over the implementation of each scheme.
The impact of the Commission’s Administrative Reform and the way forward
The Commission is pleased that the Court's comments on its administrative reform comfort its view that this reform was largely and successfully implemented by the end of 2003. As part of the most ambitious reforms undertaken by any public administration, comprising 97 actions to be implemented over three years, the Commission introduced:
The Commission believes that, alongside constant improvement of the design of control systems, the Commission must work, in partnership with the Member States who manage 80% of the EU expenditure, to provide evidence that the supervisory and control systems in place are effective in keeping the risks within reasonable limits.