# C_2007292EN.01000101.xml

| 5.12.2007 | EN | Official Journal of the European Union | C 292/1 |
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5.12.2007

EN

Official Journal of the European Union

C 292/1

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REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS' ACCOUNTS FOR THE FINANCIAL YEAR 2006

REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS' ACCOUNTS FOR THE FINANCIAL YEAR 2006

(2007/C 292/01)

NOTE TO READERS

Without prejudice to the provisions of Article 248 of the Treaty establishing the European Community, which gives the Court of Auditors responsibility for auditing all of the Community's revenue and expenditure, and the provisions of Article 276 of the said Treaty on the granting of the discharge, the Court of Auditors has had its revenue and expenditure accounts audited by an external auditor every year since the close of the financial year 1987.

The reports which the external auditor of the Court of Auditors drew up in respect of the Court's accounts for the financial years 1987 to 1991 were sent only to the Chairman of the European Parliament's Budgetary Control Committee.

Pursuant to a decision taken by the Members of the Court of Auditors at the Court meeting of 8 July 1993, the external auditor's reports have since been published in the Official Journal of the European Union, starting with the report on the financial year 1992.

Official Journal of the European Union

For the Court of Auditors

Michel HERVÉ

Secretary-General of the European Court of Auditors

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CONTENTS

Certificate concerning the regularity and fairness of the financial statements at 31 December 2006

The administrative and accounting procedures, the soundness of the financial management and the internal control system

Financial statements at 31 December 2006

Certificate concerning the regularity and fairness of the financial statements at 31 December 2006

To the Members

of the European Court of Auditors

In accordance with the instructions given to us by the European Court of Auditors, we have audited the accompanying financial statements of the European Court of Auditors, which comprise the balance sheet at 31 December 2006, the economic outturn account for the year then ended, the cash-flow statement and the statement of changes in equity, plus a summary of significant accounting policies and other explanatory notes.

Responsibility of the Members of the European Court of Auditors for the preparation and presentation of the financial statements

The Members of the European Court of Auditors are responsible for the preparation and fair presentation of the financial statements in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, the implementing rules thereof, generally accepted accounting principles and the European Court of Auditors' Internal Rules. This responsibility includes: planning, implementing and maintaining a system of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements in the light of our audit. We carried out our audit in accordance with International Standards on Auditing as adopted by the Institut des Réviseurs d'Entreprises. Those standards require that we comply with ethical standards and plan and perform the audit so as to obtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures designed to obtain audit evidence concerning the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgement, as also does the assessment of the risks of material misstatement in the financial statements, whether due to fraud or error. In making these risk assessments, the auditor takes account of the internal control system operating within the entity in respect of the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, and not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Members of the European Court of Auditors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the European Court of Auditors as at 31 December 2006 and of its operating results for the year then ended, in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, the implementing rules thereof, generally accepted accounting principles and the European Court of Auditors' Internal Rules.

Luxembourg, 28 September 2007.

KPMG Audit S.à r.l.

Auditors

P. WIES

The administrative and accounting procedures, the soundness of the financial management and the internal control system

To the Members

of the European Court of Auditors

In accordance with the instructions given to us by the European Court of Auditors, we have examined the administrative and accounting procedures, the soundness of the financial management and the internal control system for the financial year ended on 31 December 2006. The purpose of our examination was to ensure that the various authorities at the European Court of Auditors can be reasonably sure that:

| — | the financial management of the Court of Auditors complies with the applicable regulations; |
| --- | --- |

—

the financial management of the Court of Auditors complies with the applicable regulations;

| — | the system of internal controls enables the preparation of reliable financial statements and compliance with the regulatory framework. |
| --- | --- |

—

the system of internal controls enables the preparation of reliable financial statements and compliance with the regulatory framework.

The applicable regulations are:

| — | Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities, |
| --- | --- |

—

Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities,

| — | Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities, |
| --- | --- |

—

Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities,

| — | the Internal Rules of the European Court of Auditors for the implementation of the general budget of the European Union, laid down by Court Decision No 80-2003 and adopted by the Court at a meetings held on 17 and 18 December 2003. |
| --- | --- |

—

the Internal Rules of the European Court of Auditors for the implementation of the general budget of the European Union, laid down by Court Decision No 80-2003 and adopted by the Court at a meetings held on 17 and 18 December 2003.

We have also examined the control environment, risk evaluation, the control systems and activities and the management control systems. Our work consisted of evaluating the administrative and accounting procedures and the management procedures, carrying out sample tests on supporting documents and holding interviews with staff. The nature and extent of the tests were determined by our assessment of the control environment. We consider that our work forms a reasonable basis for our conclusions regarding the European Court of Auditors' procedures, the soundness of its financial management and its internal control system.

On the basis of the procedures described above, our work did not disclose any facts which might cast doubt on the adequacy of the administrative and accounting procedures or internal control or the compliance of financial management with the applicable regulations.

Luxembourg, 28 September 2007.

KPMG Audit S.à r.l.

Auditors

P. WIES

Financial statements at 31 December 2006

Balance sheet at 31 December 2006 and 31 December 2005

| (1000 euro) |
| --- |
| | Notes | 2006 | 2005 |
| Non-current assets | | 36 212 | 38 532 |
| Intangible fixed assets | 2 | 592 | 537 |
| Tangible fixed assets | 2 | 35 620 | 37 995 |
| Current assets | | 3 800 | 5 623 |
| Short-term receivables | 3 | 1 993 | 2 777 |
| Cash and cash equivalents | | 1 807 | 2 846 |
| Total assets | | 40 012 | 44 155 |
| Non-current liabilities | | 44 349 | 47 869 |
| Employee benefits | 4 | 44 147 | 47 694 |
| Other long-term liabilities | | 202 | 175 |
| Current liabilities | | 7 081 | 7 736 |
| Provisions for risks and charges | | 2 008 | 2 031 |
| Current payables | 5 | 5 073 | 5 705 |
| Total liabilities | | 51 430 | 55 605 |
| Net assets | 6 | (11 418) | (11 450) |
| Brought forward from previous years | | (11 450) | 5 370 |
| Economic outturn for the financial year | | 32 | (16 820) |
| The attached notes form an integral part of these financial statements. |

(1000 euro)

Notes

2006

2005

Non-current assets

36 212

38 532

Intangible fixed assets

2

592

537

Tangible fixed assets

2

35 620

37 995

Current assets

3 800

5 623

Short-term receivables

3

1 993

2 777

Cash and cash equivalents

1 807

2 846

Total assets

40 012

44 155

Non-current liabilities

44 349

47 869

Employee benefits

4

44 147

47 694

Other long-term liabilities

202

175

Current liabilities

7 081

7 736

Provisions for risks and charges

2 008

2 031

Current payables

5

5 073

5 705

Total liabilities

51 430

55 605

Net assets

6

(11 418)

(11 450)

Brought forward from previous years

(11 450)

5 370

Economic outturn for the financial year

32

(16 820)

The attached notes form an integral part of these financial statements.

Economic outturn account for the year ended 31 December 2006 and 31 December 2005

| (1000 euro) |
| --- |
| | Notes | 2006 | 2005 |
| Operating revenues |
| Funds transferred from the Commission to other institutions | | 82 297 | 70 787 |
| Revenue from administrative operations | 7 | 16 263 | 16 163 |
| | | 98 560 | 86 950 |
| Operating expenses |
| Administrative expenses |
| Staff expenses | | (78 718) | (74 686) |
| Fixed asset related expenses | | (3 637) | (4 396) |
| Pensions | 4 | 1 274 | (6 033) |
| Other administrative expenses | 8 | (17 512) | (18 761) |
| | | (98 593) | (103 876) |
| Operating outturn | | (33) | (16 926) |
| Non-operating activities |
| Revenue from investment operations | | — | 53 |
| Revenue from financial operations | | 80 | 68 |
| Costs of financial operations | | (15) | (15) |
| | | 65 | 106 |
| Economic outturn for the financial year | | 32 | (16 820) |
| The attached notes form an integral part of these financial statements. |

(1000 euro)

Notes

2006

2005

Operating revenues

Funds transferred from the Commission to other institutions

82 297

70 787

Revenue from administrative operations

7

16 263

16 163

98 560

86 950

Operating expenses

Administrative expenses

Staff expenses

(78 718)

(74 686)

Fixed asset related expenses

(3 637)

(4 396)

Pensions

4

1 274

(6 033)

Other administrative expenses

8

(17 512)

(18 761)

(98 593)

(103 876)

Operating outturn

(33)

(16 926)

Non-operating activities

Revenue from investment operations

—

53

Revenue from financial operations

80

68

Costs of financial operations

(15)

(15)

65

106

Economic outturn for the financial year

32

(16 820)

The attached notes form an integral part of these financial statements.

Cash flow statement for the financial year 2006

| (1000 euro) |
| --- |
| | 2006 | 2005 |
| Cash flow from ordinary activities |
| Economic outturn of activities for the year | 32 | (16 820) |
| Adjustments concerning activities: |
| | — | depreciation charge (intangible fixed assets) + |

(1000 euro)

2006

2005

Cash flow from ordinary activities

Economic outturn of activities for the year

32

(16 820)

Adjustments concerning activities:

—

depreciation charge (intangible fixed assets) +

268

311

| — | depreciation charge (tangible fixed assets) + |
| --- | --- |

—

depreciation charge (tangible fixed assets) +

2 440

3 522

| — | increase (decrease) in provisions for risks and charges |
| --- | --- |

—

increase (decrease) in provisions for risks and charges

(23)

397

| — | increase (decrease) in employee benefits |
| --- | --- |

—

increase (decrease) in employee benefits

(3 547)

4 004

| — | increase (decrease) in short-term pre-financing |
| --- | --- |

—

increase (decrease) in short-term pre-financing

—

3 514

| — | increase (decrease) in short-term receivables |
| --- | --- |

—

increase (decrease) in short-term receivables

769

(889)

| — | increase (decrease) in receivables relating to Community bodies |
| --- | --- |

—

increase (decrease) in receivables relating to Community bodies

16

21

| — | increase (decrease) in long-term payables |
| --- | --- |

—

increase (decrease) in long-term payables

27

(19)

| — | increase (decrease) in suppliers and other creditors |
| --- | --- |

—

increase (decrease) in suppliers and other creditors

378

348

| — | increase (decrease) in amounts owed to Community bodies |
| --- | --- |

—

increase (decrease) in amounts owed to Community bodies

(1 011)

393

| — | gains (losses) on sales of moveable fixed assets |
| --- | --- |

—

gains (losses) on sales of moveable fixed assets

—

571

| — | exceptional items |
| --- | --- |

—

exceptional items

—

61

Cash flow from ordinary activities

(651)

(4 586)

Cash flow from investment activities

Acquisitions of tangible and intangible assets

(1 314)

(1 680)

Disposals of tangible and intangible assets

926

2 004

Cash flow from investment activities

(388)

324

Net increase (decrease) in flows of cash and cash equivalents

(1 039)

(4 262)

Cash and cash equivalents at the beginning of the financial year

2 846

7 108

Cash and cash equivalents at the end of the financial year

1 807

2 846

Statement of changes in equity for the year 2006

| (1000 euro) |
| --- |
| | Accumulated results | Economic outturn for the financial year | Total net assets |
| Balance at 31 December 2005 | 5 370 | (16 820) | (11 450) |
| Economic outturn for the previous financial year | (16 820) | 16 820 | — |
| Economic outturn for the financial year | — | 32 | 32 |
| Balance at 31 December 2006 | (11 450) | 32 | (11 418) |

(1000 euro)

Accumulated results

Economic outturn for the financial year

Total net assets

Balance at 31 December 2005

5 370

(16 820)

(11 450)

Economic outturn for the previous financial year

(16 820)

16 820

—

Economic outturn for the financial year

—

32

32

Balance at 31 December 2006

(11 450)

32

(11 418)

NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2006

1.   Accounting principles

1.1.   Regulations and presentation of the accounts

The accounts of the European Court of Auditors (the Court) are kept and the financial statements are drawn up in accordance with the provisions of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities and Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the said financial Regulation.

1.2.   Intangible and tangible fixed assets

The intangible and tangible fixed assets are stated at historical cost less depreciation and impairment.

Depreciation is calculated by the straight-line method and charged over their estimated useful lives, as follows:

| Computer software | 4 years |
| --- | --- |
| Buildings | 25 years |
| Plant, machinery and tools | 4, 8 years |
| Furniture and vehicle fleet | 4, 8, 10 years |
| Computer hardware | 4 years |
| Fittings specific to leased buildings | The duration of the lease |

Computer software

4 years

Buildings

25 years

Plant, machinery and tools

4, 8 years

Furniture and vehicle fleet

4, 8, 10 years

Computer hardware

4 years

Fittings specific to leased buildings

The duration of the lease

1.3.   Pre-financing

Pre-financing is a payment intended to provide the beneficiary with funds in advance, e.g. a petty cash account. It may be split into a number of payments over a period defined in the particular pre-financing agreement. The advance is repaid or used for the purpose for which it was provided during the period defined in the agreement.

At the year end, outstanding pre-financed amounts are valued at the original amounts paid out less the sum of any amounts returned, cleared eligible expenditure, estimated eligible expenditure not yet cleared at the year-end, and any reductions in value.

1.4.   Receivables

Receivables are carried at their original value less amortisation for impairment where applicable.

1.5.   Payables

Payables are entered in the balance sheet at their nominal value.

1.6.   Commitments for the Members' pension scheme

Under Article 19 of Council Regulation (EC, Euratom, ECSC) No 2290/77 of 18 October 1977 determining the emoluments of the Members of the Court of Auditors (OJ L 268, 20.10.1977, p. 1), the benefits provided for in this pension scheme are entered in the budget of the Communities and the Member States jointly guarantee payment of them.

The amounts guaranteed by the Member States are based, on the one hand, on accounting standard No 12 ‘Employee benefits’ adopted by a decision of the Commission's accounting officer pursuant to Article 133 of the Financial Regulation applicable to the general budget of the European Communities, and, on the other hand, on the basis of an actuarial analysis carried out by the experts of the specialised PMO unit at the Commission.

Since the 2006 financial year, the pension provision has been calculated net of taxes withheld at the time that pension payments are made on the grounds that these taxes constitute revenue for the Court of Auditor's budget (see comments in paragraph 4). In 2005, the pension provision included these taxes. If the Court had applied these principles in 2005, the amount of the provision at 31 December 2005 would have been EUR 41 779 878. The comparative figures have not been adjusted.

2.   Intangible and tangible fixed assets

| (in 1000 euro) |
| --- |
| | 2006 | 2005 |
| Depreciable value | Cumulative depreciation | Net book value | Net book value |
| Intangible fixed assets | 1 945 | (1 353) | 592 | 537 |
| Tangible fixed assets |
| — | land |

(in 1000 euro)

2006

2005

Depreciable value

Cumulative depreciation

Net book value

Net book value

Intangible fixed assets

1 945

(1 353)

592

537

Tangible fixed assets

—

land

777

—

777

777

| — | buildings |
| --- | --- |

—

buildings

52 075

(19 735)

32 340

34 198

| — | plant, machinery and tools |
| --- | --- |

—

plant, machinery and tools

1 199

(856)

343

358

| — | furniture and vehicle fleet |
| --- | --- |

—

furniture and vehicle fleet

1 845

(1 260)

585

630

| — | computer hardware |
| --- | --- |

—

computer hardware

3 867

(2 926)

941

1 398

| — | other tangible fixed assets |
| --- | --- |

—

other tangible fixed assets

1 044

(609)

435

609

| — | tangible assets in the course of construction |
| --- | --- |

—

tangible assets in the course of construction

199

—

199

25

Sub-total

61 006

(25 386)

35 620

37 995

Total

62 951

(26 739)

36 212

38 532

3.   Short-term receivables

Short-term receivables mostly correspond to entitlements established but not yet collected, of which EUR 841 528 (2005: EUR 1 392 326) are attributable to the acquisition of national pension rights by members of the Court's staff.

The balance mainly consists of advances paid for mission expenses already incurred by the Members and staff of the Court but not yet settled and accrued expenses calculated in advance.

4.   Employee benefits

Employee benefits represent the future pension rights of the Members of the Court.

The Employee benefits amount for 2006 is stated net of tax (see comments in paragraph 1.6).

5.   Current payables

‘Current payables’ comprise amounts due to suppliers, mission expenses still to be invoiced by the credit card organisation and amounts due to sundry beneficiaries.

In addition, this item includes amounts due to staff for acquired rights under the Staff Regulations and for mission expenses yet to be reimbursed.

6.   Net assets

The movements in net assets in 2006 were as follows:

| (1000 euro) |
| --- |
| Balance at 31 December 2005 | (11 450) |
| Economic outturn for the financial year | 32 |
| Net assets at 31 December 2006 | (11 418) |

(1000 euro)

Balance at 31 December 2005

(11 450)

Economic outturn for the financial year

32

Net assets at 31 December 2006

(11 418)

7.   Revenue from administrative operations

This item principally comprises taxes and social security contributions on the salaries of the Members and staff.

8.   Other administrative expenses

The main items under this heading are rents of buildings and related charges, mission expenses of the staff and Members, IT expenses, and expenses relating to professional training.

9.   Off-balance sheet commitments

Under the framework agreement concerning the construction of one or more extensions to the Court building, which was concluded by the Court of Auditors on 15 December 1999, the contracting parties agreed as follows:

The Luxembourg State undertakes to grant the Court a building lease on the land for the first extension at the price of EUR 1 (one) for a period not exceeding 49 years. Any further building leases on other land needed for the other extensions must not exceed the expiry date of the building lease granted for the first extension.

The Court decided to proceed with a second extension (K3 building) and, because the conditions of performance are different, the Luxembourg State and the Court have agreed to conclude a new framework agreement, due to be signed in 2007.

Moreover, the following bank guarantees were arranged by third party suppliers for proper performance of contracts:

| (1000 euro) |
| --- |
| | 2006 | 2005 |
| — | for the provision of travel agency services |

(1000 euro)

2006

2005

—

for the provision of travel agency services

51

20

| — | for the long-term hire of official vehicles |
| --- | --- |

—

for the long-term hire of official vehicles

75

75

| — | for the provision of catering services |
| --- | --- |

—

for the provision of catering services

28

28

Total

154

123

For four existing rental contracts, the outstanding rent commitments amount to EUR 7 960 550, (2005: EUR 9 951 290), itemised below:

| (1000 euro) |
| --- |
| | 2006 | 2005 |
| — | buildings |

(1000 euro)

2006

2005

—

buildings

7 833

9 758

| — | Brussels office |
| --- | --- |

—

Brussels office

110

144

| — | parking facilities |
| --- | --- |

—

parking facilities

17

50

Total

7 960

9 952

| (1000 euro) |
| --- |
| | 2006 |
| For operating leases of plant and equipment, outstanding rental commitments amount to | 363 |
| Remaining amounts payable on budgetary commitments | 3 150 |
| Total | 3 513 |

(1000 euro)

2006

For operating leases of plant and equipment, outstanding rental commitments amount to

363

Remaining amounts payable on budgetary commitments

3 150

Total

3 513

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