# C_2004294EN.01009901.xml

| 30.11.2004 | EN | Official Journal of the European Union | C 294/99 |
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30.11.2004

EN

Official Journal of the European Union

C 294/99

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THE COURT OF AUDITORS' STATEMENT OF ASSURANCE

THE COURT OF AUDITORS' STATEMENT OF ASSURANCE

(2004/C 294/02)

| I. | Pursuant to the provisions of Article 248 of the Treaty the Court has examined the consolidated annual accounts (1) of the European Communities for the financial year ended 31 December 2003. It carried out its audit in accordance with its own audit policies and standards, which are based on international standards that have been adapted to the Community context. Through its audit, the Court has obtained a reasonable basis for the opinion expressed below. In the case of own resources the scope of the Court's audit work was limited (2). |
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I.

Pursuant to the provisions of Article 248 of the Treaty the Court has examined the consolidated annual accounts (1) of the European Communities for the financial year ended 31 December 2003. It carried out its audit in accordance with its own audit policies and standards, which are based on international standards that have been adapted to the Community context. Through its audit, the Court has obtained a reasonable basis for the opinion expressed below. In the case of own resources the scope of the Court's audit work was limited (2).

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RELIABILITY OF THE ACCOUNTS

| II. | In the Court's opinion, the consolidated annual accounts of the European Communities and the notes to them were drawn up in accordance with the provisions of the Financial Regulation of 25 June 2002 and with the accounting principles, rules and methods set out in the annexes to the consolidated financial statements (3). Except for the effects of the observation in paragraph III, they faithfully reflect the revenue and expenditure of the Communities for the year and their financial position at the year-end. |
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II.

In the Court's opinion, the consolidated annual accounts of the European Communities and the notes to them were drawn up in accordance with the provisions of the Financial Regulation of 25 June 2002 and with the accounting principles, rules and methods set out in the annexes to the consolidated financial statements (3). Except for the effects of the observation in paragraph III, they faithfully reflect the revenue and expenditure of the Communities for the year and their financial position at the year-end.

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| III. | In the absence of effective internal control procedures for miscellaneous revenue and advances, the Court cannot be certain that the transactions relating to the sundry debtors item have been correctly and completely recorded. |
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III.

In the absence of effective internal control procedures for miscellaneous revenue and advances, the Court cannot be certain that the transactions relating to the sundry debtors item have been correctly and completely recorded.

| IV. | Without calling into question the opinion expressed in paragraph II, the Court wishes to draw attention to the fact that, as in the past, the accounting system used to draw up the 2003 accounts was not designed to ensure that the assets are fully recorded. On 17 December 2002 the Commission approved an action plan for the modernisation of the European Communities' accounting system which should be operational as from 1 January 2005. The Court notes, however, that the full implementation of all the new rules and accounting plans requires a considerable effort by the bodies whose accounts will be subject to consolidation. |
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IV.

Without calling into question the opinion expressed in paragraph II, the Court wishes to draw attention to the fact that, as in the past, the accounting system used to draw up the 2003 accounts was not designed to ensure that the assets are fully recorded. On 17 December 2002 the Commission approved an action plan for the modernisation of the European Communities' accounting system which should be operational as from 1 January 2005. The Court notes, however, that the full implementation of all the new rules and accounting plans requires a considerable effort by the bodies whose accounts will be subject to consolidation.

LEGALITY AND REGULARITY OF THE UNDERLYING TRANSACTIONS

| V. | In view of the results of its audits, the Court is of the opinion that the transactions underlying the consolidated annual accounts of the European Communities, taken as a whole, are legal and regular in respect of revenue, commitments and administrative expenditure. |
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V.

In view of the results of its audits, the Court is of the opinion that the transactions underlying the consolidated annual accounts of the European Communities, taken as a whole, are legal and regular in respect of revenue, commitments and administrative expenditure.

| VI. | As regards other expenditure, the Court established that:






  (a) | In the case of the EAGGF Guarantee Section the payments were, again, materially affected by errors. Arable crops are less subject to the risk of error than animal premiums, whereas the other categories of expenditure which are not subject to the integrated administration and control system present a higher risk whilst being subject to less effective controls. There is still room for progress as regards agricultural expenditure in its entirety in order to rectify the significant shortcomings observed in the supervisory systems and controls; |
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VI.

As regards other expenditure, the Court established that:

(a)

In the case of the EAGGF Guarantee Section the payments were, again, materially affected by errors. Arable crops are less subject to the risk of error than animal premiums, whereas the other categories of expenditure which are not subject to the integrated administration and control system present a higher risk whilst being subject to less effective controls. There is still room for progress as regards agricultural expenditure in its entirety in order to rectify the significant shortcomings observed in the supervisory systems and controls;

| (b) | in the case of the structural measures, owing to persistent weaknesses at Member State level in the systems for supervising and controlling the implementation of the EU budget, payments were still subject to the same errors occurring with the same frequency as in previous years; |
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(b)

in the case of the structural measures, owing to persistent weaknesses at Member State level in the systems for supervising and controlling the implementation of the EU budget, payments were still subject to the same errors occurring with the same frequency as in previous years;

| (c) | in the case of internal policies, the improvements noted in the supervisory systems and controls are not yet sufficient to prevent significant errors of legality and regularity in terms of payments. In the case of the research framework programmes, these errors are likely to persist if the rules governing the programmes are not revised; |
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(c)

in the case of internal policies, the improvements noted in the supervisory systems and controls are not yet sufficient to prevent significant errors of legality and regularity in terms of payments. In the case of the research framework programmes, these errors are likely to persist if the rules governing the programmes are not revised;

| (d) | in the case of the external actions, a relatively large number of legality and regularity errors continue to affect not only the bodies responsible for implementing the projects but also the projects themselves. Although in principle 2003 was the last year of management decentralisation, it is essential that the tools needed to supervise and control systems and expenditure should become operational with a view to making the improvements which are still necessary; |
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(d)

in the case of the external actions, a relatively large number of legality and regularity errors continue to affect not only the bodies responsible for implementing the projects but also the projects themselves. Although in principle 2003 was the last year of management decentralisation, it is essential that the tools needed to supervise and control systems and expenditure should become operational with a view to making the improvements which are still necessary;

| (e) | in the case of pre-accession aid, shortcomings in the supervisory systems and controls which had already been identified in 2002 resulted in errors and greater risks affecting the legality and regularity of the transactions. |
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(e)

in the case of pre-accession aid, shortcomings in the supervisory systems and controls which had already been identified in 2002 resulted in errors and greater risks affecting the legality and regularity of the transactions.

| VII. | The Court notes the progress made by the Commission as regards the reform of its internal control system and the positive impact of this reform on the legality and regularity of operations subject to direct management by the Commission. However, progress is still required in terms of actual implementation. |
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VII.

The Court notes the progress made by the Commission as regards the reform of its internal control system and the positive impact of this reform on the legality and regularity of operations subject to direct management by the Commission. However, progress is still required in terms of actual implementation.

| VIII. | In the area of shared or decentralised management (see paragraphs VI(a) and (b) and VI(d) and (e) respectively) and of indirect centralised management (see paragraph VI(c)), where operations are materially subject to errors, a greater effort must be made to apply the supervisory systems and controls in an effective manner so as to improve the handling of the attendant risks. |
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VIII.

In the area of shared or decentralised management (see paragraphs VI(a) and (b) and VI(d) and (e) respectively) and of indirect centralised management (see paragraph VI(c)), where operations are materially subject to errors, a greater effort must be made to apply the supervisory systems and controls in an effective manner so as to improve the handling of the attendant risks.

| IX. | The Court notes that the Commission, as the institution responsible under Article 274 of the Treaty for implementing the budget, included, for the first time in its Synthesis of the 2003 annual activity reports of its Directorates-General and departments, an analysis of the assurance provided by the supervisory systems and controls as to the legality and regularity of the underlying transactions, which, in general, is corroborated by the Court's audit work. |
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IX.

The Court notes that the Commission, as the institution responsible under Article 274 of the Treaty for implementing the budget, included, for the first time in its Synthesis of the 2003 annual activity reports of its Directorates-General and departments, an analysis of the assurance provided by the supervisory systems and controls as to the legality and regularity of the underlying transactions, which, in general, is corroborated by the Court's audit work.

6 and 7 October 2004

Juan Manuel FABRA VALLÉS

President

European Court of Auditors

12, rue Alcide De Gasperi, L-1615 Luxembourg

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(1)  Namely: ‘Revenue and expenditure account: execution of the budget’ and ‘Consolidated balance sheet’, which make up Volume I of the annual accounts of the European Communities, financial year 2003.

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(2)  Firstly, the Court's audits focus on macroeconomic statistics for which the underlying data cannot be audited directly, and secondly, they cannot possibly cover the imports that have, not been subject to customs supervision.

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(3)  See Annex 1, Volume 1, of the final accounts of the European Communities, financial year 2002.

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