# CE2004084EN.01032604.xml

| 3.4.2004 | EN | Official Journal of the European Union | CE 84/326 |
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3.4.2004

EN

Official Journal of the European Union

CE 84/326

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(2004/C 84 E/0386)

WRITTEN QUESTION E-0177/04

by Christopher Heaton-Harris (PPE-DE) to the Commission

(29 January 2004)

Subject:   Commission's accounting systems

Subject:

I understand the Internal Audit Service, in a report entitled ‘IAS Review of the Commission's Accounting Framework — Final Report’ dated 15 April 2003, made a number of recommendations to the Commission regarding the accounting systems.

What measures has the Commission taken to revise the accounting and consolidation manual and simplify the terminology used?

Joint answer

to Written Questions P-0156/04, E-0161/04, E-0162/04, E-0163/04, E-0164/04, E-0165/04, E-0166/04, E-0167/04, E-0168/04, E-0169/04, E-0170/04, E-0171/04, E-0172/04, E-0173/04, E-0174/04, E-0175/04, E-0176/04 and E-0177/04

given by Mrs Schreyer on behalf of the Commission

(10 March 2004)

(10 March 2004)

One of the first actions taken by the Commission in the modernisation of the accounting systems (ABAC) project was to make an inventory of all the business processes arising in each Directorate General (DG). Accounting standards were then drafted and accounting procedures are currently being prepared. This is one of the basic elements for the re-engineering of its processes.

An independent study was undertaken on the feasibility of the Commission's project for the modernisation of its accounting system, the conclusions of which were communicated to the Budgetary Control Committee on 8 July 2003. The Commission already uses ‘off the shelf’ software for its accounting, and will use the same software to support accrual-based accounts. Following the move to accrual accounting the Commission is planning to investigate the feasibility of integrating many financial management functions supported by in-house systems to appropriate Standard administrative provisions (SAP) modules.

The project leader of the ABAC project is the Accounting Officer of the Commission and he is directly supported by a full-time Project Supervisor, who is an external consultant. A project management team consisting of those responsible for the Accounting, Information Technology (IT) and User needs areas is also established. IT and accounting consultants are employed to reinforce the Commission staff designated to the project.

The current Sincom2 system has already been adapted and is compliant with the new Financial Regulation (1) in force. The development of ABAC aims to increase integration of the different system elements, so that the Commission will, in 2005, have a system in which all accounting records are integrated, and will allow the production of accrual accounts, as is required by that date by the Financial Regulation.

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The Commission presently has an Accounting Officer in DG Budget of an Al Grade, who has no responsibilities for operational budgetary matters, and a separate directorate (BUDG C) dealing with all accounting aspects, including the modernisation project.

Each DG has an internal control co-ordinator who is usually the Director of Resources. Currently there is an Accounting correspondent in each DG that has been nominated to liaise with the central accounting directorate, i.e. ‘Accounting Net,’ and additionally an Accounting Modernisation team in each DG is being created. Accounting cells are not foreseen at present.

Improvements in the quality of financial reporting have been made over the past several years.

Furthermore, several actions will result in future improvements to the financial information and accounting practices:

| — | improving the accounting control framework in each DG and accounting services. A draft document has been drawn up; |
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improving the accounting control framework in each DG and accounting services. A draft document has been drawn up;

| — | the creation of a new Accounting Manual, which is now being prepared; |
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the creation of a new Accounting Manual, which is now being prepared;

| — | in the future, each item on the balance sheet will be supported by inventories/listings drawn from the accounts; |
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in the future, each item on the balance sheet will be supported by inventories/listings drawn from the accounts;

| — | the Accounting Officer will validate local systems; |
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the Accounting Officer will validate local systems;

| — | an accounting training plan for DGs has been presented; |
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an accounting training plan for DGs has been presented;

| — | accounting Standards are currently being finalised. |
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accounting Standards are currently being finalised.

The modernisation project is an ongoing process:

| — | a questionnaire was sent to the DGs in September 2002 asking services to identify the accounting impacts of their activities; |
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a questionnaire was sent to the DGs in September 2002 asking services to identify the accounting impacts of their activities;

| — | workshops on the subject were held with each DG during May and June 2003; |
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workshops on the subject were held with each DG during May and June 2003;

| — | all business events and processes have been described and documented by the DGs and validated by the accounting correspondent in 2003; |
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all business events and processes have been described and documented by the DGs and validated by the accounting correspondent in 2003;

| — | a validation by each Director General has been made with the obligation on him or her to inform accounting services if new events are foreseen in the DG; |
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a validation by each Director General has been made with the obligation on him or her to inform accounting services if new events are foreseen in the DG;

| — | generic business events for the entire Commission have been detailed in 2003; |
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generic business events for the entire Commission have been detailed in 2003;

| — | functional blueprints for the accounting procedures in accrual accounting have been prepared following the business event process. |
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functional blueprints for the accounting procedures in accrual accounting have been prepared following the business event process.

Improvements in the quality of financial information will continue to be made in the future. For example, the preparation of provisional accounts, which are then audited by the Court of Auditors, allows the Commission to update its final accounts with recommendations made by the Court. In the future, the quality control should be easier because all data will be included within the accounting system and extra/non system accounting data will disappear.

Major improvements to the presentation of data have been made in the last few years based on the recommendations of the ECA and external experts. The Commission will continue these efforts to improve the presentation of financial data for the 2003 accounts.

The Commission has improved its presentation of information concerning tangible and intangible fixed assets so as to clarify and simplify the data presented — as was done in the 2002 accounts.

A concerted effort has been made with regard to quality control over the financial data presented in the 2002 accounts and two external experts were consulted in the process. Similar efforts will continue to be made for the 2003 accounts.

The Commission has improved its presentation of information on risk capital operations. The tables in the 2002 accounts were simplified compared to those in 2001 and 2000.

The DG responsible for ECIP is currently performing an inventory of tangible and intangible assets. However, given the size of the programme, where between 1988 and 1999, the Commission granted 1 365 advances for a total of EUR 139,3 million, the final results will not be available until end 2005. The 2003 accounts will, however, be updated to reflect the available information.

Preliminary figures for JOP at the end of 2003 show that there remained 12 open files totalling EUR 7 million which become due between 2006 and 2011. The open files are monitored by the DG responsible, for example through the receipt of third party reports, and amounts due to the Commission are followed up.

When providing the relevant information on such risk capital operations for inclusion in the annual accounts, the authorising officer provides his estimate of any write downs deemed necessary under the prudence principle. This is then reviewed by the accounting services. In both 2002 and 2001 the gross amounts, the writedowns and the net amounts were clearly presented in the notes to the balance sheet along with information on the movements since the preceeding year-end.

For consistency purposes the same presentation in the balance sheet was kept for the guarantee fund in the 2001 and 2002 accounts. However, as with all areas of the balance sheet this area is currently being examined under the modernisation of the accounting system project, and changes will be made if needed to bring the disclosures into line with International Public Sector Accounting Standards (IPSAS) requirements for the 2005 accounts.

The Commission agrees with the consistent application of accounting practices and works towards achieving it each year in its annual accounts. New accounting standards are currently being prepared and an accounting manual should aid the consistent application of accounting practices.

On the basis of an actuarial valuation, a provision for pension liabilities was included in the 2001 and 2002 accounts. For the 2002 accounts, the Commission also received the advice of an external accounting expert on this subject. Furthermore, an Accounting Standard on this matter is currently being prepared, and was first discussed in the Accounting Standard Committee meeting in December 2003. Finally, a new actuarial valuation is currently being made and its results should be available to be reflected in the pension provision of 31 December 2003.

The rules on the valuation of stocks are clear and explained in the present accounting manual. The Accounting Officer insists on the correct application of these rules. A new accounting standard has also been prepared on stocks and was discussed in the Accounting Standard Committee.

The changes of valuation rules are already explained in the annual accounts. An effort is of course always made to continue to improve the explanations provided.

Additional staff have been allocated to DG Budget in 2003 which, together with external resources made available under two framework contracts, have enabled the modernisation project to be undertaken, and the IT structures to be adapted as necessary. A project team has been established within DG Budget, headed by the Accounting Officer. The resource needs of other services during the 2004 implementation phase are presently being assessed. Each service is setting up a management team charged with implementing the project's requirements.

The Commission is currently in the process of examining its accounting treatment of the sickness insurance scheme for the 2003 accounts, based on the opinion of the Court of Auditors and external accounting experts.

The Commission has improved the quality of its financial reports, and will continue to do so in the future. Clearly the improvement in the quality of the annual accounts is an ongoing process — thus the Commission reviews its presentation of financial information each year with the goal of improving its financial reports. This has, in the last couple of years, included the involvement of external experts in accounting.

The present accounting manual will be updated if important changes occur in the Commission's activities. It is being redrafted in order to be in line with the new accounting standards and integrated accounting system as part of the modernisation project.

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(1)  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, OJ L 357, 31.12.2002.

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