# Official Journal C 315/2006

| | ISSN 1725-2423 |
| --- | --- |
| Official Journal
  of the European Union | C 315 |
| | |
| English edition | Information and Notices | Volume 4921 December 2006 |

ISSN 1725-2423

Official Journal

of the European Union

C 315

English edition

Information and Notices

Volume 4921 December 2006

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| Notice No | Contents | page |
| --- | --- | --- |
| | I   Information |
| | Court of Auditors |
| 2006/C 315/1 | Report by the external auditor on the Court of Auditors' accounts for the financial year 2005 | 1 |

Notice No

Contents

page

I   Information

Court of Auditors

2006/C 315/1

Report by the external auditor on the Court of Auditors' accounts for the financial year 2005

1

| EN | |
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EN

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I Information

Court of Auditors

| 21.12.2006 | EN | Official Journal of the European Union | C 315/1 |
| --- | --- | --- | --- |

21.12.2006

EN

Official Journal of the European Union

C 315/1

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REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS' ACCOUNTS FOR THE FINANCIAL YEAR 2005

(2006/C 3150/01)

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.

For the Court of Auditors

Hubert WEBER

President of the Court

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CONTENTS

Certificate concerning the regularity and fairness of the financial statements at 31 December 2005

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

Financial statements at 31 December 2005

Certificate concerning the regularity and fairness of the financial statements at 31 December 2005

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 financial statements of the European Court of Auditors at 31 December 2005. The financial statements are the responsibility of the European Court of Auditors. Our responsibility is, on the basis of our audit work, to express an opinion on the financial statements.

We have conducted our work in accordance with international auditing standards. These standards require us to plan and carry out our work in such a way as to obtain reasonable assurance that the financial statements do not contain any significant anomalies. As required, the audit included an examination, on the basis of a sample, of the evidence in support of the amounts and information contained in the financial statements. It also included an appraisal of the accounting principles and practices applied and of the significant estimates used by the European Court of Auditors in drawing up the accounts, as well as a review of their overall presentation. We think that the audit provided a reasonable basis for the opinion expressed.

In accordance with accounting standard No 12 (Employee benefits), which was adopted on 28 December 2004 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, on 31 December 2004, for the first time, the Court recorded a provision for its Members' pensions and a long-term receivable from the Member States to the value of 43 689 621 euro. Accounting standard No 12 is currently being revised. Pending a final decision on this subject and in compliance with the Commission's instructions, the Court of Auditors deducts its ‘receivable’ from the Member States for the pension commitments to establish the amount of the net assets.

In our view, subject to the effect of any rectifications that may prove necessary with respect to the aforementioned accounting treatment for pensions, the attached financial statements give a true and fair view, in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002, the implementing rules, generally accepted accounting principles and the European court of Auditors' Internal Rules, of the assets and financial position of the European Court of Auditors at 31 December 2005 and of the economic outturn and the revenue and expenditure for the financial year then ended.

Luxembourg, 25 October 2006.

KPMG Audit S.à r.l.

Auditors

P. WIES

Report on 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 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 2005. The purpose of our examination was to ensure that the various departments of 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 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 of 25 June 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 its 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 its meetings held on 17 and 18 December 2003.

We examined the control environment, the risk evaluation, the control systems and activities and the management control systems. Our work consisted of an evaluation of the administrative and accounting procedures, management procedures, sample tests on supporting documents and interviews with staff. The nature and extent of the tests were determined by our appraisal of the control environment. We think 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, 25 October 2006.

KPMG Audit S.à r.l.

Auditors

P. WIES

Financial statements at 31 December 2005

Balance sheet at 31 December 2005 and 31 December 2004

| (in 1000 euro) |
| --- |
| | Notes | 2005 | 2004 |
| Non-current assets | | 38 532 | 43 322 |
| Intangible fixed assets | 2 | 537 | 443 |
| Tangible fixed assets | 2 | 37 995 | 42 879 |
| Current assets | | 5 623 | 12 531 |
| Short-term prefinancing | 3 | — | 3 514 |
| Short-term receivables | 4 | 2 777 | 1 909 |
| Cash and cash equivalents | | 2 846 | 7 108 |
| Total assets | | 44 155 | 55 853 |
| Non-current liabilities | | 47 869 | 43 884 |
| Employee benefits | 5 | 47 694 | 43 689 |
| Other long-term liabilities | | 175 | 195 |
| Current liabilities | | 7 736 | 6 599 |
| Provisions for risks and charges | | 2 031 | 1 634 |
| Current payables | 6 | 5 705 | 4 965 |
| Total liabilities | | 55 605 | 50 483 |
| Net assets | 7 | (11 450) | 5 370 |
| Amounts to be called from Member States | | | |
| | Carried over from previous years | | 5 370 | 5 370 |
| | Economic outturn for the financial year | | (16 820) | — |
| The notes annexed hereto form an integral part of these financial statements. |

(in 1000 euro)

Notes

2005

2004

Non-current assets

38 532

43 322

Intangible fixed assets

2

537

443

Tangible fixed assets

2

37 995

42 879

Current assets

5 623

12 531

Short-term prefinancing

3

—

3 514

Short-term receivables

4

2 777

1 909

Cash and cash equivalents

2 846

7 108

Total assets

44 155

55 853

Non-current liabilities

47 869

43 884

Employee benefits

5

47 694

43 689

Other long-term liabilities

175

195

Current liabilities

7 736

6 599

Provisions for risks and charges

2 031

1 634

Current payables

6

5 705

4 965

Total liabilities

55 605

50 483

Net assets

7

(11 450)

5 370

Amounts to be called from Member States

Carried over from previous years

5 370

5 370

Economic outturn for the financial year

(16 820)

—

The notes annexed hereto form an integral part of these financial statements.

Economic outturn account at 31 December 2005

| (in 1000 euro) |
| --- |
| | Notes | 2005 |
| Operating revenues |
| | Funds transferred from the Commission to other institutions | | 70 787 |
| | Revenue from administrative operations | 8 | 16 163 |
| | | 86 950 |
| Operating expenses |
| Administrative expenses | | |
| | Staff expenses | | (74 686) |
| | Fixed asset related expenses | | (4 396) |
| | Pensions | | (6 033) |
| | Other administrative expenses | 9 | (18 761) |
| | | (103 876) |
| Operating outturn | | (16 926) |
| Non-operating activities |
| | Investment operations revenue | | 53 |
| | Financial operations revenue | | 68 |
| | Financial operations expenses | | (15) |
| | | 106 |
| Economic outturn for the year | | (16 820) |
| The notes annexed hereto form an integral part of these financial statements. |

(in 1000 euro)

Notes

2005

Operating revenues

Funds transferred from the Commission to other institutions

70 787

Revenue from administrative operations

8

16 163

86 950

Operating expenses

Administrative expenses

Staff expenses

(74 686)

Fixed asset related expenses

(4 396)

Pensions

(6 033)

Other administrative expenses

9

(18 761)

(103 876)

Operating outturn

(16 926)

Non-operating activities

Investment operations revenue

53

Financial operations revenue

68

Financial operations expenses

(15)

106

Economic outturn for the year

(16 820)

The notes annexed hereto form an integral part of these financial statements.

Cash-flow table for the financial year 2005

| (in 1000 euro) |
| --- |
| Cash-flow from ordinary activities |
| Revenue from the activities of the financial year | (16 925) |
| | Adjustments concerning activities: | |
| | — | Allocation for depreciation (intangible fixed assets) + |

(in 1000 euro)

Cash-flow from ordinary activities

Revenue from the activities of the financial year

(16 925)

Adjustments concerning activities:

—

Allocation for depreciation (intangible fixed assets) +

311

| — | Allocation for depreciation (tangible fixed assets) + |
| --- | --- |

—

Allocation for depreciation (tangible fixed assets) +

3 522

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

—

Increase (decrease) in provisions for risks and charges

397

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

—

Increase (decrease) in employee benefits

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

(889)

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

—

Increase (decrease) in receivables relating to Community bodies

21

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

—

Increase (decrease) in long-term payables

(19)

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

—

Increase (decrease) in suppliers and other creditors

348

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

—

Increase (decrease) in amounts owed to Community bodies

393

| — | Gains (losses) on sales of fixed moveable property |
| --- | --- |

—

Gains (losses) on sales of fixed moveable property

571

| — | Execeptional items |
| --- | --- |

—

Execeptional items

62

Cash-flow from ordinary activities

(4 690)

Cash-flow from investment activities

Acquisitions of tangible and intangible assets

(1 680)

Disposals of tangible and intangible assets

2 003

Financial income

52

Cash-flow from investment activities

376

Cash-flow from financing activities

Financial income

68

Financial expenditure

(15)

Cash-flow from financing activities

53

Net increase (decrease) in cash-flow

(4 261)

Cash at start of the financial year

7 108

Cash at end of the financial year

2 846

NOTES TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2005

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.

With effect from 1 January 2005, the financial statements have been drawn up in accordance with the accruals principle. The Court's opening balance sheet was drawn up in accordance with the new accounting rules adopted on 28 December 2004 and applicable for the first time to the financial year 2005.

The comparative data for the financial year 2004 have been adjusted so as to reflect the Court's new accounting principles.

A reconciliation of the balance-sheet accounts, as previously determined according to the 2004 principles, is provided in note 10.

In accordance with accounting standard No 12 (Employee benefits), which was adopted on 28 December 2004 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, the Court had recorded, for the first time at 31 December 2004, a provision for its Members' pensions to the value, calculated actuarially, of the commitments arising from the length of service at the date of calculation. In 2004, the Court had balanced this provision by means of a long-term receivable from the Member States. Accounting standard No 12 is currently being revised. Pending a final decision on this matter, and in compliance with the Commission's instructions, the Court has, since 2005 deducted, the ‘receivable’ from the Member States for the pension commitments to establish the amount of the net assets. The comparative figures have been adapted.

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 using to the straight-line method to allocate their cost to their residual values 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.   Prefinancing

Prefinancing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular prefinancing agreement. The float or advance is repaid or used for the purpose for which it was provided during the period defined in the agreement.

At year-end outstanding prefinancing amounts are valued at the original amount(s) paid to the beneficiary less: any amounts returned, eligible amounts cleared, the estimated eligible amounts not yet cleared at year-end and the value reductions.

1.4.   Receivables

Receivables are carried at the original amount less write-down 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), payment of the benefits provided for in this pension scheme are entered in the budget of the Communities and the Member States jointly guarantee payment of these benefits.

The amounts guaranteed by the Member States are based, on 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.

2.   Intangible and tangible fixed assets

| (in 1000 euro) |
| --- |
| | 2005 | 2004 |
| Depreciable value | Cumulative depreciation | Net book value | Net book value |
| Intangible fixed assets | 1 621 | (1 084) | 537 | 443 |
| Tangible fixed assets |
| — | Land and buildings |

(in 1000 euro)

2005

2004

Depreciable value

Cumulative depreciation

Net book value

Net book value

Intangible fixed assets

1 621

(1 084)

537

443

Tangible fixed assets

—

Land and buildings

52 581

(17 606)

34 975

39 177

| — | Plant, machinery and tools |
| --- | --- |

—

Plant, machinery and tools

1 247

(889)

358

514

| — | Furniture and vehicle fleet |
| --- | --- |

—

Furniture and vehicle fleet

1 993

(1 363)

630

789

| — | Computer hardware |
| --- | --- |

—

Computer hardware

4 049

(2 651)

1 398

1 516

| — | Other tangible fixed assets |
| --- | --- |

—

Other tangible fixed assets

1 044

(435)

609

783

| — | Tangible assets in course of construction |
| --- | --- |

—

Tangible assets in course of construction

25

—

25

100

Sub-total

60 939

(22 944)

37 995

42 879

Total

62 560

(24 028)

38 532

43 322

3.   Short-term prefinancing

The 2004 balance corresponds to funds that the Court had advanced to a Project Manager in the context of the construction of a building.

4.   Short-term receivables

Short-term receivables correspond mostly to entitlements established but not yet collected, 1 392 326 euro of which are attributable to the acquisition of national pension rights by members of the institution's staff.

The balance of the amount shown mainly consists of advances paid on mission expenses already incurred by the Members and staff of the Court but not yet settled.

5.   Employee benefits

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

6.   Current payables

The item ‘Current payables’ comprises 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.

7.   Net assets

The movements in net assets in 2005 were as follows:

| (in 1000 euro) |
| --- |
| Balance at 31 December 2004 | 43 252 |
| Adjustments — changes in accounting principles (note 10) | 5 808 |
| Cancellation at 31 December 2004 of the counterpart of the provision for the pensions of the Members of the Court | (43 690) |
| Net assets at 31 December 2004 | 5 370 |
| Economic outturn for the financial year | (16 820) |
| Net assets at 31 December 2005 | (11 450) |

(in 1000 euro)

Balance at 31 December 2004

43 252

Adjustments — changes in accounting principles (note 10)

5 808

Cancellation at 31 December 2004 of the counterpart of the provision for the pensions of the Members of the Court

(43 690)

Net assets at 31 December 2004

5 370

Economic outturn for the financial year

(16 820)

Net assets at 31 December 2005

(11 450)

8.   Revenue from administrative operations

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

9.   Other administrative expenses

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

10.   Impact of the adoption of accruals accounting

During the financial year, the Court adopted the principles of accruals accounting. The adoption of these principles requires the adjustment of the comparative statements as follows:

Assets

| (in 1000 euro) |
| --- |
| | 31.12.2004 restated | Changes | 31.12.2004 |
| Intangible fixed assets | 443 | 28 | 415 |
| Tangible fixed assets | 42 879 | 719 | 42 160 |
| Stocks | — | (197) | 197 |
| Short-term prefinancing | 3 514 | 3 514 | — |
| Short-term receivables | 1 909 | 525 | 1 384 |
| Long-term receivables (1) | 43 690 | — | 43 690 |
| Disposable assets | 7 108 | — | 7 108 |
| | 99 543 | 4 589 | 94 954 |

(in 1000 euro)

31.12.2004 restated

Changes

31.12.2004

Intangible fixed assets

443

28

415

Tangible fixed assets

42 879

719

42 160

Stocks

—

(197)

197

Short-term prefinancing

3 514

3 514

—

Short-term receivables

1 909

525

1 384

Long-term receivables (1)

43 690

—

43 690

Disposable assets

7 108

—

7 108

99 543

4 589

94 954

Liabilities

| (in 1000 euro) |
| --- |
| | 31.12.2004 restated | Adjustments | 31.12.2004 |
| Net assets (note 7) | 49 060 | 5 808 | 43 252 |
| Non-current liabilities | 43 885 | 176 | 43 709 |
| Provisions for risks and charges | 1 634 | 1 634 | — |
| Current payables | 4 964 | (3 029) | 7 993 |
| | 99 543 | 4 589 | 94 954 |

(in 1000 euro)

31.12.2004 restated

Adjustments

31.12.2004

Net assets (note 7)

49 060

5 808

43 252

Non-current liabilities

43 885

176

43 709

Provisions for risks and charges

1 634

1 634

—

Current payables

4 964

(3 029)

7 993

99 543

4 589

94 954

The changes in the accounting rules and methods resulting from the implementation of accruals accounting require the following adjustments to take into account elements that previously did not have to be shown in the financial statements:

| (in 1000 euro) |
| --- |
| Reclassification of the positive balance of advances of funds as revenue by the European Commission | 7 051 |
| Fixed assets (including 99 843 for fixed assets in course of construction), depreciation calculated on a monthly rather than annual basis | 746 |
| Stocks, exclusion from the balance sheet | (197) |
| Prefinancing in favour of K2 project manager | 3 514 |
| Payables, invoices to be received | (624) |
| Settlement and suspense accounts, expenses still to be invoiced | (3 048) |
| Others: the value of leave not taken by staff at 31 December 2004 | (1 634) |
| Total | 5 808 |

(in 1000 euro)

Reclassification of the positive balance of advances of funds as revenue by the European Commission

7 051

Fixed assets (including 99 843 for fixed assets in course of construction), depreciation calculated on a monthly rather than annual basis

746

Stocks, exclusion from the balance sheet

(197)

Prefinancing in favour of K2 project manager

3 514

Payables, invoices to be received

(624)

Settlement and suspense accounts, expenses still to be invoiced

(3 048)

Others: the value of leave not taken by staff at 31 December 2004

(1 634)

Total

5 808

11.   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 have 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 1 (one) euro 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 Luxembourg State also undertakes to sell the land at any time at the market rate determined by a joint expert opinion.

For its part, the Court undertakes to do all it can to purchase the land from the Luxembourg State. It will ask the budgetary authority for the necessary funds.

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

| (in 1000 euro) |
| --- |
| — | for the provision of travel services |

(in 1000 euro)

—

for the provision of travel services

20

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

—

for the long-term hire of official vehicles

75

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

—

for the provision of catering services

28

Total

123

For four building rental contracts in force, outstanding rent commitments amount to 9 951 290 euro, broken down as shown below:

| (in 1000 euro) |
| --- |
| — | Buildings |

(in 1000 euro)

—

Buildings

9 758

| — | Brussels office |
| --- | --- |

—

Brussels office

144

| — | Parking facilities |
| --- | --- |

—

Parking facilities

50

Total

9 952

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(1)  Amount deducted from the net assets (note 7).

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