# C_2006312EN.01000601.xml

| 19.12.2006 | EN | Official Journal of the European Union | C 312/6 |
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19.12.2006

EN

Official Journal of the European Union

C 312/6

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REPORT

REPORT

on the annual accounts of the European Aviation Safety Agency for the financial year 2005 together with the Agency's replies

(2006/C 312/02)

CONTENTS

| 1-2 | INTRODUCTION |
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1-2

| 3-6 | STATEMENT OF ASSURANCE |
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3-6

| 7-11 | OBSERVATIONS |
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7-11

Tables 1 to 4

The Agency's replies

The Agency's replies

INTRODUCTION

| 1. | The European Aviation Safety Agency (hereinafter called the Agency) was established by Regulation (EC) No 1592/2002 of the European Parliament and of the Council of 15 July 2002 (1). The Agency's tasks are to maintain a high level of civil aviation safety, to ensure the proper development of civil aviation safety, to establish certification specifications and to provide certification of aeronautical products. |
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1.

The European Aviation Safety Agency (hereinafter called the Agency) was established by Regulation (EC) No 1592/2002 of the European Parliament and of the Council of 15 July 2002 (1). The Agency's tasks are to maintain a high level of civil aviation safety, to ensure the proper development of civil aviation safety, to establish certification specifications and to provide certification of aeronautical products.

1

| 2. | Table 1 summarises the competences and activities of the Agency. Key information from the financial statements drawn up by the Agency for the financial year 2005 is presented in Tables 2, 3 and 4. |
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2.

Table 1 summarises the competences and activities of the Agency. Key information from the financial statements drawn up by the Agency for the financial year 2005 is presented in Tables 2, 3 and 4.

Table 1

Tables 2, 3 and 4

STATEMENT OF ASSURANCE

| 3. | This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (2); it was drawn up following an examination of the Agency's accounts, as required by Article 248 of the Treaty establishing the European Community. |
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3.

This Statement of Assurance is addressed to the European Parliament and the Council in accordance with Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (2); it was drawn up following an examination of the Agency's accounts, as required by Article 248 of the Treaty establishing the European Community.

2

| 4. | The Agency's accounts for the financial year ended 31 December 2005 (3) were drawn up by its Executive Director, pursuant to Article 49 of Regulation (EC) No 1592/2002, and sent to the Court, which is required to give a statement of assurance on their reliability and on the legality and regularity of the underlying transactions. |
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4.

The Agency's accounts for the financial year ended 31 December 2005 (3) were drawn up by its Executive Director, pursuant to Article 49 of Regulation (EC) No 1592/2002, and sent to the Court, which is required to give a statement of assurance on their reliability and on the legality and regularity of the underlying transactions.

3

| 5. | The Court conducted an audit in accordance with its policies and standards, which are based on international auditing standards that have been adapted to the Community context. The audit was planned and performed to obtain reasonable assurance that the accounts are reliable and the underlying transactions are legal and regular. |
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5.

The Court conducted an audit in accordance with its policies and standards, which are based on international auditing standards that have been adapted to the Community context. The audit was planned and performed to obtain reasonable assurance that the accounts are reliable and the underlying transactions are legal and regular.

| 6. | The Court has thus obtained a reasonable basis for the statement expressed below. |
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6.

The Court has thus obtained a reasonable basis for the statement expressed below.

Reliability of the accountsThe Agency's accounts for the financial year ended 31 December 2005 are, in all material respects, reliable.Legality and regularity of the underlying transactionsThe transactions underlying the Agency's annual accounts, taken as a whole, are legal and regular.The observations which follow do not call the Court's opinion into question.

Reliability of the accountsThe Agency's accounts for the financial year ended 31 December 2005 are, in all material respects, reliable.Legality and regularity of the underlying transactionsThe transactions underlying the Agency's annual accounts, taken as a whole, are legal and regular.The observations which follow do not call the Court's opinion into question.

OBSERVATIONS

| 7. | The utilisation rate for commitment and payment appropriations was less than 80 %. This situation is due to the low rate of implementation of commitment and payment appropriations (69 % and 32 % respectively) for operating expenditure. The cancellation rate for appropriations for the financial year is also high (ranging from 7 % to more than 30 % depending on the title of the expenditure and the nature of the appropriations). Cancellation rates for appropriations carried over from the previous year are also high. This situation should prompt the Agency to improve and step up the monitoring of its planning so as to ensure that resources are not mobilised unnecessarily. |
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7.

The utilisation rate for commitment and payment appropriations was less than 80 %. This situation is due to the low rate of implementation of commitment and payment appropriations (69 % and 32 % respectively) for operating expenditure. The cancellation rate for appropriations for the financial year is also high (ranging from 7 % to more than 30 % depending on the title of the expenditure and the nature of the appropriations). Cancellation rates for appropriations carried over from the previous year are also high. This situation should prompt the Agency to improve and step up the monitoring of its planning so as to ensure that resources are not mobilised unnecessarily.

| 8. | The appropriations under one budget heading were amended by 1,2 million euro but the Agency submitted no documents to justify this reduction. |
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8.

The appropriations under one budget heading were amended by 1,2 million euro but the Agency submitted no documents to justify this reduction.

| 9. | The Court notes the failure to introduce activity-based management even though the Agency's Financial Regulation provides for its introduction, along the lines applied to the general budget, so as to allow better monitoring of performance. In this respect, the realisation of the Agency's objectives must not be reduced to the implementation of a series of tasks but should be appraised in terms of its contribution to the objectives established in its basic Regulation. The Agency's work programme should, in principle, express this contribution in operational and measurable terms. |
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9.

The Court notes the failure to introduce activity-based management even though the Agency's Financial Regulation provides for its introduction, along the lines applied to the general budget, so as to allow better monitoring of performance. In this respect, the realisation of the Agency's objectives must not be reduced to the implementation of a series of tasks but should be appraised in terms of its contribution to the objectives established in its basic Regulation. The Agency's work programme should, in principle, express this contribution in operational and measurable terms.

| 10. | The Management Board did not adopt minimal internal-control standards. Management and internal-control systems and procedures were not always described. The risks linked to financial transactions were not analysed. The initiation and operational verification of payment functions were not always separate in 2005. The procedures introduced by the authorising officers to guarantee the accuracy and exhaustiveness of the financial information they submit to the accounting officer were not validated. At the end of 2005, the Agency still did not have a system for ensuring that the fees which it charges its clients for the services it provides were sufficient to cover the cost of those services. |
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10.

The Management Board did not adopt minimal internal-control standards. Management and internal-control systems and procedures were not always described. The risks linked to financial transactions were not analysed. The initiation and operational verification of payment functions were not always separate in 2005. The procedures introduced by the authorising officers to guarantee the accuracy and exhaustiveness of the financial information they submit to the accounting officer were not validated. At the end of 2005, the Agency still did not have a system for ensuring that the fees which it charges its clients for the services it provides were sufficient to cover the cost of those services.

| 11. | The principle of open competition was not observed in certain cases: the Agency used the negotiated procedure for one 250 000 euro contract with an employment agency. For security services, the Agency renewed the contract it had signed in 2004 (value: 85 557 euro) by direct agreement and without justification. In another case, the Agency invited only four tenderers to submit a bid even though there were five names on the list drawn up following a call for expressions of interest. |
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11.

The principle of open competition was not observed in certain cases: the Agency used the negotiated procedure for one 250 000 euro contract with an employment agency. For security services, the Agency renewed the contract it had signed in 2004 (value: 85 557 euro) by direct agreement and without justification. In another case, the Agency invited only four tenderers to submit a bid even though there were five names on the list drawn up following a call for expressions of interest.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 28 September 2006.

For the Court of Auditors

Hubert WEBER

President

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(1)  OJ L 240, 7.9.2002, p. 1.

1

(2)  OJ L 248, 16.9.2002, p. 1.

2

(3)  These accounts were drawn up on 30 June 2006 and received by the Court on 3 July 2006.

3

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Table 1

European Aviation Safety Agency (Cologne)

| Areas of Community competence deriving from the Treaty | The Agency's powers as defined in Regulation (EC) No 1592/2002 of the Parliament and of the Council of 15 July 2002 | Governance | Resources made available to the Agency | Products and services |
| --- | --- | --- | --- | --- |
| Common transport policy

  ‘The Council may, acting by a qualified majority, decide whether, to what extent and by what procedure appropriate provisions may be laid down for sea and air transport.’

  (Article 80 of the Treaty) | Objectives:

  to maintain a high uniform level of civil aviation safety in Europe and to ensure the proper functioning and development of civil aviation safety. | Measures to be adopted by the Agency:







  — | to issue opinions to the Commission, |

Areas of Community competence deriving from the Treaty

The Agency's powers as defined in Regulation (EC) No 1592/2002 of the Parliament and of the Council of 15 July 2002

Governance

Resources made available to the Agency

Products and services

Common transport policy

‘The Council may, acting by a qualified majority, decide whether, to what extent and by what procedure appropriate provisions may be laid down for sea and air transport.’

(Article 80 of the Treaty)

Objectives:

to maintain a high uniform level of civil aviation safety in Europe and to ensure the proper functioning and development of civil aviation safety.

Measures to be adopted by the Agency:

—

to issue opinions to the Commission,

| — | to issue certification specifications, including airworthiness codes and acceptable means of compliance, and any guidance material for the application of Community policy, |
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—

to issue certification specifications, including airworthiness codes and acceptable means of compliance, and any guidance material for the application of Community policy,

| — | to take decisions regarding airworthiness and environmental certification, |
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—

to take decisions regarding airworthiness and environmental certification,

| — | to conduct standardisation inspections at the competent authorities of the Member States, |
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—

to conduct standardisation inspections at the competent authorities of the Member States,

| — | to conduct the necessary investigations in undertakings. |
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—

to conduct the necessary investigations in undertakings.

1. The Management Board

consisting of one representative of each Member State and one representative of the Commission, sets up an advisory body of interested parties.

2. The Executive Director manages the Agency and is appointed by the Management Board on a proposal from the Commission.

3. The Board of Appeal

rules on the Agency's decisions concerning certification, fees, charges and checks at undertakings.

4. External control

Court of Auditors.

5. Discharge authority

the Parliament on a recommendation from the Council.

Final budget for 2005:

Total budget: 36,5 million euro, including:

revenue from fees and charges: 8,6 million euro

Community subsidy: 18,6 million euro

200 posts in the establishment plan

posts occupied: 132

+21 other posts

Total staff: 153

assigned to the following tasks:

| — | operational: 86 |
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—

operational: 86

| — | administrative: 38 |
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—

administrative: 38

| — | mixed: 29 |
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—

mixed: 29

Opinions:

| — | four opinions concerning amendments to Regulations Nos 1592/2002, 1702/2003 and 2042/2003, |
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—

four opinions concerning amendments to Regulations Nos 1592/2002, 1702/2003 and 2042/2003,

| — | one opinion concerning the acceptance of navigation database suppliers, |
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—

one opinion concerning the acceptance of navigation database suppliers,

| — | five opinions on opt-outs requested by EASA Member States. |
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—

five opinions on opt-outs requested by EASA Member States.

Rulemaking decisions:

| — | one amendment of CS 25 certification specifications, |
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—

one amendment of CS 25 certification specifications,

| — | one amendment of Acceptable Means of Compliance and Guidance Material for Regulation No 2042/2003. |
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—

one amendment of Acceptable Means of Compliance and Guidance Material for Regulation No 2042/2003.

International cooperation:

| — | two new cooperation agreements with China regarding Eurocopter and Dassault products, |
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—

two new cooperation agreements with China regarding Eurocopter and Dassault products,

| — | extension of the cooperation agreement with the Aeronautical Committee of the Commonwealth of Independent States. |
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—

extension of the cooperation agreement with the Aeronautical Committee of the Commonwealth of Independent States.

Certification decisions:

| | Type certificates: 78 |
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Type certificates: 78

| | Supplementary type certificates: 900 |
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Supplementary type certificates: 900

| | Airworthiness directives: 490 |
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Airworthiness directives: 490

| | European Technical Specifications: 249 |
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European Technical Specifications: 249

| | Acceptable means of compliance: 116 |
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Acceptable means of compliance: 116

| | Major changes: 693 |
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Major changes: 693

| | Minor changes: 2 369 |
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Minor changes: 2 369

| | Major repairs: 192 |
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Major repairs: 192

| | Minor repairs: 1 384 |
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Minor repairs: 1 384

| | AFM/RFM (= Flight Manual Revisions): 334 |
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AFM/RFM (= Flight Manual Revisions): 334

| | Approval of design organisations: 55 |
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Approval of design organisations: 55

| | Approval of maintenance organisations (bilateral): 85 |
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Approval of maintenance organisations (bilateral): 85

| | Approval of maintenance organisations (foreign): 113 |
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Approval of maintenance organisations (foreign): 113

| | Approval of maintenance training organisations: 11 |
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Approval of maintenance training organisations: 11

| | Approval of manufacturing organisations: 4 |
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Approval of manufacturing organisations: 4

Standardisation inspections (number of countries by type):

| | Approval of manufacturing organisations: 7 countries |
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Approval of manufacturing organisations: 7 countries

| | Approval of maintenance organisations: 19 countries |
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Approval of maintenance organisations: 19 countries

Source: Information supplied by the Agency.

EUROPEAN AVIATION SAFETY AGENCY

Source: Agency data — These tables summarise the data supplied by the Agency in its annual accounts.

Table 2

Implementation of the budget for the financial year 2005

| (1000 euro) |
| --- |
| Revenue | Expenditure |
| Origin of revenue | Revenue entered in the final budget for the financial year | Revenue collected | Allocation of expenditure | Final budget appropriations | Appropriations carried over from the previous financial year | Appropriations available
  (2005 and 2004) |
| entered | committed | paid | carried over | cancelled | outstanding commitments | paid | cancelled | appropriations | committed | paid | carried over | cancelled |
| Community subsidies | 22 138 | 18 930 | Title I
  Staff | 16 192 | 13 968 | 13 754 | 214 | 2 224 | 314 | 212 | 102 | 16 506 | 14 282 | 13 966 | 214 | 2 326 |
| Own revenue | 8 000 | 8 569 | Title II
  Administration | 3 691 | 3 428 | 2 646 | 782 | 263 | 810 | 732 | 78 | 4 501 | 4 238 | 3 378 | 782 | 341 |
| Other revenue | 1 443 | 1 472 | Title III
  Operating activities | | | | | | | | | | | | | |
| CA | 20 098 | 13 865 | 0 | 0 | 6 233 | 0 | 0 | 0 | 20 098 | 13 865 | 0 | 0 | 6 233 |
| PA | 11 698 | 0 | 4 656 | 5 611 | 1 431 | 264 | 237 | 27 | 11 962 | 0 | 4 893 | 5 611 | 1 458 |
| Total | 31 581 | 28 971 | Total CA | 39 981 | 31 261 | 0 | 996 | 8 720 | 1 124 | 944 | 180 | 41 105 | 32 385 | 0 | 996 | 8 900 |
| Total PA | 31 581 | 0 | 21 056 | 6 607 | 3 918 | 1 388 | 1 181 | 207 | 32 969 | 0 | 22 237 | 6 607 | 4 125 |
| CA: commitment appropriations, PA: payment appopriations. |

(1000 euro)

Revenue

Expenditure

Origin of revenue

Revenue entered in the final budget for the financial year

Revenue collected

Allocation of expenditure

Final budget appropriations

Appropriations carried over from the previous financial year

Appropriations available

(2005 and 2004)

entered

committed

paid

carried over

cancelled

outstanding commitments

paid

cancelled

appropriations

committed

paid

carried over

cancelled

Community subsidies

22 138

18 930

Title I

Staff

16 192

13 968

13 754

214

2 224

314

212

102

16 506

14 282

13 966

214

2 326

Own revenue

8 000

8 569

Title II

Administration

3 691

3 428

2 646

782

263

810

732

78

4 501

4 238

3 378

782

341

Other revenue

1 443

1 472

Title III

Operating activities

CA

20 098

13 865

0

0

6 233

0

0

0

20 098

13 865

0

0

6 233

PA

11 698

0

4 656

5 611

1 431

264

237

27

11 962

0

4 893

5 611

1 458

Total

31 581

28 971

Total CA

39 981

31 261

0

996

8 720

1 124

944

180

41 105

32 385

0

996

8 900

Total PA

31 581

0

21 056

6 607

3 918

1 388

1 181

207

32 969

0

22 237

6 607

4 125

CA: commitment appropriations, PA: payment appopriations.

Table 3

Revenue and expenditure account for the financial years 2005 and 2004

| (1000 euro) |
| --- |
| | 2005 | 2004 |
| Operating revenue |
| Community subsidies | 17 416 | 7 777 |
| Other subsidies/revenue | 13 053 | 601 |
| Total (a) | 30 469 | 8 378 |
| Operating expenditure |
| Staff | 13 636 | 5 557 |
| Administration | 4 016 | 1 521 |
| Operations | 11 660 | 2 081 |
| Total (b) | 29 312 | 9 159 |
| Operating result (c = a — b) | 1 157 | – 781 |
| Other income (d) | 41 | 0 |
| Other charges (e) | –14 | –1 |
| Economic result (f = c + d + e) | 1 184 | – 782 |

(1000 euro)

2005

2004

Operating revenue

Community subsidies

17 416

7 777

Other subsidies/revenue

13 053

601

Total (a)

30 469

8 378

Operating expenditure

Staff

13 636

5 557

Administration

4 016

1 521

Operations

11 660

2 081

Total (b)

29 312

9 159

Operating result (c = a — b)

1 157

– 781

Other income (d)

41

0

Other charges (e)

–14

–1

Economic result (f = c + d + e)

1 184

– 782

Table 4

Balance sheet as at 31 December 2005 and 31 December 2004

| (1000 euro) |
| --- |
| | 2005 | 2004 |
| Assets |
| Tangible assets | 1 531 | 991 |
| Current assets | 8 816 | 329 |
| Cash | 11 746 | 4 978 |
| Total | 22 093 | 6 298 |
| Liabilities |
| Total outturns for previous financial years | 1 845 | 2 627 |
| Outturn for the year | 1 184 | – 782 |
| Current liabilities | 19 064 | 4 453 |
| Total | 22 093 | 6 298 |

(1000 euro)

2005

2004

Assets

Tangible assets

1 531

991

Current assets

8 816

329

Cash

11 746

4 978

Total

22 093

6 298

Liabilities

Total outturns for previous financial years

1 845

2 627

Outturn for the year

1 184

– 782

Current liabilities

19 064

4 453

Total

22 093

6 298

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THE AGENCY'S REPLIES

| 7. | The utilisation of commitment appropriations was less than forecast due to recruitment difficulties. The low rate of implementation of payment appropriations for operational activities is due essentially to the fact that the national authorities did not invoice the Agency during the first year of the implementation of Commission Regulation (EC) No 488/2005. |
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7.

The utilisation of commitment appropriations was less than forecast due to recruitment difficulties. The low rate of implementation of payment appropriations for operational activities is due essentially to the fact that the national authorities did not invoice the Agency during the first year of the implementation of Commission Regulation (EC) No 488/2005.

| 8. | The sum of EUR 1,2 million had been erroneously entered under normal appropriations and had to be transferred under assigned revenue appropriations. The Agency will ensure that the Management Board is informed of any future changes made to the budget. |
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8.

The sum of EUR 1,2 million had been erroneously entered under normal appropriations and had to be transferred under assigned revenue appropriations. The Agency will ensure that the Management Board is informed of any future changes made to the budget.

| 9. | In 2006 the Agency introduced an integrated management project for certification activities, including a detailed monitoring of the Agency's activities as well as the adaptation of the financial system to allow the drawing up of analytical accounts. This project is expected to be operational as of 2008. In the meantime, the Agency is endeavouring to establish a closer link between its budget and its operational objectives and, in this connection, the 2007 budget will be presented by activities. |
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9.

In 2006 the Agency introduced an integrated management project for certification activities, including a detailed monitoring of the Agency's activities as well as the adaptation of the financial system to allow the drawing up of analytical accounts. This project is expected to be operational as of 2008. In the meantime, the Agency is endeavouring to establish a closer link between its budget and its operational objectives and, in this connection, the 2007 budget will be presented by activities.

| 10. | On 2 June 2006, the Management Board adopted internal-control standards based on the standards applied by the Commission and on the ISO 9000 standards. A quality assurance programme aimed at implementing these standards was launched in March 2006. The description of systems and procedures and the risk analysis will be developed in this context. The anomaly raised by the Court concerning the separation of functions has been corrected. The implementation in 2006 of computer links between the operational and financial systems should improve the quality assurance of the financial information submitted by the authorising officers to the accounting officer. The current recasting of Commission Regulation (EC) No 488/2005 on fees and charges will enable the Agency to cover the costs of certification activities. |
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10.

On 2 June 2006, the Management Board adopted internal-control standards based on the standards applied by the Commission and on the ISO 9000 standards. A quality assurance programme aimed at implementing these standards was launched in March 2006. The description of systems and procedures and the risk analysis will be developed in this context. The anomaly raised by the Court concerning the separation of functions has been corrected. The implementation in 2006 of computer links between the operational and financial systems should improve the quality assurance of the financial information submitted by the authorising officers to the accounting officer. The current recasting of Commission Regulation (EC) No 488/2005 on fees and charges will enable the Agency to cover the costs of certification activities.

| 11. | Over the first months following its transfer to Cologne in November 2004, the Agency was unable to apply the normal purchasing procedures for goods and services due to the time limits and a human resources deficit. Since it has been in a position to set up a specialised purchasing unit, the regulatory processes have been applied. |
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11.

Over the first months following its transfer to Cologne in November 2004, the Agency was unable to apply the normal purchasing procedures for goods and services due to the time limits and a human resources deficit. Since it has been in a position to set up a specialised purchasing unit, the regulatory processes have been applied.

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