# C_2010308EN.01012901.xml

| 12.11.2010 | EN | Official Journal of the European Union | C 308/129 |
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12.11.2010

EN

Official Journal of the European Union

C 308/129

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THE COURT’S STATEMENT OF ASSURANCE PROVIDED TO THE EUROPEAN PARLIAMENT AND THE COUNCIL — INDEPENDENT AUDITOR’S REPORT

2010/C 308/02

| I. | Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU) the Court has audited






  (a) | the ‘Annual Accounts of the European Union’ which comprise the ‘Consolidated financial statements’ (1) and the ‘Consolidated reports on implementation of the budget’ (2) for the financial year ended 31 December 2009; and |
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I.

Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union (TFEU) the Court has audited

(a)

the ‘Annual Accounts of the European Union’ which comprise the ‘Consolidated financial statements’ (1) and the ‘Consolidated reports on implementation of the budget’ (2) for the financial year ended 31 December 2009; and

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| (b) | the legality and regularity of the transactions underlying those accounts. |
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(b)

the legality and regularity of the transactions underlying those accounts.

Management’s responsibility

Management’s responsibility

| II. | In accordance with Articles 310 to 325 of the TFEU and the Financial Regulation, management (3) is responsible for the preparation and fair presentation of the ‘Annual Accounts of the European Union’ and the legality and regularity of the transactions underlying them:






  (a) | Management’s responsibility in respect of the ‘Annual Accounts of the European Union’ includes: designing, implementing and maintaining 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, on the basis of the accounting rules adopted by the Commission’s accounting officer (4); and making accounting estimates that are reasonable in the circumstances. According to Article 129 of the Financial Regulation, the Commission approves the ‘Annual Accounts of the European Union’ after the Commission’s accounting officer has consolidated them on the basis of the information presented by the other institutions (5) and bodies (6) and established a note, accompanying the consolidated accounts, declaring, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the European Union in all material aspects. |
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II.

In accordance with Articles 310 to 325 of the TFEU and the Financial Regulation, management (3) is responsible for the preparation and fair presentation of the ‘Annual Accounts of the European Union’ and the legality and regularity of the transactions underlying them:

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(a)

Management’s responsibility in respect of the ‘Annual Accounts of the European Union’ includes: designing, implementing and maintaining 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, on the basis of the accounting rules adopted by the Commission’s accounting officer (4); and making accounting estimates that are reasonable in the circumstances. According to Article 129 of the Financial Regulation, the Commission approves the ‘Annual Accounts of the European Union’ after the Commission’s accounting officer has consolidated them on the basis of the information presented by the other institutions (5) and bodies (6) and established a note, accompanying the consolidated accounts, declaring, inter alia, that he has reasonable assurance that they present a true and fair view of the financial position of the European Union in all material aspects.

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| (b) | The way in which management exercises its responsibility for ensuring the legality and regularity of underlying transactions depends on the method of implementation of the budget. In the case of direct centralised management, implementation tasks are performed by the Commission’s departments. Under shared management, implementation tasks are delegated to Member States, under decentralised management to third countries and under indirect centralised management to other bodies. In the case of joint management, implementation tasks are shared between the Commission and international organisations (Article 53 to 57 of the Financial Regulation). Implementation tasks have to comply with the principle of sound financial management, requiring designing, implementing and maintaining effective and efficient internal control including adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. Regardless of the method of implementation applied, the Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Union (Article 317 of the TFEU). |
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(b)

The way in which management exercises its responsibility for ensuring the legality and regularity of underlying transactions depends on the method of implementation of the budget. In the case of direct centralised management, implementation tasks are performed by the Commission’s departments. Under shared management, implementation tasks are delegated to Member States, under decentralised management to third countries and under indirect centralised management to other bodies. In the case of joint management, implementation tasks are shared between the Commission and international organisations (Article 53 to 57 of the Financial Regulation). Implementation tasks have to comply with the principle of sound financial management, requiring designing, implementing and maintaining effective and efficient internal control including adequate supervision and appropriate measures to prevent irregularities and fraud and, if necessary, legal proceedings to recover funds wrongly paid or used. Regardless of the method of implementation applied, the Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Union (Article 317 of the TFEU).

Auditor’s responsibility

Auditor’s responsibility

| III. | The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council with a statement of assurance as to the reliability of the accounts and the regularity of the transactions. The Court conducted its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions, in so far as these are applicable in the European Union context. These standards require that the Court plans and performs the audit to obtain reasonable assurance whether the ‘Annual Accounts of the European Union’ are free from material misstatement and the transactions underlying them are legal and regular. |
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III.

The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council with a statement of assurance as to the reliability of the accounts and the regularity of the transactions. The Court conducted its audit in accordance with the IFAC International Standards on Auditing and Codes of Ethics and the INTOSAI International Standards of Supreme Audit Institutions, in so far as these are applicable in the European Union context. These standards require that the Court plans and performs the audit to obtain reasonable assurance whether the ‘Annual Accounts of the European Union’ are free from material misstatement and the transactions underlying them are legal and regular.

| IV. | An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and the legality and the regularity of the transactions underlying them. The procedures are selected based on the auditor’s judgment, including an assessment of the risks of material misstatement of the consolidated accounts and of material non-compliance of the underlying transactions with the requirements of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal control relevant to the preparation and fair presentation of the consolidated accounts, and supervisory and control systems implemented to ensure legality and regularity of underlying transactions, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated accounts and the annual activity reports. |
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IV.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts and the legality and the regularity of the transactions underlying them. The procedures are selected based on the auditor’s judgment, including an assessment of the risks of material misstatement of the consolidated accounts and of material non-compliance of the underlying transactions with the requirements of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal control relevant to the preparation and fair presentation of the consolidated accounts, and supervisory and control systems implemented to ensure legality and regularity of underlying transactions, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated accounts and the annual activity reports.

| V. | In the context of ‘Revenue’, the Court’s audit of Value Added Tax- and Gross National Income-based own resources takes as its starting point the receipt by the Commission of the macroeconomic aggregates prepared by the Member States, and then assesses the Commission’s systems for processing the data until they are included in the final accounts and the contributions by the Member States have been received. For traditional own resources, the Court examines the accounts of the customs authorities and analyses the flow of duties under custom surveillance until the amounts are recorded in the final accounts and received by the Commission. |
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V.

In the context of ‘Revenue’, the Court’s audit of Value Added Tax- and Gross National Income-based own resources takes as its starting point the receipt by the Commission of the macroeconomic aggregates prepared by the Member States, and then assesses the Commission’s systems for processing the data until they are included in the final accounts and the contributions by the Member States have been received. For traditional own resources, the Court examines the accounts of the customs authorities and analyses the flow of duties under custom surveillance until the amounts are recorded in the final accounts and received by the Commission.

| VI. | The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance. |
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VI.

The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for its statement of assurance.

Opinion on the reliability of the accounts

Opinion on the reliability of the accounts

| VII. | In the Court’s opinion, the ‘Annual Accounts of the European Union’ present fairly, in all material respects (7), the financial position of the Union as of 31 December 2009, and the results of their operations and cash flows for the year then ended, in accordance with the provisions of the Financial Regulation and the accounting rules adopted by the Commission’s accounting officer. |
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VII.

In the Court’s opinion, the ‘Annual Accounts of the European Union’ present fairly, in all material respects (7), the financial position of the Union as of 31 December 2009, and the results of their operations and cash flows for the year then ended, in accordance with the provisions of the Financial Regulation and the accounting rules adopted by the Commission’s accounting officer.

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| VIII. | Without calling into question the opinion expressed in paragraph VII, the Court notes that weaknesses in the accounting systems of certain Directorates-General of the Commission (in particular accounting for pre-financing and the related cut-off as well as for invoices/cost claims) still need to be resolved. |
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VIII.

Without calling into question the opinion expressed in paragraph VII, the Court notes that weaknesses in the accounting systems of certain Directorates-General of the Commission (in particular accounting for pre-financing and the related cut-off as well as for invoices/cost claims) still need to be resolved.

Opinion on the legality and regularity of the transactions underlying the accounts

Opinion on the legality and regularity of the transactions underlying the accounts

| IX. | In the Court’s opinion, ‘Revenue’, commitments for all policy groups and payments underlying the accounts for the policy groups ‘Economic and financial affairs’ and ‘Administrative and other expenditure’ for the year ended 31 December 2009 in all material respects are legal and regular. |
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IX.

In the Court’s opinion, ‘Revenue’, commitments for all policy groups and payments underlying the accounts for the policy groups ‘Economic and financial affairs’ and ‘Administrative and other expenditure’ for the year ended 31 December 2009 in all material respects are legal and regular.

| X. | In the Court’s opinion, payments underlying the accounts for the year ended 31 December 2009 for the policy groups ‘Agriculture and natural resources’, ‘Cohesion’, ‘Research, energy and transport’, ‘External Aid, development and enlargement’ and ‘Education and Citizenship’ are materially affected by error. The supervisory and control systems are partially effective in preventing or detecting and correcting the reimbursement of overstated or ineligible costs. |
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X.

In the Court’s opinion, payments underlying the accounts for the year ended 31 December 2009 for the policy groups ‘Agriculture and natural resources’, ‘Cohesion’, ‘Research, energy and transport’, ‘External Aid, development and enlargement’ and ‘Education and Citizenship’ are materially affected by error. The supervisory and control systems are partially effective in preventing or detecting and correcting the reimbursement of overstated or ineligible costs.

9 September 2010

Vítor Manuel da SILVA CALDEIRA

President

European Court of Auditors

12, rue Alcide De Gasperi, 1615 Luxembourg

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(1)  The ‘Consolidated Financial Statements’ comprise the balance sheet, the economic outturn account, the cash flow table, the statement of changes in net assets and a summary of significant accounting policies and other explanatory notes (including segment reporting).

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(2)  The ‘Consolidated Reports on Implementation of the Budget’ comprise the consolidated reports on implementation of the budget and a summary of budgetary principles and other explanatory notes.

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(3)  At the level of the European Institutions and bodies management includes the Members of the Institutions, Directors of the Agencies, Authorising Officers by delegation and sub-delegation, Accounting Officers and the leading staff of financial, audit or control units. At the level of Member and Beneficiary States, management includes Authorising Officers, Accounting Officers and the leading staff of paying authorities, certifying bodies and implementing agencies.

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(4)  The accounting rules adopted by the Commission’s accounting officer are derived from International Public Sector Accounting Standards (IPSAS) issued by the International Federation of Accountants or, in their absence, International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board. In accordance with the Financial Regulation, the ‘Consolidated Financial Statements’ for the 2009 financial year are prepared (as they have been since the 2005 financial year) on the basis of these accounting rules adopted by the Commission’s accounting officer, which adapt accruals based accounting principles to the specific environment of the European Union, while the ‘Consolidated Reports on Implementation of the Budget’ continue to be primarily based on cash movements.

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(5)  Before the adoption of the Annual Accounts by the institutions, the different accounting officers sign them off, thereby certifying that they have a reasonable assurance that the accounts present a true and fair view of the financial situation of the institution (Article 61 of the Financial Regulation).

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(6)  The Annual Accounts of the bodies are drawn up by the respective directors and sent to the Commission’s accounting officer together with the opinion of the management board concerned. In addition, the respective accounting officers sign them off, thereby certifying that they have a reasonable assurance that the accounts present a true and fair view of the financial situation of the bodies (Article 61 of the Financial Regulation).

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(7)  According to the International Standard on Auditing 700 ‘Forming an opinion and reporting on financial statements’ (ISA 700, paragraph 35), the terms ‘present fairly, in all material aspects’ or ‘give a true and fair view’ are equivalent.

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