ACTION PLAN - Commission Action Plan to follow up the recommendations of the Court of Auditors in its Annual Report relating to the 2002 budgetary year

INTRODUCTION

The White Paper on Reform [1] highlighted the need to make financial actors accountable and responsible in order to increase the effectiveness of Commission activities.

[1] COM(2000)200, 1 March 2000.

The Commission announced that it would present an Action Plan as part of the 2001 discharge. The purpose of this document is to indicate the corrective measures required to follow up the recommendations of the Court of Auditors as well as the impact expected from these measures.

This Action Plan is based on the Commission's replies to the Annual Report of the Court of Auditors relating to the 2002 financial year, with updates and additional information provided by the Commission's departments. It examines the measures to be implemented sector by sector to improve the Commission's financial management and thus obtain a satisfactory statement of assurance (DAS).

The Annual Report is a first step in the discharge procedure. The Commission's replies to the Court's observations are thus of particular importance for the discharge procedure. The commitments made or announced, grouped by sector of expenditure in this Action Plan, all aim to improve financial management.

As regards improvement of the reliability of the accounts, the Commission has established an Accounting Standards Committee which is examining, among other things, the issues of defining the generating event giving rise to accounting entries in a way which allows it to maintain control over the process and of defining without ambiguity a recording base which remains comparable over the years. The Commission is also improving its mechanism for the identification and recovery of debts and has undertaken a review of all commitment balances which have remained open for an extended period in order to identify overdue payments. It will assure accounting controls over prefinancing which will help authorising departments identify items for which justification is overdue. It has set up a system of regular reporting to authorising departments of forecasts of revenue and of recovery orders which are overdue. This reporting mechanism will be further improved. As for debt claims in the field of external actions, an accounting standard for prefinancing payments is being prepared. The Commission is following very closely the implementation of the reforms which it is undertaking, notably as regards the implementation of internal control standards.

As regards budget implementation, the Commission is endeavouring to ensure realistic budgeting of payment appropriations. By continuing to put the emphasis on the budget implementation plan relating to the current financial year, including follow-up, review and revision in the course of the budgetary decision-making procedure, it expects a gradual improvement of the budget forecasts for the PDB. This also includes an assessment of whether low spending in the past should lead to lower budgeting (or the reverse).

The Commission shares fully the Court's concern regarding the importance of improving the quality of Member States' forecasts. Each year it draws up a widely distributed report on the subject. The Commission will continue its cooperation with the Member States to improve the quality of forecast.

In the field of own resources, the Commission undertakes to deal with every irregularity identified by the Court. The changeover to electronic transmission of statements and accompanying documents since 2001, and the regular discussions on the method held within ACOR, have contributed to increasing standardisation and transparency. The Commission will continue to consider the extent to which standardisation and transparency can be increased further.

As regards GNP, the checks carried out by the Commission are based on a full analysis of the procedures implemented by the Member States to establish their GNP, using inventories of sources and methods which themselves are the subject of in-depth analyses by the Commission and which are examined during missions to the countries concerned. The Commission is willing to examine the possibility of more direct checks in future.

As regards the common agricultural policy, the 2003 CAP reform proposal addresses many of the Court's recommendations. On export refunds, the Commission has already taken several measures. Five regulations were adopted to address the main weaknesses concerning the prefinancing regime. Concerning the way it sets export refunds, the Commission has introduced a comprehensive action plan covering horizontal issues. The improvements concern the Commission's decision-making procedures. The Commission will also assess the market organisation for beef in 2004/2005 and will analyse the impact of the various instruments available in this sector.

For structural operations, the systems of fundamental importance in ensuring the supervision and control over the implementation of the Community budget for structural actions are those governing the areas of shared management with the Member States. For the closure of 1994-99 interventions the Commission is obtaining assurance on the regularity of expenditure from its already completed audit work and from the desk checks being undertaken on closure statements. It will verify the reliability of the closure process in Member States by audits of a sample of programmes and will draw the necessary financial consequences where appropriate by making recoveries from Member States. Concerning the current 2000-2006 period, from the work the Commission has carried out it has been able to conclude that Member States have in general made significant steps in improving their systems. However, further improvements are necessary, and the effective functioning of the systems should be regularly verified. The Commission will pursue its audit strategy to achieve this aim. For both programming periods the Commission is continuing to follow up the Court's findings made in previous DAS exercises in the light of the Member States' replies and further audits in some cases, and will take corrective action where appropriate. Similar follow-up will be given to the Court's findings in the 2002 DAS. The Commission is pursuing improvements in the management of the Cohesion Fund and has stepped up its own audit activity in this area. It will take account of the Court's views in the regulatory framework for the post-2006 period.

In the area of internal policy in general and more particularly in the area of research, the Commission welcomes the Court's recommendations. These are the subject of action plans drawn up on the basis of its own observations. The implementation of internal control systems as part of the reform is being followed up particularly closely, and the strengthening of checks on beneficiaries is continuing within the framework of a coordinated action for research consecutive on Action 1 of the 2001 summary report of the annual activity reports.

As regards external actions, the establishment of a methodological framework and of an audit strategy will be continued in 2004 within the 2004 annual audit plan. Priority will be given to fine-tuning a risk assessment model, setting up a clear organisational framework for audit-related tasks at headquarters and in delegations, completing the audit-related information system, and training. Moreover, instructions are being drafted in order to improve the quality and content of reports by Delegations and Directorates on the management of external assistance. Regarding enlargement, the Court's audit of external actions in 2002 focused essentially on the evaluation of the supervisory systems and controls put in place in the Commission. The Commission has already taken steps in 2003 with a view to meeting the Court's concerns. Other improvements recommended by the Court are in progress.

For administrative expenditure, after carrying out its Internal Control and Risk Self-Assessment, the Commission has analysed the risks and weaknesses of the internal control system and adopted an action plan for its further improvement. In the course of 2003, the existing software application (VAP) will be gradually replaced by a new system (NAP) which will interface directly with Sysper. The recommendations of the Court regarding surveillance systems have been taken on board. An evaluation report on the management of leave and absence already produced will be discussed by management so as to identify the necessary measures to be taken. As regards financial instruments, in the area of banking activities, the Commission has established an internal control and management system designed to confront the particular questions that are specific to that area. The data on EIB lending covered by the Community guarantee are supplied to the Commission by the EIB's accounting service which is itself subject to audit. Nevertheless, the Commission will examine with the EIB whether, and in what way, further assurance may be given on the reliability of the data. Concerning other third parties such as the EBRD and Council of Europe Development Bank, the Commission considers that the risk concerning the quality and exhaustiveness of the information supplied by them is relatively low.

The forthcoming internal audit of the banking operations under the direct responsibility of the Commission will address the need for any changes in the control environment, including ex post controls. In cooperation with the EIB, the Commission will seek to address the Court's observations with regard to the EEA Financial Mechanism.

For the EDF, the Commission continues its efforts to meet the recommendations regarding the reinforcement of internal controls, the various aspects of financial management of the EDF highlighted in the Court's Annual Report, such as the speed of closure of dormant commitments, the better identification of budgetary support measures in EDF accounts, and the inclusion of the EDF in the modernisation of the Accounting System of the Commission. A Communication on the inclusion of the EDF in the EU budget was presented in October 2003.

Regarding the ECSC, the Commission will study the possibility of setting up in the field of revenue from research, an inventory of patents filed by firms and research institutes which have received ECSC funding.

CONTENTS

ACTIONS RESULTING FROM THE DAS FOR 2001 (19 Recommendations)

BUDGET IMPLEMENTATION (6 Recommendations)

OWN RESOURCES (6 Recommendations)

COMMON AGRICULTURAL POLICY (15 Recommendations)

STRUCTURAL OPERATIONS (23 Recommendations)

INTERNAL POLICIES (13 Recommendations)

EXTERNAL ACTIONS (16 Recommendations)

ENLARGEMENT (21 Recommendations)

ADMINISTRATIVE EXPENDITURE (6 Recommendations)

FINANCIAL INSTRUMENTS (11 Recommendations)

EUROPEAN DEVELOPMENT FUND (EDF) (8 Recommendations)

EUROPEAN COAL AND STEEL COMMUNITY (ECSC) (2 Recommendations)

TOTAL 147 Recommendations

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