EN Official Journal of the European Union C 388/208

REPORT

on the annual accounts of the European GNSS Agency for the financial year 2011, together with the Agency’s replies

2012/C 388/35

INTRODUCTION

1. The European GNSS (Global Navigation Satellite System) Agency (hereinafter "the Agency"), which is located in Brussels, was set up by Regulation (EU) No 912/2010 of the European Parliament and the Council (1), repealing Council Regulation (EC) No 1321/2004 (2) and amending Regulation (EC) 683/2008 (3), to manage the public interests relating to the European GNSS programmes and to act as the regulatory agency for the programme during the deployment and operational phases of the Galileo Programme. Regulation (EC) No 683/2008 of the European Parliament and the Council reduced the responsibilities of the Agency to the control of the security of Galileo systems and to the preparation of their commercialisation (4). According to Decision 2010/803/UE of the Member States (5), the Agency will be relocated to Prague as of 1 September 2012.

INFORMATION IN SUPPORT OF THE STATEMENT OF ASSURANCE

2. The audit approach taken by the Court comprises analytical audit procedures, direct testing of transactions and an assessment of key controls of the Agency’s supervisory and control systems. This is supplemented by evidence provided by the work of other auditors (where relevant) and an analysis of management representations.

STATEMENT OF ASSURANCE

3. Pursuant to the provisions of Article 287 of the Treaty on the Functioning of the European Union, the Court has audited the annual accounts (6) of the Agency, which comprise the “financial statements” (7) and the “reports on the implementation of the budget” (8) for the financial year ended 31 December 2011, and the legality and regularity of the transactions underlying those accounts.

The Management’s responsibility

4. As authorising officer, the Director implements the revenue and expenditure of the budget in accordance with the financial rules of the Agency, under his own responsibility and within the limits of the authorised appropriations (9). The Director is responsible for putting in place (10) the organisational structure and the internal management and control systems and procedures relevant for drawing up final accounts (11) that are free from material misstatement, whether due to fraud or error, and for ensuring that the transactions underlying those accounts are legal and regular.

The Auditor’s responsibility

5. The Court’s responsibility is to provide, on the basis of its audit, the European Parliament and the Council (12) with a statement of assurance as to the reliability of the annual accounts of the Agency and the legality and regularity of the transactions underlying them.

6. 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. These standards require that the Court plans and performs the audit to obtain reasonable assurance as to whether the annual accounts of the Agency are free of material misstatement and the transactions underlying them are legal and regular.

7. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the accounts and the legality and 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 accounts and of material non-compliance of the underlying transactions with the requirement of the legal framework of the European Union, whether due to fraud or error. In assessing those risks, the auditor considers internal controls relevant to the preparation and fair presentation of the 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 accounts.

8. The Court considers that the audit evidence obtained is sufficient and appropriate to provide a basis for the opinions set out below.

Opinion on the reliability of the accounts

9. In the Court’s opinion, the Agency’s Annual Accounts (13) fairly present, in all material respects, its financial position as of 31 December 2011 and the results of its operations and its cash flows for the year then ended, in accordance with the provisions of its Financial Regulation and the accounting rules adopted by the Commission’s accounting officer (14).

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

10. In the Court’s opinion, the transactions underlying the annual accounts of the Agency for the financial year ended 31 December 2011 are legal and regular in all material respects.

11. The comments which follow do not call the Court’s opinions into question.

COMMENTS ON KEY CONTROLS OF THE AGENCY’S SUPERVISORY AND CONTROL SYSTEMS

12. Ex-post audits carried-out for the Agency by an external audit firm in respect of grant payments made in previous years under the Sixth Framework Programme for Research and Development (FP6) (15) frequently called into question the declarations of cost made by the beneficiaries. At the end of 2011, the amounts in dispute were estimated at 1,7 million euro or 5 % of the audited grants.

13. In 2011, the Agency made grant payments under the Seventh Framework Programme for Research and Development (FP7) amounting to 5,8 million euro. In order to verify the expenditure claimed by the beneficiaries (private and public entities performing research), the Agency, although it performs reasonableness checks, does not usually request supporting documentation that would address the risk of ineligible expenditure.

14. In 2011, payments amounting to 4,8 million euro (22 % of the amounts paid during the year) were made after the deadlines stipulated in the Financial Regulation (16).

OTHER COMMENTS

15. The Court had qualified it's opinion on the reliability of the Agency’s 2010 accounts on the grounds of incorrect accounting treatment of tangible fixed assets related to the Galileo satellite programme (17). These assets were incorporated in two satellites that were launched in October 2011. On 27th September 2012 the Court received confirmation from DG ENTR that these assets are now under the control of the Commission and are not to be capitalised in the Agency’s accounts according to International accounting standards (18). The Court considers that there is no longer the basis for a qualification on such grounds for 2011.

16. As noted in the previous year’s report, the staff selection procedures audited showed that the threshold scores were not determined for admission to written tests and interviews or for inclusion in the list of suitable candidates. These practices jeopardised the transparency of the recruitment procedures.

This Report was adopted by Chamber IV, headed by Dr Louis GALEA, Member of the Court of Auditors, in Luxembourg at its meeting of 16 October 2012. For the Court of Auditors Vítor Manuel da SILVA CALDEIRA President

(1) OJ L 276, 20.10.2010, p. 11.

(2) OJ L 246, 20.7.2004, p. 1.

(3) OJ L 196, 24.7.2008, p. 1.

(4) The Annex summarises the Agency's competences and activities. It is presented for information purposes.

(5) OJ L 342, 28.12.2010, p. 15.

(6) These accounts are accompanied by a report on the budgetary and financial management during the year which gives further information on budget implementation and management.

(7) The financial statements include the balance sheet and the economic outturn account, the cash-flow table, the statement of changes in net assets and a summary of the significant accounting policies and other explanatory notes.

(8) The budget implementation reports comprise the budget outturn account and its annex.

(9) Article 33 of Commission Regulation (EC, Euratom) No 2343/2002 (OJ L 357, 31.12.2002, p. 72).

(10) Article 38 of Regulation (EC, Euratom) No 2343/2002.

(11) The rules concerning the presentation of the accounts and accounting by the Agencies are laid down in Chapters 1 and 2 of Title VII of Regulation (EC, Euratom) No 2343/2002 as last amended by Regulation (EC, Euratom) No 652/2008 (OJ L 181, 10.7.2008, p. 23) and are integrated as such in the Financial Regulation of the Agency.

(12) Article 185(2) of Council Regulation (EC, Euratom) No 1605/2002 (OJ L 248, 16.9.2002, p. 1).

(13) The Final Annual Accounts were drawn up on 15 June 2012 and received by the Court on 29 June 2012. The Final Annual Accounts, consolidated with those of the Commission, are published in the Official Journal of the European Union by 15 November of the following year. They can be found on the following website http://eca.europa.eu or http://gsa.europa.eu/

(14) 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.

(15) The audited grants account for 50 % of all FP6 grants under the Second and Third Calls (65,3 million euro).

(16) Approximately 9 days’ delay on average.

(17) Regulation (EC) No 683/2008 on the further implementation of European satellite navigation programmes (EGNOS and Galileo).

(18) IPSAS accounting rule No 1.

ANNEX European GNSS Agency (Brussels) Competences and activities Areas of Union competence deriving from the Treaty — Competitiveness for growth and employment The Agency’s powers (Regulation (EU) No 912/2010 of the European Parliament and of the Council of 22 September 2010) Objectives — to contribute to the achievement of fully operational European satellite navigation systems established under the EGNOS and Galileo programmes Tasks — to ensure security accreditation and operation of the Galileo security centres; — to guarantee the operations of the Galileo Security Monitoring Centres (GSMC); — to contribute to the preparation of the commercialisation of the systems, including the necessary market analysis; — to accomplish other tasks that may be entrusted to it by the Commission, such as promoting application and services in the satellite navigation market, ensuring that the components of the system are certified by the appropriate, duly authorised certification bodies. Governance Administrative Board Composition: — one representative per Member State; — five representatives from the Commission; — a non-voting representative of the European Parliament; — one representative of the HR and ESA each to be invited as observers. Tasks: — appoints the Executive Director (ED); — adopts the annual work programme; — produces a statement of estimates of revenue and expenditure; — adopts the budget; — delivers an opinion on the final accounts of the Agency; — oversees the operation of the Galileo Security Monitoring Centre; — exercises disciplinary power over the ED; — adopts the special provisions necessary for implementing right of access to documents; — adopts the annual report on the activities and prospects of the Authority. Executive Director Appointed by the Administrative Board. Security Accreditation Board Composition: — one representative per Member State; — one representative from the Commission; — one representative from the HR; — one representative of ESA to be invited as observer. Tasks: To act as the security accreditation authority; External audit Court of Auditors. Discharge Authority Parliament, acting on a recommendation from the Council. Resources made available to the Agency in 2011 (2010) Final Budget 38,7 (15,9) million euro consisting of the EU subsidy of 8,2 (8,7) million euro, which is the operating subsidy from the Commission, and 30,5 (7,2) million euro in operational funds from the Commission. Staff as at 31 December 2011 Authorised: 29 (28) Occupied: 28 (26) Other posts: 14 (14) Total: 42 (40), assigned to the following duties: Allocated to: — operational tasks: 20 (18) — administrative and support tasks: 14 (14) — mixed tasks: 8 (8) Products and services 2011 Programmes Support to the European Commission in the implementation of the EGNOS and Galileo programmes. Systems Security Galileo and EGNOS Systems Security (Galileo Security Accreditation, System Safety and Security Committee – 3SC, GNSS Security Requirements, EGNOS Security); Public Regulated Service – PRS (Preparation of the PRS User Segment); Galileo Security Monitoring Centre – GSMC; GNSS Technology Control Regime. Market development EGNOS Market Entry (Aviation, Agriculture, Road, EDAS, Market Monitoring); International activities (Latin America, Israel, China, Africa); Information and Outreach (EGNOS Information Portal). Research and development Management of projects under the 6th Framework Programme and 7th Framework Programme (1st, 2nd and 3d calls) for research; Implementation/update of a web-based knowledge management and dissemination tool. Source: Information supplied by the Agency.