WRITTEN QUESTION E-1618/02

by Gabriele Stauner (PPE-DE) to the Commission

(6 June 2002)

Subject: Shortcomings in the Commission's accounting system

At the end of May, the Commission removed its new Accounting Officer from her post after not even five months in office. She was demoted because she had dared to criticise the changes to the Financial Regulation currently being made by the Commission and to point out that they would increase the risk of fraud and irregularities.

The Accounting Officer had also drawn attention to the shortcomings and risks associated with Sincom2, the Commission's present accounting system. Although the Commission has apparently been aware of these problems for some years now, no start on any changes thereto has been made.

With regard to Sincom2, can the Commission confirm that:

1. After migration to this system, information was lost with the result that, in the research sector, for example, it is, in many cases, no longer possible to find out exactly how much the Commission disbursed on particular projects?

2. The system is so insecure that data from financial years in respect of which the accounts have already been closed can be manipulated at a later date, for example in order to cover up mistakes and inconsistencies?

3. The Commissioner with special responsibility for the budget has deliberately delayed an audit of the accounting system by the Commission's Internal Audit Service?

Can the Commission state whether the Director-General responsible for the budget has correctly described the problems and risks associated with Sincom2 in the annual Statement of Assurance for his Directorate-General and, if this is the case, provide me with a copy of the passages concerned?

Answer giving by Mrs Schreyer on behalf of the Commission

(23 September 2002)

The Commission welcomes the adoption by the Council of the recast Financial Regulation on 25 June 2002 after the Parliament and the Court of Auditors had provided helpful amendments.

The Budgetary Control Committee of the European Parliament included the matter on its agenda on twelve occasions and the Budgets Committee of the Parliament deliberated on the matter at fifteen meetings. Parliament's plenary considered and voted on three occasions. The position of Parliament is documented in the Minutes of the Sittings of 31 May 2001, 29 November 2001 and 12 June 2002.

The recast Financial Regulation forms the cornerstone for improved financial management in the European institutions, setting out clearly the budget principles, the rules on implementation and attributing clear lines of responsibility for financial actors, including the accounting officer. Title VII sets out the rules for the presentation of the accounts and accounting and is based on modern practice. It is requiring the Commission to reform its accounting system once more, which it is currently doing.

1. The Commission changed its accounting system in 1997 for the Joint Research Centre (JRC), and in 1998 for the remaining part of the research sector. Only the operations not yet closed were transferred to the new accounting system.

Nevertheless, to avoid the loss of financial data, the following actions were taken:

- the historical data for the research sector (except the Joint Research Centre), i.e. all the payments realised for each commitment, have been put into the Datawarehouse of Sincom 2 (the new accounting system). The historical data may be consulted using this database.

- as for the Joint Research Centre, historical data have not been completely integrated into the Datawarehouse of Sincom2. Only the required data for the establishment of the financial statements have been transferred. Nevertheless, all the historical data were copied in a database (DATA POOL), and are thus available for consultation.

Consequently, all the payments made for each commitment can be known through these databases.

2. With regard to the security of the system, the Commission points out that security exists within the system to ensure that data from closed financial years cannot be manipulated at a later date. Access to closed financial years is blocked.

If a final version of the financial situation has to be established in order to take into consideration (non-budgetary) information on financial data only known after the closure, the accountant registers the necessary accounting entries in the accounting system. This guarantees the exhaustiveness of the accounts, foreseen in the accounting standards and required by the Court of Auditors.

3. The Internal Audit Service (IAS) prepared a draft work plan which proposed an audit with the aim of obtaining an overview of the functional effectiveness of Sincom and local systems. The APC (Audit Progress Committee) pointed out during its meeting in December 2000 that there was a risk of overlap with audits planned or ongoing by the Court of Auditors. In its up-dated work plan the IAS proposed that the audit of Sincom and the linked local information technology (IT) systems might reasonably form part of the up-coming management and control systems review stipulated in Action 87 (phase 2) of the Reform White Paper. The IAS started a separate audit of the accounting practices and procedures in April 2001. The forward audit plan of the IAS for 2002 included an audit of the Sincom2 computerised financial management and accounting system. The start of the audit was announced by the IAS in a letter to Directors General and heads of service in March 2002 and it has now started.

4. The Commission's central financial management and accounting needs are provided for by a central computer application SINCOM 2. This was introduced for the first time in 1997 and extended to all Commission services in 1999. Work is ongoing to identify and address problems, which occur. The problems are also addressed in the DG Budget working paper of June 2001, which is published on the DG Budget website.

This working paper was the basis for the expected work of the new accounting officer to prepare for March 2002 a memorandum to the Commission on the modernisation of the accounting system. As the accounting officer prepared no adequate document at that time, the memorandum was postponed to the end of July 2002.

The Director General of DG Budget has reflected the problems and risks associated with Sincom2 in his annual Statement of Assurance. This declaration included a reservation concerning Sincom2. The individual annual activity reports of the Commission Directorates General, along with a summary report, will be sent by the Commission to the other Institutions.