Report by the external auditor on the Court of Auditors' accounts for the financial year 1997
Date: 1998-08-06
Institutions: European Court of Auditors
Subjects: European Court of Auditors, auditing, budgetary control, financial year, report, self-employed person

15.10.98

EN

Official  Journal  of  the  European  Communities

C 318/1

I

(Information)

COURT  OF  AUDITORS

REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS’ ACCOUNTS
FOR  THE  FINANCIAL  YEAR  1997

(98/C 318/01)

NOTE  TO  READERS

Without  prejudice  to  the  provisions  of  Article  188c  of  the  Treaty  establishing  the  European
Community,  which  gave  the  Court  of  Auditors  responsibility  for  auditing  all  of  the
Community’s  revenue  and  expenditure,  and  the  provisions  of  Article  206  of  the  Treaty  on  the
granting  of  the  discharge,  the  Court  of  Auditors  has  had  its  revenue  and  expenditure  accounts
audited  by  an  external  auditor  every  year  since  the  close  of  the  financial  year  1987.

The  reports  that  the  external  auditor  of  the  Court  of  Auditors  has  drawn  up  in  respect  of  the
Court’s  accounts  for  the  financial  years  1987  to  1991  were  sent  only  to  the  Chairman  of  the
European  Parliament’s  Budgetary  Accounts  Committee.

Pursuant to a decision taken by the Members of the Court of Auditors at the Court meeting of
8  July  1993,  the  external  auditor’s  reports  have  been  published  in  the  Official  Journal  of  the
European  Communities,  starting  with  the  report  on  the  financial  year  1992.

The  financial  statements  annexed  to  the  enclosed  report  are  based  on  the  accounting  data  that
the Court of Auditors sent to the Commission so that the revenue and expenditure account and
the  financial  balance  sheet  of  the  European  Communities  could  be  drawn  up  for  the  financial
year 1997. These accounting data may be supplied to anyone who submits a written request to
the  External  Relations  Department  of  the  Court  of  Auditors.

For  the  Court  of  Auditors

Bernhard  FRIEDMANN

President

C 318/2

EN

Official  Journal  of  the  European  Communities

15.10.98

Certificate  concerning  the  regularity  and  fairness  of  the  financial  statements
at  31  December  1997

To  the  Members  of  the
European  Court  of  Auditors

In  accordance  with  the  instructions  given  to  us  by  the  European  Court  of  Auditors,  we  have
examined:

— the  accounting  data  sent  by  the  European  Court  of  Auditors  to  the  Commission  for  the
purpose  of  drawing  up  the  revenue  and  expenditure  account  and  balance  sheet  of  the
European  Communities  for  the  financial  year  1997,

— the financial statements of the European Court of Auditors as at 31 December 1997, which
were  drawn  up  on  the  basis  of  the  same  accounting  data  and  prepared  for  the  purpose  of
publication  in  the  Official  Journal  of  the  European  Communities.

The  accounting  data  and  the  financial  statements  are  the  responsibility  of  the  European  Court
of Auditors. Our responsibility is, on the basis of our audit work, to express an opinion on the
accounting  data  and  the  financial  statements.

We  have  conducted  our  work  in  accordance  with  international  auditing  standards.  These
standards  require  us  to  plan  and  carry  out  our  work  in  such  a  way  as  to  obtain  reasonable
assurance  that  the  accounting  data  and  financial  statements  do  not  contain  any  material
misstatement.  As  required,  the  audit  included  examination,  on  the  basis  of  a  sample,  of  the
evidence  in  support  of  the  amounts  and  information  contained  in  the  accounting  data  and
financial statements. It also included appraisal of the accounting principles and practices applied
and  of  the  significant  estimates  used  by  the  European  Court  of  Auditors  in  drawing  up  the
accounts,  as  well  as  a  review  of  their  overall  presentation.  We  think  that  the  audit  provided  a
reasonable  basis  for  the  opinion  expressed.

In our opinion, the enclosed accounting data and financial statements give a true and fair view,
in  accordance  with  the  Financial  Regulation,  the  implementing  rules,  generally  accepted
accounting principles and the European Court of Auditors’ rules of procedure, of the assets and
financial  position  of  the  European  Court  of  Auditors  at  31  December  1997  and  of  its  revenue
and  expenditure  for  the  financial  year  then  ended.

Luxembourg,  6  August  1998.

KPMG  Audit

Auditors

Stephen  NYE

15.10.98

EN

Official  Journal  of  the  European  Communities

C 318/3

FINANCIAL  STATEMENTS  AT  31  DECEMBER  1997

Revenue  and  expenditure  accounts  for  the  financial  years  ending
31  December  1997  and  1996

Note

1997

1996

(thousand  ECU)

Revenue

Contribution  from  the  general  revenue  of  the  European  Communities

45 215

44 527

Court  of  Auditors’  own  resources

— Community  levies  and  dues  deducted  from  remuneration

— Revenue  accruing 

from 

the  administrative  operation  of 

the

institution

— Miscellaneous revenue

1(b)

2

1(f)

7 577

7 516

1 250

1 800

65

76

Total  revenue

54 107

53 919

Expenditure

1(c)

Expenditure  relating  to  persons  working  for  the  institution

— Members  of  the  institution

— Staff  in  active  employment

— Allowances and miscellaneous contributions relating to termination of

service

— Missions  and  duty  travel

— Other

Operating  expenditure

— Expenditure  on  immovable  property

— Expenditure  on  data-processing

— Movable  property  and  associated  costs

— Current  administrative  expenditure

— Publishing  and  information

— Other

1(f)

5 101

5 586

39 633

39 542

477

1 746

1 034

542

1 852

912

47 991

48 434

2 428

2 300

928

656

411

954

491

684

656

491

896

485

5 868

5 512

Balance  for  the  financial  year

7

248

(27)

The  notes  annexed  hereto  form  an  integral  part  of  these  financial  statements.

Total  expenditure

53 859

53 946

C 318/4

EN

Official  Journal  of  the  European  Communities

15.10.98

Balance  sheets  at  31  December  1997  and  1996

ASSETS

Fixed  assets

Buildings

Furniture  and  equipment

Other  fixed  assets

Current  assets

Supplies

Sundry  accounts  receivable

Cash  accounts

LIABILITIES

Fixed  capital

Own  capital

Balance  carried  forward  from  previous  financial  year

Balance  for  the  financial  year

Current  liabilities

Sundry  accounts  payable

Payments  in  hand

Note

1997

1996

(thousand  ECU)

1(d)

1(e)

4

24 465

24 419

4 113

5 305

274

275

28 852

29 999

95

761

414

101

1 068

352

1 270

1 521

Total  assets

30 122

31 520

3

7

7

5

6

28 673

29 825

47

248

74

(27)

28 968

29 872

1 153

1 641

1

7

1 154

1 648

The  notes  annexed  hereto  form  an  integral  part  of  these  financial  statements.

Total liabilities

30 122

31 520

15.10.98

EN

Official  Journal  of  the  European  Communities

C 318/5

Notes  to  the  financial  statements  at  31  December  1997

ACCOUNTING  PRINCIPLES

1(d) Fixed  assets

1(a) Accounting  rules

The accounts of the European Court of Auditors are kept
and  the  financial  statements  drawn  up  in  accordance
with  the  provisions  of  the  Financial  Regulation  of
21  December  1977,  as 
last  amended  by  Council
Regulation (EC) No 2444/97 of 22 September 1997, and
the  provisions  of  Commission  Regulation  (Euratom,
ECSC,  EC)  No  3418/93  of  9  December  1993  laying
down  detailed  rules  for  the  implementation  of  certain
provisions  of  the  Financial  Regulation.

In  accordance  with  Article  136  of  the  said  implementing
rules, the financial statements are presented in accordance
with  generally  accepted  accounting  principles,  including
the  principles  provided  for  in  Council  directives,  except
where  otherwise  provided  for  by  regulation.

The  Court’s  building  and  equipment  and  furniture  are
valued  at  acquisition  cost.  Where  the  value  is  expressed
in  national  currency,  it  is  converted  into  ecu  at  the
accounting rate in force at the time of purchase. Since the
acquisition  cost  was  charged  in  full  to  the  corresponding
expenditure account at the time of acquisition, there is no
depreciation.  The  total  value  of  these  tangible  assets  is
entered  on  the  assets  side  for  the  entire  period  of  their
use,  with  a  counterpart  entry  for  an  equivalent  amount
on  the  liabilities  side  under  the  heading  ‘Own  capital’.

Furniture  and  equipment  are  not  recorded  in  fixed  asset
accounts  unless  their  value 
is  ECU  400  or  more
(ECU  350  in  1996).  Items  to  a  value  of  less  than
ECU  400  which  still  appeared  in  the  financial  inventory
because they were in excess of the earlier thresholds were
eliminated  as  of  31  December  1997.  The  total  value  of
the  items  thus  removed  was  ECU  1 031 181,42.

1(b) Court  of  Auditors’  own  resources

1(e) Supplies

The  Court  of  Auditors’  own  resources  are  entered  in  the
accounts  on  the  basis  of  the  amounts  actually  received
during  the  financial  year.

Amounts  owing  but  not  yet  received  by  the  end  of  the
financial year are entered on the assets side of the balance
sheet  under  the  heading  ‘Sundry  accounts  receivable’
in  the  ‘Revenue  to  be  collected’  item.  They  have  a
counterpart  entry  on  the  liabilities  side  of  the  balance
sheet  in  an  item  with  the  same  title  under  the  heading
‘Sundry  accounts  payable’.  These  entries  are  reversed
once  the  amounts  have  been  collected.

1(c) Expenditure

Expenditure for the financial year, which is shown in the
statement  of  revenue  and  expenditure,  represents  the
payments  made  against  the  appropriations  for  the
financial year and against the appropriations carried over
from  the  previous  financial  year  in  accordance  with  the
provisions  of  the  regulations  applicable  in  this  field.

In accordance with the sixth subparagraph of Article 6 of
the Financial Regulation, the expenditure for the financial
year  is  entered  in  the  accounts  for  that  year  on  the  basis
of  the  expenditure  for  which  authorisation  reached  the
financial  controller  not  later  than  31  December  and
the  accounting  officer  not  later  than  the  following
10  January,  and  for  which  payment  was  effected  by  the
accounting  officer  not  later  than  15  January.

Supplies  comprise  a  stock  of  office  and  other  supplies,
valued  at  the  most  recent  acquisition  price,  with  a
counterpart  entry,  for  an  equivalent  amount,  on  the
liabilities  side  under  the  ‘Own  capital’  heading.  Where
the acquisition cost is expressed in national currency, it is
converted into ecu at the accounting rate used in drawing
up  the  balance  sheet.

1(f) Exchange  differences

Exchange  gains  or  losses  are  entered  as  ‘Miscellaneous
revenue’  or  ‘Operating  expenditure  —  Other’.

REVENUE  ACCRUING  FROM  THE  ADMINISTRATIVE
OPERATION  OF  THE  INSTITUTION

Revenue accruing from the administrative operation

2.
of  the  institution  comprises  mainly:

— revenue  accruing 

the
European  Court  of  Auditors’  reports  and  opinions  in
the  Official  Journal  of  the  European  Communities,

the  publication  of 

from 

— the  payment  of  actuarial  reserves  by  national  pension
bodies  and  provident  societies  by  way  of  transfers  of
officials’  pension  rights.

C 318/6

EN

Official  Journal  of  the  European  Communities

15.10.98

OWN  CAPITAL

which  it  was  not  materially  possible  to  charge  to  the
budget.

3.
The amount of own capital determined according to
the principles described in 1(d) and 1(e) at the year-end is
broken  down  as  follows:

Fixed  assets

— Buildings

— Furniture  and  equipment

Current  assets

— Supplies

Own capital

1997

1996

(thousand  ECU)

24 465

24 419

4 113

5 305

95

101

28 673

29 825

SUNDRY  ACCOUNTS  RECEIVABLE

SUNDRY  ACCOUNTS  PAYABLE

The  sundry  accounts  payable  heading  at  the

5.
year-end  is  broken  down  as  follows:

Sums  owing  to  a  credit  card
organisation

Revenue  available  for  reuse

Revenue  to  be  collected

Provision  for  accident  insurance

Other

1997

1996

(thousand  ECU)

237

195

450

205

66

243

173

802

204

219

1 153

1 641

The  sundry  accounts  receivable  heading  at  the

4.
year-end  is  broken  down  as  follows:

Sums owing to a credit card organisation combine all the
amounts  invoiced  by  the  travel  agency  under  contract  to
the  Court  of  Auditors  pending  their  recovery  by  the
credit  organisation.

Claims  relating  to  persons  working  for
the  institution

Revenue  to  be  collected

Expenditure  to  be  charged

Other

1997

1996

(thousand  ECU)

206

450

87

18

163

802

92

11

761

1 068

Claims  relating  to  persons  working  for  the  institution
relate  mainly  to  advances  paid  on  mission  expenses
already  incurred  but  not  yet  charged.

Revenue  to  be  collected  consists  almost  entirely  of
established  entitlements  vis-à-vis  Member  States  for
transfers of pension entitlements for which no funds have
yet  been  transferred.  There  is  a  counterpart  entry  in  the
suspense  account  with  the  same  title  under  sundry
accounts payable.

Expenditure  to  be  charged  comprises  amounts  which
were  invoiced  by  the  Commission  at  the  year-end  and

Revenue  available  for  reuse  is  the  unused  counterpart  of
the  amounts  entered  on  the  assets  side  for  refunds  of
insurance  payments,  tax  refunds  or  proceeds  from  the
sale  of  fixed  assets.  The  revenue  available  for  reuse  is
earmarked  for  new  expenditure  of  the  same  kind  and
must be used by the end of the following financial year at
the  latest.

Revenue  to  be  collected  represents  the  established
entitlements  vis-à-vis  Member  States  for  transfers  of
pension  rights  for  which  no  funds  have  yet  been
transferred.

PAYMENTS  IN  HAND

6.
Under  the  Financial  Regulation,  payments  which
are  made  between  1  and  15  January  of  the  following
financial  year  and  which  are  authorised  before  the
year-end  are  entered  in  the  accounts  as  expenditure  for
the financial year and are shown on the liabilities side of
the  balance  sheet  as  payments  in  hand.

15.10.98

EN

Official  Journal  of  the  European  Communities

C 318/7

BALANCE  TO  BE  CARRIED  FORWARD  TO  THE
FOLLOWING  FINANCIAL  YEAR

the 

total  revenue 

The  balance  for  the  financial  year  is  the  difference
7.
between 
the
expenditure  against  appropriations  specific  to  the  year
and  appropriations  carried  forward  from  the  previous
year.

the  year  and 

for 

Balance  carried  forward  from  previous
years

Balance  for  the  financial  year

1997

1996

(thousand  ECU)

47

248

74

(27)

The  changes  in  the  balance  to  be  carried  forward  to  the
following  financial  year  are  as  follows:

Balance  to  be  carried  forward  to  the
following year

295

47

IMPLEMENTATION  OF  THE  BUDGET

8.
The  implementation  of  the  budget  for  the  financial  year  1996  can  be  divided  into  the
implementation  of  appropriations  brought  forward  and  the  implementation  of  appropriations
for  the  financial  year.

(a) Appropriations  brought  forward  represent,  on  the  one  hand,  all  the  commitments
chargeable  to  the  Court  that  have  been  entered  into  but  not  settled  before  the  year-end,
and, on the other hand, appropriations which the budgetary authority has decided to carry
forward.  Appropriations  brought  forward  from  the  previous  year  and  not  used  during  the
following  year  are  cancelled.

Appropriations
carried  forward
from  1996  to
1997

Payments

Appropriations
cancelled

(thousand  ECU)

Expenditure  relating  to  persons  working  for  the
institution

— Members  of  the  institution

— Staff  in  active  employment

— Missions  and  duty  travel

— Other

Operating  expenditure

— Expenditure  on  immovable  property

— Expenditure  on  data-processing

— Movable  property  and  associated  costs

— Current  administrative  expenditure

— Publishing  and  information

— Other

11

63

258

182

514

331

283

306

81

698

51

8

61

235

166

470

318

279

293

80

622

44

1 750

Total

2 264

1 636

2 106

3

2

23

16

44

13

4

13

1

76

7

114

158

(b) The  implementation  of  the  appropriations  for  the  financial  year  represents  the  payments
made  against  appropriations  committed.  The  unpaid  balance  of  the  commitments  may  be
carried  forward  to  the  following  year.  Appropriations  still  uncommitted  at  the  end  of  the
year  usually  lapse.

C 318/8

EN

Official  Journal  of  the  European  Communities

15.10.98

Appropriations
for  the  financial
year

Commitments
chargeable  to
the financial
year

Payments

Appropriations
carried  forward
to  1998

Lapsed
appropriations

(thousand  ECU)

Expenditure  relating  to  persons  working  for  the
institution

— Members  of  the  institution

— Staff  in  active  employment

— Allowances  and  miscellaneous  contributions

relating  to  termination  of  service

— Missions  and  duty  travel

— Other

5 232

43 364

523

1 863

1 102

5 111

39 659

477

1 856

1 036

5 093

39 573

477

1 510

868

52 084

48 139

47 521

Operating  expenditure

— Expenditure  on  immovable  property

2 365

2 350

2 110

— Expenditure  on  data-processing

— Movable  property  and  associated  costs

— Current  administrative  expenditure

— Publishing  and  information

— Other

893

533

458

905

433

893

530

441

903

428

649

363

331

332

331

5 587

5 545

4 116

Total

57 671

53 684

51 637

18

86

—

346

168

618

240

244

167

110

571

97

1 429

2 047

121

3 705

46

7

66

3 945

15

—

3

17

2

5

42

3 987

Payments  against  appropriations  carried  forward  (ECU  2 105 741)  and  the  appropriations  for
the  financial  year  (ECU  51 636 581)  totalled  ECU  53 742 322  which,  with  the  addition  of  the
total  for  exchange  losses,  is  equal  to  the  total  expenditure  shown  in  the  statement  of  revenue
and  expenditure  for  the  1997  financial  year.

15.10.98

EN

Official  Journal  of  the  European  Communities

C 318/9

Report  on  the  administrative  and  accounting  procedures,  the  soundness  of  the  financial
management  and  the  internal  control  system

To  the  Members
of  the  European  Court  of  Auditors

As  part  of  our  audit  of  the  annual  financial  statements  of  the  European  Court  of  Auditors  for
the  financial  year  ending  31  December  1997,  we  examined  the  administrative  and  accounting
procedures,  the  soundness  of  the  financial  management  and  the  internal  control  system.  The
purpose  of  our  examination  was  to  ensure  that  the  various  departments  of  the  Court  of
Auditors  can  be  reasonably  sure  that:

— they  have  a  clear  view  of  the  extent  to  which  operational  objectives  are  being  achieved,

— the  basis  on  which  the  published  financial  statements  are  drawn  up  is  reliable,

— the  Court  of  Auditors  has  complied  with  current  regulations.

The  current  regulations  in  question  are:

— the  Financial  Regulation  of  21  December  1977  applicable  to  the  general  budget  of  the
European  Communities,  as  last  amended  by  Council  Regulation  (EC)  No  2444/97  of
22  September  1997,

— Commission  Regulation  (Euratom,  ECSC,  EC)  No  3418/93  of  9  December  1993  laying
down detailed rules for the implementation of certain provisions of the Financial Regulation
of  21  December  1977,

— the  Internal  Rules  of  the  Court  of  Auditors  for  the  implementation  of  the  Court’s  budget,

laid  down  by  Court  Decision  No  97-47  of  4  December  1997.

We therefore examined very closely the control environment, risk evaluation, control activities,
information  and  communications  systems  and  management  procedures  of  the  Court  of
Auditors.  The  initial  descriptive  phase  was  followed  by  systems  evaluation  based  on  sample
checks  of  supporting  documents  and  interviews  with  staff.  The  nature  and  extent  of  our  tests
were determined by our appraisal of the control environment. We think that our work forms a
reasonable basis for our conclusions regarding the Court of Auditors’ procedures, the soundness
of  its  financial  management  and  its  internal  control  system.

In  our  opinion  the  current  internal  control  rules  ensure  that  the  operational  objectives  are
achieved satisfactorily, the financial statements are reliably drawn up and the legal framework is
complied  with.

Luxembourg,  6  August  1998.

KPMG  Audit

Auditors

Stephen  NYE