Report by the external auditor on the Court of Auditors' accounts for the financial year 1998
Date: 1999-04-28
Institutions: European Court of Auditors
Subjects: European Court of Auditors, accounting, auditing, financial management, financial year, report

7.10.1999

EN

Official Journal of the European Communities

C 286/1

I

(Information)

COURT OF AUDITORS

REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS(cid:146) ACCOUNTS FOR
THE FINANCIAL YEAR 1998

(1999/C 286/01)

NOTE TO READERS

Without prejudice to the provisions of Article 248 EC, which gave the Court of Auditors responsibility for
auditing all of the Community(cid:146)s revenue and expenditure, and the provisions of Article 276 EC on the grant-
ing 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 have drawn up in respect of the Court(cid:146)s accounts
for the financial years 1987 to 1991 were sent only to the Chairman of the European Parliament(cid:146)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(cid:146)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 1998. These accounting data may be
supplied to anyone who submits a written request to the External Relations Department of the Court of Audi-
tors.

For the Court of Auditors

Jan O. KARLSSON

President

C 286/2

EN

Official Journal of the European Communities

7.10.1999

CONTENTS

Certificate concerning the regularity and fairness of the financial statements at 31 December 1998 . . . . . .

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

Recommendation concerning the discharge to be given to the accounting officers of the European Court of
Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial statements at 31 December 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recommendation concerning the internal control system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pages

3

4

5

6-11

11

7.10.1999

EN

Official Journal of the European Communities

C 286/3

Certificate concerning the regularity and fairness of the financial statements at 31 December 1998

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:

(cid:151) the accounting data sent by the European Court of Auditors to the Commission for the purpose of draw-
ing up the revenue and expenditure account and the balance sheet of the European Communities for the
financial year 1998,

(cid:151) the financial statements of the European Court of Auditors as at 31 December 1998, 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 account-
ing 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(cid:146) Internal Rules, of the assets and financial position of the European Court of Audi-
tors at 31 December 1998 and of its revenue and expenditure for the financial year then ended.

Luxembourg, 28 April 1999.

KPMG Audit

Auditors

Stephen Nye

C 286/4

EN

Official Journal of the European Communities

7.10.1999

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 1998, 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:

(cid:151) they have a clear view of the extent to which operational objectives are being achieved,

(cid:151) the basis on which the published financial statements are drawn up is reliable,

(cid:151) the financial management of the Court of Auditors complies with current regulations.

The current regulations in question are:

(cid:151) the Financial Regulation of 21 December 1977 applicable to the general budget of the European
Communities, as last amended by Council Regulation (EC, ECSC, Euratom) No 2779/98 of 17 December
1998,

(cid:151) 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,

(cid:151) the Internal Rules of the Court of Auditors for the implementation of the Court(cid:146)s budget, laid down by
Court Decision No 97-47 of 4 December 1997 (as last amended by Written Procedure No 3/97 of 16
January 1998).

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(cid:146) pro-
cedures, 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 satisfact-
orily, the financial statements are reliably drawn up and the legal framework is complied with.

Luxembourg, 28 April 1999.

KPMG Audit

Auditors

Stephen Nye

7.10.1999

EN

Official Journal of the European Communities

C 286/5

Recommendation concerning the discharge to be given to the accounting officers of the European
Court of Auditors

To the Members of the European Court of Auditors

As part of our audit of the European Court of Auditors(cid:146) revenue and expenditure account and balance sheet at
31 December 1998 we have examined the management by the accounting officers. On the basis of the work
carried out during the audit we confirm that the accounting officers have exercised their responsibility within
the framework of the European Communities(cid:146) regulations and we therefore recommend that you grant them
discharge for the financial year ending 31 December 1998.

Luxembourg, 28 April 1999.

KPMG Audit

Auditors

Stephen Nye

C 286/6

EN

Official Journal of the European Communities

7.10.1999

Financial statements at 31 December 1998

Revenue and expenditure accounts for the financial years ending 31 December 1998 and 1997

Note

1998

1997

(1 000 ECU)

Revenue

Contribution from the general revenue of the European Communities
Court of Auditors(cid:146) own resources
(cid:151) Community levies and dues deducted from remuneration
(cid:151) Revenue accruing from the administrative operation of the institution
(cid:151) Miscellaneous revenue

Total revenue

Expenditure

Expenditure relating to persons working for the institution
(cid:151) Members of the institution
(cid:151) Staff in active employment
(cid:151) Allowances and miscellaneous contributions relating to termination of

service

(cid:151) Missions and duty travel
(cid:151) Other

Operating expenditure
(cid:151) Expenditure on immovable property
(cid:151) Expenditure on data processing
(cid:151) Movable property and associated costs
(cid:151) Current administrative expenditure
(cid:151) Publishing and information
(cid:151) Other

1(b)

2
1(f)

1(c)

1(f)

48 067

45 215

8 068
697
28

7 577
1 250
65

56 860

54 107

5 038
42 972

203
1 945
918

5 101
39 633

477
1 746
1 034

51 076

47 991

2 464
995
692
433
1 016
403

6 003

2 428
928
656
411
954
491

5 868

Balance for the financial year

7

(219)

248

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

Total expenditure

57 079

53 859

7.10.1999

EN

Official Journal of the European Communities

C 286/7

Balance sheets at 31 December 1998 and 1997

Note

1998

1997

(1 000 ECU)

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 years
Balance for the financial year

Current liabilities
Sundry accounts payable
Payments in hand

1(d)

1(e)
4

24 689
4 486
493

24 465
4 113
274

29 668

28 852

109
388
216

713

95
761
414

1 270

Total assets

30 381

30 122

3
7
7

5
6

29 284
295
(219)

28 673
47
248

29 360

28 968

962
59

1021

1 153
1

1 154

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

Total liabilities

30 381

30 122

C 286/8

EN

Official Journal of the European Communities

7.10.1999

Notes to the financial statements at 31 December 1998

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, ECSC, Euratom) No 2779/98 of 17
December 1998, 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 gener-
ally accepted accounting principles, including the principles pro-
vided for in Council directives, except where otherwise provided
for by regulation.

1(b)

Court of Auditors(cid:146) own resources

The Court of Auditors(cid:146) 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 (cid:145)Sundry accounts receivable(cid:146) in the (cid:145)Revenue to be col-
lected(cid:146) item. They have a counterpart entry on the liabilities side
of the balance sheet in an item with the same title under the head-
ing (cid:145)Sundry accounts payable(cid:146). These entries are reversed once the
amounts have been collected.

1(c)

Expenditure

Expenditure for the financial year, which is shown in the (cid:145)State-
ment of revenue and expenditure(cid:146), 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.

The Court(cid:146)s building and equipment and furniture are valued at
acquisition cost. Where the value is expressed in national cur-
rency, 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 (cid:145)Own capital(cid:146).

Furniture and equipment are not recorded in fixed asset accounts
unless their value is ECU 400 or more.

1(e)

Supplies

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 (cid:145)Own capital(cid:146)
heading. Where the acquisition cost is expressed in national cur-
rency, it is converted into ecu at the accounting rate used in draw-
ing up the balance sheet.

1(f)

Exchange differences

Exchange gains or losses are entered as (cid:145)Miscellaneous revenue(cid:146) or
(cid:145)Operating expenditure (cid:151) Other(cid:146).

REVENUE ACCRUING FROM THE ADMINISTRATIVE OPERATION OF
THE INSTITUTION

2. Revenue accruing from the administrative operation of the
institution comprises mainly:

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 expend-
iture 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.

(cid:151) revenue accruing from the publication of the European Court
of Auditors(cid:146) reports and opinions in the Official Journal of the
European Communities,

(cid:151) the payment of actuarial reserves by national pension bodies
and provident societies by way of transfers of officials(cid:146) pen-
sion rights.

7.10.1999

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Official Journal of the European Communities

OWN CAPITAL

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

Fixed assets

(cid:151) Buildings

(cid:151) Furniture and equipment

Current assets

(cid:151) Supplies

Own capital

(1 000 ECU)

1998

1997

24 689

4 486

24 465

4 113

109

95

29 284

28 673

SUNDRY ACCOUNTS RECEIVABLE

4. The sundry accounts receivable heading at the 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

C 286/9

(1 000 ECU)

1998

1997

316

159

171

225

91

962

237

195

450

205

66

1 153

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

Revenue available for reuse is the unused counterpart of the
amounts entered on the assets side for refunds of insurance pay-
ments, 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.

(1 000 ECU)

1998

1997

Revenue to be collected represents the established entitlements
vis-(cid:224)-vis Member States for transfers of pension rights for which
no funds have yet been transferred.

Claims relating to persons working for the
institution

Revenue to be collected

Expenditure to be charged

Other

142

142

23

81

388

206

450

87

18

761

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

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.

Revenue to be collected consists almost entirely of established
entitlements vis-(cid:224)-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.

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

BALANCE TO BE CARRIED FORWARD TO THE FOLLOWING
FINANCIAL YEAR

Expenditure to be charged comprises amounts which were invoiced
by the Commission at the year-end and which it was not materi-
ally possible to charge to the budget.

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

SUNDRY ACCOUNTS PAYABLE

Balance carried forward from previous years

Balance for the financial year

(1 000 ECU)

1997

47

248

1998

295

(219)

5. The sundry accounts payable heading at the year-end is
broken down as follows.

Balance to be carried forward to the following
year

76

295

C 286/10

EN

Official Journal of the European Communities

7.10.1999

IMPLEMENTATION OF THE BUDGET

8. The implementation of the budget for the financial year 1998 can be divided up 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.

Expenditure relating to persons working for the institution
(cid:151) Members of the institution
(cid:151) Staff in active employment
(cid:151) Missions and duty travel
(cid:151) Other

Operating expenditure
(cid:151) Expenditure on immovable property
(cid:151) Expenditure on data processing
(cid:151) Movable property and associated costs
(cid:151) Current administrative expenditure
(cid:151) Publishing and information
(cid:151) Other

Appropriations carried
forward from 1997 to
1998

(1 000 ECU)

Payments

Appropriations cancelled

18
86
346
168

618

240
244
167
110
571
97

1 429

2 047

Total

13
86
323
149

571

230
243
156
76
569
79

1 353

1 924

5
(cid:151)
23
19

47

10
1
11
34
2
18

76

123

(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.

Expenditure relating to persons working for the institution
(cid:151) Members of the institution
(cid:151) Staff in active employment
(cid:151) Allowances and miscellaneous contributions relating to ter-

mination of service
(cid:151) Missions and duty travel
(cid:151) Other

Buildings, equipment and sundry items of operating expend-
iture
(cid:151) Expenditure on immovable property
(cid:151) Expenditure on data processing
(cid:151) Movable property and associated costs
(cid:151) Current administrative expenditure
(cid:151) Publishing and information
(cid:151) Other

Other expenditure
(cid:151) Provisional appropriations

Appropri-
ations for
the financial
year

Commitments
chargeable to the
financial year

Payments

Appropriations
carried forward to
1999

(1 000 ECU)

Lapsed appro-
priations

5 097
44 660

222
1 873
1 121

52 973

2 542
895
643
533
978
500

6 091

41

41

5 041
42 989

203
1 832
1 324

51 389

2 534
895
642
532
974
494

6 071

(cid:151)

(cid:151)

5 025
42 886

203
1 622
768

50 504

2 234
752
536
357
447
319

4 645

(cid:151)

(cid:151)

16
103

(cid:151)
210
556

885

300
143
106
175
527
175

1 426

(cid:151)

(cid:151)

56
1 411

19
41
57

1 584

8
(cid:151)
1
1
4
6

20

41

41

Total

59 105

57 460

55 149

2 311

1 645

Payments against appropriations carried forward (ECU 1 924 873) and the appropriations for the financial year (ECU 55 149 412) totalled
ECU 57 074 285 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 financial year 1998.

7.10.1999

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Official Journal of the European Communities

C 286/11

Recommendation concerning the internal control system

To the Members of the European Court of Auditors

As part of the audit of the annual accounts of the Court of Auditors for the financial year ending 31 December
1998, we confirm that in the course of our testing we did not encounter any shortcomings in the internal
control system which called for written recommendations by us.

Luxembourg, 28 April 1999.

KPMG Audit

Auditors

Stephen Nye