Report by the external auditor on the Court of Auditors’ accounts for the financial year 2004
Date: 2005-09-27
Institutions: European Court of Auditors
Subjects: European Court of Auditors, auditing, budgetary control, financial year, report

29.11.2005

EN

Official Journal of the European Union

C 299/1

I

(Information)

COURT OF AUDITORS

REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS’ ACCOUNTS FOR THE
FINANCIAL YEAR 2004

(2005/C 299/01)

NOTE TO READERS

Without prejudice to the provisions of Article 248 of the Treaty establishing the European Community, which
gives the Court of Auditors responsibility for auditing all of the Community’s revenue and expenditure, and
the provisions of Article 276 of the said 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 which the external auditor of the Court of Auditors drew 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 Con-
trol 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 since been published in the Official Journal of the European Union, starting with
the report on the financial year 1992.

For the Court of Auditors
Hubert WEBER
President of the Court

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Official Journal of the European Union

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CONTENTS

Certificate concerning the regularity and fairness of the financial statements at 31 December 2004 . . . . . . .

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

Financial statements at 31 December 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

3

4

5

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Official Journal of the European Union

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Certificate concerning the regularity and fairness of the financial statements at 31 December 2004

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 draw-
ing up the revenue and expenditure account and the balance sheet of the European Communities for the
financial year 2004,

— the financial statements of the European Court of Auditors at 31 December 2004, which were drawn up
on the basis of the same accounting data and prepared for the purpose of publication in the Official Jour-
nal of the European Union.

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 finan-
cial 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
the financial statements do not contain any material misstatement. As required, the audit included an exami-
nation, 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 an appraisal of the accounting principles and prac-
tices 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 Euro-
pean Court of Auditors’ Internal Rules, of the assets and the financial position of the European Court of Audi-
tors at 31 December 2004 and of the economic result and the revenue and expenditure for the financial year
then ended.

Your attention is drawn to the information given in note 1 of the Annex to the financial statements, to the
effect that, in accordance with accounting standard No 12 (Employee benefits), which was adopted on
28 December 2004 by a decision of the Commission’s accounting officer pursuant to Article 133 of the Finan-
cial Regulation applicable to the general budget of the European Communities, on 31 December 2004, for the
first time, the Court recorded a provision for its Members’ pensions combined with a long-term claim on the
Member States to the value of 43 689 621 euro. The amount of the provision was calculated on the basis of
an actuarial analysis carried out by the European Commission.

Luxembourg, 27 September 2005.

KPMG Audit S.à.r.l.
Auditors
P. WIES

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Official Journal of the European Union

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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 2004, 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 European 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 financial management of the Court of Auditors complies with current regulations.

The current regulations in question are:

— Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable

to the general budget of the European Communities,

— Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules
for the implementation of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the
Financial Regulation applicable to the general budget of the European Communities,

— the Internal Rules of the European Court of Auditors for the implementation of the general budget of the
European Union, laid down by Court Decision No 80-2003 and adopted by the Court at its meetings held
on 17 and 18 December 2003.

Court Decision No 80-2003 on the Internal Rules of the European Court of Auditors for the implementation
of the general budget of the European Union cancels and replaces Decision No 97-47 of 4 December 1997
and took effect on 18 December 2003.

We therefore examined very closely the control environment, risk evaluation, control activities, information
and communications systems and management procedures of the European Court of Auditors. The initial
descriptive phase was followed by a systems evaluation based on sample checks of supporting documents
and interviews with staff. The nature and extent of the tests were determined by our appraisal of the control
environment. We think that our work forms a reasonable basis for our conclusions regarding the European
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 satisfac-
torily, the financial statements are reliably drawn up and the legal framework is complied with.

Luxembourg, 27 September 2005.

KPMG Audit S.à.r.l.
Auditors
P. WIES

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Official Journal of the European Union

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Financial statements at 31 December 2004

Balance sheet at 31 December 2004 and 31 December 2003

Notes

2004

2003

(in 1 000 euro)

ASSETS

Intangible fixed assets

Tangible fixed assets

Land and buildings

Plant, machinery and tools

Furniture and vehicle fleet

Computer hardware

Other tangible fixed assets

Tangible assets in course of construction, advances and payments
on account in respect of tangible assets

Financial assets

Other financial assets

Stocks

Short-term assets

Current assets

Sundry debtors

Long-term assets

Disposable assets

LIABILITIES

Own capital

Economic result of the financial year

Results carried over from previous years

Pensions provision

Long-term liabilities

Other long-term liabilities

Short-term liabilities

Current liabilities

— Community institutions and bodies

— Sundry creditors

Total assets

2

2

3

4

5

6

7

8

6

9

9

415

433

42 161

39 094

230

675

1 289

783

42 676

11 329

212

373

905

957

90

28 900

—

—

197

1 384

819

565

43 689

7 108

94 954

43 252

(598)

43 850

43 689

19

19

555

555

179

1 142

747

395

—

6 434

51 419

43 850

11 922

31 928

—

72

72

7 994

7 497

7 055

939

6 860

637

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

Total liabilities

94 954

51 419

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Official Journal of the European Union

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Statement of economic result at 31 December 2004 and 31 December 2003

Notes

2004

2003

(in 1 000 euro)

Positive adjustments

Decrease in expenditure: increase in assets

— Intangible fixed assets

— Tangible fixed assets

— Stocks

Write-backs of depreciation

Revenue arising from budgetary entitlements acquired during the
financial year and not collected

Negative adjustments

Decrease in revenue: decrease in assets

— Tangible fixed assets

— Stocks

— Collection of entitlements established in previous years

Allocation for depreciation

Allocation for value write-downs

Non-budgetary expenditure

Economic result for the year

Total

Total

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

2

2

4

2

10

2

4

11

2

12

8

257

2 827

29

190

393

193

13 221

22

496

677

3 696

14 609

191

11

564

3 616

2

(90)

4 294

(598)

498

12

197

1 979

—

1

2 687

11 922

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Official Journal of the European Union

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Statement of revenue and expenditure for the financial years ended 31 December 2004 and 31 December 2003

Revenue

Contribution from the general revenue of the European
Communities

European Court of Auditors’ own revenue

— Community levies and dues deducted from remuneration

— Revenue accruing from administrative operation

— Miscellaneous revenue

Notes

2004

2003

(in 1 000 euro)

13

14

71 275

79 574

11 195

1 880

90

9 624

801

20

Expenditure

15, 17

Expenditure relating to persons working for the institution

Total revenue

84 443

90 019

— Members of the institution

— Staff in active employment

— Missions and duty travel

— Other

Operating expenditure

— Expenditure on immovable property

— Expenditure on IT

— Movable property and associated costs

— Current administrative expenditure

— Publishing and information

— Other

8 586

59 316

2 030

2 089

6 579

53 222

1 979

1 830

72 021

63 610

5 459

2 761

1 586

671

709

1 013

15 250

1 865

662

701

1 204

570

12 199

20 252

Balance for the financial year

16

223

6 157

Total expenditure

84 220

83 862

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

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Official Journal of the European Union

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Notes to the financial statements at 31 December 2004

ACCOUNTING PRINCIPLES

1.

The accounts of the European Court of Auditors (the
Court) are kept and the financial statements are drawn up
in accordance with the provisions of Council Regulation
(EC, Euratom) No 1605/2002 of 25 June 2002 on the
Financial Regulation applicable to the general budget of
the European Communities and Commission Regulation
(EC, Euratom) No 2342/2002 of 23 December 2002 lay-
ing down detailed rules for the implementation of Regula-
tion (EC, Euratom) No 1605/2002.

It was decided in 2004 to delete the ‘Transitional accounts’
the balance sheet and
headings from both sides of
to include these accounts under current assets and sundry
creditors respectively.

The figures shown for the corresponding items in the pre-
vious year have been adjusted as required to ensure that
they are comparable.

In accordance with accounting standard No 12 (Employee
benefits), which was adopted on 28 December 2004 by a
decision of the Commission’s accounting officer pursuant
to Article 133 of the Financial Regulation applicable to the
the European Communities, since
general budget of
2004 the Court has
its
recorded a provision for
Members’pensions to the value, calculated actuarially, of
the commitments arising from the length of service at the
date of calculation. The Court balances this provision by
means of a long-term claim on the Member States. The
corresponding figures for 2003 have not been adjusted.

BALANCE SHEET

2.

Tangible and intangible fixed assets

(in 1 000 euro)

Computer
software

Acquisition value

At the end of the preceding financial year

959

Changes over the financial year

— Acquisitions in the financial year

At the end of the financial year

Depreciation and value write-downs

At the end of the preceding financial year

Changes over the financial year

— Recorded

At the end of the financial year

Net book value at end of financial year

258

1 217

(526)

(276)

(802)

415

The increase in the item ‘Land and buildings’ comes to
27 765 000 euro and is mainly composed of the acquisi-
tion value of a second building which the Court began to
use in 2004 and which was purchased by the Court for
27 969 000 euro net after depreciation.

The Court’s tangible and intangible fixed assets are assessed
at their acquisition value in the national currency, con-
verted into euro at the accounting rate in force at the time
of purchase.

The cost of acquiring land and the net value, calculated
after depreciation, of the remaining tangible fixed assets
are entered on the assets side for the entire period of their
use.

Tangible fixed assets other than land and buildings are
only recorded in the fixed assets accounts if the cost of
acquiring or producing them is 420 euro or more, they are
in use for longer than one year and they are not consum-
ables within the meaning of Article 222 of Commission
Regulation (EC, Euratom) No 2342/2002 of 23 December
2002 laying down detailed rules for the implementation of
Council Regulation (EC, Euratom) No 1605/2002 of
25 June 2002 on the Financial Regulation applicable to the
general budget of the European Communities.

by

required

The Court has calculated the depreciation of its fixed assets
as
(EC)
Commission
No 2909/2000 of 29 December 2000 on the accounting
management of the European Communities’ non-financial
fixed assets.

Regulation

The ‘Intangible fixed assets’ heading includes computer
software packages that have been acquired and are covered
by a site licence or a major account contract.

Changes in value and depreciation, calculated using the
straight-line method and by complete year, were as follows
at the end of the financial year:

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Official Journal of the European Union

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Land and
buildings

Plant,
machinery
and tools

Furni-
ture
and
vehicle
fleet

Com-
puter
hard-
ware

Other
tangible
fixed
assets

(in 1 000 euro)

Fixed
assets in
the course
of
construc-
tion and
payments
on
account

Total

Acquisition value

At the end of the previous year

24 560

1 293

1 527

2 730

1 044

28 900

60 054

Changes over the year:

— Acquisitions

— Disposals and withdrawals

— Transfers from one heading to

another

— Other changes

830

—

29 135

—

107

(14)

—

—

513

1 046

(81)

(95)

—

5

—

—

—

—

—

—

686

3 182

—

(190)

(29 135)

—

(361)

(356)

At the end of the financial year

54 525

1 386

1 964

3 681

1 044

90

62 690

Depreciation and value adjustments

At the end of the previous year

(13 231)

(1 081)

(1 154)

(1 825)

(87)

—

(17 378)

Changes over the year:

— Recorded

(2 200)

(89)

(216)

(662)

(174)

— Cancelled following disposal, with-

drawal

— Other adjustments

—

—

14

81

95

—

—

—

—

—

At the end of the financial year

(15 431)

(1 156)

(1 289)

(2 392)

(261)

—

—

—

—

(3 341)

190

—

(20 529)

Net book value at end of financial
year

39 094

230

675

1 289

783

90

42 161

3.

Financial assets

In 2004 the balance of the working capital made available
to the Office for Official Publications of the European
Communities, which accounted for a total of 555 000 euro
granted’, was
the
under
reimbursed.

sub-heading

‘Advances

Claims relating to Community institu-
tions and bodies

Sundry debtors

Total

(in 1 000 euro)

2004

2003

49

770

819

57

690

747

4.

Stocks

The stocks comprise office supplies and other consum-
ables, valued at the price of the last supplies entered. Where
the acquisition cost is expressed in a national currency, it
is converted into euro at the exchange rate used in draw-
ing up the balance sheet.

The item ‘Sundry debtors’ consists essentially of sums
receivable, virtually all of which are attributable to the
acquisition of national pension rights by members of the
institution’s staff.

5.

Short-term assets

The item ‘Current assets’ can be broken down as follows at
the year-end:

The sundry claims mainly concern advances paid on mis-
sion expenses already incurred by the Members and staff
of the Court but not yet charged.

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6.

Long-term assets and pensions provision

10.

Revenue
acquired during the financial year and not collected

from budgetary entitlements

arising

The Court decided to establish, at 31 December 2004 and
for the first time, a provision for expenditure on its Mem-
bers’ pensions, offset by a claim for the same amount on
the Member States (see note 1).

7.

Disposable assets

The item ‘Disposable assets’ consists of a request in transit
to the European Commission for funds to the value of
5 500 000 euro (2003: 5 500 000 euro), in accordance
with Chapter IX of the Accounting and Consolidation
Manual of the European Communities (see also note 9.2
below).

8.

Own capital

For 2004, the total for own capital comprises the eco-
nomic result for the year and the results carried over from
previous years.

The economic result for the year comprises the result of
the implementation of the budget for the year and the
result of adjustments.

The result of the implementation of the budget for the year
can only be established when the financial statements are
consolidated by the European Commission.

Consequently, for the other institutions, the economic
result for the financial year is limited to the sum of the
positive and negative adjustments entered in non-
budgetary expenditure and revenue accounts.

9.

Liabilities

9.1.

Long-term liabilities

This item concerns revenue established during the finan-
cial year under review and not yet collected.

11.

Collection of entitlements established in previous
years

This item concerns revenue established in a previous finan-
cial year which has been collected and entered in the
accounts in the financial year under review.

12. Non-budgetary expenditure

This item concerns sundry expenditure which could not be
materially booked to the budget. For 2004, it relates to the
variation for the year in current expenditure invoiced by
the Commission.

REVENUE AND EXPENDITURE

13.

European Court of Auditors’ own revenue

The item ‘Other long-term liabilities’ comprises that part of
the consulting architect’s and engineer’s fees that was with-
held as a performance guarantee for their work in respect
of the extension of the Court building.

The Court’s own revenue is entered in the accounts on the
basis of the amounts actually received during the financial
year.

9.2.

Short-term liabilities

14.

Revenue accruing from administrative operation

The item ‘Community institutions and bodies’ comprises
the balance to be carried forward to the following finan-
cial year and includes the sum of 5 500 000 euro by way
of counterpart for the amount of a request to the Commis-
sion for funds in respect of payments to be made during
January 2005 (see also note 7 above).

The item ‘Sundry creditors’ mainly comprises sums due in
respect of social security and insurance contributions for
staff and mission expenses still to be invoiced by the credit
card organisation.

The item ‘Revenue accruing from administrative operation’
mainly comprises:

— revenue accruing from the publication of the Court’s
reports and opinions in the Official Journal of the Euro-
pean Union,

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

against appropriations specific to the year, appropriations
carried over from the previous year and appropriations
resulting from the collection of assigned revenue.

— interest and comparable revenue.

15.

Expenditure

The expenditure for the financial year that is shown in the
statement of revenue and expenditure represents the pay-
ments made against appropriations for the financial year,
appropriations carried over from the previous financial
year and appropriations made available following the col-
lection of assigned revenue, in accordance with the provi-
sions of the applicable regulations.

In accordance with Article 6 of the Financial Regulation,
the appropriations entered in the budget are authorised for
one financial year running from 1 January to 31 December.

The changes that occurred during the year were as follows:

Balance carried forward from previous
years

Balance for the year

Exchange gains/losses for the year

(in 1 000 euro)

2004

2003

6 860

223

(28)

703

6 069

88

Balance to be carried forward to the
following year

7 055

6 860

17.

Budgetary implementation

16.

Financial situation and balance for the financial year

The balance for the year is calculated as the difference
between the total revenue for the year and expenditure

The implementation of the budget for the financial year
2004 can be divided into the implementation of appro-
priations 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 paid before the year-end and, on the other hand, appropriations which
the budgetary authority has decided to carry forward. Appropriations brought forward from the previ-
ous year and not used during the following year lapse.

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 IT

— Movable property and associated costs

— Current administrative expenditure

— Publishing and information

— Other

(in 1 000 euro)

Payments

Lapsed
appropriations

Appropriations
carried forward
from 2003
to 2004

52

74

529

567

42

74

470

474

10

—

59

93

1 222

1 060

162

1 535

1 090

707

183

509

342

4 366

Total

5 588

1 356

1 086

674

147

396

316

3 975

5 035

179

4

33

36

113

26

391

553

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

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 IT

— Movable property and associated costs

— Current administrative expenditure

— Publishing and information

— Other

Other expenditure

— Provisional appropriations

Appropria-
tions for
the year

Commitments
chargeable to
the year

Payments

9 361

68 216

2 810

3 130

83 517

5 186

3 037

1 637

796

1 620

1 023

8 672

60 095

2 260

2 373

73 400

4 961

3 037

1 148

775

1 619

994

8 544

59 242

1 557

1 615

70 958

4 088

1 675

900

476

195

698

13 299

12 534

8 032

(in 1 000 euro)

Appropria-
tions carried
forward
to 2005

Lapsed
appro-
priations

128

853

702

759

688

8 121

550

758

2 442

10 117

873

1 362

248

299

1 424

296

4 502

225

—

489

20

1

30

765

109

109

109

109

—

—

—

Total

96 925

85 934

78 990

6 944

10 991

euro)

The payments made against appropriations carried for-
ward (5 035 000 euro), appropriations for the year
resulting
(78 990 000
from assigned
totalled
84 220 000 euro, which is equal to the total expenditure
shown in the statement of revenue and expenditure for the
financial year 2004.

appropriations
(195 000

and
revenue

euro)

The expenditure included under ‘Other’ expenditure relat-
ing to persons working for the institution consists mainly
of expenditure on interinstitutional cooperation, transla-
tion, the canteen, the crèche, training, recruitment, recep-
tions and representation.

The expenditure included under ‘Other’ operating expen-
diture consists mainly of expenditure on telecommunica-
tions, meetings, studies and fact-finding missions.

18. Off-balance sheet commitments

Under the framework agreement concerning the construc-
tion of one or more extensions to the Court building,
which was concluded on 15 December 1999 with the State
of Luxembourg, the Court undertook to do everything in
its power to acquire from the State the land concerned by
the contract. To this end, the Court will approach the bud-
getary authority for the necessary funds.

The Court also undertook, by virtue of a building rental
contract in force until 30 June 2009, to pay the lessor a
fixed amount of 175 000 euro for works to renovate the
rented building.