Communication from the Commission - Progress Report as at 31 March 2006 on modernising the European Commission’s accounting system
Date: 2006-07-04
Institutions: European Commission
Subjects: European Commission, accounting system, computer system, financial regulation, institutional reform, international standard, management audit, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 04.07.2006 
COM(2006) 358 final 

COMMUNICATION FROM THE COMMISSION 

PROGRESS REPORT AS AT 31 MARCH 2006 ON MODERNISING THE 
EUROPEAN COMMISSION’S ACCOUNTING SYSTEM 

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TABLE OF CONTENTS 

COMMUNICATION FROM THE COMMISSION REPORT ON PROGRESS TO 31 
MARCH 2006 OF THE MODERNISATION OF THE ACCOUNTING SYSTEM OF THE 
EUROPEAN COMMISSION .................................................................................................... 1 

1. 

2. 

3. 

3.1 

3.2 

3.3 

3.4 

3.5 

4 

4.1 

4.2 

5. 

6. 

7 

8 

9 

Introduction.................................................................................................................. 4 

Summary of implementation to 31 March 2006 .......................................................... 4 

Implementation of the modernised accounts in the Commission’s services................ 5 

Preparation of the financial statements and opening balances for the 2005 financial 
year............................................................................................................................... 5 

Loans and borrowings .................................................................................................. 6 

Training........................................................................................................................ 6 

Consolidation. .............................................................................................................. 7 

Change of budgetary year ............................................................................................ 7 

Control environment and validation of local systems.................................................. 8 

Communication and accounting quality....................................................................... 8 

Validation of local systems. ......................................................................................... 8 

IT developments for the General Budget ..................................................................... 9 

Implementation of ABAC by the other institutions and agencies.............................. 10 

ABAC Delegations. ................................................................................................... 10 

European Development Fund..................................................................................... 11 

Future developments .................................................................................................. 12 

10 

Conclusion ................................................................................................................. 12 

ANNEX 1: INTEGRATED PROGRAMME PLAN 31 MARCH 2006………………………………..13 

Annex II: System security and synchronisation....................................................................... 18 

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1. 

INTRODUCTION 

On 31 March 2006, the Commission's Accounting Officer forwarded to the European Court of 
Auditors  the  first  provisional  accounts  of  the  European  Communities  to  be  prepared  in 
accordance  with  internationally  accepted  accounting  standards.  Besides  placing  itself  at  the 
forefront  of  public  bodies  in  this  respect,  the  Commission  has  thus  demonstrated  to  its 
Discharge  Authorities  its  desire  to  be  fully  accountable  for  the  taxpayers'  funds  which  are 
entrusted to it.  

These accounts are the fruit of three years' intensive work by all Commission services, and by 
the other institutions and agencies: 

•  Accounting rules were developed which were relevant to the Communities' activities and 
which  complied  with  international  standards,  along  with  the  appropriate  accounting 
manuals; 

•  IT systems were developed to support the new accounting requirements; 

•  Each Commission service has adapted its administrative and financial procedures to record 
accounting events as and when they occur, and not only when cash is received or paid, or 
at year end only, and thus allow accrual-based accounts to be established; 

•  The balances necessary to open the first accrual-based accounts were determined. 

This work was completed by January 2005, in time for the 2005 financial year to start on the 
right basis. Since January 2005: 

•  The opening balances have been checked and validated by the authorising services. 

•  The expenses to be accrued at the beginning and end of each year have been estimated by 

every service. 

•  All systems have been examined  by the Commission's  Accounting Officer to ensure that 
they are capable of recording and communicating the required accounting information. 

•  The  Commission's  accounts  were  prepared,  and  consolidated  with  those  of  8  other 

institutions and 16 agencies. 

The  Commission  has  thus  respected  the  deadlines  set  in  the  Financial  Regulation  for  the 
preparation  of  financial  statements  which  comply  in  all  material  respects  with  international 
standards,  and  has  fulfilled  its  commitment  to  the  European  Parliament  and  the  Council  to 
report on its progress towards this goal1, which they considered to be particularly ambitious. 

The work is however not yet complete. Attaining complete respect of all accounting standards 
is a process which will take time to complete. The imprest accounts held in the Commission's 
external  delegations  need  to  be  incorporated  in  the  central  accounting  system,  and  the 
European Development Funds need to be moved to a modernised IT system. Delays in these 

1 

The Commission has presented half-yearly progress reports up to and including 31 May 2005. 

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tasks  arose  from  the  difficulties  in  introducing  new  systems  and  the  required  training  in 
geographically dispersed services, and do not have a material impact on the accounts. 

The systems of two DGs need improving before they can be validated. Material errors have 
been  found  in  the  figures  supplied  by  at  least  one  DG,  which  has  been  asked  to  present 
corrected figures. Despite the efforts made by Commission services to check and recheck the 
opening  balances  and  the  accrued  expenses,  the  Court  of  Auditors  is  likely  to  find  further 
errors, which must where possible be corrected in the final accounts which are due by 31 July 
2006. The risk of error is exacerbated by the inadequate number of qualified accounting staff 
in  the  Commission  to  absorb  quickly  such  a  large  reform,  by  the  delays  incurred  in  some 
services,  leading  to  hurried  work,  and  by  delays  in  developing  certain  accounting  and 
reporting tools in the IT system and in updating documentation and training courses. 

2. 

SUMMARY OF IMPLEMENTATION TO 31 MARCH 2006 

The  transition  to  a  new  accounting  system  in  the  European  Commission  has  so  far  been 
successful.  On  1  January  2005,  the  Commission  moved  the  general  accounting  of  the  EU 
from cash-based to accrual-based accounts, a system  which  has  already  given  the  European 
Commission greater day-to-day control over its finances and provides it with better financial 
information.  The  accrual-based  accounting  system  continued  to  be  developed  throughout 
2005; development and improvement will continue in 2006 and 2007 to include progressively 
the European Development Fund, Delegations, the Agencies and a single datawarehouse.  

A  detailed  action  plan  was  established  for  the  two  years  2005  and  2006,  and  adapted  and 
extended in the light of experience. The plans for 2006 and 2007 are presented graphically in 
annex.  The  work  required  to  complete  many  IT  developments  was  underestimated  in  the 
initial  plan,  which  meant  that  certain  tasks  had  to  be  rescheduled.  The  principal  accounting 
projects still in progress are ABAC-EDF and ABAC-Delegations, which are now planned to 
be  fully  operational  at  the  beginning  of  the  2007  (Delegations)  and  2008  (EDF)  financial 
years. The main issues arising during 2005 are presented in this report. 

The Commission's Accounting Officer has presented to the Court of Auditors the provisional 
financial  statements  for  2005,  the  first  to  be  prepared  on  a  full  accrual  basis.  The  final 
statements are due to be approved by the Commission by 31 July 2006. All DGs and services 
have deployed considerable efforts to prepare the opening balances for this first year, to check 
them  and  make  the  necessary  corrections,  and  to  estimate  the  accrued  expenditure  at  the 
beginning and end of the financial year on a coherent and consistent basis. Some checks on 
the  data  will  continue  until  the  final  accounts  are  closed,  some  accounts  must  still  be 
reconciled in the general accounts, and one Directorate-General has been requested to redo its 
estimates.  Notwithstanding  these  efforts,  given  the  magnitude  of  the  task  and  the  services' 
unfamiliarity  with  the  new  accounting  procedures,  and  the  limited  number  of  qualified  and 
trained staff, there is a risk that material errors and omissions will remain undetected in the 
final accounts. 

Some  accounting  issues  have  been  drawn  to  the  attention  of  the  Court  of  Auditors,  in 
particular  concerning  the  entities  which  were  to  be  included  in  the  EC's  consolidated 
accounts, but which have not yet agreed to this inclusion, and the means of disclosure of the 
amounts to be called up from Member States to pay existing liabilities of the EC. 

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3. 

IMPLEMENTATION OF MODERNISED ACCOUNTING IN THE COMMISSION 

3.1. 

Preparation  of  the  financial  statements  and  opening  balances  for  the  2005 
financial year. 

The  new  reporting  requirements  for  the  2005  financial  statements  were  defined,  and  the 
accounting  processes  for  closing  the  2005  accounts  and  preparing  the  2005  financial 
statements were prepared. The provisional annual accounts were delivered on 31 March 2006, 
the date set in the Financial Regulation. 

In  order  to  establish  the  opening  operational  balances,  essentially  all  the  information 
necessary for accrual accounting was uploaded into the central accounting system in January 
2005; this included  over 7  000  invoices  or cost claims, 30 000 prefinancing entries,  92  000 
assets and 3 100 guarantees. Each service was asked to verify the accuracy of these uploads 
by 1 May 2005, and in July 2005 each Director-General and Head of Service was requested to 
formally  validate  their  opening  operational  balances..  After  verifications  and  controls,  each 
DG validated the figures but requested some corrections to ensure the quality of the data. The 
last validation was received in January 2006. 

The Court of Auditors was provided with details of the invoice and prefinancing uploads in 
February 2005, and the balance sheets by DG once they were sent for validation in July 2005. 
The Court of Auditors has also had access for consulting all the data booked in the accounting 
system since it was first introduced.  

The major work in 2005 for the transition has been to finalise the opening accrual balances 
as  at  1  January  2005,  which  proved  to  be  an  arduous  task  for  DG  Budget  and  all  services 
alike.  Guidelines  on  estimating  the  value  of  claims  on  EC  funding  not  yet  submitted  by 
beneficiaries  ('cut-off')  were  sent  to  the  Directorates-General  on  16  August  2005,  after 
consultations  with  them  as  to  the  most  appropriate  basis  for  this  estimation.  By  31  January 
2006,  the  last  Directorate-General  had  prepared  its  individual  methodology  and  cut-off 
bookings  for  the  opening  balance  sheet,  and  by  17  March,  the  last  DG  had  presented  the 
information necessary for the year-end cut-off bookings. Reviews and coherence checks have 
been  performed  by  DG  Budget  to  ensure  the  quality  of  data.  Some  corrections  will  be 
required before the final accounts are approved on 31 July 2006, in particular concerning one 
DG which will be requested to rework its cut-off estimates.  

Although all DGs did the work requested of them, there were considerable delays before the 
information  was  complete,  as  shown  in  Table  1.  These  delays  reflect  the  difficulties  of 
making the transition to accrual-based accounts within a short time-frame, and of providing 
IT tools and training to all services in good time.  

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Table 1 

Information on financial accounts 

Date of request 
of data 

Deadline for 
answers 

24/01/2005 

31/03/2005* 

DGs on 
time 

Up to 1 
month 
delay 
Initial contribution 

More than 
1 month 

Last answers   Last request 
for additional 
bookings 

Final version 

29/07/2005 

15/09/2005 

23 

 16/8/2005 

14/10/2005 

6 

12 

15 

6 

19 

24/01/2006 

10/03/2006** 

23/2/2006 

17/3/2006 

4/10/2005 

31/1/2006 

18 

21 

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13/3/2006 

17/3/2006 

Checking on 
Opening 
balances  

Validation of 
Opening 
balances 
Cut off on 
opening 
balance 
01/01/05 
Cut off 
31/12/2005 

* Deadline indicates the automatic correction period for uploaded invoices and prefinancing. No formal 
validation was required at this date. 

** Even after the validation had been received a number of DGs submitted requests for further 
corrections to be made to the opening balance

As  regards  the  consolidated  accounts,  the  other  institutions  and  the  agencies  provided  the 
required  information  largely  within  the  deadlines.  The  exceptions  concern  two  institutions, 
which did not submit their cash-flow statements, and three entities which considered that they 
should  not  be  included  in  the  consolidated  accounts,  as  the  Financial  Regulation  permitted 
this exclusion (two agencies), or as they were not controlled by the European Community (the 
Joint  Sickness  Scheme).  These  issues  should  be  resolved  before  the  final  accounts  are 
approved.  

The provisional accounts show that the EC's liabilities exceed its assets by some 62 billion €. 
This  is  because  its  revenue  is  called  up  only  when  payment  of  the  liabilities  is  due.  The 
principal liabilities are for staff pensions (32 billion €), and for claims on EAGGF, Guarantee 
section  (47  billion  €).  In  the  absence  of  international  standards  for  the  presentation  of  the 
Member  States'  liabilities  in  this  respect,  the  accounts  will  be  finalised  in  the  light  of  the 
Court of Auditors' remarks. 

3.2. 

Loans and borrowings  

Operations  on  loans  and  borrowing  activities,  which  are  outside  the  Commission’s  budget, 
were  previously  recorded  in  DG  ECFIN's  IT  system,  Globus.  During  2005,  this  data  was 
moved to the Commission's central system (SAP/CFM and FM). Certain financial instruments 
were  uploaded  to  the  new  system  in  July,  with  the  remaining  instruments  being  moved  in 
November  2005.  Reporting  functionalities  are  still  being  finalised.  A  central  IT  system 
upgrade  will  be  required  before  it  can  produce  accounts  which  are  fully  compliant  with 
international standards. This upgrade is planned for the second quarter of 2006. 

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3.3. 

Training 

In 2005, the main achievements in the area of training were: 

–  completion  of  the  intensive  ABAC  training,  which  provided  over  7  000  training  places 

from October 2004 to June 2005; 

–  progressive  updating  of  the  courses  on  how  to  use  ABAC,  to  take  into  account 
developments  in  the  system,  and  to  improve  the  quality  of  the  courses.  Satisfaction  with 
ABAC courses rose from 79% in 2004 to 90% in 2005. In response to demand from DGs, 
a  new  integrated  course  was  launched,  covering  all  the  basic  aspects  of  managing 
transactions  in  both  SI2  (gradually  being  phased  out)  and  ABAC.  Specific  briefing 
sessions for authorising officers were provided in the first quarter of the year; 

–  Continued delivery of ABAC and SI2 courses after the completion of the intensive phase, 
as  well  as  the  courses  on  private  and  public-sector  accounting,  even  though  at  times 
training material and documentation did not keep pace with system changes. 

In 2006, the principal tasks will be: 

–  Continued delivery and update of courses, with a stronger message on  the importance of 

choosing the correct accounts code, since this appears to be a problem in some DGs 

–  Delivery of training for staff to Delegations and Representations 

–  Preparation  for  delivery  of  training  to  staff  of  Agencies  or  other  Institutions  who  may 

decide to adopt ABAC 

3.4. 

Consolidation  

A  consolidation  manual  and  reporting  package  has  been  prepared  and  sent  to  all 
Institutions/Agencies. A new IT consolidation tool (SAP ECCS) was developed and tested in 
November, using test reporting packages received from 15 participating Institutions/Agencies. 
The  Institutions/Agencies  have  prepared  their  individual  opening  balance  sheets  and 
communicated them to the Accounting Officer of the Commission for coherence controls and 
consolidation. The provisional accounts of Institutions and Agencies have been successfully 
consolidated using the new tool. 

3.5. 

Change of budgetary year  

As  from  July  2005,  all  Directorates-General  and  services  collaborated  with  DG  Budget  in 
reducing  to  a  few  days  the  period  during  which  financial  operations  are  interrupted  while  a 
new financial year is opened. This period was successfully reduced by more than three weeks 
compared to the usual timetable (Table 2). This achievement is not strictly part of the ABAC 
project,  but  due,  on  the  one  hand,  to  better  coordination  between  13  units  of  the  five 
directorates of DG Budget and, on the other, to the use of the preliminary draft budget data as 
a  basis  for  the  first  inter-services  consultation  on  the  internal  Rules  for  2006  as  from 
September 2005. This provisional data was then updated once the budget had been adopted. 

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TABLE  2:  COMPARISON  BETWEEN  THE  OPENING  OF  THE  2006  AND  2005 
YEARS 

Event 

2005/2006 

2004/2005 

Opening of the anticipated environment (*) 

15.11 

19.11 

Inscription of voted appropriations enabling new 
commitment and related payments  

21.12 (**) 

10.1 

Carry forward of outstanding (pre)commitments 
enabling their payment: 

 - run 1 

 - run 2 (***) 

 - run 2bis (***) 

 - run 3 (***) 

Residual appropriations, main run 

Income run 

5.1 -- 9.1 

31.1 -- 1.2 

20.1 -- 22.1 

24.1 

3.2  

6.1 -- 9.1 

16.1 -- 17.1 

18.2 

n/a 

28.2 

3.2 

15.2 

(*) The date 15/11 is laid down in RF 178.1 and 150.3 

(**) Payments, with the exception of those allowed by RF 178.2, are not authorised before 1.1.  

(***) Additional runs concern DGs which had not carried out the required preparatory work in 
time for the earlier run  

4. 

CONTROL ENVIRONMENT AND VALIDATION OF LOCAL SYSTEMS 

4.1. 

Communication and accounting quality.  

The  involvement  of  Directorates-General  and  the  communication  with  them  on  accounting 
issues  continued  throughout  2005,  in  the  form  of  meetings  with  the  networks  of  accounting 
and  financial  correspondents.  To  make  the  accounts  more  reliable,  the  Accounting  Officer's 
staff carried out checks during 2005 on the quality of the new accounting data. Any errors and 
inconsistencies  found  were  communicated  to  the  services  concerned.  Financial  reporting  by 
Directorate-General  was  developed,  and  several  meetings  with  accounting  correspondents 
were organized.  

Work  continues  on  improving  the  accounting  control  environment  and  clarifying  roles  and 
responsibilities, with a view to improving the quality of the accounting data.  

4.2. 

4.2  Validation of local systems.  

Concerning the  quality  of  data,  the  modernised  accounting  system  depends  on  the  accurate 
and complete introduction of data by the many users of the central IT system (some 7000 are 
expected). The  screens developed  for  users have progressively provided assistance aimed at 
minimising  the  risk  of  error,  but  the  quality  of  the  data  introduced  depends  on  the  control 
environment put in place by each Authorising Officer by Delegation. DG Budget's validation 

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team of 8 persons has undertaken a programme of in-depth checks of systems laid down by 
the authorising officers to supply or justify accounting information, as required under article 
61.1 (e) of the Financial Regulation, commencing with those assessed as presenting the higher 
risks.  

The systems validation team in the Directorates-General completed all the work planned for 
2005. The progress report published in July 2005 notes the overall satisfactory situation in 27 
Directorates-General. The final report, adopted on 28 February 2006, describes progress made 
in  all  DGs,  but  there  remain  significant  problems  in  the  systems  of  two  DGs  (AIDCO  and 
EAC),  which  led  the  Accounting  Officer  to  suspend  the  validation  of  their  systems  until 
improvements were completed. Furthermore, the systems for recording the imprest accounts 
cannot be validated until the ABAC-Delegations IT project is completed (see §7 below). 

5. 

IT DEVELOPMENTS FOR THE GENERAL BUDGET 

The  ABAC  modules  were  progressively  improved  through  releases  in  April,  June  and 
November  2005,  and  in  March  2006.  Invoices,  payments  and  legal  entity  files  can  now  be 
recorded through web-based applications. Work to improve security over access to the central 
accounting  system  (SAP)  continued,  and  new  restricted  accesses  for  IT  staff  were 
implemented in February 2006. The ABAC system generally performed well, but some delays 
in the implementation of the IT development programme resulted in services being unable to 
make certain accounting corrections until March 2006. 

The  first  phase  of  improvements  to  the  dunning  procedure  was  completed  by  mid-
December. The second phase is due to be implemented by end September 2006. 

Work  progressed  well  on  the  JRC's  project  to  use  SAP-PS  and  CATS  (timesheet) 
functionalities to support its needs for detailed budgeting and accounting for research projects. 
The project was implemented in readiness for the 2006 budgetary year. 

A feasibility study completed in 2005 showed that the new version of the SAP FM module, 
BCS  (Budget  Control  System)  could  be  used  to  replace  the  version  currently  used  for  the 
central budget management, and that it was capable of incorporating the local budgetary lines 
required  to  provide  departments  with  a  more  detailed  system  for  managing  their  budgets. 
These local lines are currently managed in Si2. The introduction of BCS is now expected by 
end- 2006. 

Progress  on  the  development  of  a  new  financial  Single  Data  Warehouse,  necessary  to 
complete the integration of IT files and of accounting records, was limited to the conceptual 
stage.  

For ABAC Contracts, 2005 was focused on the provision of functions requested by the User 
Group and on completing deployment of the system in all the DGs. All contracts over 13 800 
€ and signed since January 2005 were required to be recorded in ABAC Contracts. At the end 
of March 2006, there were some 57 000 contracts with a total value of more than €7.7 billion 
registered in the application. 

The main activities during 2005 for ABAC Assets were focused on the following areas:  

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–  Completion  of  developments  for  accrual  accounting  and  improved  integration  and 
coherence with the other ABAC applications, with  a view  to making data more coherent 
within ABAC;  

–  Completing the replacement of previous systems; 

–  Pilot phase of the development of applications for Delegations and Representations. 

The Commission continued to improve security over access to the system, and to ensure the 
synchronisation of the accounting data held in the system (Annex II) 

6. 

IMPLEMENTATION OF ABAC BY THE OTHER INSTITUTIONS AND AGENCIES 

Several  agencies  and  smaller  institutions  use  a  version  of  the  Commission’s  Si2  system  for 
their budgetary accounts.  The  Commission agreed to  continue  to  make  Si2  available  during 
2006, and to make all modules of ABAC available to those entities which wished to use them  

A number of Agencies (2 executive and 9 traditional) and 2 committees (Economic and Social 
Committee, Committee of the Regions) have officially requested the use of ABAC. Five 
agencies will start using ABAC in 2006 on a pilot basis, the rest in 2007 and 2008. 

For each Agency, a specific financial and accounting environment is implemented in ABAC. 
Individual accounting officers remain responsible for their accounts and for the execution of 
their payment runs. 

7. 

ABAC DELEGATIONS 

DG  Budget,  DG  RELEX  and  DG  DIGIT  have  determined  the  means  of  incorporating  in 
ABAC the delegations' transactions which are at present executed via imprest accounts, and 
recorded  on  an  independent  system,  RAI-web.  Their  fixed  asset  registers  will  have  to  be 
managed  in  ABAC-Assets.  This  project  will  require  adaptations  to  the  ABAC  modules 
concerned  and  the  development  and  completion  of  web-based  applications.  The  roll-out  to 
delegations is planned in 2006, though the link to SAP will not be in production until the year 
2007  is  opened.  So  far  as  possible,  the  roll-out  to  delegations  will  be  aligned  with  that  of 
ABAC-EDF (see §8 below). 

8. 

EUROPEAN DEVELOPMENT FUND 

In  a  separate  exercise,  the  accounts  of  the  European  Development  Funds  (“EDF”),  which 
differ from those of the General Budget, also need to be modernised. 

Modernising the EDF includes preparing an updated chart of accounts and formulating new 
accounting  rules  in  compliance  with  the  requirements  of  accrual  based  accounting.  The 
modernisation project will also include replacing OLAS, the existing IT system for the EDF. 
OLAS  will  be  replaced  by  a  combination  of  ABAC  and  the  DG  AIDCO  local  IT  system, 
CRIS.  Both  ABAC  and  CRIS  are  already  used  for  producing  the  General  Budget  accounts, 
and they are currently being adapted to the specificities of the EDF.  

Substantial  progress  was  made  on  the  ABAC  EDF  project  during  2005.  A  new  chart  of 
accounts  and  new  accounting  methods  were  drawn  up  and  approved  by  the  Accounting 

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Officer.  In  cooperation  with  DG  AIDCO,  a  gap  analysis  was  also  carried  to  see  what 
developments  were  still  needed  in  ABAC  and  CRIS.  These  IT  developments  are  underway 
and  now  aim  to  “go  live”  as  of  January  2008.  Training  the  future  users  in  the  46  ACP 
delegations remains a challenge. 

It  is  important  to  underline  that  although  the  new  IT  support  tools  are  currently  being 
developed, the EDF annual accounts for 2005 were nevertheless drawn up in compliance with 
accrual  based  accounting  principles.  Furthermore,  to  ensure  the  comparability  of  the 
information  in  the  annual  accounts,  the  EDF  Accounting  Officer  has  restated  the  opening 
financial  statements  for  the  financial  year  2005  on  a  full  accrual  accounting  basis. 
The accounting  information  provided  by  the  current  IT  accounting  system  (OLAS)  was 
adapted  where  necessary,  in  order to  present  accrual-compliant  data.  The  EDF  Accounting 
Officer  also  made  the  necessary  corrections  to  the  cash  based  data,  based  on  additional 
information supplied by the Authorising Officer. 

9. 

FUTURE DEVELOPMENTS 

The action plan has been updated for 2006 and extended to 2007 (see Annex). By end-2006, 
the full ABAC IT architecture should be in place. Further IT developments will relate mainly 
to  improving  user-friendliness  and  the  financial  reporting  functions,  and  to  achieving  the 
longer-term  aim  of  closer  integration  of  local  systems  and  providing  further  tools  for  user 
support and financial management. As regards the accounting framework, work will focus on 
defining the roles and responsibilities of the actors in the financial procedures, on improving 
the  quality  of  accounting  data  and  of  management  reports,  and  on  monitoring  compliance 
with validation criteria for local systems by all authorising officers by delegation. 

10. 

CONCLUSION  

The  transition  to  a  new  accounting  system  in  the  European  Commission  met  the  statutory 
deadline and, on 1 January  2005, the  Commission  moved the general accounting of the  EU 
from cash-based to accrual-based accounts, and is now in a position to comply in all material 
respects with internationally accepted accounting standards. The first definitive results of the 
system  in  place  were  tested  and  documented  when  the  Commission's  accounting  officer 
prepared  the  provisional  accounts  on  the  due  date  of  31  March  2006.  The  Commission  has 
thus achieved the objective of moving to accrual-based accounts within a very ambitious time 
frame. This objective could not have been achieved without the commitment and constructive 
collaboration of all Commission services. 

However,  although  so  far  the  transition  has  been  managed  successfully  and  comprehensive 
tests  have  been  conducted,  the  verification  work  on  local  systems  at  the  end  of  2005 
highlighted concerns on three systems where validation was not possible. The report on DGs' 
local  systems  also  contains  recommendations  on  improving  controls  over  accounting 
information,  better  understanding  of  the  choice  of  accounting  codes,  better  training  on 
accounting  issues,  and  on  the  related  cultural  change.  Moreover,  Commission  departments 
were  under  considerable  pressure  in  2005  to  deliver  new,  complicated  processes  within 
ambitious deadlines. Work on improving the consistency checks within the accounting system 
will  undoubtedly  extend  at  least  until  the  approval  of  the  final  consolidated  accounts  by  31 
July 2006.  

As regards the three local systems which could not be validated, two are planned to become 
compliant  by  end-  2006  (AIDCO  and  RELEX).  There  have  been  delays  in  developing  a 

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replacement  for  the  third  system  (EAC),  so  the  DG  concerned  will  have  to  ensure  that  the 
present system can be improved in time for the closure of the 2006 financial year. 

The Commission is addressing the issue of its lack of qualified accounting staff by launching 
specialised  external  competitions  to  attract  candidates  with  appropriate  training  and 
experience. It will also increase the number of training courses offered to existing staff.  

The  IT  developments  necessary  to  incorporate  the  European  Development  Funds,  the 
Delegations'  imprest  accounts  and  the  Agencies  into  ABAC  should  be  completed  by  mid-
2006,  and  thereafter  the  Commission  will  concentrate  on  completing  the  integration  of  the 
central IT systems, and on perfecting its security checks.  

The project plans to provide each department’s management with more reliable and complete 
information  on  the  assets  and  liabilities  for  which  it  is  responsible  and  on  its  financial 
relationships with each supplier (in the longer term), and, in the medium term, on the financial 
implementation of multiannual programmes and projects. 

The lessons learnt from the problems and delays encountered during this first year of accrual-
based  accounting  should  enable  the  Commission  to  improve  the  quality  of  the  financial 
information and compliance with deadlines for subsequent years' accounts. 

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Annex 1 

Q1 06 

Q2 06 

Q3 06 

Q4 06 

Q1 07 

Q2 07 

Q3 07 

Q4 07 

ABAC Agencies Pilot & Data 
Migration 

ABAC FED Developments 

Mo
d 
Tes
ts 

ABAC Agencies Migration 

Traini
ng & 
Int. 
tests 

Post-Impl. 
Support 

ABAC Delegations Migration 

ABAC Delegations 
Developments 

Te
sts 

Correctio
ns 

Roll
-out 
with
out 
SA
P 
link 

ABAC Assets for delegations development & PRESS 

Deleg 
Post Impl 
support 

Data 
upload in 
SAP 

Post 
Implemen
tat. 

Complete 
Roll-Out 

Migration & 
Roll-Out 

Traini
ng 

Trainin
g 

Integrat. ABAC 
Assets / Invoice 

ABAC Assets vs 
SAP gap 
analysis 

  ABAC Guaranties 

Assets to SAP migration? 

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Sp
ecs 

D
ev
. 

Te
st 
& 
Pro
d. 

Web Commitments 

Systems Screen 
Coherence 

v  

Integrat. ABAC Contract and 
Workflow? 

Income BPR 

Web Income Development 

Ongoing review of Security and 
Workflow specifications 

Development of enhanced Security and Workflows 
as specified in the previous phase 

ABAC 
Corrections 
Developments 

Inb
ox 

Spec
s 

FEL 
Split/Merg
e 

EN 

C  

Systems Db 
Coherence 

C  

14 

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Expert 
Screen
s: 
SAP/D
ev? 

DG Expert Screens 
Development 

BCS Implementation 

PS re-
assess
ment 

Dunning Phase 2 
Implementation 

Si2 
impa
ct 
anal
ysis 

Dunning Phase 
2 
Technical BP 

Support R3 for 
Close & 
Consolidation 

ABAC PS post-Implementation 

ABAC ECFIN Follow UP R3 & C2 

SAP and SAP CFM Upgrade + Test 

Weblogic  Upgrade 

Oracle  Upgrade 

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Archiving FM 

Ar
ch. 
FI 

Archiving ABAC Workflow 

ABAC Performance Improvement 

Performance Improvement based on the Data Model 

Arc
h. 
FI 

D
RP  

Data Dictionary and Model 

Single Data Warehouse 

Budget Reporting Review 

Acc. 
Correspon
dant R&R 

Acc
. 
Bud
g 
R&
R 

Internal Accounting Control 

Procedures Documentation 

Consolidation: Intragroup Procedure / 
Reconciliation 

Accounting Reporting BUDG C / DGs 

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Company Codes, CoA & Object Codes: HB Accounting, 
Security, Accounting Impact Analysis and Maintenance 

Accounting Follow up, DGs awareness & Training 

Acc. Manual 
new Web Site 
solution 

Provisional 
Closing 

Final 
Closing 

Accounting is the main 
impact 

USM and 
DwH 

Performance 
impacted 

ABAC 
impacted 

ABAC-Assets 
impacted 

FED 
Functio
nal 

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ANNEX II 

SYSTEM SECURITY AND SYNCHRONISATION 

1. 

System Security.  

Following the formalisation of the Security Policy for SINCOM2 in 2003 and taking account 
of  the  recommendations  of  various  audits,  an  action  plan  was  established  the  same  year  to 
reinforce security within the central accounting system.  

The  implementation  of  this  action  plan  was  continued  in  2005,  in  particular  regarding  the 
revision  of  access  in  the  accounting  system,  SAP,  aiming  to  guarantee  the  segregation  of 
functions, concerning in particular the management of the Treasury banking reconciliations, 
and  to  control  the  IT  experts'  accesses.  Due  to  new  emerging  priorities  (accesses  to  new 
modules of SAP and new users of other modules, including the more extensive use of SAP by 
other DGs), the revisions were not effective until February 2006.  

In order to investigate and resolve dysfunctions in the system with the greatest effectiveness, a 
broad  access  (emergency  profile)  was  kept  in  the  system  but  will  be  activated  only  for  a 
limited  period  necessary  for  the  resolution  of  the  problem.  In  these  cases,  the  procedure  of 
approval, monitoring and reporting of the interventions will ensure an effective control of the 
actions taken by the user of this "broad" access. A rigorous monitoring of system security was 
in place in 2005 and no major errors were found. 

During 2005, an analysis was also launched for the complete recasting of security in ABAC 
Workflow,  including  the  setting  up  of  a  workflow  for  subdelegations.  A  new,  integrated 
ABAC disaster recovery plan was successfully tested in March 2006.  

There remain two actions to be completed in 2006 concerning security:  

•  completion  of  the  revision  of  the  SAP  accesses  in  DG  Budget  (e.g.  by  budgetary 

rapporteurs) 

•  the  revision  of  the  security  module  in  ABAC  Workflow,  including  the  creation  of  an 

electronic workflow for subdelegations.  

2. 

Quality of the system.  

An  important  activity  in  2005  concerned  the  identification  of  errors  in  the  system  and  their 
correction. Checks on the datawarehouse, on a daily basis and at the end of the year, ensured 
the  consistency  of  the  budgetary  data  between  Si2  and  SAP  at  the  level  of  each  individual 
transaction. Changes in the system improved this consistency (for example in the treatment of 
the exchange rates). Three "system change requests" implemented in 2005 had a  significant 
impact in the daily consistency of the system. Reconciliation reports for 2004 were presented 
to the Directorates-General to check the consistency of the budgetary data in the accounting 
annexes  of  the  RAA  with  those  encoded  in  Si2.  In  2005,  a  major  project  was  launched 
concerning the creation of a data model and its data dictionary for ABAC. 

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