Report on the annual accounts of the European Aviation Safety Agency for the financial year 2005 together with the Agency's replies
Date: 2006-09-28
Institutions: European Court of Auditors
Subjects: European Aviation Safety Agency, European Court of Auditors, administration of the Institutions, financial control, interinstitutional relations (EU), report

C 312/6

EN

Official Journal of the European Union

19.12.2006

on the annual accounts of the European Aviation Safety Agency for the
financial year 2005 together with the Agency’s replies

REPORT

(2006/C 312/02)

CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

STATEMENT OF ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-2

3-6

7-11

Tables 1 to 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

7

7

9

The Agency’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

Paragraph

Page

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Official Journal of the European Union

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INTRODUCTION

The Court has thus obtained a reasonable basis for the

6.
statement expressed below.

1.
The European Aviation Safety Agency (hereinafter called
the Agency) was established by Regulation (EC) No 1592/2002 of
the European Parliament and of the Council of 15 July 2002 (1).
The Agency’s tasks are to maintain a high level of civil aviation
safety, to ensure the proper development of civil aviation safety,
to establish certification specifications and to provide certification
of aeronautical products.

2.
Table 1 summarises the competences and activities of the
Agency. Key information from the financial statements drawn up
by the Agency for the financial year 2005 is presented in Tables 2,
3 and 4.

Reliability of the accounts

The Agency’s accounts for the financial year ended 31 Decem-
ber 2005 are, in all material respects, reliable.

Legality and regularity of the underlying transactions

The transactions underlying the Agency’s annual accounts,
taken as a whole, are legal and regular.

The observations which follow do not call the Court’s opin-
ion into question.

STATEMENT OF ASSURANCE

OBSERVATIONS

This Statement of Assurance is addressed to the European
3.
Parliament and the Council in accordance with Article 185(2) of
Council Regulation (EC, Euratom) No 1605/2002 (2);
it was
drawn up following an examination of the Agency’s accounts, as
required by Article 248 of the Treaty establishing the European
Community.

4.
The Agency’s accounts for the financial year ended
31 December 2005 (3) were drawn up by its Executive Director,
pursuant to Article 49 of Regulation (EC) No 1592/2002, and
sent to the Court, which is required to give a statement of assur-
ance on their reliability and on the legality and regularity of the
underlying transactions.

5.
The Court conducted an audit in accordance with its poli-
cies and standards, which are based on international auditing
standards that have been adapted to the Community context. The
audit was planned and performed to obtain reasonable assurance
that the accounts are reliable and the underlying transactions are
legal and regular.

7.
The utilisation rate for commitment and payment appro-
priations was less than 80 %. This situation is due to the low rate
of implementation of commitment and payment appropriations
(69 % and 32 % respectively) for operating expenditure. The can-
cellation rate for appropriations for the financial year is also high
(ranging from 7 % to more than 30 % depending on the title of
the expenditure and the nature of the appropriations). Cancella-
tion rates for appropriations carried over from the previous year
the Agency
are also high. This situation should prompt
to improve and step up the monitoring of its planning so as to
ensure that resources are not mobilised unnecessarily.

8.
The appropriations under one budget heading were
amended by 1,2 million euro but the Agency submitted no docu-
ments to justify this reduction.

9.
The Court notes the failure to introduce activity-based
management even though the Agency’s Financial Regulation pro-
vides for its introduction, along the lines applied to the general
budget, so as to allow better monitoring of performance. In this
respect, the realisation of the Agency’s objectives must not be
reduced to the implementation of a series of tasks but should be
appraised in terms of its contribution to the objectives established
in its basic Regulation. The Agency’s work programme should, in
principle, express this contribution in operational and measurable
terms.

(1) OJ L 240, 7.9.2002, p. 1.
(2) OJ L 248, 16.9.2002, p. 1.
(3) These accounts were drawn up on 30 June 2006 and received by the

Court on 3 July 2006.

10.
The Management Board did not adopt minimal internal-
control standards. Management and internal-control systems and
procedures were not always described. The risks linked to finan-
cial transactions were not analysed. The initiation and operational

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Official Journal of the European Union

19.12.2006

verification of payment functions were not always separate in
2005. The procedures introduced by the authorising officers to
guarantee the accuracy and exhaustiveness of the financial
information they submit to the accounting officer were not
validated. At the end of 2005, the Agency still did not have a
system for ensuring that the fees which it charges its clients for
the services it provides were sufficient to cover the cost of those
services.

The principle of open competition was not observed in
11.
certain cases: the Agency used the negotiated procedure for one
250 000 euro contract with an employment agency. For security
services, the Agency renewed the contract it had signed in 2004
(value: 85 557 euro) by direct agreement and without justifica-
tion. In another case, the Agency invited only four tenderers to
submit a bid even though there were five names on the list drawn
up following a call for expressions of interest.

This report was adopted by the Court of Auditors in Luxembourg at
28 September 2006.

its meeting of

For the Court of Auditors
Hubert WEBER
President

Areas of Community
competence deriving from
the Treaty

The Agency’s powers as defined in Regulation (EC)
No 1592/2002 of the Parliament and of the Council
of 15 July 2002

Governance

Resources made
available to the Agency

Products and services

Table 1
European Aviation Safety Agency (Cologne)

.

1
9
1
2
2
0
0
6

.

Objectives:
to maintain a high
uniform level of civil
aviation safety in
Europe and to ensure
the proper function-
ing and development
of civil aviation
safety.

Common transport
policy
‘The Council may, act-
ing by a qualified
majority, decide
whether, to what
extent and by what
procedure appropriate
provisions may be laid
down for sea and air
transport.’
(Article 80 of the Treaty)

Source:

Information supplied by the Agency.

Final budget for
2005:
Total budget:
36,5 million euro,
including:
revenue from fees
and charges: 8,6 mil-
lion euro
Community subsidy:
18,6 million euro
200 posts in the
establishment plan
posts occupied: 132
+ 21 other posts

Total staff: 153

assigned to the fol-
lowing tasks:
— operational: 86
— administrative: 38
— mixed: 29

Measures to be
adopted by the
Agency:
— to issue opinions
to the Commis-
sion,

— to issue certifica-
tion specifica-
tions, including
airworthiness
codes and accept-
able means of
compliance, and
any guidance
material for the
application of
Community
policy,

— to take decisions
regarding airwor-
thiness and envi-
ronmental certifi-
cation,

— to conduct stan-
dardisation
inspections at the
competent
authorities of the
Member States,
— to conduct the

necessary investi-
gations in under-
takings.

1. The Management
Board
consisting of one
representative of each
Member State and
one representative of
the Commission, sets
up an advisory body
of interested parties.

2. The Executive
Director manages
the Agency and is
appointed by the
Management Board
on a proposal from
the Commission.

3. The Board of
Appeal
rules on the Agency’s
decisions concerning
certification, fees,
charges and checks at
undertakings.

4. External control
Court of Auditors.

5. Discharge author-
ity
the Parliament on a
recommendation
from the Council.

Opinions:
— four opinions concerning amendments to Regulations Nos 1592/2002,

1702/2003 and 2042/2003,

— one opinion concerning the acceptance of navigation database suppliers,
— five opinions on opt-outs requested by EASA Member States.

Rulemaking decisions:
— one amendment of CS 25 certification specifications,
— one amendment of Acceptable Means of Compliance and Guidance Material for

Regulation No 2042/2003.

International cooperation:
— two new cooperation agreements with China regarding Eurocopter and Dassault

products,

— extension of the cooperation agreement with the Aeronautical Committee of the

Commonwealth of Independent States.

Certification decisions:
Type certificates: 78
Supplementary type certificates: 900
Airworthiness directives: 490
European Technical Specifications: 249
Acceptable means of compliance: 116
Major changes: 693
Minor changes: 2 369
Major repairs: 192
Minor repairs: 1 384
AFM/RFM (= Flight Manual Revisions): 334
Approval of design organisations: 55
Approval of maintenance organisations (bilateral): 85
Approval of maintenance organisations (foreign): 113
Approval of maintenance training organisations: 11
Approval of manufacturing organisations: 4

Standardisation inspections (number of countries by type):
Approval of manufacturing organisations: 7 countries
Approval of maintenance organisations: 19 countries

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EUROPEAN AVIATION SAFETY AGENCY

Table 2

Implementation of the budget for the financial year 2005

Revenue

Origin of revenue

Revenue entered in
the final budget for
the financial year

Revenue collected

Allocation of expenditure

Community subsi-
dies
Own revenue

22 138
8 000

Other revenue

1 443

18 930
8 569

1 472

Total

31 581

28 971

CA: commitment appropriations, PA: payment appopriations.

Title I
Staff
Title II
Administration
Title III
Operating activities
— CA
— PA

(1 000 euro)

Final budget appropriations

Expenditure

Appropriations carried
over from the previous
financial year

Appropriations available
(2005 and 2004)

entered

commit-
ted

paid

carried
over

cancelled

outstand-
ing com-
mitments

paid

cancelled

appro-
priations

commit-
ted

paid

carried
over

cancelled

16 192 13 968 13 754

214

2 224

314

212

102

16 506 14 282 13 966

214

2 326

3 691

3 428

2 646

782

263

810

732

78

4 501

4 238

3 378

782

341

20 098 13 865
11 698
0
Total CA 39 981 31 261
Total PA 31 581

0
4 656
0
0 21 056

0
5 611
996
6 607

6 233
1 431
8 720
3 918

0
264
1 124
1 388

0
237
944
1 181

0
27
180
207

20 098 13 865
11 962
0
41 105 32 385
32 969

0
4 893
0
0 22 237

0
5 611
996
6 607

6 233
1 458
8 900
4 125

Revenue and expenditure account for the financial years 2005 and 2004

Balance sheet as at 31 December 2005 and 31 December 2004

Table 3

Table 4

Operating revenue
Community subsidies
Other subsidies/revenue

Operating expenditure
Staff
Administration
Operations

Other income (d)
Other charges (e)

Total (a)

Total (b)
Operating result (c = a – b)

Economic result (f = c + d + e)

2005

17 416
13 053
30 469

13 636
4 016
11 660
29 312
1 157
41
– 14
1 184

(1 000 euro)

2004

7 777
601
8 378

5 557
1 521
2 081
9 159
– 781
0
– 1
– 782

Source: Agency data — These tables summarise the data supplied by the Agency in its annual accounts.

Assets
Tangible assets
Current assets
Cash

Liabilities
Total outturns for previous financial years
Outturn for the year
Current liabilities

2005

1 531
8 816
11 746
22 093

1 845
1 184
19 064
22 093

Total

Total

(1 000 euro)

2004

991
329
4 978
6 298

2 627
– 782
4 453
6 298

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THE AGENCY’S REPLIES

The utilisation of commitment appropriations was less
7.
than forecast due to recruitment difficulties. The low rate of
implementation of payment appropriations for operational activi-
ties is due essentially to the fact that the national authorities did
not invoice the Agency during the first year of the implementa-
tion of Commission Regulation (EC) No 488/2005.

8.
The sum of EUR 1,2 million had been erroneously entered
under normal appropriations and had to be transferred under
assigned revenue appropriations. The Agency will ensure that the
Management Board is informed of any future changes made to
the budget.

9.
In 2006 the Agency introduced an integrated management
project for certification activities, including a detailed monitoring
of the Agency’s activities as well as the adaptation of the financial
system to allow the drawing up of analytical accounts. This
project is expected to be operational as of 2008. In the meantime,
the Agency is endeavouring to establish a closer link between its
budget and its operational objectives and, in this connection, the
2007 budget will be presented by activities.

On 2 June 2006,

the Management Board adopted
10.
internal-control standards based on the standards applied by the
Commission and on the ISO 9000 standards. A quality assurance
programme aimed at implementing these standards was launched
in March 2006. The description of systems and procedures and
the risk analysis will be developed in this context. The anomaly
raised by the Court concerning the separation of functions has
been corrected. The implementation in 2006 of computer links
between the operational and financial systems should improve
the quality assurance of the financial information submitted by
the authorising officers to the accounting officer. The current
recasting of Commission Regulation (EC) No 488/2005 on fees
and charges will enable the Agency to cover the costs of certifi-
cation activities.

11.
Over the first months following its transfer to Cologne in
November 2004, the Agency was unable to apply the normal
purchasing procedures for goods and services due to the time lim-
its and a human resources deficit. Since it has been in a position
to set up a specialised purchasing unit, the regulatory processes
have been applied.