Opinion No 6/2007 on the annual summaries of Member States; national declarations of Member States; and audit work on EU funds of national audit bodies
Date: 2007-07-19
Institutions: European Court of Auditors
Subjects: EU Member State, EU institution, audit, budgetary control, fund (EU), management audit

14.9.2007

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Official Journal of the European Union

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on the annual summaries of Member States; ‘national declarations’ of Member States; and audit
work on EU funds of national audit bodies

OPINION No 6/2007

(submitted pursuant to Article 248(4), second paragraph, EC Treaty)

(2007/C 216/02)

THE EUROPEAN COURT OF AUDITORS,

Having regard to the Treaty establishing the European Commu-
nity, and in particular Articles 248(4) and 279 thereof,

Having regard to the Treaty establishing the European Atomic
Energy Community, notably Article 160 C, paragraph 4, and
Article 183 thereof,

agriculture, and issued by audit authorities in the case of Struc-
tural Funds). The second is the national declarations by some
Member State authorities, launched as voluntary initiatives within
the context of accountability to national parliaments, and audited
by the respective national audit bodies. The third is the voluntary
reports and certificates of national audit bodies on management
of EU funds within their Member States.

Having regard to the Court’s Opinion No 2/2004 on the ‘single
audit model’ (and a proposal for a Community internal control
framework) (1),

Annual summaries

Having regard to the Council Regulation (EC, Euratom)
No 1995/2006 of 13 December 2006 amending Regulation (EC,
Euratom) No 1605/2002 on the Financial Regulation applicable
to the general budget of the European Communities (2),

II.
The annual summaries of sectoral audits and statements of
assurance (opinions) introduced by the revised Financial Regula-
tion represent an additional link between the Commission and
Member States in a chain-based model. The first annual summa-
ries are due by 15 February 2008, in relation to 2007.

Having regard to the Commission’s action plan towards an inte-
grated internal control framework (3), in particular Actions 5, 6
and 8 thereof,

Having regard to the European Parliament’s decision on discharge
for 2005 — Section III — Commission (4), in particular points 19
to 30 thereof,

Having regard to the resolution of 11 December 2006 of the
Contact Committee of the Supreme Audit Institutions of the
European Union on strengthening and facilitating cooperation
between the EU SAIs to contribute to the improvement of
accountability for Community funds (5), in particular point 9
thereof,

HAS ADOPTED THE FOLLOWING OPINION:

III.
The Commission should undertake adequate supervision
of the annual summaries — the quality of which will depend on
the quality of the underlying declarations — to ensure they are
consistent, comparable and useful. Whereas the legislation
restricts the annual summaries to simple sector-specific summa-
ries, the Commission should be encouraged to promote value
added to the process, such as identification of common problems,
possible solutions and best practices.

IV.
Annual summaries are an additional element of internal
control. If they highlight strengths and weaknesses they could
stimulate improved control of the EU funds in shared manage-
ment areas.

The opinion covers three different but related issues. The
I.
first is the new requirement introduced by the revised Financial
Regulation for annual summaries of audits and opinions required
by sectoral regulations (such as on paying agencies within

National declarations

(1) OJ C 107, 30.4.2004.
(2) OJ L 390, 30.12.2006.
(3) COM(2006) 9 final.
(4) P6_TA(2007)0132.
(5) Resolution CC-R-2006-01.

V.
National declarations are voluntary initiatives of certain
Member States provided from the highest level and addressed to
national parliaments. Whether national declarations provide use-
ful additional information will depend on the scope and quality
of the work that underlies them.

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By focusing and demonstrating national accountability
VI.
for the use of shared management EU funds, they are intended to
lead to improved management. The national declarations can be
considered as a new element of internal control, and the Com-
mission and the Court should consider them in this respect.

transactions. Experience suggests that the major risk for the latter
occurs in the reliability of the information supplied by beneficia-
ries when claiming EU funds, not in the way that information is
processed by Member States or the Commission. A declaration
that systems are functioning as required by EU regulations may
not in itself provide assurance about the legality and regularity of
the transactions concerned.

National audit work

VII.
Some national audit bodies audit EU funds on their own
initiative and for national reporting purposes. In one case the
national audit body issues an opinion on compliance of systems
with regulation and the legality and regularity of transactions.

Conditions and constraints for using the potential assurance

An audit approach

XII.
Being an integral part of the internal control system
means that annual summaries will be integrated into the Court
standard audit procedures. This could include assessing the con-
tribution annual summaries make to overall internal control and
how the Commission manages the process and uses the informa-
tion they provide for its supervisory role.

VIII.
The Court recognises that it may be possible to make
use of the potential assurance provided by the audited national
declarations and national audit work, while respecting the require-
ments of international auditing standards. As a precondition to
using the potential assurance,
the national declarations or
national audit work would need to be of appropriate scope,
approach and timing, and be carried out according to interna-
tional standards.

XIII.
One focus for the Court’s approach to national declara-
tions or national audit work should be their impact on, and use
by, its principal auditee — the Commission. This could include
assessing how the Commission provides guidance, how it takes
the findings into consideration, how it assures itself of their reli-
ability, and how it adapts its own control activities in response.

In respect of complying with international auditing stan-
IX.
dards, a single overriding requirement emerges: the external
auditor wishing to rely on, or use, the opinion or work of
others must obtain direct evidence of the sound basis of that
work. The time taken by the Court for obtaining such evidence
should be compared with the time saved through reduced direct
testing (or other procedures) of the audit area.

So far as the Court’s statement of assurance is con-
XIV.
cerned, a distinction should be made between national declara-
tions per se, and national declarations audited by the national
audit bodies. National declarations share some of the character-
istics of management representations: they may contain valuable
information about the implementation of the EU budget, but do
not themselves constitute conclusive audit evidence. Nor is it the
Court’s responsibility to audit their reliability, unless the Court
wishes to use them.

X.
The ‘national’ nature of the national declarations and
national audit work contrasts with the current horizontal nature
of the Court’s work where conclusions are generally provided by
budgetary area rather than by individual Member State. To have a
potential impact on the Court’s work the national declarations or
national audit work would need to be of adequate and compa-
rable scope, approach and timing. However, regardless of the
Court’s use of this work, it recognises the potential effect of
national declarations and national audit work on raising aware-
ness within Member States of the importance of internal control
of EU funds.

XV.
Opinions produced by national audit bodies on systems
and/or the legality and regularity of income and expenditure,
whether freestanding or as opinions on national declarations,
may constitute audit evidence on which the Court can place reli-
ance, subject to international auditing standards. The Court will
take them into account when planning and undertaking its work.

XI.
Both the sectoral opinions (underpinning the annual
summaries) and the various national declaration and audit initia-
tives have a common characteristic: they examine and conclude
on systems. National declarations may also provide specific opin-
the underlying
legality and regularity of
ions on the

XVI.
In practice, the assurance provided on systems could be
used in planning financial/compliance audits both in assessing
control risk and the application of the audit assurance model. If
tested and found to be reliable the work of the national audit bod-
ies could be used by the Court in the context of its own system
testing — including tests of controls — potentially reducing the
amount of direct substantive testing required.

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As explained above, if the Court is to rely on the work
XVII.
of the national audit bodies it will need to satisfy itself about the
suitability and quality of the work done. In practice, this will
require cooperation between the Court and the national audit
bodies bilaterally.

between compliance of systems with regulation and the criteria
used for judging the acceptable level of legality and regularity of
underlying transactions through the sectoral opinions underlying
the annual summaries and the national declarations.

Moving forward

In order to contribute to improved management the
XVIII.
Commission should consider using the annual summaries to
identify, and promote, best practices within (and between) Mem-
ber States. The Commission should examine the relationship

XIX.
The approach to the audit of EU funds by the national
audit bodies is being addressed within the mandate of the Con-
tact Committee Working Group responsible for ‘developing com-
mon auditing standards and comparable audit criteria tailored for
the EU area’ (1). Common standards of approach and methods
may increase the potential for the Court to rely on the work of
the national audit bodies, subject to the need to obtain direct evi-
dence of the quality of that work.

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of
19 July 2007.

For the Court of Auditors
Hubert WEBER
President

(1) Resolution CC-R-2006-01 of the Contact Committee of the Supreme

Audit Institutions of the European Union, 11.12.2006.