Report on the annual accounts of the European GNSS Supervisory Authority for the financial year 2006 together with the Authority's replies
Date: 2007-09-20
Institutions: European Court of Auditors
Subjects: EU office or agency, European Court of Auditors, administration of the Institutions, financial control, implementation of the budget, powers of the institutions (EU), report, satellite navigation

C 309/72

EN

Official Journal of the European Union

19.12.2007

REPORT

on the annual accounts of the European GNSS Supervisory
Authority for the financial year 2006 together with the Authority’s
replies

(2007/C 309/13)

CONTENTS

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

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

1-5

6-9

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

10-11

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

The Authority’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73

73

74

75

79

Paragraph

Page

19.12.2007

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Official Journal of the European Union

C 309/73

INTRODUCTION

Key information from the financial statements drawn up
5.
by the Authority for the financial year 2006 is presented in Tables
2, 3 and 4.

1.
The European GNSS (Global Navigation Satellite System)
Supervisory Authority (hereinafter ‘the Authority’) was set up
as
a Community Agency by Council Regulation (EC)
No 1321/2004 (1) of 12 July 2004 to manage the public inter-
ests relating to the European GNSS programmes and to act as the
regulatory authority for the programme during the deployment
and operational phases of the Galileo Programme. Table 1 sum-
marises the Authority’s objectives and activities.

2.
Council Regulation (EC) No 1942/2006 (2) of 12 Decem-
ber 2006 extended the mandate of the Authority to cover the
activities of the development phase (first phase of the Galileo Pro-
gramme (3)) which the Galileo Joint Undertaking was not able to
finalise before its winding-up on 31 December 2006.

STATEMENT OF ASSURANCE

6.
This Statement is addressed to the European Parliament
and the Council in accordance with Article 185(2) of Council
Regulation (EC, Euratom) No 1605/2002 (8); it was drawn up fol-
lowing an examination of the Authority’s accounts, as required by
Article 248 of the Treaty establishing the European Community.

The Authority began operations in 2006. Initially, all the
3.
financial transactions of the Authority were carried out on its
behalf by the Directorate-General for Energy and Transport. Fol-
lowing the installation of the necessary financial systems, the
Authority took over responsibility for its financial operations in
September 2006 (4).

7.
The Authority’s accounts for the financial year ended
31 December 2006 were drawn up by its Executive Director, pur-
suant to Article 12 of Council Regulation (EC) No 1321/2004,
and sent to the Court, which is required to give a statement of
assurance on their reliability and on the legality and regularity of
the underlying transactions. The financial statements cover the
period from 18 September (the starting date for independent
financial operations) to 31 December 2006.

4.
The handover of activities from the Galileo Joint Under-
taking to the Authority started in December 2006 with the trans-
fer of 70 million euro and the rights and obligations related to
FP6 (5), MEDA (6), EGNOS (7) and other contracts. Therefore,
although the Community subsidy and other revenue for the
Authority in 2006 was just over 7 million euro, the total assets
of the Authority amounted to 76,6 million euro at the end of
2006.

(1) OJ L 246, 20.7.2004, p. 1.
(2) OJ L 367, 22.12.2006, p. 18.
(3) The Galileo programme is divided into three phases: development and
validation (2001-2005); deployment (2006-2007); and commercial
operation (2008 onwards).
In its communication to the European Parliament and to the Council
‘Taking stock of the Galileo programme’ (COM(2006) 272 final of
7.6.2006), the Commission amended the schedule of the Galileo pro-
gramme. Development and validation will continue until the begin-
ning of 2009; deployment will take place in 2009 and 2010; the
commercial operating phase will commence at the end of 2010.
(4) Agreement on the transfer modalities between the Directorate-General
for Energy and Transport and the Authority, 15 September 2006.
(5) FP6 is the Sixth framework programme of the European Community
for research, technological development and demonstration activities,
contributing to the creation of the European Research Area and to
innovation (2002 to 2006) — (Decision No 1513/2002/EC of the
European Parliament and of the Council of 27 June 2002 — OJ L 232,
29.8.2002).

(6) The MEDA programme is the principal instrument of economic and
financial cooperation under the Euro-Mediterranean partnership
(Council Regulation (EC) No 1488/96 of 23 July 1996 — OJ L 189,
30.7.1996).

(7) The EGNOS (European Geostationary Navigation Overlay Service)
programme, the European satellite navigation system which aims at
correcting and improving GPS data, has been integrated into the Gali-
leo programme following the Council Conclusions of 5 June 2003.

8.
The Court conducted its audit in accordance with the IFAC
and INTOSAI International Auditing Standards and Codes of Eth-
ics, insofar as these are applicable in the European Community
context. The audit was planned and performed to obtain reason-
able assurance that the accounts are reliable and that the under-
lying transactions are legal and regular.

The Court has thus obtained a reasonable basis for the

9.
statement expressed below.

Reliability of the accounts

The Authority’s accounts for the financial year ended
31 December 2006 are, in all material respects, reliable.

Legality and regularity of the underlying transactions

The transactions underlying the Authority’s annual accounts
for the financial year ended 31 December 2006 are, taken as
a whole, legal and regular.

The observations which follow do not call the Court’s state-
ment into question.

(8) OJ L 248, 16.9.2002, p. 1.

C 309/74

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Official Journal of the European Union

19.12.2007

OBSERVATIONS

10.
The Court’s testing of a representative sample of 80
transactions identified weaknesses in the operation of the man-
agement and control systems. In 12 cases, the initiating official
for the transaction did not have the delegated authority and the
appropriate financial circuit was not followed. In two cases the
Authority’s authorising officer did not approve a budgetary com-
mitment before entering into a legal commitment, contrary to the
requirements of the Financial Regulation.

According to the Regulation, as of 1 January 2007, the
11.
Authority is the owner of all tangible and intangible assets cre-
ated or developed during the development phase of the Galileo
Programme (1). A part of the assets were transferred from the
Galileo Joint Undertaking in December 2006 (paragraph 4 above).
Due to the absence of agreement between three of the members
of the Joint Undertaking (2) and the Authority, the transfer of the
further identified assets of 65 million euro (3) was delayed until
mid 2007.

This report was adopted by the Court of Auditors in Luxembourg at
20 September 2007.

its meeting of

For the Court of Auditors
Hubert WEBER
President

(1) Article 3(1) of Council Regulation (EC) No 1321/2004 as amended by

Article 1(2) of Regulation (EC) No 1942/2006.

(2) The European Space Agency, the National Remote Sensing Centre of
China and the MATIMOP-Israeli Industry Centre for Research and
Development.

(3) This amount does not include the balance of funds resulting from the
winding-up of the Galileo Joint Undertaking, which will only be trans-
ferred to the Authority at the end of the winding-up procedure.

Areas of Community competence
deriving from the Treaty

Competences of the Authority as defined in Council Regulation (EC) No 1321/2004
and amended by Council Regulation (EC) No 1942/2006

Governance

Resources made available
to the Authority

Main products and services supplied in 2006

Table 1

European GNSS Supervisory Authority (Brussels)

.

1
9
1
2
2
0
0
7

.

Competitivity for growth and
employment

Objectives

Tasks

1. Administrative Board

Final budget

Setting-up of the GSA

7,0 million euro including a
Community subsidy: 100 %

Staff numbers at 31 Decem-
ber 2006

39 posts in the establishment
plan

Posts occupied: 18

+ 5 other posts (auxiliary con-
tracts,
national-
experts, local and employment-
agency staff)

seconded

Total staff numbers: 23

assigned to the following tasks:

— operational: 9

— administrative: 9

— mixed: 5

— To manage the public
interests relating to the
European GNSS pro-
grammes

— To conclude the concession contract with the
private concession holder
responsible for
implementing and managing the Galileo
deployment and operating phases;

— To be the regulatory
authority for the Euro-
pean
pro-
GNSS
grammes

— To ensure that the concession holder complies
with the concession contract and the specifica-
tions annexed thereto;

— To take all appropriate measures to ensure the
continuity of services in case of default of the
concession holder;

— To manage the funds specifically allocated to it

for the European GNSS programmes;

— To monitor the overall financial management
in order to advise on the public sector contri-
butions;

— To take over the management of the agreement
with the economic operator charged with oper-
ating Egnos;

Composition

— One representative per Member

State

— One representative from the

Commission

Tasks

— Appoints the Executive Direc-

tor;

— Adopts the annual work pro-

gramme;

— Produces a statement of esti-
mates of revenue and expendi-
ture for the Authority for the
following financial year and
sends it
to the Commission
which forwards it to the Bud-
getary Authority;

— To present a framework on the future policy

— Adopts the budget;

options concerning Egnos;

— To coordinate Member States’ actions in respect
of the frequencies neccessary to ensure the
operation of the system;

— To prepare drafts in order to assist the Commis-
sion in preparing proposals for the European
GNSS programmes to be presented to the Euro-
pean Parliament and to the Council and in
adopting the corresponding implementing
rules;

— To modernise the system and develop new gen-

erations thereof;

— To accomplish such budgetary implementation
tasks as are entrusted to it by the Commission
and that are linked to the European GNSS pro-
grammes;

— To ensure that the components of the system
are duly certified and to empower the appropri-
ate authorised certification bodies for issuing
the relevant certificates and monitoring the
respect of related standards and technical speci-
fications;

— Delivers an opinion on the
annual accounts of the Author-
ity;

— Takes decisions on all aspects
relating to the system’s safety
and security;

— Exercises disciplinary authority
over the Executive Director;

— Adopts the special provisions
necessary for the implementa-
tion of the right of access to the
documents of the Authority;

— Adopts the annual report on
the activities and prospects of
the Authority and forwards it,
by 15 June,
to the Member
the European Parlia-
States,
ment, the Council, the Com-
mission,
European
the
Economic and Social Commit-
tee and the Court of Auditors;

— Adopts its rules of procedure.

— Financial autonomy in September 2006

E
N

— 18 posts filled and 13 others recruited at

31.12.2006

— Move to new premises was planned and

prepared

— Plan for establishing the System Safety and
Security
on
Committee
30.11.2006 and call
for nominations
issued on 13.12.2006

approved

— Preparation of the documentation and
signing of the transfer of the activities of
the GJU (except for the In-Orbit-Validation
phase and international activities)

— Introduction of the basic elements of com-

munication (logo, graphics)

Galileo and EGNOS systems

— Draft certification plan for EGNOS

— Preparation and approval of an ESA/GSA

agreement by the Administrative Board

— Contribution to defining a policy for man-
aging the GNSS intellectual property rights

Concession

— Support given to the GJU negotiating team

for the concession contract

— Start-up of consultations on introducing
the accounting rules for recording tangible
and intangible assets.

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
U
n
o
n

i

C
3
0
9
/
7
5

Areas of Community competence
deriving from the Treaty

Competences of the Authority as defined in Council Regulation (EC) No 1321/2004
and amended by Council Regulation (EC) No 1942/2006

Governance

Resources made available
to the Authority

Main products and services supplied in 2006

— To enforce and verify compliance by the con-
cession holder with instructions issued pursu-
ant to Joint Action 2004/552/CFSP;

— To manage all aspects relating to the system’s

safety and security;

— To take over, with a view to the completion of
the development phase of the Galileo pro-
gramme, the tasks assigned to the latter by
Articles 2, 3 and 4 of the Annex to Regulation
(EC) No 876/2002;

— To carry out all research of benefit to the devel-
opment and promotion of the European GNSS
programmes.

2. Executive Director

Appointed by the Administrative
Board.

3. Scientific and Technical Com-
mittee

Composed of acknowledged experts
from Member States and the Com-
mission.

4. System Safety and Security
Committee

Composed of one representative per
Member State and one representative
from the Commission.

5. External audit

European Court of Auditors.

6. Discharge authority

European Parliament on a recom-
mendation from the Council.

Source:

Information submitted by the Authority.

C
3
0
9
/
7
6

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
U
n
o
n

i

.

1
9
1
2
2
0
0
7

.

.

1
9
1
2
2
0
0
7

.

European GNSS Supervisory Authority (Brussels) — Implementation of the budget for the financial year 2006

Table 2

Origin of Revenue

Revenue

Revenue entered
in the final budget for
the financial year

Revenue collected

Allocation of expenditure

Expenditure

Appropriations under the final budget

(1 000 euro)

Appropriations carried over from
the previous financial year

entered

committed

paid

carried
over

cancelled

available

paid

cancelled

Community subsidies

7 026

7 026

Other subsidies

Other revenue

3

0

Title I
Staff

Title II
Administration

Title III
Operating activities

Earmarked revenue

2 510

921

522

398

1 589

1 353

1 060

182

878

293

3 100

1 127

0

0

0

0

1 127

1 973

0

0

Total

7 029

7 026

Total

6 963

3 108

704

2 403

3 855

37

27

0

0

64

0

0

0

0

0

37

27

0

0

64

NB: Any discrepancies in totals are due to the effects of rounding.
Source: Data supplied by the Authority — This table summarises the data provided by the Authority in its annual accounts.

Revenue collected and paymets are estimated on a cash basis.

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
U
n
o
n

i

C
3
0
9
/
7
7

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Official Journal of the European Union

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European GNSS Supervisory Authority (Brussels) — Economic outturn account for the financial years 2006
and 2005

Table 3

Operating revenue
Own resources
Community subsidies
Other subsidies
Other revenues

Operating expenses
Staff expenses
Fixed asset related expenses
Other administrative expenses
Operational expenses

Total (a)

Total (b)
Surplus/(deficit) from operating activities (c = a – b)

Financial operations revenues (e)
Financial operations expenses (f)

Surplus /(deficit) from non-operating activities (g = e – f)
Economic result for the year (h = c + g)

(1 000 euro)

2006

2005

0,00
1 981,00
0,00
60,00
2 041,00

564,00
4,00
595,00
53,00
1 216,00
825,00
0,00
0,00
0,00
825,00

0,00
0,00
0,00
0,00
0,00

0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00
0,00

European GNSS Supervisory Authority (Brussels) — Balance sheet at 31 December 2006 and 2005

Table 4

Non-current assets
Intangible fixed assets
Tangible fixed assets
Current assets
Short-term pre-financing
Short-term receivables
Cash and cash equivalents

Non-current liabilities
Provisions for risks and charges
Other long-term liabilities

Current liabilities
Provisions for risks and charges
Accounts payable (1)

Net assets
Reserves
Accumulated surplus/deficit
Economic result of the year

2006

0,00
65,00

0,00
59,00
76 485,00
76 609,00

0,00
0,00

29,00
75 755,00
75 784,00

0,00
0,00
825,00
825,00
76 609,00

(1 000 euro)

2005

0,00
0,00

0,00
0,00
0,00
0,00

0,00
0,00

0,00
0,00
0,00

0,00
0,00
0,00
0,00
0,00

Total assets

Total liabilities

Total net assets
Total liabilities and net assets

(1)

Including an amount of 70 069 962,04 euro from the Galileo Joint Undertaking for the activities transferred with effect from 1 Janu-
ary 2007. This amount will be reclassified in the 2007 Accounts.

Source: Data supplied by the Authority — This table summarises the data provided by the Authority in its annual accounts: these accounts

are drawn up on an accrual basis.

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Official Journal of the European Union

C 309/79

THE AUTHORITY’S REPLIES

These preliminary observations have been the subject of
10.
all my attention. With regards to your observation No 10, please
consider that the transactions took place during a period of
start-up where the Authority’s staff was limited in number and
was gathering experience while at the same time dealing with a
heavy workload. The Authority’s situation has much improved
since and specific attention has been and is being paid to the
training of staff and the improvement and documentation of
procedures.

The Court also observes that a part of the Galileo Joint
11.
Undertaking’s assets for an amount of 65 million euro had not
been transferred as of 1 January 2007. I am pleased to confirm
that, to date, 97 % of this amount has been received by the
Authority and that the issues having slowed down the transfer are
resolved.