Report on the annual accounts of the European Aviation Safety Agency for the financial year 2006 together with the Agency's replies
Date: 2007-09-27
Institutions: European Court of Auditors
Subjects: European Aviation Safety Agency, European Court of Auditors, administration of the Institutions, financial control, implementation of the budget, powers of the institutions (EU), report

19.12.2007

EN

Official Journal of the European Union

C 309/47

on the annual accounts of the European Aviation Safety Agency for the
financial year 2006 together with the Agency’s replies

REPORT

(2007/C 309/09)

CONTENTS

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

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

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

1-2

3-6

7-10

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

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

48

48

48

50

54

Paragraph

Page

C 309/48

EN

Official Journal of the European Union

19.12.2007

INTRODUCTION

The Court has thus obtained a reasonable basis for the

6.
Statement set out 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 Agency’s competences and activi-
ties. Key data summarised from the financial statements drawn up
by the Agency for the financial year 2006 is presented in Tables 2,
3 and 4 for information purposes.

Reliability of the accounts

The Agency’s accounts for the financial year ended 31 Decem-
ber 2006 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 State-
ment 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 2006 (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 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.

(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 29 June 2007 and received by the

7.
At the end of 2006, the appropriations carried over for
title II (administrative expenditure) were about 40 % of the com-
mitments and for title III (non-differentiated operational expen-
diture) were about 50 %. For the same titles, more than 15 % of
the appropriations were cancelled. Contrary to its financial regu-
lation, the Agency used its differentiated payment appropriations
carried over from 2005 despite the fact that it had enough pay-
ment appropriations for 2006. Thus, the budgetary principle of
annuality was not strictly observed.

8.
For its 2006 certification activities, the Agency’s cost
analysis system showed costs of about 48 million euro versus rev-
enue of about 35 million euro. The Agency, in cooperation with
the Commission (4), must review the current fees scheme in order
to ensure that the Agency’s costs for the certification activities are
justified and covered by its fees.

9.
In the Agency’s balance sheet, short-term receivables
amounted to approximately 14 million euro, of which 20 % were
more than three months old. The Agency has not yet imple-
mented an effective claim management system, possibly includ-
ing interest on late payment.

Court on 11 July 2007.

(4) Fees and charges are fixed by an ad hoc Commission Regulation.

19.12.2007

EN

Official Journal of the European Union

C 309/49

For a contract with an external consultant (221 000 euro)
10.
and for the renewal of an agreement for travel services signed in
2004 (annual market value of approximately 1,5 million euro),

the Agency had recourse to the negotiated procedure for reasons
of urgency (1) which were not justified and rather reflected insuf-
ficient programming.

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

its meeting of

For the Court of Auditors
Hubert WEBER
President

(1) Article 126 (1) (c) of the implementing rules of the Financial Regula-

tion applicable to the general budget.

Table 1

European Aviation Safety Agency (Cologne)

Areas of Community competence
deriving from the Treaty

The Agency’s powers as defined in Regulation (EC) No 1592/2002

Governance

Common transport policy:

Objectives:

‘The Council may, acting by a
qualified majority,
decide
whether, to what extent and by
what procedure appropriate
provisions may be laid down
for sea and air transport.’

To maintain a high uniform
level of civil aviation safety in
Europe and to ensure the
proper functioning and devel-
aviation
opment of
safety.

civil

(Article 80 of the Treaty)

Measures to be adopted by
the Agency:

(1) To issue opinions to the
Commission;

certification
(2) To issue
specifications,
including air-
worthiness codes and accept-
able means of compliance,
and any guidance material for
the application of Commu-
nity policy;

(3) To
decisions
take
regarding airworthiness and
environmental certification;

(4) To conduct standardisa-
tion inspections at the com-
petent
the
Member States;

authorities of

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

(2) The Executive Direc-
tor manages the Agency and
is appointed by the Manage-
ment Board on a proposal
from the Commission.

(3) The Board of Appeal
rules on the Agency’s deci-
sions
concerning certifica-
tion, fees, charges and checks
at undertakings.

Financial control Court

(4)
of Auditors.

(5) To conduct the neces-
sary investigations on com-
pany premises.

(5) Discharge given by the
Parliament on a recommen-
dation from the Council.

Resources made available
to the Agency in 2006
(2005)

Final budget:

Opinions:

Products and services

Total budget: 66,8 (31,5) mil-
lion euro, including:

from fees

Revenue
and
charges: 33,2 (8,6) million
euro (50 %)

Community
subsidy:
31,4 (18,9) million euro
(47 %),

Contribution from the Federal
Republic of Germany (Minis-
try of Transport): 1,2 million
euro (2 %)

— 5 opinions concerning amendments to Regu-
lations (EC) Nos 1592/2002, 1702/2003
and 2042/2003.

Rulemaking decisions:

— 3 amendments of CS 25, CS-P and CS-ETSO

certification specifications;

— 6 amendments of Acceptable Means of Com-
pliance and Guidance Material for Regulations
(EC) Nos 1702/2003 and 2042/2003;

— 1 decision on the organisation of approval

numbers.

Staff at 31.12.2006;

International cooperation:

328 (200) temporary staff in
the establishment plan

posts occupied: 276 (132)

Other satff: 33 (21) contract
and auxiliary staff

Total staff:

309 (153) assigned to the fol-
lowing tasks:

— operational: 227 (86)

— administrative: 57 (38)

— mixed: 25 (29)

— 1 agreement protocol concluded with China
on the final production line of the Airbus
A320 in China and 1 cooperation agreement
signed with China on Airbus products in gen-
eral;

— 1 cooperation agreement concluded with
Japan for the export of European products;

— 13 cooperation agreements concluded with
every non-EU ECAC country within the con-
text of the continuation of the SAFA pro-
gramme;

— Extension of the cooperation agreement with
the Aeronautical Committee of the Common-
wealth of Independent States on Beriev prod-
ucts.

Certification decisions:

Type certificates: 70

Supplementary type certificates: 803

Airworthiness directives: 382

European Technical Specifications: 178

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Areas of Community competence
deriving from the Treaty

The Agency’s powers as defined in Regulation (EC) No 1592/2002

Governance

Resources made available
to the Agency in 2006
(2005)

Products and services

Acceptable means of compliance: 97

.

1
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.

(1) Total initial and surveillance approvals at 31.12.2006.
Source:

Information supplied by the Agency.

Major changes: 1 125

Minor changes: 1 830

Major repairs: 1 009

Minor repairs: 372

AFM/RFM (= Flight Manual Revisions): 430

Approval of design organisations (1): 377

Approval of maintenance organisations (bilat-
eral) (1): 1 293

Approval of maintenance organisations
eign) (1): 201

(for-

Approval of maintenance
tions (1): 16

training organisa-

Approval of manufacturing organisations (1): 6

Standardisation inspections (number of countries
by type):

Approval of manufacturing organisations: 12 coun-
tries

Approval of maintenance organisations: 26 coun-
tries

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European Aviation Safety Agency (Cologne) — Implementation of the budget for the financial year 2006

Table 2

Source of revenue

Revenue

Revenue entered
in the final budget
for the financial year

Own revenue

30 700

Community subsidy

32 899

Other subsidies

635

Other revenue

Assigned revenue

156

1 273

Revenue collected

Allocation of expenditure

Title I
Staff (NDA)

Title II
Administration (NDA)

Title III
Operating activities (NDA)

Title III
Operating activities (DA)

33 236

31 454

453

308

Expenditure

Appropriations for the financial year

(1 000 euro)

Appropriations carried over from
the previous financial year

entered

committed

paid

carried
over

cancelled

available

paid

cancelled

25 211

23 881

23 595

286

1 330

6 812

6 222

3 637

2 585

590

214

782

160

690

54

92

7 380

5 625

2 763

2 862

1 756

1 276

1 130

146

Total

65 663

66 831

1 380

Assigned revenue

1 380

1 365

1 357

— CA

25 680

23 219

— PA

24 880

11 362

13 518

Total CA

66 463

60 312

Total PA

65 663

42 714

19 251

2 461

0

22

6 159

3 698

4 334

4 334

0

2 272

6 606

0

6 314

0

0

292

292

0

5 733

NDA: non-differentiated appropriations (commitment appropriations are equal to payment appropriations).
differentiated appropriations (commitment appropriations may differ from payment appropriations).
DA:
commitment appropriations in the context of differentiated appropriations.
CA:
PA:
payment appropriations in the context of differentiated appropriations.
Source: Data supplied by the Agency. This table summarises the data provided by the Agency in its annual accounts. Revenue collected and payments are estimated on a cash basis.

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19.12.2007

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Official Journal of the European Union

C 309/53

European Aviation Safety Agency (Cologne) — Economic outturn account for the financial years 2006
and 2005

Table 3

Note

2006

2005

(1 000 euro)

Operating revenue
Fees and charges
Community subsidies
Other subsidies
Other revenue

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

Total (a)

(1)

(2)

(3)

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

Financial operations revenue (e)
Financial operations expenditure (f)

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

35 173
26 401
2 021
340
63 935

23 778
573
6 436
27 798
58 586
5 349
263
19
243
5 593

10 888
17 417
2 138
26
30 469

13 636
341
3 675
11 660
29 312
1 157
41
14
27
1 184

(1) The strong increase in revenue reflects the first full year of implementation of Commission Regulation (EC) No 488/2005 on fees and

charges levied for certification activities.

(2) 126 people were recruited in 2006.
(3) Building cost of the new space needed.

European Aviation Safety Agency (Cologne) — Balance sheet at 31 December 2006 and 2005

Table 4

Note

2006

2005

(1 000 euro)

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

Current liabilities
Provisions for risks and charges
Accounts payable

Net assets
Accumulated surplus/deficit
Economic result of the year

(1)
(2)

(3)
(4)

Total assets

Total liabilities

Total net assets
Total liabilities and net assets

268
1 719

13 881
24 056
39 924

639
30 663
31 302

3 029
5 593
8 622
39 924

182
1 348

8 816
11 746
22 094

—
19 065
19 065

1 845
1 184
3 029
22 094

(1) Short-term receivables reflect the growth in fees and charges revenue.
(2) The increase in cash reflects both improved collection of revenue and a high unpaid amount of accrued charges as a a result of late invoic-

ing by main suppliers.

(3) 2006 provisions for risks and charges represent staff expenditure related to annual leave accrual. The corresponding expenses in 2005, an

amount of 237 180 euro, were reported under accounts payable.

(4) The increase in accounts payable is related to the certification suppliers accrual, reflecting both higher activity and late invoicing from

external providers.

Source: Data supplied by the Agency. This table summarises the data provided by the Agency in its annual accounts: these accounts are drawn

up on a accrual basis.

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Official Journal of the European Union

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THE AGENCY’S REPLIES

The carried over differentiated payment appropriations

7.
were related to activities to be paid by the fee income.

The Agency had to use differentiated payment appropriations car-
ried over from 2005 because the 2006 fee income was insuffi-
cient to cover the cost of its certification activities and to offset
the impact of the change from differentiated to non-differentiated
appropriations from 1 January 2007 (The Financial Regulation
does not provide a procedure for making such a change).

8.
The new fees and charges regulation (EC) No 593/2007
which has entered into force on 1 June 2007 should generate rev-
enue sufficient to cover the cost of the certification activities. The
Agency has decided to implement during 2007 and 2008 an inte-
grated management system that will further increase the level of
detail in monitoring the cost of its activities.

During 2006, the follow up of receivables has been
9.
impacted by the burden of old 2005 recoverable amounts for
which sufficient information was not always available. The
Agency continues its efforts to make this information more reli-
able and to reduce the delays in the collection of receivables.
Moreover, since December 2006, the Agency has been sending
out systematically reminders and is charging interest in case of
late payment.

10.
The Agency takes note of the Court’s observation. In the
first case, a prior study has been ordered in urgency, as it appeared
during the last quarter of 2005 that a fast review of the Fees and
charges Regulation was crucial to guarantee sufficient revenue to
the Agency. In the second case, the contract has been prolonged,
looking forward to the results of an external analysis ordered to
enable the decision upon internalisation or externalisation of
travel related services. The Agency is currently drafting the Terms
of Reference in view of launching a comprehensive call for
tenders.