Special Report No 5/2009#The Commission’s Treasury Management
Date: 2009-04-30
Institutions: European Court of Auditors
Subjects: Community budget, EU law, European Commission, Treasury, fund (EU), implementation of the budget, opinion of the Court of Auditors

EUROPEAN COURT 
OF AUDITORS

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THE COMMISSION’S
TREASURY MANAGEMENT

 
 
 
 
Special Report No 5  

 2009

THE COMMISSION’S 
TREASURY MANAGEMENT

(pursuant to Article 248(4), second subparagraph, EC)

EUROPEAN COURT OF AUDITORS

2

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-45410
Fax +352 4398-46430
E-mail: euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 5  

 2009

More information on the European Union is available on the Internet (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 2009

ISBN 978-92-9207-295-7

© European Communities, 2009

Reproduction is authorised provided the source is acknowledged.

Special Report No 5/2009 — The Commission’s treasury management

Printed in Belgium

CONTENTS

3

Paragraph

I–VI 

1–8 

1–4 

5–7 

8 

EXECUTIVE SUMMARY

INTRODUCTION

BACKGROUND

REGULATORY FRAMEWORK

THE EUROPEAN COMMISSION’S TREASURY MANAGEMENT ACTIVITIES

9–12 

AUDIT SCOPE AND APPROACH

13–39 

13–20 

13–18 
19 
20 

21–39 

21–23 
24–26 
27–29 
30–32 
33–34 
35–38 
39 

40–47 

40–43 

44–47 

MAIN OBSERVATIONS

 DOES THE COMMISSION COMPLY WITH THE RULES AND REGULATIONS APPLICABLE 
TO TREASURY MANAGEMENT?
TREASURY MANAGEMENT AND FORECASTING
MANAGEMENT OF IMPREST ACCOUNTS
HUMAN RESOURCES — SENSITIVE POSTS

 HAS THE COMMISSION ESTABLISHED INTERNAL CONTROL SYSTEMS WHICH ENSURE 
SOUND TREASURY MANAGEMENT?
OVERALL SET-UP OF THE COMMISSION’S TREASURY MANAGEMENT ACTIVITIES
RISK MANAGEMENT OF TREASURY ACTIVITIES
PERFORMANCE MEASUREMENT AND BENCHMARKING
MANAGEMENT OF FIDUCIARY ACCOUNTS
MANAGEMENT OF FINES
THE PAYMENT PROCESS AND MANAGEMENT OF THE BANK ACCOUNTS
HUMAN RESOURCES

CONCLUSIONS AND RECOMMENDATIONS

 DOES THE COMMISSION COMPLY WITH THE RULES AND REGULATIONS APPLICABLE 
TO TREASURY MANAGEMENT?

 HAS THE COMMISSION ESTABLISHED INTERNAL CONTROL SYSTEMS WHICH ENSURE 
SOUND TREASURY MANAGEMENT?

REPLY OF THE COMMISSION

Special Report No 5/2009 — The Commission’s treasury management

 
4

EXECUTIVE 
REPLY OF THE 
SUMMARY
COMMISSION

I.
T r e a s u r y   m a n a g e m e n t   a t   t h e   C o m m i s s i o n 
i s   p e r f o r m e d   b y   t w o   D i r e c t o r a t e s - G e n e r a l 
(DG):  DG  Budget  (DG  BUDG)  and  the  DG  for 
Economic  and  Financial  Affairs  (DG  ECFIN). 
D G   B U D G   i s   r e s p o n s i b l e   f o r   t r e a s u r y   m a n -
agement  of  the  entire  budget  managed  by 
the Commission and the European Develop-
ment Fund. DG ECFIN is responsible for the 
treasury management of other non-budget-
ary items and the investment of Community 
funds.

II.
The main objective of the audit was to assess 
t h e   q u a l i t y   o f   t h e   C o m m i s s i o n ’ s   t r e a s u r y 
management and in particular whether:

(a) 

the Commission complied with the rules 
a n d   r e g u l a t i o n s   a p p l i c a b l e   t o   t r e a s u r y 
management; and

(b) 

t h e   C o m m i s s i o n   h a d   e s t a b l i s h e d   i n t e r -
nal control systems which ensure sound 
treasury management.

III.
T h e   C o u r t   e x a m i n e d   t h e   f o l l o w i n g   m a i n 
treasury management areas:

(d) 

treasury planning and forecasting;

(e) 

management of fiduciary accounts;

(f) 

management of fines;

(g) 

t h e   p a y m e n t   p r o c e s s   a n d   m a n a g e m e n t 
of bank accounts; and

(h) 

human resources.

IV.
The three main legal requirements are:

(a) 

t h e   C o m m i s s i o n   s h o u l d   e n s u r e   t h a t   i t 
h a s   a t   i t s   d i s p o s a l   s u f f i c i e n t   f u n d s   t o 
c o v e r   c a s h   n e e d s   a r i s i n g   f r o m   b u d g e t -
ary implementation;

(b) 

the Commission should set up cash man-
agement  systems  enabling  the  drawing 
up of cash-flow forecasts; and

(c) 

the Commission should draw on the sums 
credited to the own resources accounts 
t o   t h e   e x t e n t   n e c e s s a r y   t o   c o v e r   c a s h 
r e q u i r e m e n t s   a r i s i n g   f r o m   t h e   i m p l e -
mentation of the budget.

(a) 

t h e   o v e r a l l   s e t - u p   o f   t h e   C o m m i s s i o n ’ s 
treasury management activities;

V.
The Court’s main conclusions are:

(b) 

risk management of treasury activities;

 —

(c) 

p e r f o r m a n c e   m e a s u r e m e n t   a n d 
benchmarking;

the Commission did overall comply with 
t h e   m a i n   p r o v i s i o n s   p r e s c r i b e d   b y   t h e 
Community legislation;

Special Report No 5/2009 — The Commission’s treasury management

5

EXECUTIVE 
REPLY OF THE 
SUMMARY
COMMISSION

VI.
The Court’s main recommendations are:

 —

 —

 —

 —

 —

t h e   C o m m i s s i o n   s h o u l d   i m p r o v e   t h e 
docu mentation of its cash flow forecast-
ing procedures;

t h e   C o m m i s s i o n   s h o u l d   a n a l y s e   t h e 
f u n c t i o n i n g   o f   t h e   p r e s e n t   s y s t e m   o f 
o w n   r e s o u r c e s   a c c o u n t s   w i t h   t h e   a i m 
of reducing balances on these accounts 
during the second half of the year;

the Commission should put in place pro-
cedures which ensure coordination of its 
treasury management activities;

DG BUDG should improve the documen-
t a t i o n   o f   i t s   r i s k   m a n a g e m e n t   a n d   t h e 
scope of its performance measurement; 
and

t h e   C o m m i s s i o n   s h o u l d   a s   a   m a t t e r   o f 
priority reach a conclusion in its search 
f o r   a n   o p t i m u m   s o l u t i o n   f o r   t h e   t r e a t -
ment of provisionally collected fines.

 —

 —

 —

 —

 —

the Commission has set up prudent cash 
management forecast procedures ensur-
ing  that  it  has  at  its  disposal  sufficient 
funds to cover cash requirements arising 
from budgetary implementation;

t h e   C o m m i s s i o n ’ s   p r o c e d u r e s   t o   t r a n s -
fer  funds  between  Member  States’  own 
resources accounts were not sufficiently 
documented;

as a result of the provisions of the Com-
munities’ own resources regulation, sig-
nificant balances accumulate during the 
second half of the year as a consequence 
o f   t r a n s f e r r i n g   o w n   r e s o u r c e s   t o   t h e 
accounts  opened  by  the  Member  States 
i n   t h e   n a m e   o f   t h e   C o m m i s s i o n   o n   t h e 
basis of budget appropriations;

the internal control procedures in place 
c o n c e r n i n g   t h e   e x e c u t i o n   o f   p a y m e n t s 
and  bank  accounts  were  effective  over-
all. However, unlike DG ECFIN, DG BUDG 
d i d   n o t   d o c u m e n t   i t s   m a n a g e m e n t   o f 
risks arising from treasury activities, nor 
were its procedures established to assess 
all aspects of its performance;

lack  of  coordination  between  the  Com-
mission DGs in an area where a common 
approach to issues such as risk manage-
ment and control is necessary. This led to 
the situation where the accounts’ limits 
for holding funds with commercial banks 
were  established  by  the  DGs  concerned 
w i t h o u t   c o n s i d e r i n g   t h e   C o m m i s s i o n ’ s 
overall risk exposure with each commer-
cial bank; and

 —

f i n e s   a r e   h e l d   i n   s p e c i f i c   b a n k   c u r r e n t 
accounts, thus there is an increased risk 
of loss.

Special Report No 5/2009 — The Commission’s treasury management

INTRODUCTION

6

1. 

2. 

BACKGROUND

The European Union budget provides funding for a wide range of actions 
in the European Union and beyond. The European Commission imple-
ments the budget under its own responsibility in accordance with the 
Financial  Regulation 1  and  within  the  limits  of  the  budgetary  appro-
priations. In the process of budget implementation, the Commission 
m a d e   i n   2 0 0 7   a p p r o x i m a t e l y   1 , 5   m i l l i o n   p a y m e n t s   t o   t h i r d   p a r t i e s . 
Third parties range from EU officials and pensioners, Member States’ 
public  authorities  managing  funds  to  private  firms  and  individuals 
directly benefiting from aid under a Community scheme. In 2007 the 
total payments made by the Commission reached 114 billion euro.

Financial resources need to be readily available to fund these payments. 
There  are  two  main  categories  of  income:  own  resources  and  other 
revenue 2. The largest revenue components are own resources calcu-
lated on the basis of value added tax (VAT) and own resources based 
o n   t h e   M e m b e r   S t a t e s ’   g r o s s   n a t i o n a l   i n c o m e   ( G N I ) .   A c c o u n t s   a r e 
opened  in  the  name  of  the  Commission  by  each  Member  State  and 
into which their respective own resources contributions are paid on 
a monthly basis (see Box 1).

1  Council Regulation (EC, 

Euratom) No 1605/2002 of 

25 June 2002 on the Financial 

Regulation applicable to the 

general budget of the European 

Communities (OJ L 248, 16.9.2002, 

p. 1), as amended by Regulation 

(EC, Euratom) No 1995/2006 

(OJ L 390, 30.12.2006, p. 1) 

and Regulation (EC, Euratom) 

No 1525/2007 (OJ L 343, 

27.12.2007, p. 9). 

2  For more details please refer to 

Chapter 4 of the European Court of 

Auditors Annual Report concerning 

the financial year 2007. 

T A B L E   1

CASH AND CASH EQUIVALENTS

(million euro)

Balance at 
31.12.2007

Balance at 
31.12.2006

11 313

11 467

956

81

2

1 367

5 037

249

933

82

3

976

2 924

440

Accounts with Member States’ 
treasuries and central banks

Current accounts

Imprest accounts

Cash in transit

Short-term deposits and other 
cash equivalents

Restricted cash (fi nes)

Cash and cash equivalents — 
Guarantee Fund

Total

19 005

16 824

Source: Annual accounts of the European Communities, financial year 2007.

Special Report No 5/2009 — The Commission’s treasury management

 
 
7

3. 

4. 

5. 

6. 

In addition, the Commission opens bank accounts at central and com-
m e r c i a l   b a n k s   i n   o r d e r   t o   e x e c u t e   p a y m e n t s   t o   t h i r d   p a r t i e s   a n d 
collects receipts other than Member States’ own resources contribu-
t i o n s   t o   t h e   b u d g e t .   F u n d s   a r e   t r a n s f e r r e d   r e g u l a r l y   f r o m   t h e   o w n 
resources accounts to the bank accounts used for payments. Sufficient 
funds  need  to  be  maintained  in  these  payment  accounts  to  ensure 
un interrupted funding of Community activities. On 31 December 2007 
t h e   t o t a l   b a l a n c e   o n   a l l   a c c o u n t s   a m o u n t e d   t o   1 9   b i l l i o n   e u r o   ( s e e 
Table 1).

The Commission has set up systems to manage its treasury operations 
and more specifically cash flows (receipts and payments), the open-
i n g   a n d   r u n n i n g   o f   b a n k   a c c o u n t s ,   c a s h   f o r e c a s t i n g   a n d   l i q u i d i t y 
management.

REGULATORY FRAMEWORK

According to the Financial Regulation and the implementing measures, 
t r e a s u r y   m a n a g e m e n t   i s   p a r t   o f   t h e   A c c o u n t i n g   O f f i c e r ’ s   d u t i e s 3. 
Although an overall definition of treasury management or of its main 
c o m p o n e n t s   i s   n o t   p r o v i d e d ,   i n d i v i d u a l   t a s k s   w h i c h   a r e   o r d i n a r i l y 
part of treasury management, such as management of bank accounts, 
payment  and  reconciliation  procedures,  are  described  in  sufficient 
detail.

3  Commission Regulation 

(EC, Euratom) No 2342/2002 

of 23 December 2002 laying 

down detailed rules for the 

implementation of Council 

Regulation (EC, Euratom) 

No 1605/2002 on the Financial 

Regulation applicable to the 

general budget of the European 

Communities (OJ L 357, 

31.12.2002, p. 1), as amended 

by Regulation (EC, Euratom) 

No 1261/2005 (OJ L 201, 2.8.2005, 

p. 3), Regulation (EC, Euratom) 

No 1248/2006 (OJ L 227, 19.8.2006, 

p. 3) and Regulation (EC, Euratom) 

No 478/2007 (OJ L 111, 28.4.2007, 

p. 13). 

4  Article 61(1)(f) and 61(3) of the 

Financial Regulation. 

5  Article 58 of the Implementing 

Rules. 

The  Financial  Regulation  states  that  the  Accounting  Officer  should, 
a m o n g s t   o t h e r   d u t i e s ,   b e   r e s p o n s i b l e   f o r   t r e a s u r y   m a n a g e m e n t , 
and  only  the  Accounting  Officer  is  empowered  to  manage  cash  and 
c a s h   e q u i v a l e n t s 4.   I n   a d d i t i o n ,   t h e   I m p l e m e n t i n g   R u l e s   s t a t e   t h a t 
the  Accounting  Officer  shall  ensure  that  the  Commission  has  at  its 
d i s p o s a l   s u f f i c i e n t   f u n d s   t o   c o v e r   c a s h   r e q u i r e m e n t s   a r i s i n g   f r o m 
budgetary implementation and shall set up cash management systems 
enabling the drawing-up of cash-flow forecasts 5.

Special Report No 5/2009 — The Commission’s treasury management

 
 
 
 
8

7. 

8. 

The Communities’ own resources regulation 6 includes provisions rele-
vant  to  treasury  management.  These  provisions  set  out  the  funding 
framework within which the Commission must operate and define the 
Commission’s treasury management objectives. The most important 
provisions in the context of this report are presented in Box 1.

THE EUROPEAN COMMISSION’S TREASURY 
MANAGEMENT ACTIVITIES

Two Directorates-General at the Commission are involved in treasury man-
agement activities: DG BUDG and DG ECFIN. DG BUDG is responsible 
for treasury management of the entire budget managed by the Com-
mission,  and  the  European  Development  Fund.  DG  ECFIN  is  respon-
s i b l e   f o r   t h e   t r e a s u r y   m a n a g e m e n t   o f   o t h e r   n o n - b u d g e t a r y   i t e m s , 
w h i c h   a r e   m a i n l y   t h e   E u r o p e a n   C o a l   a n d   S t e e l   C o m m u n i t y   ( E C S C ) 
in  liquidation,  the  European  Community’s  and  Euratom’s  loans  and 
investments of funds and certain funds managed by financial institu-
t i o n s   u n d e r   a   m a n d a t e   f r o m   t h e   C o m m i s s i o n 7.   D i a g r a m   1   p r e s e n t s 
an  overview  of  the  Commission’s  treasury  management  system  and 
Box 2 summarises its main tasks.

6  Council Regulation (EC, 

Euratom) No 1150/2000 of 

22 May 2000 implementing 

Decision 94/728/EC, Euratom on 

the system of the Communities’ 

own resources (OJ L 130, 31.5.2000, 

p. 1), as amended by Regulation 

(EC, Euratom) No 2028/2004 

(OJ L 352, 27.11.2004, p. 1). 

7  DG ECFIN manages a diverse 

number of financial instruments 

related to its off-budget activity 

treasury operations. These 

encompass operations relating 

to the management of some 

2,2 billion euro — representing the 

assets of the ECSC in liquidation 

and other mandated funds — and 

banking operations (borrowing 

and lending activities) for which 

the outstanding EC/Euratom/ECSC 

in liquidation borrowing/lending 

position amounted to close to 

1,8 billion euro as of the end 

of 2007. 

B O X   1

OWN RESOURCES REGULATION PROVISIONS

• 

• 

• 

Accounts for own resources should be opened in the name of the Commission with the treasury 
or the body appointed by each Member State. The Member States should credit resources to 
these accounts, which shall be kept free of charge8.

On the first working day of each month, one twelfth of the relevant totals in the budget should 
be credited to the account for the VAT and GNI resources9.

The Commission should draw on the sums credited to the accounts to the extent necessary to 
cover its cash resources requirements arising from budgetary implementation10.

8  Articles 6(1) and 9(1) of Regulation (EC, Euratom) No 1150/2000 as amended. 
9  Article 10(3) of Regulation (EC, Euratom) No 1150/2000 as amended. 
10  Article 12(1) of Regulation (EC, Euratom) No 1150/2000. 

Special Report No 5/2009 — The Commission’s treasury management

 
 
9

D I A G R A M   1

OVERVIEW OF THE COMMISSION’S TREASURY MANAGEMENT SYSTEM

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Special Report No 5/2009 — The Commission’s treasury management

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10

B O X   2

SUMMARY OF THE MAIN TASKS OF THE COMMISSION’S TREASURY MANAGEMENT

Treasury planning and forecasting

• 

Cash flow forecasts (estimates of inflows and outflows)

• 

Drawing from own resources accounts (treasury and central bank accounts)

Management of receipts and payments

• 

Maintenance and control of third-party files

• 

Execution and monitoring of payment transactions

• 

Matching the receipts to recovery orders issued by authorising officers

• 

Bank account reconciliations

• 

Foreign exchange operations

Management of bank accounts

• 

Opening and closing of bank accounts

• 

Selecting commercial banks (tender procedures)

• 

Checking bank interest and charges

• 

Management of imprest accounts

• 

Management of fiduciary accounts

• 

Management of fines

• 

Management of investments

Special Report No 5/2009 — The Commission’s treasury management

AUDIT SCOPE AND APPROACH

11

9. 

The main objective of the audit was to assess the quality of the Com-
m i s s i o n ’ s   t r e a s u r y   m a n a g e m e n t .   T h i s   w a s   d o n e   b y   a d d r e s s i n g   t w o 
questions:

 —

D o e s   t h e   C o m m i s s i o n   c o m p l y   w i t h   t h e   r u l e s   a n d   r e g u l a t i o n s 
applic able to treasury management?

 —

Has  the  Commission  established  internal  control  systems  which 
ensure sound treasury management?

10. 

The Court addressed the second question by selecting and examining 
the  main  areas  of  the  Commission’s  treasury  management  which  is 
implemented by DG BUDG and DG ECFIN. These were:

(a) 

t h e   o v e r a l l   s e t - u p   o f   t h e   C o m m i s s i o n ’ s   t r e a s u r y   m a n a g e m e n t 
activities;

(b) 

risk management of treasury activities;

(c) 

performance measurement and benchmarking;

(d) 

management of fiduciary accounts;

(e) 

management of fines;

(f) 

the payment process and management of bank accounts; and

(g) 

 human resources.

11. 

12. 

The  audit  did  not  cover  the  processes  established  for  managing  the 
funding of the other institutions and Community bodies such as the 
European  agencies,  or  the  investment  decisions  made  by  DG  ECFIN 
in  managing  the  other  non-budgetary  items,  including  the  borrow-
i n g   a c t i v i t i e s   t o   f i n a n c e   C o m m u n i t y   l o a n s .   T h e   C o u r t   r e p o r t s   i n   i t s 
Annual  Report  on  the  Commission’s  management  of  the  Guarantee 
Fund  for  external  actions  and  on  the  compliance  with  the  relevant 
legislation of the financial operations of the European Coal and Steel 
Community (ECSC) in liquidation. The audit focused on the financial 
years  2006  and  2007.  Developments  in  Commission  practices  in  the 
first half of 2008 were also considered.

The audit included visits to both DG BUDG and DG ECFIN. Audit evidence 
was collected through examination and assessment of existing rules 
and  procedures,  reviews  of  documentation,  testing  of  controls  and 
transactions, and interviews. For comparison purposes treasury man-
agement  practices  in  other  public  bodies  were  also  considered  and 
a review of the relevant academic literature was undertaken.

Special Report No 5/2009 — The Commission’s treasury management

 
 
 
 
MAIN OBSERVATIONS

12

DOES THE COMMISSION COMPLY WITH THE RULES 
AND REGULATIONS APPLICABLE TO TREASURY 
MANAGEMENT?

TREASURY MANAGEMENT AND FORECASTING

13. 

The  three  main  legal  provisions  which  define  the  nature  of  treasury 
management to be exercised by the Commission are:

11  Article 58 of the Implementing 

Rules. 

(a) 

t h e   C o m m i s s i o n   s h o u l d   e n s u r e   t h a t   i t   h a s   a t   i t s   d i s p o s a l   s u f -
f i c i e n t   f u n d s   t o   c o v e r   c a s h   n e e d s   a r i s i n g   f r o m   b u d g e t a r y 
implementation;

12  Article 12(1) of Regulation (EC, 

Euratom) No 1150/2000. 

(b) 

the Commission should set up cash management systems enabling 
the drawing-up of cash-flow forecasts 11;

13  In the case of the 2007 budget, 

a substantial repayment was made 

at the beginning of 2008. 

(c) 

t h e   C o m m i s s i o n   s h o u l d   d r a w   o n   t h e   s u m s   c r e d i t e d   t o   t h e   o w n 
resources accounts to the extent necessary to cover cash require-
ments arising from the implementation of the budget 12.

14. 

15. 

The Court tested whether the Commission’s systems and procedures in 
place  and  the  actions  taken  for  paragraph  13(a)  and  (c)  adhered  to 
these  provisions.  The  Court’s  testing  did  not  reveal  any  significant 
instances of non-compliance with the abovementioned provisions.

As mentioned in paragraph 2, VAT and GNI own resources are the lar-
gest revenue components of the Community budget. These resources 
a r e   c r e d i t e d   t o   t h e   a c c o u n t s   o p e n e d   b y   e a c h   M e m b e r   S t a t e   i n   t h e 
name  of  the  Commission  in  monthly  twelfths  of  their  relevant  total 
o f   t h e   b u d g e t .   T h e r e f o r e ,   w i t h   t h e   e x c e p t i o n   o f   t h e   n e e d   t o   p r o -
v i d e   e a r l i e r   f u n d i n g   t o   t h e   E u r o p e a n   A g r i c u l t u r a l   G u a r a n t e e   F u n d 
(see  paragraph  16)  in  the  first  months  of  the  year,  the  crediting  of 
resources to the aforementioned Commission accounts is not based 
o n   a c t u a l   t r e a s u r y   n e e d s   b u t   o n   t h e   M e m b e r   S t a t e s ’   s h a r e   o f   t h e 
annual budget. Considering that the budget is in equilibrium, there 
is  therefore  a  low  risk  that  the  Commission  will  not  have  at  its  dis-
p o s a l   s u f f i c i e n t   f u n d s   t o   c o v e r   c a s h   n e e d s   a r i s i n g   f r o m   b u d g e t a r y 
implementation. As a consequence of the above method for provid-
ing own resources laid out by the Communities’ regulation, together 
with the effect of a level of budgetary execution lower than planned, 
significant  balances  are  accumulated  during  the  second  half  of  the 
year on these own resources accounts (see Table 1). Budgetary own 
r e s o u r c e s   a r e   a m e n d e d   o n l y   a s   a   c o n s e q u e n c e   o f   a   r e v i s i o n   o f   t h e 
Community  budget 13.  Since  this  procedure  takes  considerable  time, 
excess  funds  are  not  released  back  to  the  Member  States  as  quickly 
as they could be.

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13

16. 

17. 

18. 

The Regulation stipulates that the VAT and GNI resources can be called 
up  in  advance,  within  certain  limits,  during  the  first  months  of  the 
year for the purpose of financing the EAGF payments. The Commission 
prepares  a  monthly  cash  forecast  with  the  purpose  of  determining 
whether  advanced  calls  of  own  resources  are  needed  to  cover  pay-
ments. The Court noted that the documentation in place was neither 
recently updated nor provided sufficient details of the method ology 
used for the preparation of these cash flow forecasts. Moreover, finan-
cial information on cash requirements, covering approximately 85 % 
o f   b u d g e t a r y   e x p e n d i t u r e ,   i s   p r o v i d e d   b y   t h r e e   D G s   o n l y 1 4,   t w o   o f 
which provide this information on an informal basis only to the unit 
in DG BUDG responsible for treasury management.

14  DG Agriculture and Rural 

Development, DG Regional Policy 

and DG Employment, Social Affairs 

and Equal Opportunities. 

15  DG BUDG managed 33 bank 

accounts in total with 30 banks in 

26 Member States. 

The Commission has also put in place another cash management forecast 
procedure. Its main aim is to ensure that there are sufficient funds in 
each  commercial  bank  account  for  the  execution  of  payments.  This 
is  an  effective  automated  tool  which  enables  the  Commission  both 
to monitor bank balances and to ensure availability of funds 15.

Finally, the Commission has put in place a third cash forecast procedure 
which aims to transfer funds between Member States’ own resources 
accounts in order to align the balances on these accounts with their 
respective  budgetary  contributions.  The  calculations  underpinning 
the amounts transferred are partly based on estimates of future cash 
flows. The Court noted that the methodology used for the preparation 
of the forecast was not sufficiently documented and that the estimates 
made  were  not  subsequently  checked  for  their  accuracy.  This  has  a 
t e m p o r a r y   e f f e c t   o n   t h e   b a l a n c e s   o f   t h e   a c c o u n t s   o p e n e d   b y   e a c h 
Member State in the name of the Commission (see paragraph 2).

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14

19. 

20. 

MANAGEMENT OF IMPREST ACCOUNTS

Imprest accounts can be set up for the collection of revenue and for 
the payment of small sums of money. However, in certain situations, 
e.g. external aid operations, such accounts may be used without any 
limitation on the amounts of the payment transactions 16. The require-
ments set out in the Implementing Rules and in the internal guidelines 
established for tender procedures for the selection of the banks were 
not  followed  in  most  of  the  cases  the  Court  examined.  In  addition, 
t h e   s e l e c t i o n   p r o c e d u r e   w a s   n o t   a p p r o p r i a t e l y   d o c u m e n t e d   i n   o n e 
third of the cases examined.

HUMAN RESOURCES — SENSITIVE POSTS

Applying the internal control standards of the Commission, DG ECFIN 
c a r r i e d   o u t   a   r i s k   a s s e s s m e n t   ( s e e   p a r a g r a p h   2 6 ) ,   o n   t h e   b a s i s   o f 
which in 2004 a number of posts were listed as sensitive. As this list 
is rather old, it needs to be reassessed in the context of the DG’s risk 
assessment, the completion of which is imminent. The 2008 DG BUDG 
r i s k   a s s e s s m e n t   e x e r c i s e   c o n c l u d e d   t h a t   o n l y   o n e   p o s t   i n   t h e   u n i t 
responsible for treasury management has been assessed as sensitive. 
This  is  despite  the  high  volumes,  values  and  nature  of  transactions 
processed daily by this unit.

16  Article 63(1) of the Financial 

Regulation as amended. 

17  Depending on the nature of the 

public sector organisation, the 

treasury management structures 

can embrace a wide range of 

activities. A definition of treasury 

management provided by the 

Chartered Institute of Public 

Finance and Accountancy (UK) is 

as follows: ‘Treasury management 

includes the management of cash 

flows, banking, money-market 

and capital-market transactions; 

the effective control of the risk 

associated with those activities; 

and the pursuit of optimum 

performance consistent with those 

risks’ (Management in the public 

services, code of practice and 

cross-sectoral guidance notes, 

2001, the Chartered Institute of 

Public Finance and Accountancy, 

United Kingdom). 

HAS THE COMMISSION ESTABLISHED INTERNAL 
CONTROL SYSTEMS WHICH ENSURE SOUND 
TREASURY MANAGEMENT?

OVERALL SET-UP OF THE COMMISSION’S TREASURY 
MANAGEMENT ACTIVITIES

21. 

Large commercial organisations have established treasury management 
departments whose ultimate aim is to contribute to maximising cor-
porate profitability and ensuring at the same time an effective man-
agement of risks and the availability of sufficient cash reserves for the 
financing  of  operations.  Likewise,  many  public  sector  organisations 
have established treasury management structures aimed at providing 
support to the attainment of their organisational objectives 17. What-
ever  the  nature  of  the  organisation,  effective  treasury  management 
significantly contributes to corporate success.

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15

22.  With a view to achieving effective treasury management whilst remain-
ing within the boundaries of the regulatory framework of Community 
legislation (see paragraph 7), the Commission assigned the treasury 
management  of  the  Community  budget  to  DG  BUDG  and  the  treas-
u r y   m a n a g e m e n t   o f   t h e   n o n - b u d g e t a r y   i t e m s 1 8  a n d   t h e   a c t i v i t y   o f 
i n v e s t i n g   C o m m u n i t y   f u n d s   t o   D G   E C F I N 1 9  ( s e e   p a r a g r a p h s   6   a n d 
8).  Considering  their  respective  areas  of  expertise  and  the  role  and 
responsibilities of these two DGs in the implementation of the Com-
mission’s annual work programme and in the execution of the Com-
munity  budget,  this  split  of  responsibilities  reflects  the  day-to-day 
reality of treasury operations 20. Notwithstanding the aforementioned, 
it was noted that each DG operates entirely independently in manag-
ing and controlling its treasury activities. As a result of this split there 
was in effect no unit with overall responsibility for the Commission’s 
treasury management operations and there was no coordination in an 
area  where  a  common  approach  to  issues  such  as  risk  management 
and control is necessary.

23. 

For instance, in order to control the risk of loss generated by holding 
f u n d s   i n   a c c o u n t s   w i t h   c o m m e r c i a l   b a n k s ,   D G   B U D G   a n d   D G   E C F I N 
h a v e   e a c h   e s t a b l i s h e d   t h e i r   o w n   l i m i t s   f o r   t h e   m a x i m u m   a m o u n t s 
o f   f u n d s   t o   b e   h e l d   a t   s p e c i f i c   b a n k s .   T h e   t w o   D G s   u s e d   d i f f e r e n t 
methodologies to establish the limits without considering the Com-
mission’s overall risk exposure with each commercial bank. This was 
due  to  a  lack  of  communication  and  coordination  between  the  two 
D G s   i n   t h e   t r e a s u r y   m a n a g e m e n t   a r e a .   T h e   C o m m i s s i o n ’ s   t r e a s u r y 
management  practices  are  not  aimed  at  reducing  the  Commission’s 
overall exposure to financial losses.

18  Except for the treasury 

management of the European 

Development Fund, which is 

managed by DG BUDG. 

19  The Accounting Officer gives 

his/her agreement for the opening 

and closing of accounts with 

financial institutions and his/

her opinion on internal rules 

established for the DG’s treasury 

operations. 

20  DG ECFIN processes a smaller 

number of high-value payment 

transactions in comparison to 

DG BUDG. For DG ECFIN, the 

timeliness of the execution of 

payments is a major issue. The DG 

often needs to make payments 

within very strict deadlines 

following an investment decision. 

Payments commonly have to be 

executed at the latest within two 

days and there are instances where 

payments have to be made on the 

day the instruction is issued. 

RISK MANAGEMENT OF TREASURY ACTIVITIES

24. 

Entities should carry out risk assessments for each significant business 
process in order to identify and analyse the key risks to the achieve-
ment of their objectives. On the basis of these assessments, the appro-
priate measures to be taken for the management and monitoring of 
the identified risks should be decided.

Special Report No 5/2009 — The Commission’s treasury management

 
 
 
25. 

26. 

16

No specific risk assessment was carried out by DG BUDG for its treasury 
management  operations.  In  the  2007  and  2008  general  risk  assess-
ment exercises undertaken by DG BUDG, only two risks pertaining to 
treasury management operations were identified: the shortage of staff 
in the ‘third party’ section (see paragraph 36) and the risk of loss con-
cerning deposits with commercial banks of provisionally cashed fines 
(see paragraph 33). Notwithstanding this, the Commission published 
for  the  first  time  an  overview  of  the  risks  in  its  treasury  operations 
i n   t h e   2 0 0 7   a n n u a l   a c c o u n t s   o f   t h e   E u r o p e a n   C o m m u n i t i e s 2 1.   T h i s 
overview  includes  risks  arising  from  the  Commission’s  management 
of the day-to-day operations, operational, currency, credit and inter-
est rate risks, and risks arising from the management of provisionally 
c a s h e d   f i n e s   ( s e e   p a r a g r a p h   3 3 ) .   N o   d o c u m e n t a t i o n   w a s   i d e n t i f i e d 
p r o v i d i n g   e v i d e n c e   o f   a c t i v e   m a n a g e m e n t   a n d   m o n i t o r i n g   o f   t h e 
abovementioned risks.

21  Annual accounts of the 

European Communities 

financial year 2007, Volume I 

(Consolidated financial 

statements and consolidated 

reports on implementation of the 

budget), Section 7 (Financial risk 

management). 

Although risk assessments were performed for financial instruments 
where major changes had occurred, DG ECFIN’s last overall risk assess-
ment was carried out in 2004. This assessment contained an evalua-
tion  of  the  impact  and  likelihood  of  potential  risks  for  the  treasury 
a n d   f i n a n c i a l   m a r k e t   o p e r a t i o n s .   I n   a d d i t i o n ,   i n   2 0 0 4 ,   a   r i s k   m a n -
agement  function  was  established  by  DG  ECFIN  contributing  to  the 
effective  management  of  risk  and  monitoring  at  entity  and  activity 
levels.  For  the  risks  identified  in  the  abovementioned  assessments, 
risk reports are produced regularly and meetings are held throughout 
the  year  to  monitor  risk  exposure  (see  Box  3).  The  Court  examined 
t h e s e   r e p o r t s   a n d   n o t e d   t h a t   t h e   p r i n c i p a l   r i s k s   l i s t e d   b e l o w   w e r e 
m o n i t o r e d   a n d   t h a t   l i m i t s   s e t   p e r   i n v e s t m e n t   c a t e g o r y   w e r e   r e g u -
larly checked by the DG, which took corrective actions when this was 
deemed necessary:

(a) 

market risk: this is the potential loss that could result from adverse 
m a r k e t   m o v e m e n t s ;   i t   i n c l u d e s   i n t e r e s t   r a t e   r i s k ,   w h i c h   i s   t h e 
fluctuation of a financial instrument’s future cash flows because 
o f   c h a n g e s   i n   m a r k e t   i n t e r e s t   r a t e s ,   a n d   f o r e i g n   e x c h a n g e   r i s k , 
namely the currency exposures resulting from a financial instru-
ment being denominated in a currency other than the euro;

(b) 

c r e d i t   r i s k :   t h i s   i s   t h e   p o t e n t i a l   l o s s   t o   a   p o r t f o l i o   t h a t   c o u l d 
r e s u l t   f r o m   t h e   d e f a u l t   o f   a   c o u n t e r p a r t y   o r   t h e   d e t e r i o r a t i o n 
of  its  creditworthiness,  such  as,  for  instance,  downgrading  by  a 
rating agency;

(c) 

operational risk: this is the risk of loss resulting from inadequate 
o r   f a i l e d   i n t e r n a l   p r o c e s s e s ,   p e o p l e   a n d   s y s t e m s   a n d   e x t e r n a l 
events.

Special Report No 5/2009 — The Commission’s treasury management

 
 
17

PERFORMANCE MEASUREMENT AND BENCHMARKING

27.  Management should monitor performance by establishing systems which 
gather information on the implementation of the selected activities. 
T h e s e   s y s t e m s   s h o u l d   m a k e   u s e   o f   i n d i c a t o r s   i n   o r d e r   t o   e v a l u a t e 
performance in relation to the set goals and objectives 22. In addition, 
benchmarking  is  a  process  used  in  management  by  which  organisa-
tions evaluate various aspects of their processes and performance in 
relation to best practice and take corrective action.

22  These notions are documented 

in the Commission’s internal 

control standard number 5 

‘objectives and performance 

indicators’. 

28. 

DG BUDG established a number of ‘high level’ indicators linked to its 
treasury  operations.  These  were  included  in  the  DG’s  monthly  ‘tab-
leau de bord’ (scoreboard system). They refer to payment operations 
(at  least  one  payment  run  per  day),  the  bank  reconciliation  process 
(number of unreconciled items older than 30 days), and to the man-
agement of third-party files. These ‘high level’ indicators do not cover 
all the areas of the treasury management operations and no evidence 
of appropriate benchmarks was found.

B O X   3

EXAMPLE OF RISK MONITORING ACTIVITIES BY DG ECFIN

Quarterly risk report on financial activities of a DG ECFIN unit for the quarter 
ending on 31 December 2007 (extracts)

• 

• 

• 

The financial market turmoil, also known as the sub-prime crisis, continued over the report-
ing period. The operational unit concerned and the risk management unit continued the close 
monitoring of the development of the sub-prime crisis over the past months in order to assess 
its possible impact on the treasury management portfolio of bonds and bank deposits. From a 
credit risk perspective, an updated analysis of the bond portfolio and the bank counterparties 
was prepared.

Concentration risk is also monitored. This is the risk arising from too high a proportion of bonds 
or deposits being allocated to a specific country, sector, instrument or type of transaction.

Operational risk for treasury transactions is also monitored. Compliance with in-house procedures 
and standard regulations was tested and results for the quarter were reported and analysed. 
This was based on the examination of a sample of securities transactions and deposits placed 
during the period.

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18

29. 

30. 

31. 

32. 

DG ECFIN uses a market index 23 as the benchmark for its performance 
review  of  the  portfolio  of  securities  and  cash  of  the  European  Coal 
a n d   S t e e l   C o m m u n i t y   ( E C S C )   a n d   t h e   G u a r a n t e e   F u n d   f o r   e x t e r n a l 
actions. In this respect, tolerance ranges were established and when 
the portfolio’s actual monthly performance was found to fall outside 
the range, the DG undertook actions to correct the portfolio. However, 
the  benchmark  to  be  used  for  the  performance  review  of  the  other 
portfolios, namely money market products, such as deposits managed 
by the DG, was under preparation at the time of the audit.

MANAGEMENT OF FIDUCIARY ACCOUNTS

Fiduciary accounts are established for certain EU spending programmes 
in  the  context  of  specific  agreements  entered  into  by  the  Commis-
s i o n ,   w h e r e   a   f i n a n c i a l   i n s t i t u t i o n   a c t s   a s   a n   a u t h o r i s e d   a g e n t   o f 
the  Commission.  In  other  words,  these  are  accounts  opened  with  a 
financial institution for it to manage funds directly and to make pay-
ments  on  behalf  of  the  Commission.  Funds  are  transferred  from  the 
C o m m i s s i o n   t o   t h e s e   f i d u c i a r y   a c c o u n t s   t o   c o v e r   f u t u r e   p a y m e n t s . 
The  total  amount  of  funds  held  in  such  accounts  at  the  end  of  2007 
was approximately 970 million euro 24; the largest part, approximately 
900 million euro, is classified as short-term deposits and the rest as 
current accounts (see Table 1).

The Court’s audit showed that there are no clear rules for the setting 
up  of  these  fiduciary  accounts.  In  addition,  there  is  also  no  explicit 
strategy aimed at the optimisation of the interest produced by these 
accounts. The Court’s audit revealed that the terms of the contractual 
agreements entered into with financial intermediaries differ. This can 
result  in  significant  variations  as  to  the  return  obtained  from  these 
accounts 25. It should be noted, however, that these variations can be 
partly  explained  by  the  different  legal  bases,  payment  frequencies 
and maturity patterns.

23  The iboxx index is published 

by ‘Deutsche Börse AG’ on the 

basis of prices from multiple 

providers. According to DG ECFIN 

it constitutes a market standard. 

24  720 million euro of this amount 

relates to specific agreements 

entered into by Commission DGs 

with the European Investment 

Bank (EIB) and the European 

Investment Fund (EIF). 

25  For instance, different rules 

apply for the interest calculation 

in the conventions entered into 

between the Commission and the 

EIB on the accounts for risk capital 

and interest rebates from the 

ones used for the Facility for Euro-

Mediterranean Investment (FEMIP). 

The Court calculated that interest 

generated up to the end of 2006 

on the FEMIP accounts would have 

been approximately 0,8 million 

euro higher, if the interest method 

of the accounts for risk capital and 

interest rebates had been used. 

26  EuropeAid, DG Enlargement, 

DG Research, DG Regional Policy, 

DG External Relations and DG 

Development. 

There is no overall supervision of the management of the funds held by 
t h e s e   f i n a n c i a l   i n s t i t u t i o n s .   D G   E C F I N   h a s   t h e   n e c e s s a r y   e x p e r t i s e 
and  systems  in  place  to  ensure  an  effective  overview.  In  July  2007, 
DG ECFIN offered its asset management services to the six DGs con-
c e r n e d 2 6.   A s   a   r e s u l t ,   a g r e e m e n t s   b e t w e e n   D G   E C F I N   a n d   t w o   D G s 
have been signed.

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33. 

34. 

MANAGEMENT OF FINES

Fines are imposed by the Commission for infringement of competition 
r u l e s   b y   M e m b e r   S t a t e s   o r   c o m p a n i e s .   F i n e s   p a i d   t o   t h e   C o m m i s -
sion  in  cases  of  ongoing  litigation  are  provisionally  held  in  specific 
deposit accounts with commercial banks and they cannot be used to 
finance  any  other  Community  activities 27.  The  volume  of  fines  held 
a s   r e s t r i c t e d   c a s h   h a s   g r o w n   s i g n i f i c a n t l y   f r o m   2 , 9   b i l l i o n   e u r o   o n 
31 December 2006 to 5 billion euro on 31 December 2007.

27  Accounts are held with the 

following six banks: Fortis, BBVA, 

ING Belgium, KBC, ING NL and 

Citibank. 

Although some informal guidelines have been devised and are being 
followed, a clear policy on the treatment of these fines has not been 
established. In these guidelines, DG BUDG addressed risk exposure by 
defining  a  specific  minimum  Moody’s  or  equivalent  rating  required 
a n d   b y   l i m i t i n g   i t s   e x p o s u r e   t o   e a c h   c o m m e r c i a l   b a n k   ( s e e   p a r a -
g r a p h   2 3 ) .   N o t w i t h s t a n d i n g   t h e   a b o v e ,   t h e   r i s k   o f   s u c h   l a r g e   s u m s 
o f   m o n e y   b e i n g   h e l d   i n   s p e c i f i c   c u r r e n t   a c c o u n t s   w i t h   c o m m e r c i a l 
banks still needs to be effectively addressed. At the time of the audit 
DG BUDG and DG ECFIN were in the process of searching for an opti-
mum  solution  to  the  problem  of  the  treasury  management  of  these 
substantial funds, aiming to minimise the risk of loss and at the same 
time to yield a fair return.

T A B L E   2

SELECTED PAYMENT PROCESS STATISTICS

Number of payments processed by 
DG BUDG

Number of payments processed by 
DG ECFIN

Bank account fi le validations

Bank account fi le modifi cations

Third-party fi le validations

Third-party fi le modifi cation volume

2007

2006

1 570 576

1 508 983

1 485

71 879

31 703

56 864

17 598

1 577

60 637

18 227

14 551

18 796

Source: European Court of Auditors, on the basis of data provided by the Commission.

Special Report No 5/2009 — The Commission’s treasury management

 
 
28  Examples of foreign currency 

transactions: (i) bank accounts are 

held in currencies other than the 

euro for the purpose of executing 

payments denominated in these 

same currencies; depending on 

the needs, funds are transferred to 

these accounts from euro accounts 

and (ii) own resources paid by 

Member States in currencies other 

than the euro are converted into 

euro depending on the treasury 

needs.

20

35. 

36. 

THE PAYMENT PROCESS AND MANAGEMENT 
OF THE BANK ACCOUNTS

A significant number of treasury transactions are executed and processed 
each year by both DGs (see Table 2). The Court examined key internal 
c o n t r o l s   o v e r   t h e   p a y m e n t   e x e c u t i o n   p r o c e s s ,   s u c h   a s   s e g r e g a t i o n 
of duties, third-party validation, access rights and exception report-
ing,  in  the  units  concerned.  No  significant  weaknesses  were  noted. 
Internal controls were overall operating effectively in both DG BUDG 
and DG ECFIN.

Before a payment can be processed, a third-party file has to be created in 
the Commission’s computerised accounting system containing bank 
details and information on the identity of the recipient. In 2006 there 
was a significant delay of approximately four to six weeks for process-
ing creation and modification requests for third-party files. This was 
overcome by DG BUDG in 2007 by increasing human resources in the 
unit concerned.

37. 

The Commission also established procedures with the aim of ensuring 
that:

(a) 

the transactions processed by the commercial banks on the Com-
m i s s i o n ’ s   a c c o u n t s   a r e   r e c o n c i l e d   o n   a   r e g u l a r   b a s i s   w i t h   t h e i r 
corresponding entries in the Commission’s accounting system in 
order to identify and resolve any differences;

(b) 

b a n k   i n t e r e s t   a n d   c h a r g e s   a r e   c h e c k e d   r e g u l a r l y   t o   e n s u r e   c o r -
rectness of the amounts received and paid;

(c) 

foreign exchange operations are accurately processed

28.

38. 

The Court examined the implementation of the above procedures. No 
s i g n i f i c a n t   w e a k n e s s e s   w e r e   n o t e d   a n d   t h e   p r o c e d u r e s   i n   p l a c e 
were  adequate  and,  overall,  operating  effectively  at  both  DG  BUDG 
and  DG  ECFIN.  A  foreign  exchange  policy  was  nevertheless  formally 
adopted by DG BUDG only in February 2008.

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HUMAN RESOURCES

39. 

Both DG BUDG and DG ECFIN apply standard Commission procedures 
i n   t h e   a r e a   o f   h u m a n   r e s o u r c e s   m a n a g e m e n t .   T h e s e   p r o c e d u r e s 
include  the  recruitment,  appraisal  and  career  mobility  of  members 
o f   s t a f f   i n v o l v e d   i n   t r e a s u r y   m a n a g e m e n t .   T h e   C o u r t ’ s   a u d i t   c o n -
firmed that appropriate job descriptions had been drawn up and staff 
e m p l o y e d   p o s s e s s   a d e q u a t e   q u a l i f i c a t i o n s   a n d   s u f f i c i e n t   p r e v i o u s 
experience relevant to the duties attached to their posts. DG BUDG’s 
unit responsible for treasury management operates with a small and 
highly ex perienced number of staff. The low staff turnover over recent 
y e a r s   h a s   c r e a t e d   a   r e l a t i v e l y   s t a b l e   w o r k i n g   e n v i r o n m e n t .   I n   t h e 
event,  though,  of  key  members  of  staff  leaving  at  short  notice,  and 
c o n s i d e r i n g   t h e   l a c k   o f   d o c u m e n t a t i o n   i n   s o m e   o f   t h e   p r o c e d u r e s 
(see  paragraphs  16  and  18),  there  is  a  considerable  risk  to  business 
continuity, potentially impacting on the management and control of 
the Commission’s treasury activities.

Special Report No 5/2009 — The Commission’s treasury management

 
CONCLUSIONS AND 
RECOMMENDATIONS

22

DOES THE COMMISSION COMPLY WITH THE RULES 
AND REGULATIONS APPLICABLE TO TREASURY 
MANAGEMENT?

The Commission complied overall with the main legal provisions prescribed 
by the Communities’ own resources regulation and in the Implement-
ing Rules of the Financial Regulation (paragraphs 13 and 14).

The Commission has set up reliable and effective cash management fore-
cast  procedures  ensuring  that  it  has  at  its  disposal  sufficient  funds 
to  cover  cash  requirements  arising  from  budgetary  implementation 
(paragraph 17).

40. 

41. 

42.  One consequence of the requirement of the Communities’ own resources 
regulation of transferring own resources to the accounts opened by 
t h e   M e m b e r   S t a t e s   i n   t h e   n a m e   o f   t h e   C o m m i s s i o n   o n   t h e   b a s i s   o f 
budget  appropriations  is  that  significant  balances  are  accumulated 
during the second half of the year. Since the amending budget pro-
cedure  takes  considerable  time,  excess  funds  are  not  released  back 
to the Member States as quickly as they could be (paragraph 15).

43. 

The application of the Commission’s procedures which aim to:

(a) 

transfer funds between Member States’ own resources accounts; 
and

(b) 

determine  the  need  in  the  first  months  of  the  year  for  advanced 
call-ups of own resources to cover payments,

  were not sufficiently documented or recently updated. Estimates used for the 
transfer of funds between Member States’ own resources accounts were 
not subsequently checked for their accuracy (paragraphs 15 to 18).

  R E C O M M E N D A T I O N S

• 

• 

The Commission should analyse the functioning of the present sys-
tem of own resources accounts, with the aim of reducing balances 
on these accounts during the second half of the year.

The Commission should improve the documentation of its cash flow 
f o r e c a s t i n g   p r o c e d u r e s ,   a n d   c h e c k   t h e   a c c u r a c y   o f   t h e   e s t i m a t e s 
used for the transfers of the Member States’ own resources.

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23

HAS THE COMMISSION ESTABLISHED INTERNAL 
CONTROL SYSTEMS WHICH ENSURE SOUND TREASURY 
MANAGEMENT?

44.  Overall, the internal control procedures in place concerning the execution 
of  payments  and  the  bank  accounts  were  effective.  However,  unlike 
DG  ECFIN,  no  documentation  was  identified  at  DG  BUDG  providing 
evidence  of  active  management  and  monitoring  of  the  risks  arising 
from  treasury  activities,  nor  were  procedures  established  to  assess 
all aspects of its performance (paragraphs 24 to 29 and 35 to 38).

45. 

46. 

47. 

As a result of the Commission’s decision to split treasury management 
operations between DG ECFIN and DG BUDG, there was no unit with 
o v e r a l l   r e s p o n s i b i l i t y   f o r   t h e   C o m m i s s i o n ’ s   t r e a s u r y   m a n a g e m e n t . 
There was a lack of coordination between the two Commission DGs in 
an area where a common approach to issues such as risk management 
and control is necessary. This led to the situation where the accounts’ 
limits for holding funds with commercial banks were established by 
these DGs without considering the Commission’s overall risk exposure 
with each commercial bank (paragraphs 21 to 23).

No clear rules for setting up fiduciary accounts were established, and 
n e i t h e r   w a s   t h e r e   a n   o v e r a l l   o v e r v i e w   o f   a l l   t h e   f u n d s   h e l d   b y   t h e 
financial institutions. Optimisation of interest generated was there-
fore not assured (paragraphs 30 to 32).

The value of the provisionally collected fines held in commercial bank 
current  accounts  has  more  than  doubled  over  recent  years,  to  5  bil-
l i o n   e u r o .   T h i s   a p p r o a c h   e x p o s e s   t h e   C o m m i s s i o n   t o   r i s k   o f   l o s s   i n 
the  event  of  banking  failure.  An  optimum  approach  to  better  man-
aging the risks relating to the holding of these amounts has not been 
established (paragraphs 33 and 34).

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24

R E C O M M E N D A T I O N S

• 

• 

• 

• 

T h e   C o m m i s s i o n   s h o u l d   p u t   i n   p l a c e   p r o c e d u r e s   t o   i m p r o v e   t h e 
o v e r s i g h t   o f   i t s   t r e a s u r y   m a n a g e m e n t   a c t i v i t i e s   a n d   e n h a n c e 
co ordination between the two DGs concerned.

In the area of treasury management DG BUDG should improve the 
d o c u m e n t a t i o n   o f   i t s   r i s k   m a n a g e m e n t   a n d   t h e   s c o p e   o f   i t s   p e r -
formance measurement.

A  uniform  policy  and  adequate  guidelines  should  be  put  in  place 
for  the  opening  of  fiduciary  accounts  and  for  the  management  of 
Commission funds held in these accounts.

The  Commission  should  as  a  matter  of  priority  reach  a  conclusion 
in  its  search  for  an  optimum  solution  for  the  treatment  of  provi-
sionally collected fines.

This report was adopted by the Court of Auditors in Luxembourg at its 
meeting of 30 April 2009.

For the Court of Auditors
For the Court of Auditors

Vítor Manuel da Silva Caldeira
President

Special Report No 5/2009 — The Commission’s treasury management

 
 
25

REPLY OF THE 
REPLY OF THE 
COMMISSION
COMMISSION

EXECUTIVE SUMMARY

V.
Third indent
The  procedure  for  transfers  between  Mem-
b e r   S t a t e s ’   o w n   r e s o u r c e s   a c c o u n t s   i s   f o r -
mally documented and is complemented by 
detailed step-by-step instructions.

Fourth indent
T h e   C o m m i s s i o n   i s   b o u n d   t o   r e s p e c t   t h e 
provisions  of  the  Council  regulation  imple-
menting  the  decision  on  the  system  of  the 
C o m m u n i t i e s ’   o w n   r e s o u r c e s ,   w h i c h   f o r e -
see, namely, that Member States credit own 
resources to the account opened in the name 
o f   t h e   C o m m i s s i o n   b y   m e a n s   o f   m o n t h l y 
t w e l f t h s .   S e e   a l s o   t h e   C o m m i s s i o n ’ s   r e p l y 
to paragraph 15.

Fifth indent
T h e   C o m m i s s i o n ’ s   o v e r v i e w   o f   t h e   r i s k s 
related to its treasury operations (DG BUDG), 
which is part of its annual accounts, provides 
a clear and comprehensive summary the risks 
it is exposed to, how such risks are managed, 
and which measures have been put in place 
t o   c o n t r o l ,   m i n i m i s e   o r   n e u t r a l i s e   t h e m .   I t 
a l s o   m a k e s   r e f e r e n c e   t o   p r o c e d u r e s   t h a t 
contain measures to control or limit opera-
t i o n a l   a n d   f i n a n c i a l   r i s k s .   T h e s e   e x i s t i n g 
p r o c e d u r e s   w i l l   b e   c r o s s - r e f e r e n c e d   i n t o   a 
single formal document of DG BUDG.

T h e   i n d i c a t o r s   i n c l u d e d   i n   t h e   D G   B U D G ’ s 
‘tableau  de  bord’  are  the  most  relevant  for 
i t s   t r e a s u r y   o p e r a t i o n s   a n d   a r e   s i g n i f i c a n t 
indicators  of  its  performance.  Such  indica-
tors  are  regularly  tracked  and  performance 
a g a i n s t   t h e m   i s   a s s e s s e d .   I n   c a s e   o f   p o o r 
performance  appropriate  measures  are  put 
in place to correct it.

S e e   a l s o   t h e   C o m m i s s i o n ’ s   r e p l i e s   t o   p a r a -
graphs 25 and 28.

Special Report No 5/2009 — The Commission’s treasury management

Sixth indent
The  Commission  will  improve  its  oversight 
on the different treasury management activ-
i t i e s   p e r f o r m e d .   T h e   s e p a r a t i o n   o f   t a s k s 
between the two Directorates-General con-
cerned serves to limit the need for extensive 
coordination.

T h e   d i f f e r e n t   m e t h o d o l o g i e s   t o   l i m i t   r i s k s 
are  due  to  the  different  nature  of  the  tasks 
performed. Limits for nostro accounts, which 
cater for daily cash movements but normally 
d o   n o t   h o l d   s u b s t a n t i a l   f u n d s   f o r   a   l o n g e r 
p e r i o d ,   h a v e   t o   b e   c o n s i d e r e d   d i f f e r e n t l y 
f r o m   l i m i t s   f o r   c o u n t e r p a r t i e s   w i t h   w h o m 
money is placed for a longer period.

S e e   a l s o   t h e   C o m m i s s i o n ’ s   r e p l i e s   t o   p a r a -
graphs 22 and 23.

Seventh indent
The  current  system  for  the  management  of 
provisionally  cashed  fines  was  subject  to  a 
r e v i e w   i n   2 0 0 8 ,   w i t h   t h e   m a i n   o b j e c t i v e   o f 
increasing its security. A proposal for a Com-
m i s s i o n   d e c i s i o n   o n   t h i s   m a t t e r   h a s   b e e n 
issued in early 2009 by DG BUDG.

VI.
First indent
The Commission has redrafted its cash flow 
reporting and forecasting procedures at the 
e n d   o f   2 0 0 8 ,   i n   t h e   c o n t e x t   o f   a   r e v i e w   o f 
the related reporting tools. The updated ver-
sion  of  the  procedure,  which  also  contains 
more details on the forecasting part, will be 
adopted as from the end of March 2009.

26

REPLY OF THE 
COMMISSION

Second indent
T h e   p r e s e n t   s y s t e m   o f   o w n   r e s o u r c e s 
a c c o u n t s ,   p r i m a r i l y   d e s i g n a t e d   t o   r e c e i v e 
t h e   o w n   r e s o u r c e s   p a y m e n t s ,   i s   l i n k e d   t o 
t h e   o w n   r e s o u r c e s   s y s t e m ,   a s   e s t a b l i s h e d 
by  Council  Decision  2000/597/EC,  Euratom 
a n d   i t s   i m p l e m e n t i n g   r e g u l a t i o n ,   C o u n c i l 
R e g u l a t i o n   ( E C ,   E u r a t o m )   N o   1 1 5 0 / 2 0 0 0 , 
that the Commission is bound to implement. 
T h e   C o u n c i l   a d o p t e d   i n   2 0 0 7   t h e   n e w   o w n 
resources decision (2007/436/EC, Euratom), 
a n d   v e r y   r e c e n t l y   a   r e v i s i o n   o f   R e g u l a t i o n 
1 1 5 0 / 2 0 0 0 1,   w h i c h   d o   n o t   i n t r o d u c e   a n y 
s i g n i f i c a n t   c h a n g e s   i n   t h e   s y s t e m   o f   o w n 
resources accounts and payments. This sug-
gests  that  the  Council  is  satisfied  with  the 
functioning of the present system.

Third indent
Meetings will be established more regularly 
b e t w e e n   t h e   t w o   D i r e c t o r a t e s - G e n e r a l   t o 
share information on risks, and to exchange 
e x p e r i e n c e s   a n d   b e s t   p r a c t i c e s   r e g a r d i n g 
t r e a s u r y   a n d   a s s e t   m a n a g e m e n t   a c t i v i t i e s 
on a Commission-wide level.

Fourth indent
T h e   C o m m i s s i o n ’ s   o v e r v i e w   o f   t h e   r i s k s 
related to its treasury operations (DG BUDG), 
which is part of its annual accounts, provides 
a  clear  and  comprehensive  summary  of  the 
risks it is exposed to, how such risks are man-
a g e d ,   a n d   w h i c h   m e a s u r e s   h a v e   b e e n   p u t 
i n   p l a c e   t o   c o n t r o l ,   m i n i m i s e   o r   n e u t r a l i s e 
them. It also makes reference to procedures 
t h a t   c o n t a i n   m e a s u r e s   t o   c o n t r o l   o r   l i m i t 
operational and financial risks. These exist-
ing procedures will be cross-referenced into 
a single formal document of DG BUDG.

1 

 Council Regulation (EC, Euratom) No 105/2009, 

OJ L 36, p. 1, 5.2.2009.

Special Report No 5/2009 — The Commission’s treasury management

T h e   i n d i c a t o r s   i n c l u d e d   i n   t h e   D G   B U D G ’ s 
‘tableau  de  bord’  are  the  most  relevant  for 
i t s   t r e a s u r y   o p e r a t i o n s   a n d   a r e   s i g n i f i c a n t 
indicators  of  its  performance.  Such  indica-
tors  are  regularly  tracked  and  performance 
a g a i n s t   t h e m   i s   a s s e s s e d .   I n   c a s e   o f   p o o r 
performance  appropriate  measures  are  put 
in place to correct it.

Fifth indent
Under  the  present  system  for  the  manage-
ment of provisionally cashed fines the Com-
m i s s i o n   e n s u r e s   r i s k s   a r e   m i n i m i s e d ,   v i a   a 
s e t   o f   m e a s u r e s   i n c l u d i n g   m i n i m u m   c r e d i t 
rating  requirements  for  commercial  banks, 
l i m i t s   t o   e x p o s u r e   p e r   b a n k ,   a n d   t h e   p o s -
s i b i l i t y   t o   t r a n s f e r   f u n d s   a t   a n y   t i m e   w i t h 
immediate effect. Monitoring and review of 
the  situation  is  ensured  regularly  and  on  a 
daily basis in the current financial context.

In addition the current system for the man-
a g e m e n t   o f   p r o v i s i o n a l l y   c a s h e d   f i n e s   w a s 
s u b j e c t   t o   a   r e v i e w   i n   2 0 0 8 ,   w i t h   t h e   m a i n 
o b j e c t i v e   o f   i n c r e a s i n g   i t s   s e c u r i t y .   A   p r o -
p o s a l   f o r   a   C o m m i s s i o n   d e c i s i o n   o n   t h i s 
matter has been issued in early 2009 by DG 
BUDG.

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REPLY OF THE 
COMMISSION

INTRODUCTION

3.
T h e   b a l a n c e   o n   b a n k   a c c o u n t s   o f   1 9   b i l -
l i o n   e u r o   a t   3 1   D e c e m b e r   2 0 0 7   i n c l u d e d 
5 , 9   b i l l i o n   e u r o 2  w h i c h   w a s   r e f u n d e d   t o 
M e m b e r   S t a t e s   o n   t h e   f i r s t   w o r k i n g   d a y   o f 
the  following  year,  together  with  amounts 
r e c e i v e d   f r o m   p r o v i s i o n a l   p a y m e n t   o f 
c o m p e t i t i o n   f i n e s   ( 5 , 0   b i l l i o n   e u r o 3) ,   f r o m 
a s s i g n e d   r e v e n u e   ( 3 , 4   b i l l i o n   e u r o 4)   a n d 
from  other  sources  (1,6  billion)  which  can-
n o t   b e   r e f u n d e d   t o   M e m b e r   S t a t e s .   O f   t h e 
remainder, 1,2 billion euro 5 was withheld to 
cover  payment  appropriations  carried  over 
to  2008,  and  1,5  billion  euro 6  was  repaid  to 
Member States through deduction from their 
amounts due for 2008.

5.
T h e   C o m m i s s i o n   t a k e s   t h e   v i e w   t h a t   t h e 
d e f i n i t i o n   o f   t r e a s u r y   m a n a g e m e n t   i n   t h e 
F i n a n c i a l   R e g u l a t i o n   i s   o r i e n t e d   t o w a r d s 
the normal budgetary cash management and 
does not comprise asset management, which 
is dealt with separately.

8.
T h e   r e l e v a n t   C o m m i s s i o n   d e c i s i o n   o n   o f f -
budget activities states that DG ECFIN ‘shall 
be  responsible  for  conducting  the  borrow-
ing/lending operations of the Communities, 
for  the  activities  of  investing  funds  and  for 
the management of the non-budgetary treas-
ury ….’. DG BUDG Treasury is in charge of the 
treasury and payment operations related to 
the implementation of the EU budget.

2  Note 2.11.1 of the 2007 EC consolidated accounts.
3  Note 2.11.2 of the 2007 EC consolidated accounts.
4  Volume 1, Part II, Table 7, column 9 of the 2007 accounts.
5 

 Volume 1, Part II, Table 7 of the 2007 accounts, columns 7 

and 8.

6  Volume 1, Part II, Table 1 of the 2007 accounts.

Special Report No 5/2009 — The Commission’s treasury management

A   d i s t i n c t i o n   m u s t   b e   m a d e   b e t w e e n   t h e 
t r e a s u r y   ( a n d   p a y m e n t )   f u n c t i o n s   c o v e r e d 
by DG BUDG on the one hand and the asset 
management function ensured by DG ECFIN 
o n   t h e   o t h e r   h a n d ,   i n   a c c o r d a n c e   w i t h   t h e 
decision  taken  by  the  Commission.  Each  of 
these  functions  has  a  responsibility  clearly 
allocated to one central service.

MAIN OBSERVATIONS

15.
T h e   C o m m i s s i o n   i s   b o u n d   t o   r e s p e c t   t h e 
provisions  of  the  Council  regulation  imple-
menting  the  decision  on  the  system  of  the 
C o m m u n i t i e s ’   o w n   r e s o u r c e s ,   w h i c h   f o r e -
see, namely, that Member States credit own 
resources to the account opened in the name 
o f   t h e   C o m m i s s i o n   b y   m e a n s   o f   m o n t h l y 
twelfths.  However,  since  2005  the  Commis-
sion has proposed a preliminary draft amend-
ing budget to the budgetary authority at the 
end of October updating the budget relative 
to the forecast of revenue and expenditure. 
This  has  typically  anticipated  the  year-end 
s u r p l u s   a n d   l e d   t o   a   r e d u c t i o n   i n   M e m b e r 
States’ own resources contributions. Indeed, 
the Commission’s good budgetary manage-
ment  has  been  acknowledged  by  the  Court 
of Auditors: in its annual report concerning 
the financial year 2007 (point 3.4) the Court 
states that the reduction of payment appro-
priations  reflects  good  budgetary  manage-
ment as it demonstrates the ability to react 
to  changes  and  reduces  the  budgetary  sur-
plus, allowing own resources to be returned 
to Member States.

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COMMISSION

16.
Cash flow forecasting carried out by the Com-
mission (DG BUDG) is effective. Its objective, 
as  stated  in  Article  58  of  the  Implementing 
Rules of the Financial Regulation, has always 
b e e n   a c h i e v e d ,   i n s t a n c e s   o f   i n s u f f i c i e n t 
f u n d s   r e s u l t i n g   f r o m   i n c o r r e c t   f o r e c a s t i n g 
having never occurred.

The  existing  procedures  for  both  cash  flow 
reporting and forecasting were redrafted in 
the end of 2008 in the context of a review of 
the related reporting tools. An updated, uni-
fied, version of the procedure, also including 
more details on the forecasting part, will be 
adopted as from the end of the first quarter 
of 2009.

18.
T h e   C o m m i s s i o n   p o i n t s   o u t   t h a t   t h e   c a s h 
forecast procedure is formally documented, 
is  published,  and  is  also  complemented  by 
a  set  of  step-by-step  instructions.  For  what 
concerns  the  estimates  it  uses  in  this  exer-
c i s e ,   t h e y   a r e   m a d e   w i t h   t h e   b e s t   p o s s i b l e 
a c c u r a c y ,   a n d   t h e   C o m m i s s i o n   c o n s i d e r s 
that the current procedures have no signifi-
c a n t   i m p a c t   o n   e i t h e r   t h e   o v e r a l l   t r e a s u r y 
operations  or  the  respect  of  the  applicable 
regulation.

19.
The Commission selects all its ‘house banks’ 
through  a  public  call  for  tender  procedure. 
House banks are located in the EU and used 
for the execution of payments authorised by 
the Commission’s central services.

It  is  materially  impossible,  and  it  would  be 
inefficient,  to  apply  the  same  procedure  in 
order to open a single current bank account in 
each of the +/- 150 countries where imprests 
have  been  set  up.  These  accounts  are  used 
to  pay  small  amounts,  while  balances  kept 
on these accounts are very low and they are 
p e r i o d i c a l l y   r e f u n d e d   u p   t o   t h e   a m o u n t   o f 
the payments effectively made only.

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REPLY OF THE 
COMMISSION

Whenever it is possible and appropriate — in 
view of the local banking environment — the 
b a n k   w h e r e   s u c h   a n   a c c o u n t   w i l l   b e   h e l d 
i s   s e l e c t e d   o n   t h e   b a s i s   o f   a   b a n k   s u r v e y 
undertaken locally under the supervision of 
the imprest account holder.

The Commission will follow up on the Court’s 
observation  and  better  document  the  spe-
c i f i c   s e l e c t i o n   p r o c e d u r e   f o l l o w e d   i n   e a c h 
case.

20.
A proper segregation of duties exists within 
t h e   D G   B U D G   u n i t   c o n c e r n e d   b e t w e e n   t h e 
treasury management and the bank reconcil-
iation and is reflected in the organisational 
structure  of  the  unit.  There  are  three  team 
leaders in this unit C01:

 —
 —
 —

one for reconciliation/imprest accounts;
one for treasury;
and one for third-party files.

All  delegations  are  given  in  writing  by  the 
A c c o u n t i n g   O f f i c e r   a n d   a r e   k e p t   u p d a t e d . 
Those  delegations  detail  the  specific  tasks 
delegated.

The delegations respect the job description 
of each person and the tasks of the unit. Seg-
regations of duties are in place in the unit as 
demonstrated by the organisation chart.

The IT system itself is the main control tool as 
segregation of tasks is guaranteed (not ably 
b e t w e e n   p a y m e n t   r u n   a n d   r e c o n c i l i a t i o n ) 
and checks are effected by the system.

Risk management is in place as are effective 
supervisory measures.

On  the  basis  of  the  above,  it  has  been  con-
c l u d e d   t h a t   o n l y   t h e   h e a d   o f   t h e   u n i t   i n 
c h a r g e   o f   t r e a s u r y   m a n a g e m e n t   s h o u l d   b e 
designated as holding a sensitive function.

21.
Large public sector organisations like Mem-
b e r   S t a t e s   a l s o   h a v e   d i f f e r e n t   e n t i t i e s   f o r 
d e b t   a n d   a s s e t   m a n a g e m e n t   f r o m   t h o s e 
 handling budgetary receipts and payments. 
In the same way the Commission has found 
an efficient distribution of tasks between DG 
BUDG and DG ECFIN.

22.
The  tasks  carried  out  by  the  treasury  in  DG 
BUDG  (budgetary  payments)  and  DG  ECFIN 
(off-budget asset management, and borrow-
ings) are different from each other and so a 
different approach to risk management and 
c o n t r o l   i s   j u s t i f i e d   b a s e d   o n   t h e   d i f f e r e n t 
nature of the tasks.

23.
T h e   d i f f e r e n t   m e t h o d o l o g i e s   t o   l i m i t   r i s k s 
are  due  to  the  different  nature  of  the  tasks 
performed. Limits for nostro accounts, which 
cater for daily cash movements but normally 
d o   n o t   h o l d   s u b s t a n t i a l   f u n d s   f o r   a   l o n g e r 
p e r i o d ,   h a v e   t o   b e   c o n s i d e r e d   d i f f e r e n t l y 
f r o m   l i m i t s   f o r   c o u n t e r p a r t i e s   w i t h   w h o m 
money is placed for a longer period.

I n   a d d i t i o n ,   w i t h   t h e   e x c e p t i o n   o f   t h e 
a c c o u n t s   w h e r e   p r o v i s i o n a l l y   c a s h e d   f i n e s 
are  held  (on  this  subject  see  Commission’s 
r e p l y   t o   p a r a g r a p h   3 4 ) ,   f u n d s   h e l d   b y   D G 
B U D G   o n   c u r r e n t   a c c o u n t s   w i t h   i n d i v i d -
u a l   c o m m e r c i a l   b a n k s   a r e   f o r   s u c h   l i m i t e d 
a m o u n t s   t h a t ,   e v e n   i f   D G   E C F I N   u s e d   t h e 
s a m e   b a n k s ,   t h i s   w o u l d   n o t   r e p r e s e n t   a 
material increase of its risk.

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REPLY OF THE 
COMMISSION

29.
T h e   c a l c u l a t i o n   o f   a   b e n c h m a r k   f o r   p e r -
formance  review  for  the  other  portfolios  is 
under preparation. At the beginning of 2009 
t h e   m e t h o d o l o g y   i s   e s t a b l i s h e d   a n d   t h e   I T 
implementation is in the testing phase.

30.
T h e   m e n t i o n e d   f i d u c i a r y   a c c o u n t s   o p e n e d 
by  the  authorising  officers  for  the  require-
ments  of  the  execution  of  specific  budget-
ary programmes have a different nature than 
the  bank  accounts  opened  by  the  Account-
ing Officer for the requirements of treasury 
management  according  to  Article  59  of  the 
Implementing Rules.

A s   m e n t i o n e d   b y   t h e   C o u r t ,   f i d u c i a r y 
a c c o u n t s   a r e   e s t a b l i s h e d   f o r   c e r t a i n   p r o -
g r a m m e s   i n   t h e   c o n t e x t   o f   s p e c i f i c   a g r e e -
ments where the financial organisation acts 
as the financial intermediary of the Commis-
sion (e.g. fiduciary agreements between DG 
ECFIN and financial organisations).

Payments to financial organisations, such as 
the  European  Investment  Bank  (EIB)  or  the 
Kreditanstalt für Wiederaufbau (KFW), should 
n o t   a l w a y s   b e   s e e n   a s   a n d   a u t o m a t  i c a l l y 
t r e a t e d   a s   f i d u c i a r y   t r a n s a c t i o n s .   F i n a n -
cial  organisations  could  also  act  as  project 
coordinators, as beneficiary or as additional 
d o n o r   f o r   a   t r u s t   f u n d ;   r e l a t e d   p a y m e n t s 
have to be then normally considered as pre-
financing. Thus, the correct classification of 
such  payments  requires  a  detailed  analysis 
of the underlying contracts.

25.
T h e   C o m m i s s i o n ’ s   o v e r v i e w   o f   t h e   r i s k s 
related to its treasury operations (DG BUDG), 
t o   w h i c h   t h e   C o u r t   m a k e s   r e f e r e n c e   i n   i t s 
observation, clearly explains to which risks it 
is exposed, how such risks are managed, and 
w h i c h   m e a s u r e s   h a v e   b e e n   p u t   i n   p l a c e   t o 
control, minimise or neutralise them. It also 
makes reference to procedures that contain 
measures to control or limit operational and 
f i n a n c i a l   r i s k s .   T h e s e   e x i s t i n g   p r o c e d u r e s 
will be cross-referenced into a single formal 
document of DG BUDG.

26.
A risk assessment of all areas of DG ECFIN’s 
a c t i v i t i e s   w a s   d o n e   i n   2 0 0 4 .   S i n c e   t h e n , 
s u p p l e m e n t a l   r i s k   a s s e s s m e n t s   w e r e   p e r -
formed  for  activities  where  a  major  change 
had  occurred.  This  risk  assessment  process 
is deemed adequate taking into account the 
quite stable character of DG ECFIN activ ities. 
Another full risk assessment of all DG ECFIN 
a c t i v i t i e s   h a s   b e e n   c a r r i e d   o u t   a t   t h e   e n d 
of 2008.

T h e   i m p o r t a n t   f i n a n c i a l   r i s k s   a r e   c l o s e l y 
m o n i t o r e d   t h r o u g h   t h e   c o u r s e   o f   t h e   y e a r . 
See the Court’s statement in Box 3.

28.
T h e   i n d i c a t o r s   i n c l u d e d   i n   t h e   D G   B U D G ’ s 
‘tableau  de  bord’  are  the  most  relevant  for 
t h e   D G   B U D G   t r e a s u r y   o p e r a t i o n s   a n d   a r e 
s i g n i f i c a n t   i n d i c a t o r s   o f   i t s   p e r f o r m a n c e . 
S u c h   i n d i c a t o r s   a r e   r e g u l a r l y   t r a c k e d   a n d 
p e r f o r m a n c e   a g a i n s t   t h e m   i s   a s s e s s e d .   I n 
case of poor performance appropriate meas-
ures are put in place to correct it.

Within  the  treasury,  specific  objectives  are 
d e f i n e d   f o r   t h e   i n d i v i d u a l   t e a m   m e m b e r s , 
which are used to assess their performance. 
M o s t   o f   t h e m   a r e   i n   t h e   f o r m   o f   p e r f o r m -
a n c e   i n d i c a t o r s .   T h e y   e n a b l e   m a n a g e m e n t 
t o   o b j e c t i v e l y   a s s e s s / m e a s u r e   i n d i v i d u a l 
performances  and  the  overall  performance 
of the treasury.

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REPLY OF THE 
COMMISSION

The  current  system  for  the  management  of 
provisionally  cashed  fines  was  subject  to  a 
r e v i e w   i n   2 0 0 8 ,   w i t h   t h e   m a i n   o b j e c t i v e   o f 
increasing its security. A proposal for a Com-
m i s s i o n   d e c i s i o n   o n   t h i s   m a t t e r   h a s   b e e n 
issued in early 2009 by DG BUDG.

39.
The Commission points out that, first of all, 
a l l   t r e a s u r y   p r o c e d u r e s   i n   a l l   s i g n i f i c a n t 
a s p e c t s   a r e   f o r m a l l y   d o c u m e n t e d ,   a n d   i n 
many cases complemented by detailed step-
by-step work instructions.

In  addition,  for  all  key  tasks  within  the  DG 
BUDG  treasury  there  are  one  or  more  back-
u p s   i n   o r d e r   t o   e n s u r e   c o n t i n u i t y   o f   t h e 
operations in case of planned and/or unex-
pected absences.

T h e   C o m m i s s i o n   t h e r e f o r e   c o n s i d e r s   t h a t 
the risk to business continuity in case of key 
m e m b e r s   o f   s t a f f   l e a v i n g   t h e   u n i t   a t   s h o r t 
notice is very low.

31 — 32.
Following  a  remark  of  the  Court,  DG  BUDG 
m a d e   t w o   i n v e n t o r y   e x e r c i s e s   i n   2 0 0 7 
(30.9.2007 and 31.12.2007) in order to ensure 
the completeness in the annual accounts of 
financial  assets  held  by  financial  organisa-
tions. All Directorates-General have replied 
t o   t h e s e   t w o   r e q u e s t s   a n d   c o n t r o l s   w e r e 
made to verify the coherence of the answers 
with the annual accounts for 2007.

T h e   i n v e n t o r y   e x e r c i s e   i s   n o w   p a r t   o f   t h e 
standardised yearly closure procedure.

To  further  improve  the  situation,  the  Com-
mission has already proposed to and agreed 
w i t h   t h e   C o u r t   t h a t   a s   f r o m   t h e   2 0 0 8   c l o -
sure  an  official  circular  letter  is  sent  to  the 
financial  organisations  concerned  in  order 
to get accurate, complete and standardised 
information  from  them  regarding  the  fidu-
ciary accounts.

As  already  mentioned  in  the  reply  to  para-
graph 30 the fiduciary accounts are different 
from the bank accounts opened by the Com-
m i s s i o n ’ s   A c c o u n t i n g   O f f i c e r   a c c o r d i n g   t o 
Article 59 of the Implementing Rules. For the 
l a t t e r   a   u n i f o r m   p o l i c y   i s   a l r e a d y   i n   p l a c e . 
For  the  fiduciary  accounts  the  Commission 
will analyse the situation further in order to 
respond to the Court’s remarks.

34.
The current system employed for the manage-
ment of provisionally cashed fines is clearly 
defined and is based on a Commission deci-
sion  of  1999.  The  related  guidelines,  which 
are  aligned  to  this  decision,  are  a  standard 
and integral part of each contract concluded 
with banks used for this purpose.

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REPLY OF THE 
COMMISSION

In the context of a recent review of the cash 
r e p o r t i n g   t o o l s ,   t h e   e x i s t i n g   p r o c e d u r e s 
f o r   b o t h   c a s h   f l o w   r e p o r t i n g   a n d   f o r e c a s t -
i n g   w e r e   r e d r a f t e d   i n   t h e   e n d   o f   2 0 0 8 .   A n 
updated,  unified  version  of  the  procedure, 
also including more details on the forecast-
ing part, will be adopted as from the end of 
first quarter of 2009.

For what concerns the estimates used for the 
t r a n s f e r   o f   f u n d s   b e t w e e n   M e m b e r   S t a t e s ’ 
own resources accounts, they are made with 
the best possible accuracy and the Commis-
sion  considers  that  the  current  procedures 
h a v e   n o   s i g n i f i c a n t   i m p a c t   o n   e i t h e r   t h e 
o v e r a l l   t r e a s u r y   o p e r a t i o n s   o r   t h e   r e s p e c t 
of the applicable regulation.

Recommendations
First indent
T h e   p r e s e n t   s y s t e m   o f   o w n   r e s o u r c e s 
a c c o u n t s ,   p r i m a r i l y   d e s i g n a t e d   t o   r e c e i v e 
t h e   o w n   r e s o u r c e s   p a y m e n t s ,   i s   l i n k e d   t o 
t h e   o w n   r e s o u r c e s   s y s t e m ,   a s   e s t a b l i s h e d 
by  Council  Decision  2000/597/EC,  Euratom 
a n d   i t s   i m p l e m e n t i n g   r e g u l a t i o n ,   C o u n c i l 
R e g u l a t i o n   ( E C ,   E u r a t o m )   N o   1 1 5 0 / 2 0 0 0 , 
that the Commission is bound to implement. 
T h e   C o u n c i l   a d o p t e d   i n   2 0 0 7   t h e   n e w   o w n 
resources decision (2007/436/EC, Euratom), 
a n d   v e r y   r e c e n t l y   a   r e v i s i o n   o f   R e g u l a t i o n 
1 1 5 0 / 2 0 0 0 7,   w h i c h   d o   n o t   i n t r o d u c e   a n y 
s i g n i f i c a n t   c h a n g e s   i n   t h e   s y s t e m   o f   o w n 
resources accounts and payments. This sug-
gests  that  the  Council  is  satisfied  with  the 
functioning of the present system.

7 

 Council Regulation (EC, Euratom) No 105/2009, 

OJ L 36, p. 1, 5.2.2009.

CONCLUSIONS AND 
RECOMMENDATIONS

42.
T h e   C o m m i s s i o n   i s   b o u n d   t o   r e s p e c t   t h e 
provisions  of  the  Council  regulation  imple-
menting  the  decision  on  the  system  of  the 
C o m m u n i t i e s ’   o w n   r e s o u r c e s ,   w h i c h   f o r e -
see, namely, that Member States credit own 
resources to the account opened in the name 
o f   t h e   C o m m i s s i o n   b y   m e a n s   o f   m o n t h l y 
twelfths.  However,  since  2005  the  Commis-
sion has proposed a preliminary draft amend-
ing budget to the budgetary authority at the 
end of October updating the budget relative 
to the forecast of revenue and expenditure. 
This  has  typically  anticipated  the  year-end 
s u r p l u s   a n d   l e d   t o   a   r e d u c t i o n   i n   M e m b e r 
States’ own resources contributions. Indeed, 
the Commission’s good budgetary manage-
ment  has  been  acknowledged  by  the  Court 
of Auditors — in its annual report concern-
i n g   t h e   f i n a n c i a l   y e a r   2 0 0 7   ( p o i n t   3 . 4 )   t h e 
Court  states  that  the  reduction  of  payment 
a p p r o p r i a t i o n s   r e f l e c t s   g o o d   b u d g e t a r y 
management  as  it  demonstrates  the  ability 
to  react  to  changes  and  reduces  the  budg-
etary surplus, allowing own resources to be 
returned to Member States.

43.
W i t h   r e s p e c t   t o   t h e   C o u r t ’ s   o b s e r v a t i o n 
under paragraph (a), the Commission points 
o u t   t h a t   t h e   p r o c e d u r e   t h e   C o u r t   r e f e r s   t o 
( t r a n s f e r s   b e t w e e n   M e m b e r   S t a t e s   o w n 
resources accounts) is formally documented 
and  is  complemented  by  detailed  ‘step-by-
step’ instructions.

W i t h   r e s p e c t   t o   t h e   C o u r t ’ s   o b s e r v a t i o n 
under paragraph (b), the Commission points 
out that the cash forecasting procedure used 
f o r   a d v a n c e d   c a l l - u p s   o f   o w n   r e s o u r c e s   a s 
w e l l   a s   i t s   a p p l i c a t i o n   i s   d o c u m e n t e d .   I t 
i s   t h e   f o r m a l   b a s i s   f o r   r e q u e s t i n g   M e m b e r 
States to pay own resources in advance.

Special Report No 5/2009 — The Commission’s treasury management

Second indent
The Commission will endeavour to improve 
t h e   d o c u m e n t a t i o n   i n   t h i s   a r e a .   I t   h a s 
redrafted  its  cash  flow  reporting  and  fore-
casting procedures at the end of 2008, in the 
context of a review of the related reporting 
tools. The updated version of the procedure, 
which also contains more details on the fore-
casting part, will be adopted as from the end 
of March 2009. However, it does not consider 
that checking the accuracy of estimates used 
will have a material impact.

44.
T h e   C o m m i s s i o n ’ s   o v e r v i e w   o f   t h e   r i s k s 
related to its treasury operations (DG BUDG), 
w h i c h   i s   p a r t   o f   i t s   A n n u a l   A c c o u n t s ,   p r o -
v i d e s   a   c l e a r   a n d   c o m p r e h e n s i v e   s u m m a r y 
of  the  risks  it  is  exposed  to,  how  such  risks 
are managed, and which measures have been 
put in place to control, minimise or neutral-
ise  them.  It  also  makes  reference  to  proce-
d u r e s   t h a t   c o n t a i n   m e a s u r e s   t o   c o n t r o l   o r 
limit operational and financial risks.

T h e s e   e x i s t i n g   p r o c e d u r e s   w i l l   b e   c r o s s -
r e f e r e n c e d   i n t o   a   s i n g l e   f o r m a l   d o c u m e n t 
of DG BUDG.

T h e   i n d i c a t o r s   i n c l u d e d   i n   t h e   D G   B U D G ’ s 
‘tableau  de  bord’  are  the  most  relevant  for 
t h e   D G   B U D G   t r e a s u r y   o p e r a t i o n s   a n d   a r e 
s i g n i f i c a n t   i n d i c a t o r s   o f   i t s   p e r f o r m a n c e . 
S u c h   i n d i c a t o r s   a r e   r e g u l a r l y   t r a c k e d   a n d 
p e r f o r m a n c e   a g a i n s t   t h e m   i s   a s s e s s e d .   I n 
case of poor performance appropriate meas-
ures are put in place to correct it.

33

REPLY OF THE 
COMMISSION

45.
One  has  to  make  a  distinction  between  the 
t r e a s u r y   ( a n d   p a y m e n t )   f u n c t i o n s   c o v e r e d 
by DG BUDG on the one hand and the asset 
management function ensured by DG ECFIN 
o n   t h e   o t h e r   h a n d ,   i n   a c c o r d a n c e   w i t h   t h e 
decision  taken  by  the  Commission.  Each  of 
these  functions  has  a  responsibility  clearly 
allocated to one central service. See also the 
Commission’s reply to paragraph 23.

46.
Given  the  very  varied  purpose  of  the  funds 
held on trust accounts, which results in dif-
ferent cash flow patterns and holding peri-
ods, it is operationally very difficult to even 
o p t i m i s e   i n t e r e s t   o f   f u n d s   h e l d   w i t h   o n e 
financial institution. See also the replies to 
points 31 and 32 above.

47.
The  current  system  for  the  management  of 
provisionally  cashed  fines  was  subject  to  a 
r e v i e w   i n   2 0 0 8 ,   w i t h   t h e   m a i n   o b j e c t i v e   o f 
increasing its security. A proposal for a Com-
m i s s i o n   d e c i s i o n   o n   t h i s   m a t t e r   h a s   b e e n 
i s s u e d   i n   e a r l y   2 0 0 9   b y   D G   B U D G .   S e e   a l s o 
the Commission’s reply to paragraph 34.

Recommendations
First indent
The  Commission  will  improve  its  oversight 
on the different treasury management activ-
i t i e s   p e r f o r m e d .   T h e   s e p a r a t i o n   o f   t a s k s 
b e t w e e n   t h e   t w o   D G s   c o n c e r n e d   s e r v e s   t o 
l i m i t   t h e   n e e d   f o r   e x t e n s i v e   c o o r d i n a t i o n . 
Meetings will be established more regularly 
between  the  two  DGs  to  share  information 
on  risks,  and  to  exchange  experiences  and 
best practices regarding treasury and asset 
m a n a g e m e n t   a c t i v i t i e s   o n   a   C o m m i s s i o n -
wide level.

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REPLY OF THE 
COMMISSION

Second indent
T h e   C o m m i s s i o n ’ s   o v e r v i e w   o f   t h e   r i s k s 
related to its treasury operations (DG BUDG), 
w h i c h   i s   p a r t   o f   i t s   A n n u a l   A c c o u n t s ,   p r o -
v i d e s   a   c l e a r   a n d   c o m p r e h e n s i v e   s u m m a r y 
of  the  risks  it  is  exposed  to,  how  such  risks 
are managed, and which measures have been 
put in place to control, minimise or neutral-
ise  them.  It  also  makes  reference  to  proce-
d u r e s   t h a t   c o n t a i n   m e a s u r e s   t o   c o n t r o l   o r 
limit operational and financial risks.

T h e s e   e x i s t i n g   p r o c e d u r e s   w i l l   b e   c r o s s -
r e f e r e n c e d   i n t o   a   s i n g l e   f o r m a l   d o c u m e n t 
of DG BUDG.

T h e   i n d i c a t o r s   i n c l u d e d   i n   t h e   D G   B U D G ’ s 
‘tableau  de  bord’  are  the  most  relevant  for 
t h e   D G   B U D G   t r e a s u r y   o p e r a t i o n s   a n d   a r e 
s i g n i f i c a n t   i n d i c a t o r s   o f   i t s   p e r f o r m a n c e . 
S u c h   i n d i c a t o r s   a r e   r e g u l a r l y   t r a c k e d   a n d 
p e r f o r m a n c e   a g a i n s t   t h e m   i s   a s s e s s e d .   I n 
case of poor performance appropriate meas-
ures are put in place to correct it.

Fourth indent
The  current  system  for  the  management  of 
provisionally  cashed  fines  was  subject  to  a 
r e v i e w   i n   2 0 0 8 ,   w i t h   t h e   m a i n   o b j e c t i v e   o f 
increasing its security. A proposal for a Com-
m i s s i o n   d e c i s i o n   o n   t h i s   m a t t e r   h a s   b e e n 
i s s u e d   i n   e a r l y   2 0 0 9   b y   D G   B U D G .   S e e   a l s o 
the Commission’s reply to paragraph 34.

Special Report No 5/2009 — The Commission’s treasury management

35

REPLY OF THE 
COMMISSION

European Court of Auditors

Special Report No 5/2009

The Commission’s treasury management

Luxembourg: Office for Official Publications of the European Communities

2009 — 34 pp. — 21 x 29.7 cm

ISBN 978-92-9207-295-7

Special Report No 5/2009 — The Commission’s treasury management

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IN THIS SPECIAL REPORT THE COURT AUDITED THE QUALITY OF THE 

COMMISSION’S TREASURY MANAGEMENT, ASSESSING WHETHER THE 

COMMISSION COMPLIED WITH THE RELEVANT RULES AND REGULATIONS, 

AND  WHE THER  THE  COMMISSION  HAD  ESTABLISHED  INTERNAL 

CONTROL SYSTEMS WHICH ENSURE A SOUND TREASURY MANAGEMENT. 

THE COURT CONCLUDED THAT OVERALL THE COMMISSION COMPLIED 

WITH THE APPLICABLE COMMUNITY LEGISLATION, THAT IT HAD SET UP 

PRUDENT CASH MANAGEMENT FORECAST PROCEDURES, AND THAT 

IN GENERAL ITS INTERNAL CONTROL PROCEDURES WERE EFFECTIVE. 

HOWEVER, THE  COURT  ALSO  FOUND  A  LACK  OF  COORDINATION 

BETWEEN THE RELEVANT COMMISSION DGS IN AREAS SUCH AS RISK 

MANAGEMENT AND CONTROL. THIS LED TO A SITUATION WHERE THE 

COMMISSION DID NOT SUFFICIENTLY CONSIDER ITS OVERALL RISK 

EXPOSURE WITH EACH COMMERCIAL BANK. FURTHERMORE THE COURT 

FOUND THAT THERE IS AN INCREASED RISK OF LOSS OF PROVISIONALLY 

COLLECTED FINES HELD IN SPECIFIC BANK CURRENT ACCOUNTS.

EUROPEAN COURT OF AUDITORS

Q
J
-
A
B
-
0
9
-
0
0
5
-
E
N

-
C

ISBN 978-92-9207-295-7