Geïntegreerde financiële controles bij besteding EU-gelden: vraag en antwoord (en)

The Commission adopts today a communication on integrated control systems which looks at how the Commission and Member States can further improve implementation of the EU budget in view of the Court of Auditors' annual statement of assurance. This is being adopted at the same time as the annual synthesis report to the Commission on the management on Union resources.

This Q&A answers general questions on control and audit.

1. How is the budget implemented and by whom?

Once the Parliament and the Council together have approved the budget, the Commission implements the budget on its own responsibility (article 274 EC Treaty). It shares most of the management with the Member States.

The Director General of a Commission department is generally responsible for the use of resources in his or her Directorate General. S/he is the authorising officer delegate. Staff of the DG manage the EU programmes and activities in that particular policy area, in liaison with their counterparts in the Member States or other third parties as necessary.

2. What principles govern the Commission's implementation of the budget?

The EC Treaty states that the budget must be implemented in accordance with the principles of legality and regularity as well as sound financial management. Put simply, this means that all the rules and regulations must be strictly adhered to, and that in pursuing Union goals, those managing the money must make every effort to obtain the best possible value for money for every euro spent.

The award of contracts is subject to rules laid down in the public procurement directives. The key aims of public procurement are to ensure that as many organisations with the capacity to do the work are given the chance to tender, in an open way, that they are treated equally and that they are not subject to discrimination. The award of grants is subject to rules set out in the Financial Regulation, the main aim being to ensure compliance with the principles of transparency and equal treatment.

When the Commission does not implement the budget centrally and directly through its services, it must nonetheless ensure adequate control. Strict rules apply, therefore, when the Commission has recourse to externalisation under what is known as centralised indirect management, i.e. when it delegates budget implementation tasks to agencies and other approved bodies.

Similarly, Implementation of the budget is only delegated to Member States (shared management) or third countries (decentralised management) if the Commission is satisfied that the countries in question will implement the budget in accordance with the rules in force and with the principles of sound financial management and that they have established a clearance of accounts/financial correction mechanism to correct potential irregularities.

The Commission is under obligation to recover amounts unduly paid, whether by error, irregularity or deliberate fraud, and the Member States have a major role to play insofar as they are equally responsible for protecting EU financial interests as they are for looking after their own national budgets (article 280 EC Treaty). They cooperate in their endeavours with the Commission and with OLAF - the European Anti-Fraud Office - whose role is to carry out investigations into potential cases of fraud and to help "fraud-proof" EU legislation.

3. What rules cover the Commission's implementation of the budget?

Apart from the Treaties, a Community legal act - the Financial Regulation - agreed upon by all the Member States sets out the rules for calling on, budgeting and using EU funding. Implementing provisions are also applied.

These rules set out who is responsible for financial transactions (the authorising officer delegate), how expenditure is to be controlled and audited (see internal auditor and European Court of Auditors), and how it is to be recorded and reported on (see the role of the accounting officer).

The Commission establishes which of its staff are responsible for implementing the budget - the authorising officer delegate. These are generally the Directors general or Heads of Service.

The authorising officer delegate is responsible for the use of resources in his/her DG or service and for recording the data in the accounts. S/he sets up internal control systems for the activities of the DG or service. The internal control system is inspired by international norms.

S/he has quite separate responsibilities from the Accounting Officer, who has competence for the overall accounting system, and validates the local systems used in each DG that `feed' the accounting system. The accrual accounting system (ABAC) conforms to international standards for public service accounting.

The internal auditor undertakes independent audits within the Commission, and reports through the Audit Progress Committee to the College. Each DG is also helped by an internal audit capacity. The standards of the Institute for Internal Auditors guide the work of the internal auditors.

4. Who checks that the rules are followed?

Each authorising officer delegate has an internal control co-ordinator, normally at director level, who overviews the feedback received on internal control in the activities of each unit, and on the management information and on the data that is provided for the accounts. The local system that `feeds' the accounting system is validated by the Accounting Officer.

In the case of shared management, the Member States are required to comply with commonly recognised control standards. Similar instructions exist in case of decentralised management or centralised indirect management. Most controls are accomplished at local level. However, the Commission services supervise the sound functioning of these local levels of controls following the rules fixed in the legal bases adopted by Council and/or European Parliament.

Audits are conducted both by internal auditors and by the external auditor (the European Court of Auditors). Some activities are subject to audits from private audit companies.

5. How do we know that these checks are made?

Both the internal and external auditors make checks and report, apart from the feed-back to management of the internal control units' checks.

All income and expenditure for all institutions and EU bodies must be recorded in the recently modernised accrual accounting system. Financial statements are drawn up annually showing the assets and liabilities of the European Union and general and budget accounts are maintained and published each year.

Implementation of the budget is reported on at least monthly, and a report on the budget implementation accompanies the financial statement and accounts.

In case of shared management with Member States, decentralised management with third countries, centralised indirect management with third parties (often national agencies), the appropriate reporting procedures have been fixed before launching the execution of projects/programmes and the payment of invoices/grants. These reporting arrangements has to permit Commission services to have a reasonable assurance that the internal control system functions adequately, that resources are used for the expected activities and following sound financial management principles.

6. Do they report regularly on this and if so, to whom?

Those responsible for managing programmes and using the EU's voted resources - the authorising officers' delegate - report on their activities each year and draw up a declaration expressing their reasonable assurance on the proper use of resources and that the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions (whether the objectives of the payments have been fulfilled by the beneficiary according to the contract and the laws applying in the sector, for instance), with reservations where difficulties have been identified.

Each annual activity report is submitted to the responsible Commissioner. The College , which takes note of the situation in the Commission's services, of the internal auditor's annual report and of working documents on the functioning of the internal control systems, determines through the synthesis report actions to be taken to correct identified weaknesses after analysing the annual activity reports and the accompanying material.

The annual synthesis is a major accountability tool, which builds on the annual activity reports and the assurance declarations prepared by each Director-General and head of service.

All this material is available to the external auditor and to the discharge authority by 15 June following each budget year.

7. To whom is the Commission accountable?

The Commission accounts for its use of the resources voted by the budgetary authority (Parliament and Council) to the discharge authority (Parliament with the recommendations of Council) each year.

The discharge decision gives clearance to the accounts and makes recommendations on how to improve the Commission's and other institutions' management of the budget.

The Commission is obliged to take follow-up action on the conclusions reached and recommendations made under the discharge procedure by the European Parliament and Council of Ministers. Parliament, Council and the Court check on these follow-up actions.

8. What then is the purpose of the annual report by the European court of auditors (ECA)?

The European Court of Auditors, as the external auditor, draws up an annual report and special reports on the basis of audits and checks that it undertakes.

The ECA annual report is foreseen by the Treaty. It is transmitted to the Council and the European Parliament to serve as one of the bases for the annual discharge procedure. The purpose of the report is above all to give assurance on the soundness of the Commission's management. The Court's comments give weight to the Commission's improvements. Since the Maastricht Treaty came into force in 1993, the Court has been required to draw up a statement of assurance that accompanies its annual report.

The report concerns all those who manage Community funds. As the Member States manage 85% of the Community budget, in partnership with the Commission, the remarks of the Court of Auditors concern them at least as much as the Commission. Without their co-operation, no substantial improvement is possible. The Commission and Member States thus work together in order to strengthen the management and control standards.

9. What is the statement of assurance (DAS in its French acronym)?

The European Court of Auditors' statement of assurance looks at the legality and regularity of the underlying transactions and at the reliability of the Community accounts. It is one of the items examined by the Parliament and Council in drawing up the discharge decision.

Even if the Court of Auditors does not deliver a fully positive statement of assurance, the Discharge can be and has been given. The Statement of Assurance, which has existed since 1995 (for financial year 1994), has never been entirely positive on all operations for any financial year, except for the reliability of the accounts. This is not unusual. Though no complete equivalent exists in Member States, no national court of auditors gives assurance unreservedly for all government departments every year.

10. How does the Court come to its Statement of Assurance?

Originally the Court sampled transactions across all major areas of the Union's activity, and grossed up the effect of errors it identified. Since these estimates were subject to a large degree of sampling error and furthermore did not take account of the extent of risk nor of the management control systems in place, the Court has been adapting its methods.

The Court has based its statement concerning the legality and regularity of the underlying transactions on a number of separate sources:

a) an examination of the way in which the supervisory systems and controls set up both in the Community institutions and in the Member States and third countries work;

b) an examination of samples of transactions for each major area by carrying out checks down to final beneficiary level;

c) an analysis of the annual activity reports and declarations of the Directors-General and of the procedures applied in drawing them up;

d) where necessary, an examination of the work of other auditors who are independent of Community management procedures.

The Court's approach is based on an audit of management and control systems in the main areas of Community activity (determined according to the magnitude of the amounts involved or from a risk assessment). It has evaluated their ability to guarantee the legality and regularity of the underlying transactions and has also attempted to identify shortcomings.

This new approach makes possible a detailed and finer analysis of the quality of Community management and also because it provides the Commission with more guidance regarding corrective measures to be undertaken than the quantitative method does. This new approach is welcomed as it conforms more to the approach used in Commission Reform than the traditional transaction based auditing.

11. What does the European Court of Auditors say about the Commission's accounts and the modernisation effort?

The Court has declared the accounts reliable every year since financial year 1994, when it was first required to make a Statement of Assurance.

For the financial year 2003, the European Court of Auditors presented an annual statement of assurance which was largely positive as regards the reliability of the accounts, commitments and own resources, but which indicated that the Court cannot give all assurances for payments, except for administrative expenditure and those related to the European Development Fund.

The Commission has not only a budget and cash accounting system but, since 2005, it has an accrual accounting system for the general accounts. The consolidated accounts include all EU Institutions. The Court gave positive assurance to the accounts for the financial year 2003 - the last year available - with one observation which has been resolved by the modernisation of the accounting system.

The Commission considers that one of its objectives should be to put in place the conditions allowing the Court to deliver a statement of assurance accompanied by only minor criticisms. This process implies not only renewed Commission efforts in a number of areas, but also active participation in the initiative by Member States, since, under the Treaty, whilst the Commission has sole responsibility for implementing the Budget, approximately 80% of the Budget is implemented by Member States under shared management.

12. What commitments can the Commission make on further improving resource management?

While the Commission cannot commit itself to decisions, which belong to other institutions, through an integrated control framework, more comprehensive risk management, certification of the integrity, consistency and reliability of the EU consolidated accounts and other measures, the Commission does commit itself to realise the improvements in performance made possible by the reform. The success of the Commission's ambitions will be measured through the effective functioning of internal processes, confirmed by appreciation of other EU institutions, such as the Court of Auditors.

13. Will the Commission look to other institutions to help in this?

Financial management has been overhauled with a recast Financial Regulation, which entered into force in 2003, the introduction of activity based budgeting in 2004 and the transition to accrual based accounting as from 1st January 2005.

The Commission now proposes to the other institutions a roadmap to an integrated control framework, which will provide the Commission and its stakeholders with a reinforced assurance as to the legal and regular use of EU monies, including under shared management with Member States. Ex-post controls will also be better focussed and harmonised, in particular by ensuring increased consistency at services' `families' level.

The EU institutions involved with control, audit and discharge will develop a common approach to an integrated control framework, which includes reinforced assurance at Commission level through services' annual activity reports and more assurances coming from the Member States using shared management. Those assurances will be more clearly underpinned by sound internal control procedures, assessment and reporting mechanisms, including sharing of audit results at all levels.

14. So why, in sum, does the Commission do its annual stocktaking?

• Because it promotes the Commission's accountability : the annual synthesis report is solidly based on Directors-General and heads of services' assurances. These are all available for public scrutiny.
• Because it enhances effective performance management : it reinforces effectiveness and the ownership of supervisory and control systems by the DGs and heads of service, it encourages anticipative and solid daily management embedding the risk management dimension.
• Because it reinforces the Commission's responsibility and monitoring capacity , including when budget implementation tasks are delegated to third parties such as the Member States.
• Because it identifies further measures to strengthen the three strands above , for instance accounts under full accrual basis, which will be signed off by the Accounting Officer, an integrated internal control framework and a more coherent approach to risks by group of services'