THE EUROPEAN COURT OF AUDITORS

13/01/2009

PLEASE NOTE

The opinions and views expressed in this presentation are those of the authors and do not necessarily represent those of the European Court of Auditors.

Mission of the European Court of Auditors

The mission of the European Court of Auditors is to audit independently the collection and spending of European Union funds and, by so doing, to evaluate the way in which the European institutions discharge these duties.

The Court examines whether financial operations have been properly recorded, legally and regularly executed and managed with an eye to economy, efficiency and effectiveness.

In this way, the Court aims to contribute to improving the financial management of European Union funds at all levels, so as to ensure maximum value for money for the citizens of the Union.

The Court makes the results of its work known through the publication of relevant, objective and timely reports.

Legislature

European Parliament785 Members

Judiciary

European Court of Justice27 Judges

8 Advocates-General

Executive

European Commission27 Members

LegislatureCouncil of the EU

Ministers from the 27 Member States

External Audit

European Court of Auditors27 Members

Institutions of the EU

The EC (formerly EEC, ECSCand Euratom) cover most ofthe common policy areas, i.e.• competition, single market, Euro, immigration (no direct impact on the budget) • agriculture, research, social policies, development aid

Establishing an area of freedom, security andjustice

• Eurojust • Europol

European Communities Common Foreign and Security Policy

Police and judicial cooperation in criminal matters

THE EUROPEAN UNION

THE THREE PILLARS OF THE EU

THE TREATIES

EU position on armed conflicts, human rights etc. High Representative for the CFSP• strengthening security of the Union• preserving peace• developing and consolidating democracy

July 1975 Treaty of Brussels, creation of theEuropean Court of Auditors (ECA)

October 1977 The ECA becomes operational

February 1992 Treaty of Maastricht, the ECA becomes a Community Institution, introduction of the Statement of Assurance

October 1997 Treaty of Amsterdam, extension of the ECA’s auditing powers to the second and third pillars of the EU and conferment of

right to refer cases to the Court of Justice

February 2001 Treaty of Nice, one Member per Member State, introduction of system of chambers, possibility of issuing specific Statements

of Assurance for individual areas of activity

Historical background

• Court of 27 Members

one Member per Member State appointed for a six-year, renewable

term of office

• President

elected by the Members from amongst their number for a three-year,

renewable term of office

• Secretary-General

appointed by the Court for a six-year, renewable term of office

• Total number of staff in September 2007: 915

Audit sectors: 355, Members’ Private Offices: 160, Administration: 238,

Translation: 162

Structure

PRESIDENCYSupervision of the performance of the Court’s work.

Relations with the Community and other institutions. Legal matters. Internal audit.

AUDIT GROUPSI Preservation and management of natural resourcesII Structural, Transport, Research and Energy policiesIII External actionsIV Own resources, Banking activities, Administrative expenditure,

Community institutions and bodies, Internal policies

CEAD GROUP Coordination, Communication, Evaluation, Assurance and Development

ADMINISTRATIVE COMMITTEE (1 Member per Audit Group)Administrative matters requiring a Court decision

SECRETARIAT-GENERALHuman Resources, IT and Telecommunications, Finance andAdministration, Translation, Court Secretariat

AUDIT COMMITTEE (3 Members and 1 external expert)Court’s internal auditor reports to Audit Committee

The Court‘s role

Article 248(4) of the EC Treaty:

“[The Court] shall assist the European Parliament and the Council in exercising their powers of control over the implementation of the budget.”

• the external auditor of the EU • the Court has no judicial powers

• a collegiate body that draws up reports and delivers opinions... • ... which have no binding force but are of help to those managing EU funds...

The Court‘s tasks

Article 248 of EC Treaty:

• to audit the EU’s accounts (financial statements)

• to examine whether all EU revenue has been received and all EU

expenditure incurred in a lawful and regular manner

• to provide the European Parliament and the Council with a Statement of

Assurance (“DAS”) • to examine whether the financial management has been sound • to deliver opinions

The role of the Members

A Member’s main role is to supervise the specific audit tasks for which he is responsible, i.e. monitor the planning and perfomance of tasks.

• with his colleagues, he lays down Court strategy

• with his colleagues, he decides upon Court reports and opinions

• he represents the Court within the framework of the tasks entrusted to him

• he represents the Court in his home country

Audit field

• The general budget of the European Union (including all borrowing

and lending operations guaranteed by it)

plus:

• European Development Funds (EDFs)

• European agencies and bodies

• European Schools

• European Central Bank

2009 General Budget – RevenueTotal: 133.8 billion euro

1%

17%

65%

17%

Customs duties and agricultural leviesVATGross National Income of EU countriesOther

1% 6%

42%

45%

6%

Sustainable growth (competitiveness, knowledge-based economy, cohesion beween regions)

Natural resources (rural development, fisheries, environment: agricultural expenditure and direct aid)

Citizenship, freedom, security and justice

The EU as a global player

Administration

2009 General Budget – ExpenditureTotal: 133,8 billion euro

Types of audit

• Financial audit: reliability of the accounts

• Financial/compliance audit: legality and regularity of

underlying transactions

• Sound financial management audit or performance

audit: value for money

Financial audit: Reliability of the accounts

• The objective is to obtain sufficient evidence to show that all transactions and all

assets and liabilities have been completely, correctly and accurately

entered in the accounts and presented in the financial statements.

• As the custodian of public funds, the Commission must report accurately on

their use.

• An important element of accountability vis-à-vis the citizens of Europe.

Financial audit: Legality and regularity

• The objective is to obtain sufficient evidence to show that the revenue and

spending operations underlying the EU budget have been carried out in

accordance with contractual and legal requirements and are correctly and

accurately calculated.

Sound financialmanagement auditPerformance audit

• The objective is to obtain sufficient evidence to show that European Union

funds have been used economically, efficiently and effectively, either by

maximising output for a given input or through minimising costs

for a defined objective.

Audit approach

The direct substantive testing audit approach examines transactions directly to

provide an often statistically based conclusion as to their legality and regularity or value

for money;

or..

The systems’ analysis based audit approach examines the effectiveness of the

internal control systems set up to ensure that EU funds are properly spent. If the tests

show that the systems are operating effectively, the amount of direct substantive testing

of transactions can be reduced.

Advantage: this approach may be more efficient: it allows systems’ weaknesses to be

identified and recommendations for improvement to be made.

Audit approach

• Auditing involves obtaining direct evidence on the audit subject. As not

all transactions can be audited every year, statistical sampling is often

used to provide representative evidence.

• When carrying out its audits, the Court pays particular attention to the

internal control systems set up to ensure that EU funds are

properly spent.

• If the tests show that the systems are operating effectively, the amount

of direct substantive testing of transactions can be reduced.

• Weaknesses identified in the systems result in recommendations for

improvement which actively contribute to improving financial

management.

The Court’s audit powers

• Audit of records and on the spot in the European institutions,

Member States’ and beneficiary States’ administrations and

on the premises of final beneficiaries.

• Auditors may request at any time any document considered necessary

for the audit.

Fraud

• Responsibility for preventing or detecting and repressing fraud lies with

those who manage and supervise policy implementation

(i.e. the Commission).

• The Court is not specifically responsible for detecting all cases of fraud. • The Court, as external auditor, audits the arrangements made by

management, including OLAF.

• Normal audit procedures identify fraud indicators. Cases of actual or

suspected fraud are reported to OLAF, which is responsible for follow-up at

EU and Member State level.

Organisation of audit work

Preliminary study

Audit planning memorandum

Contradictory procedurewith the auditee

Multi-annual andannual programming

Published report

Audit field work

PublicationsPublications

• Annual Report: Statement of Assurance, observations on the

implementation of the EU budget and the European Development Funds

• Special Annual Reports: on EU bodies and agencies

• Special Reports: on specific budgetary areas or management topics

• Opinions: on new or amended legislation with financial impact

Impact of the Court’s work

Contributing to improving the financial management

of the European Union:

• Used during the discharge procedure by the European Parliament (given

on the Council’s recommendation)

• The EU institutions make improvements based on the Court’s

recommendations

• The ECA systematically checks whether the appropriate corrective action has

been taken and presents its conclusions in the Annual Report

Liaison with the national Supreme Audit Institutions (SAIs)

• Audits in the Member States are carried out in liaison with the SAIs (or

competent national bodies).

• The Court of Auditors and the SAIs cooperate in a spirit of trust while

maintaining their independence.

• Regular meetings of SAI Presidents (Contact Committee) / working

parties / joint audits, etc.

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