Report by the external auditor on the Court of Auditors' accounts for the financial year 1997
15. 10. 98 EN Official Journal of the European Communities C 318/1 I (Information) COURT OF AUDITORS REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORS’ ACCOUNTS FOR THE FINANCIAL YEAR 1997 (98/C 318/01) NOTE TO READERS Without prejudice to the provisions of Article 188c of the Treaty establishing the European Community, which gave the Court of Auditors responsibility for auditing all of the Community’s revenue and expenditure, and the provisions of Article 206 of the Treaty on the granting of the discharge, the Court of Auditors has had its revenue and expenditure accounts audited by an external auditor every year since the close of the financial year 1987. The reports that the external auditor of the Court of Auditors has drawn up in respect of the Court’s accounts for the financial years 1987 to 1991 were sent only to the Chairman of the European Parliament’s Budgetary Accounts Committee. Pursuant to a decision taken by the Members of the Court of Auditors at the Court meeting of 8 July 1993, the external auditor’s reports have been published in the Official Journal of the European Communities, starting with the report on the financial year 1992. The financial statements annexed to the enclosed report are based on the accounting data that the Court of Auditors sent to the Commission so that the revenue and expenditure account and the financial balance sheet of the European Communities could be drawn up for the financial year 1997. These accounting data may be supplied to anyone who submits a written request to the External Relations Department of the Court of Auditors. For the Court of Auditors Bernhard FRIEDMANN President C 318/2 EN Official Journal of the European Communities 15. 10. 98 Certificate concerning the regularity and fairness of the financial statements at 31 December 1997 To the Members of the European Court of Auditors In accordance with the instructions given to us by the European Court of Auditors, we have examined: — the accounting data sent by the European Court of Auditors to the Commission for the purpose of drawing up the revenue and expenditure account and balance sheet of the European Communities for the financial year 1997, — the financial statements of the European Court of Auditors as at 31 December 1997, which were drawn up on the basis of the same accounting data and prepared for the purpose of publication in the Official Journal of the European Communities. The accounting data and the financial statements are the responsibility of the European Court of Auditors. Our responsibility is, on the basis of our audit work, to express an opinion on the accounting data and the financial statements. We have conducted our work in accordance with international auditing standards. These standards require us to plan and carry out our work in such a way as to obtain reasonable assurance that the accounting data and financial statements do not contain any material misstatement. As required, the audit included examination, on the basis of a sample, of the evidence in support of the amounts and information contained in the accounting data and financial statements. It also included appraisal of the accounting principles and practices applied and of the significant estimates used by the European Court of Auditors in drawing up the accounts, as well as a review of their overall presentation. We think that the audit provided a reasonable basis for the opinion expressed. In our opinion, the enclosed accounting data and financial statements give a true and fair view, in accordance with the Financial Regulation, the implementing rules, generally accepted accounting principles and the European Court of Auditors’ rules of procedure, of the assets and financial position of the European Court of Auditors at 31 December 1997 and of its revenue and expenditure for the financial year then ended. Luxembourg, 6 August 1998. KPMG Audit Auditors Stephen NYE 15. 10. 98 EN Official Journal of the European Communities C 318/3 FINANCIAL STATEMENTS AT 31 DECEMBER 1997 Revenue and expenditure accounts for the financial years ending 31 December 1997 and 1996 Note 1997 1996 (thousand ECU) Revenue Contribution from the general revenue of the European Communities 45 215 44 527 Court of Auditors’ own resources — Community levies and dues deducted from remuneration — Revenue accruing from the administrative operation of the institution — Miscellaneous revenue 1(b) 2 1(f) 7 577 7 516 1 250 1 800 65 76 Total revenue 54 107 53 919 Expenditure 1(c) Expenditure relating to persons working for the institution — Members of the institution — Staff in active employment — Allowances and miscellaneous contributions relating to termination of service — Missions and duty travel — Other Operating expenditure — Expenditure on immovable property — Expenditure on data-processing — Movable property and associated costs — Current administrative expenditure — Publishing and information — Other 1(f) 5 101 5 586 39 633 39 542 477 1 746 1 034 542 1 852 912 47 991 48 434 2 428 2 300 928 656 411 954 491 684 656 491 896 485 5 868 5 512 Balance for the financial year 7 248 (27) The notes annexed hereto form an integral part of these financial statements. Total expenditure 53 859 53 946 C 318/4 EN Official Journal of the European Communities 15. 10. 98 Balance sheets at 31 December 1997 and 1996 ASSETS Fixed assets Buildings Furniture and equipment Other fixed assets Current assets Supplies Sundry accounts receivable Cash accounts LIABILITIES Fixed capital Own capital Balance carried forward from previous financial year Balance for the financial year Current liabilities Sundry accounts payable Payments in hand Note 1997 1996 (thousand ECU) 1(d) 1(e) 4 24 465 24 419 4 113 5 305 274 275 28 852 29 999 95 761 414 101 1 068 352 1 270 1 521 Total assets 30 122 31 520 3 7 7 5 6 28 673 29 825 47 248 74 (27) 28 968 29 872 1 153 1 641 1 7 1 154 1 648 The notes annexed hereto form an integral part of these financial statements. Total liabilities 30 122 31 520 15. 10. 98 EN Official Journal of the European Communities C 318/5 Notes to the financial statements at 31 December 1997 ACCOUNTING PRINCIPLES 1(d) Fixed assets 1(a) Accounting rules The accounts of the European Court of Auditors are kept and the financial statements drawn up in accordance with the provisions of the Financial Regulation of 21 December 1977, as last amended by Council Regulation (EC) No 2444/97 of 22 September 1997, and the provisions of Commission Regulation (Euratom, ECSC, EC) No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation. In accordance with Article 136 of the said implementing rules, the financial statements are presented in accordance with generally accepted accounting principles, including the principles provided for in Council directives, except where otherwise provided for by regulation. The Court’s building and equipment and furniture are valued at acquisition cost. Where the value is expressed in national currency, it is converted into ecu at the accounting rate in force at the time of purchase. Since the acquisition cost was charged in full to the corresponding expenditure account at the time of acquisition, there is no depreciation. The total value of these tangible assets is entered on the assets side for the entire period of their use, with a counterpart entry for an equivalent amount on the liabilities side under the heading ‘Own capital’. Furniture and equipment are not recorded in fixed asset accounts unless their value is ECU 400 or more (ECU 350 in 1996). Items to a value of less than ECU 400 which still appeared in the financial inventory because they were in excess of the earlier thresholds were eliminated as of 31 December 1997. The total value of the items thus removed was ECU 1 031 181,42. 1(b) Court of Auditors’ own resources 1(e) Supplies The Court of Auditors’ own resources are entered in the accounts on the basis of the amounts actually received during the financial year. Amounts owing but not yet received by the end of the financial year are entered on the assets side of the balance sheet under the heading ‘Sundry accounts receivable’ in the ‘Revenue to be collected’ item. They have a counterpart entry on the liabilities side of the balance sheet in an item with the same title under the heading ‘Sundry accounts payable’. These entries are reversed once the amounts have been collected. 1(c) Expenditure Expenditure for the financial year, which is shown in the statement of revenue and expenditure, represents the payments made against the appropriations for the financial year and against the appropriations carried over from the previous financial year in accordance with the provisions of the regulations applicable in this field. In accordance with the sixth subparagraph of Article 6 of the Financial Regulation, the expenditure for the financial year is entered in the accounts for that year on the basis of the expenditure for which authorisation reached the financial controller not later than 31 December and the accounting officer not later than the following 10 January, and for which payment was effected by the accounting officer not later than 15 January. Supplies comprise a stock of office and other supplies, valued at the most recent acquisition price, with a counterpart entry, for an equivalent amount, on the liabilities side under the ‘Own capital’ heading. Where the acquisition cost is expressed in national currency, it is converted into ecu at the accounting rate used in drawing up the balance sheet. 1(f) Exchange differences Exchange gains or losses are entered as ‘Miscellaneous revenue’ or ‘Operating expenditure — Other’. REVENUE ACCRUING FROM THE ADMINISTRATIVE OPERATION OF THE INSTITUTION Revenue accruing from the administrative operation 2. of the institution comprises mainly: — revenue accruing the European Court of Auditors’ reports and opinions in the Official Journal of the European Communities, the publication of from — the payment of actuarial reserves by national pension bodies and provident societies by way of transfers of officials’ pension rights. C 318/6 EN Official Journal of the European Communities 15. 10. 98 OWN CAPITAL which it was not materially possible to charge to the budget. 3. The amount of own capital determined according to the principles described in 1(d) and 1(e) at the year-end is broken down as follows: Fixed assets — Buildings — Furniture and equipment Current assets — Supplies Own capital 1997 1996 (thousand ECU) 24 465 24 419 4 113 5 305 95 101 28 673 29 825 SUNDRY ACCOUNTS RECEIVABLE SUNDRY ACCOUNTS PAYABLE The sundry accounts payable heading at the 5. year-end is broken down as follows: Sums owing to a credit card organisation Revenue available for reuse Revenue to be collected Provision for accident insurance Other 1997 1996 (thousand ECU) 237 195 450 205 66 243 173 802 204 219 1 153 1 641 The sundry accounts receivable heading at the 4. year-end is broken down as follows: Sums owing to a credit card organisation combine all the amounts invoiced by the travel agency under contract to the Court of Auditors pending their recovery by the credit organisation. Claims relating to persons working for the institution Revenue to be collected Expenditure to be charged Other 1997 1996 (thousand ECU) 206 450 87 18 163 802 92 11 761 1 068 Claims relating to persons working for the institution relate mainly to advances paid on mission expenses already incurred but not yet charged. Revenue to be collected consists almost entirely of established entitlements vis-à-vis Member States for transfers of pension entitlements for which no funds have yet been transferred. There is a counterpart entry in the suspense account with the same title under sundry accounts payable. Expenditure to be charged comprises amounts which were invoiced by the Commission at the year-end and Revenue available for reuse is the unused counterpart of the amounts entered on the assets side for refunds of insurance payments, tax refunds or proceeds from the sale of fixed assets. The revenue available for reuse is earmarked for new expenditure of the same kind and must be used by the end of the following financial year at the latest. Revenue to be collected represents the established entitlements vis-à-vis Member States for transfers of pension rights for which no funds have yet been transferred. PAYMENTS IN HAND 6. Under the Financial Regulation, payments which are made between 1 and 15 January of the following financial year and which are authorised before the year-end are entered in the accounts as expenditure for the financial year and are shown on the liabilities side of the balance sheet as payments in hand. 15. 10. 98 EN Official Journal of the European Communities C 318/7 BALANCE TO BE CARRIED FORWARD TO THE FOLLOWING FINANCIAL YEAR the total revenue The balance for the financial year is the difference 7. between the expenditure against appropriations specific to the year and appropriations carried forward from the previous year. the year and for Balance carried forward from previous years Balance for the financial year 1997 1996 (thousand ECU) 47 248 74 (27) The changes in the balance to be carried forward to the following financial year are as follows: Balance to be carried forward to the following year 295 47 IMPLEMENTATION OF THE BUDGET 8. The implementation of the budget for the financial year 1996 can be divided into the implementation of appropriations brought forward and the implementation of appropriations for the financial year. (a) Appropriations brought forward represent, on the one hand, all the commitments chargeable to the Court that have been entered into but not settled before the year-end, and, on the other hand, appropriations which the budgetary authority has decided to carry forward. Appropriations brought forward from the previous year and not used during the following year are cancelled. Appropriations carried forward from 1996 to 1997 Payments Appropriations cancelled (thousand ECU) Expenditure relating to persons working for the institution — Members of the institution — Staff in active employment — Missions and duty travel — Other Operating expenditure — Expenditure on immovable property — Expenditure on data-processing — Movable property and associated costs — Current administrative expenditure — Publishing and information — Other 11 63 258 182 514 331 283 306 81 698 51 8 61 235 166 470 318 279 293 80 622 44 1 750 Total 2 264 1 636 2 106 3 2 23 16 44 13 4 13 1 76 7 114 158 (b) The implementation of the appropriations for the financial year represents the payments made against appropriations committed. The unpaid balance of the commitments may be carried forward to the following year. Appropriations still uncommitted at the end of the year usually lapse. C 318/8 EN Official Journal of the European Communities 15. 10. 98 Appropriations for the financial year Commitments chargeable to the financial year Payments Appropriations carried forward to 1998 Lapsed appropriations (thousand ECU) Expenditure relating to persons working for the institution — Members of the institution — Staff in active employment — Allowances and miscellaneous contributions relating to termination of service — Missions and duty travel — Other 5 232 43 364 523 1 863 1 102 5 111 39 659 477 1 856 1 036 5 093 39 573 477 1 510 868 52 084 48 139 47 521 Operating expenditure — Expenditure on immovable property 2 365 2 350 2 110 — Expenditure on data-processing — Movable property and associated costs — Current administrative expenditure — Publishing and information — Other 893 533 458 905 433 893 530 441 903 428 649 363 331 332 331 5 587 5 545 4 116 Total 57 671 53 684 51 637 18 86 — 346 168 618 240 244 167 110 571 97 1 429 2 047 121 3 705 46 7 66 3 945 15 — 3 17 2 5 42 3 987 Payments against appropriations carried forward (ECU 2 105 741) and the appropriations for the financial year (ECU 51 636 581) totalled ECU 53 742 322 which, with the addition of the total for exchange losses, is equal to the total expenditure shown in the statement of revenue and expenditure for the 1997 financial year. 15. 10. 98 EN Official Journal of the European Communities C 318/9 Report on the administrative and accounting procedures, the soundness of the financial management and the internal control system To the Members of the European Court of Auditors As part of our audit of the annual financial statements of the European Court of Auditors for the financial year ending 31 December 1997, we examined the administrative and accounting procedures, the soundness of the financial management and the internal control system. The purpose of our examination was to ensure that the various departments of the Court of Auditors can be reasonably sure that: — they have a clear view of the extent to which operational objectives are being achieved, — the basis on which the published financial statements are drawn up is reliable, — the Court of Auditors has complied with current regulations. The current regulations in question are: — the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities, as last amended by Council Regulation (EC) No 2444/97 of 22 September 1997, — Commission Regulation (Euratom, ECSC, EC) No 3418/93 of 9 December 1993 laying down detailed rules for the implementation of certain provisions of the Financial Regulation of 21 December 1977, — the Internal Rules of the Court of Auditors for the implementation of the Court’s budget, laid down by Court Decision No 97-47 of 4 December 1997. We therefore examined very closely the control environment, risk evaluation, control activities, information and communications systems and management procedures of the Court of Auditors. The initial descriptive phase was followed by systems evaluation based on sample checks of supporting documents and interviews with staff. The nature and extent of our tests were determined by our appraisal of the control environment. We think that our work forms a reasonable basis for our conclusions regarding the Court of Auditors’ procedures, the soundness of its financial management and its internal control system. In our opinion the current internal control rules ensure that the operational objectives are achieved satisfactorily, the financial statements are reliably drawn up and the legal framework is complied with. Luxembourg, 6 August 1998. KPMG Audit Auditors Stephen NYE