Report by the external auditor on the Court of Auditors' accounts for the financial year 1998
7. 10. 1999 EN Official Journal of the European Communities C 286/1 I (Information) COURT OF AUDITORS REPORT BY THE EXTERNAL AUDITOR ON THE COURT OF AUDITORSí ACCOUNTS FOR THE FINANCIAL YEAR 1998 (1999/C 286/01) NOTE TO READERS Without prejudice to the provisions of Article 248 EC, which gave the Court of Auditors responsibility for auditing all of the Communityís revenue and expenditure, and the provisions of Article 276 EC on the grant- ing 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 have drawn up in respect of the Courtís accounts for the financial years 1987 to 1991 were sent only to the Chairman of the European Parliamentís 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 auditorís 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 1998. These accounting data may be supplied to anyone who submits a written request to the External Relations Department of the Court of Audi- tors. For the Court of Auditors Jan O. KARLSSON President C 286/2 EN Official Journal of the European Communities 7. 10. 1999 CONTENTS Certificate concerning the regularity and fairness of the financial statements at 31 December 1998. Report on the administrative and accounting procedures, the soundness of the financial management and the internal control system. Recommendation concerning the discharge to be given to the accounting officers of the European Court of Auditors. Financial statements at 31 December 1998. Recommendation concerning the internal control system. Pages 3 4 5 6-11 11 7. 10. 1999 EN Official Journal of the European Communities C 286/3 Certificate concerning the regularity and fairness of the financial statements at 31 December 1998 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 draw- ing up the revenue and expenditure account and the balance sheet of the European Communities for the financial year 1998, - the financial statements of the European Court of Auditors as at 31 December 1998, 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 account- ing 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 Auditorsí Internal Rules, of the assets and financial position of the European Court of Audi- tors at 31 December 1998 and of its revenue and expenditure for the financial year then ended. Luxembourg, 28 April 1999. KPMG Audit Auditors Stephen Nye C 286/4 EN Official Journal of the European Communities 7. 10. 1999 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 1998, 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 financial management of the Court of Auditors complies 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, ECSC, Euratom) No 2779/98 of 17 December 1998, - 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 Courtís budget, laid down by Court Decision No 97-47 of 4 December 1997 (as last amended by Written Procedure No 3/97 of 16 January 1998). 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 Auditorsí pro- cedures, 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 satisfact- orily, the financial statements are reliably drawn up and the legal framework is complied with. Luxembourg, 28 April 1999. KPMG Audit Auditors Stephen Nye 7. 10. 1999 EN Official Journal of the European Communities C 286/5 Recommendation concerning the discharge to be given to the accounting officers of the European Court of Auditors To the Members of the European Court of Auditors As part of our audit of the European Court of Auditorsí revenue and expenditure account and balance sheet at 31 December 1998 we have examined the management by the accounting officers. On the basis of the work carried out during the audit we confirm that the accounting officers have exercised their responsibility within the framework of the European Communitiesí regulations and we therefore recommend that you grant them discharge for the financial year ending 31 December 1998. Luxembourg, 28 April 1999. KPMG Audit Auditors Stephen Nye C 286/6 EN Official Journal of the European Communities 7. 10. 1999 Financial statements at 31 December 1998 Revenue and expenditure accounts for the financial years ending 31 December 1998 and 1997 Note 1998 1997 (1 000 ECU) Revenue Contribution from the general revenue of the European Communities Court of Auditorsí own resources - Community levies and dues deducted from remuneration - Revenue accruing from the administrative operation of the institution - Miscellaneous revenue Total revenue Expenditure 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(b) 2 1(f) 1(c) 1(f) 48 067 45 215 8 068 697 28 7 577 1 250 65 56 860 54 107 5 038 42 972 203 1 945 918 5 101 39 633 477 1 746 1 034 51 076 47 991 2 464 995 692 433 1 016 403 6 003 2 428 928 656 411 954 491 5 868 Balance for the financial year 7 (219) 248 The notes annexed hereto form an integral part of these financial statements. Total expenditure 57 079 53 859 7. 10. 1999 EN Official Journal of the European Communities C 286/7 Balance sheets at 31 December 1998 and 1997 Note 1998 1997 (1 000 ECU) 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 years Balance for the financial year Current liabilities Sundry accounts payable Payments in hand 1(d) 1(e) 4 24 689 4 486 493 24 465 4 113 274 29 668 28 852 109 388 216 713 95 761 414 1 270 Total assets 30 381 30 122 3 7 7 5 6 29 284 295 (219) 28 673 47 248 29 360 28 968 962 59 1021 1 153 1 1 154 The notes annexed hereto form an integral part of these financial statements. Total liabilities 30 381 30 122 C 286/8 EN Official Journal of the European Communities 7. 10. 1999 Notes to the financial statements at 31 December 1998 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, ECSC, Euratom) No 2779/98 of 17 December 1998, 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 gener- ally accepted accounting principles, including the principles pro- vided for in Council directives, except where otherwise provided for by regulation. 1(b) Court of Auditorsí own resources The Court of Auditorsí 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 receivableí in the Revenue to be col- lectedí item. They have a counterpart entry on the liabilities side of the balance sheet in an item with the same title under the head- ing Sundry accounts payableí. These entries are reversed once the amounts have been collected. 1(c) Expenditure Expenditure for the financial year, which is shown in the State- ment of revenue and expenditureí, 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. The Courtís building and equipment and furniture are valued at acquisition cost. Where the value is expressed in national cur- rency, 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 capitalí. Furniture and equipment are not recorded in fixed asset accounts unless their value is ECU 400 or more. 1(e) Supplies 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 capitalí heading. Where the acquisition cost is expressed in national cur- rency, it is converted into ecu at the accounting rate used in draw- ing up the balance sheet. 1(f) Exchange differences Exchange gains or losses are entered as Miscellaneous revenueí or Operating expenditure - Otherí. REVENUE ACCRUING FROM THE ADMINISTRATIVE OPERATION OF THE INSTITUTION 2. Revenue accruing from the administrative operation of the institution comprises mainly: 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 expend- iture 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. - revenue accruing from the publication of the European Court of Auditorsí reports and opinions in the Official Journal of the European Communities, - the payment of actuarial reserves by national pension bodies and provident societies by way of transfers of officialsí pen- sion rights. 7. 10. 1999 EN Official Journal of the European Communities OWN CAPITAL 3. The amount of own capital determined according to the prin- ciples 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 (1 000 ECU) 1998 1997 24 689 4 486 24 465 4 113 109 95 29 284 28 673 SUNDRY ACCOUNTS RECEIVABLE 4. The sundry accounts receivable heading at the 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 C 286/9 (1 000 ECU) 1998 1997 316 159 171 225 91 962 237 195 450 205 66 1 153 Sums owing to a credit card organisation combines all the amounts invoiced by the travel agency under contract to the Court of Auditors pending their recovery by the credit organisation. Revenue available for reuse is the unused counterpart of the amounts entered on the assets side for refunds of insurance pay- ments, 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. (1 000 ECU) 1998 1997 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. Claims relating to persons working for the institution Revenue to be collected Expenditure to be charged Other 142 142 23 81 388 206 450 87 18 761 Claims relating to persons working for the institution relate mainly to advances paid on mission expenses already incurred but not yet charged. 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. 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. 7. The balance for the financial year is the difference between the total revenue for the year and the expenditure against appropri- ations specific to the year and appropriations carried forward from the previous year. BALANCE TO BE CARRIED FORWARD TO THE FOLLOWING FINANCIAL YEAR Expenditure to be charged comprises amounts which were invoiced by the Commission at the year-end and which it was not materi- ally possible to charge to the budget. The changes in the balance to be carried forward to the following financial year are as follows: SUNDRY ACCOUNTS PAYABLE Balance carried forward from previous years Balance for the financial year (1 000 ECU) 1997 47 248 1998 295 (219) 5. The sundry accounts payable heading at the year-end is broken down as follows. Balance to be carried forward to the following year 76 295 C 286/10 EN Official Journal of the European Communities 7. 10. 1999 IMPLEMENTATION OF THE BUDGET 8. The implementation of the budget for the financial year 1998 can be divided up 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. 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 Appropriations carried forward from 1997 to 1998 (1 000 ECU) Payments Appropriations cancelled 18 86 346 168 618 240 244 167 110 571 97 1 429 2 047 Total 13 86 323 149 571 230 243 156 76 569 79 1 353 1 924 5 - 23 19 47 10 1 11 34 2 18 76 123 (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. Expenditure relating to persons working for the institution - Members of the institution - Staff in active employment - Allowances and miscellaneous contributions relating to ter- mination of service - Missions and duty travel - Other Buildings, equipment and sundry items of operating expend- iture - Expenditure on immovable property - Expenditure on data processing - Movable property and associated costs - Current administrative expenditure - Publishing and information - Other Other expenditure - Provisional appropriations Appropri- ations for the financial year Commitments chargeable to the financial year Payments Appropriations carried forward to 1999 (1 000 ECU) Lapsed appro- priations 5 097 44 660 222 1 873 1 121 52 973 2 542 895 643 533 978 500 6 091 41 41 5 041 42 989 203 1 832 1 324 51 389 2 534 895 642 532 974 494 6 071 - - 5 025 42 886 203 1 622 768 50 504 2 234 752 536 357 447 319 4 645 - - 16 103 - 210 556 885 300 143 106 175 527 175 1 426 - - 56 1 411 19 41 57 1 584 8 - 1 1 4 6 20 41 41 Total 59 105 57 460 55 149 2 311 1 645 Payments against appropriations carried forward (ECU 1 924 873) and the appropriations for the financial year (ECU 55 149 412) totalled ECU 57 074 285 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 financial year 1998. 7. 10. 1999 EN Official Journal of the European Communities C 286/11 Recommendation concerning the internal control system To the Members of the European Court of Auditors As part of the audit of the annual accounts of the Court of Auditors for the financial year ending 31 December 1998, we confirm that in the course of our testing we did not encounter any shortcomings in the internal control system which called for written recommendations by us. Luxembourg, 28 April 1999. KPMG Audit Auditors Stephen Nye