raport activ ue eng 2011

7/31/2019 Raport Activ UE Eng 2011

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European Courto Auditors

ANNUAL ACTIVIT Y REPORT

2011


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MISSION

The European Court of Auditors is the EU Institution established by the Treaty to carryout the audit of the EU finances. As the EU's external auditor it contributes toimproving EU financial management, promotes accountability and transparency, andacts as the independent guardian of the financial interests of the citizens of the Union.

VISION

VALUES

An independent and dynamic Court of Auditors, recognised for its integrity andimpartiality, respected for its professionalism and for the quality and impact of itswork, and providing crucial support to its stakeholders in improving themanagement of EU finances.

Independence, integrityand impartiality of theinstitution, its Membersand staff.

Auditing impartiallywhile taking intoaccount the views ofstakeholders, but notseeking instructions or

succumbing to pressurefrom any outsidesource.

INDEPENDENCE,INTEGRITYAND IMPARTIALITY

PROFESSIONALISM ADDING VALUE EXCELLENCEAND EFFICIENCY

Producing relevant,timely, high qualityreports, based on soundfindings and evidence,which address theconcerns ofstakeholders andprovide strong andauthoritative messages.

Contributing toeffective improvementof EU management andto enhancedaccountability in themanagement of EUfunds.

Maintaining anexemplary standard ofprofessionalism in allaspects of its work.

Being involved in EUand worldwide publicaudit development.

Valuing individuals,developing talents andrewarding performance.

Using effectivecommunication topromote a team spirit.

Maximising efficiency inall aspects of work.

EUROPEAN COURT OF AUDITORS


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TABLE OF CONTENTS

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PRESIDENTS FOREWORD

2011 AT A GLANCE

OURACTIVITIES

Audit reports and opinions

Cooperation with other SAIs

Other activities

OUR MANAGEMENT

Implementing the Strategy or 2009 to 2012

Measuring the ECAs perormance in 2011

Supporting audit

Financial inormation

Audit and accountability


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I would like to welcome you to the ECAs 2011Annual Activity Report.

In 2011 there were important developments inEU governance as a response to the economicand inancial cr is is . These have signi icantconsequences or the use o public unds in

the uture. Against this background, in May wepublished a position paper highlighting theimplications or accountability, transparencyand public audit o the measures taken inresponse to the inancial and economic crisis.Later in the year, the Contact Committee o theHeads o the Supreme Audit Institutions (SAIs)o the Member States and the ECA, called on EUdecision-makers to ensure proper respect or theprinciples o accountability, transparency andpublic audit where public unds are at stake. Inparticular, the SAIs o the euro area called orthe provision o adequate external public audit

o the European Stability Mechanism. This ledto a decision to establish a board o audit orthe Mechanism, which will include a memberproposed by the ECA.

PRESIDENTS FOREWORD

In 2011 we continue to be encouraged by theresults o our key performance indicators ,pa r t icu la r ly r e la t iv e t o t he o l low u p o recommendations accepted by our auditeesas well as to the rating o our audit work bystakeholders and by external experts . Wesucceeded in increasing our output in termso the number o audit reports and opinions

adopted in 2011, although we did not quitemeet the ambitious targets we have set orthe timeliness o reporting. We produced ourannual reports with enhanced inormation and anew chapter on perormance issues, 42 speciicannual reports and 16 special reports, alongsideseven opinions and a position paper.

Th e scop e o ou r in st it ut io ns audit powersover the Unions revenue and expenditure, inparticular in respect o VAT own resources inMember States, were conirmed by the EuropeanCourt o Justice in November 2011.


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Starting rom 2012 we will be able to reporton the extent to which our recommendationsare implemented in practice. We wil l alsostart a peer review o our perormance auditprocedures with a view to improving urtherthe management o the delivery o our specialreports. In 2011 we have published ethicalguidelines or urther strengthening the auditmanagement ramework and revised our Audit

Policies and Standards to streamline the auditand reporting processes. A new sta satisactionsurvey will also be launched in 2012.

Looking urther to the uture, in 2012 we willcomplete the preparation o our strategy forthe period 2013 to 2017. A number o keychallenges are already clear. EU governance willkeep evolving and we must continue to promotedue respect or the principles o accountability,transparency and public audit. The need orhigh quality and timely assurance about the use

o EU unds is increasing and we must developour audits and reports accordingly. As the EUcontinues to develop, we will also look to makebest use o our audit experience to help policymakers improve EU inancial management.Enhancing the inancial accountability o theEU is a goal we share with other actors and wewill seek to leverage our eorts by developingstrategic partnerships. Finally, like other EUpublic bodies, we will need to be prepared todo more with less and improve the eiciencyo our organisation.

Vtor Manuel da SILVA CALDEIRAPr esi dent

Meeting these challenges will depend cruciallyon the eorts o all who work at the ECA. Weare and will continue to be committedto developing the excellence of our staff.It is a core value o our organisation. Giventhe proessionalism, commitment and resultsachieved by our sta in the past, I am conidentthat the ECA will be able to achieve its objectivesor the uture.


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72011 AT A GLANCE

OUR ACT IVITIES

Annual reportson the EU budget and on the EDF or the 2010 inancial year providingenhanced inormation

42 specific annual reportspublished on the EUs agencies, decentralised bodies

and other institutions or the 2010 inancial year

16 special reportsadopted on speciic budgetary areas or management topics

7 opinions providing contributions on budget reorm, such as the modernisation opublic procurement policy and the Commissions legislative proposal or the rulesgoverning Cohesion spending a ter 2013

Position paper on the consequences or public accountability and public audit inthe EU and the role o the ECA in the light o the current inancial and economic crisis

OUR MANAGEMENT

Continue to be encouraged by the results o our key performance indicators ,particularly on the quality and impact o our work

Adoption o ethical guidelines urther strengthening the audit managementramework

Revision o the ECAs Audit Policies and Standards to streamline the audit and

reporting processes

Deployment ostaffrom administration to core audit tasks, helping increase auditsta by more than 12 % in comparison to 2008

Major construction work on the ECAs second extension building project nearlycomplete and itting out ongoing

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9OURACTIVITIES

AUD IT REPORTS AND OPIN IONS

o opinions on drat legislation with an impacton inancial management, and posit ion

papers on other issues at the ECAs owninitiative.

2007 2008 2009

Annual reports on EU budgetand EDFs

2 2 2

Specific annual reports onEU agencies anddecentralised bodies

29 29 37

Special reports 9 12 18

Opinions and other output 9 5 1

2011

2

42

8

16

6

14

40

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2010Number of reports

and opinions

The Eu ropean Court o Auditors has three mainoutputs:

oannual reports, comprising mainly the resultso inancial and compliance audit work on

the European Union budget and EuropeanDevelopment Funds (EDFs) . Separatelypublished speci ic annual reports on theEUs agencies, decentralised bodies and otherinstitutions;

ospecial reports, published throughout theyear, presenting the results o selected auditso speciic budgetary areas or managementtopics. These are mainly per ormance audits;and

The u ll text o al l audit reports and opinions is avai lable on the ECAs website at www.eca.europa.euin 22 EU languages.
http://www.eca.europa.eu/http://www.eca.europa.eu/http://www.eca.europa.eu/


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The key messages of the 2010 annual report

o The 2010 accounts presented air ly theinancial position o the European Unionand the results o its operations and its cashlows or the year. In contrast, the paymentsunderlying these accounts were aected bymaterial error, with an estimated error rate o

3.7 % or the EU budget as a whole. Overall,the control systems were partially eectivein ensuring the regularity o payments.

o The ECAs estimated error rate or spendingin the Cohesion, energy and transportpolicy group the most error prone EUspending area was higher than or 2009,with an es timated error rate o 7.7 %.

o For the other areas of EU spending th eestimated error rate remained relatively

stable. For theA

griculture and naturalresources policy group the estimated errorrate was 2.3 %, i.e. over the materiality level.However, direct payments to armers wereree rom material error.

o The proportion o advance payments pre-financing in the EU budget hasrisen considerably. The accounting rulesand supervision have not been adjustedadequately.

o When planning EU spending programmes,the Commission and the Member Statesshould pay greater attention to deiningobject ives that are SMART speci ic ,meas u r able , ach iev able , r e lev ant andtimed as well as to identiying andmitigating the risks to implementation.

ANNUALREPOR TSONTHE2010 FINANCIALYEAR

ANNUAL R EPOR T ON T H EIMPL EMENTAT ION OF T H E 2010EU B UDGE T

During 2011 the ECA carried out the bulk oits inancial and compliance audit work on theimplementation o the 2010 EU budget. This

resulted in the publication o the 2010 ann ualreport , including the seventeenth statement oassurance (DAS), on 10 November 2011. A numbero changes were introduced in the 2010 annualreport to improve clarity and the inormationprovided. These included revised policy groups(and related annual report chapters) into whichthe ECA groups expenditure, publication oestimated error rates per policy area (see below),an enhanced ocus on recommendations orimproving inancial management and a newchapter on perormance issues.

For the irst time the ECA published estimatederror rates or both the EU budget as a wholeand or each policy group. These error rates arecalculated by extrapolating the quantiiableerrors ound in the samples o transactionsaudited. The ECA compares the estimated errorrate with a materiality limit o 2 %, in order todetermine together with other evidence whether material error is present. Error rates arenot a measure o raud but relect the ECAsestimation o the degree o non-compliancewith the rules governing the spending. These

include breaches o public procurement rules,ineligible or incorrect calculation o costsclaimed by EU co-inanced projects, or over-declaration o land by armers.


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SPEC I F IC ANNUAL R EPOR TSON T H E EU AGENC I ES ,DECENT RAL ISED BOD I ES ANDOT H E R INST I T U T IONS FOR 2010

The ECA publ ish ed in December 2011 specificannual reports on the 2010 inancial year oreach o the EUs 42 agencies, decentralisedbodies ( s u ch as jo int u nder t ak ings ) andother inst itutions (notably the operationaleiciency o the European Central Bank). TheECA provided unqualiied opinions or all o

the audited entities, except or the EuropeanGlobal Navigation Satellite System Agency, dueto incorrect accounting or assets, and or theENIAC Joint Undertaking due to no budgetaryoutturn account having been included in theaccounts.

The EUs agencies and decentralised bodies havebeen created by the EU legislator to undertakespeciic tasks. Each agency has its own mandate,board, director, sta and budget. Agencies areactive in many areas, such as saety, security,

health, research, inance, migration and travel.

ANNUAL R EPOR T ON T H EE U ROPEAN DEVE LOPMENT FUNDSFOR 2010

I n i t s a n n u a l r e p o r t o n t h e E u r o p e a nDev elo p m ent Funds (EDFs) or the 2010inancial year (published 10 November 2011)the ECA concluded that the 2010 accountspresented airly, in all material respects, theinancial position o the EDFs, and that theiroperations and cash lows were in accord withtheir inancial regulations. The revenue o the

EDFs was ree rom material error. The EDFcommitments were also legal and regular in spiteo non-quantiiable errors ound in procurement.However, a material level o error was ound inthe EDF payments to projects, with an estimatederror rate o 3.4 %. The errors ound related tonon-respect o eligibility conditions. The ECAassessed the control systems governing the EDFspending as partially eective in ensuring theregularity o payments.

President Caldeira presenting the 2010 annual repor t

at the European Parliament plenary session


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In 2011 the ECA adopted 16 special reportson arange o topics, representing an increase on the14 adopted in 2010. They are presented brielybelow under the related heading o the inancialramework the multi-annual budget o the EU.

The spe cial reports are publ ish ed in u ll on theECAs website www.eca.europa.eu and throughthe EU bookshop in 22 EU languages.

T HEMA

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EOR COMPLIANCE AUD I T

SPECIALREPORTSIN 2011

In addit ion to its annual reports , the ECApublishes special reportsthroughout the year,covering perormance and compliance audits ospeciic budgetary areas or management topicso its choice. The ECA selects and designs theseaudit tasks to be o maximum impact, so makingbest use o its resources.

When selecting topics, the ECA considers:

o the risks to perormance or compliance orthe particular area o revenue or expenditure;

o the level o income or spending involved;

o the time elapsed since any previous audit;

o orthcoming developments in the regulatoryrameworks; and

o political and public interest.

PreliminaryStudy

Analysisoffndings

Auditplanning

Field work

Reportdrafting

Clearance

Adoption

Determinestheutilityandfeasibilityoftheauditproposal.

Setsoutthescope,objectives,approach,methodologyandtimetable

oftheaudit.

Multidisciplinaryteamscollectevidenceon-the-spotatCommission

headquartersandinMemberand benefciaryStates.

Confrmfacts withauditeesanduseevidencetoconcludeonaudit

objectives.

Clear,structuredpresentationofmain fndingsandconclusions.

Preparationofrecommendations.

Clearanceofthereport withtheauditee.

Adoptionofthereport.

Publication

Publicationofthespecial reportin22ocial languages, withtherepliesoftheauditee.


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SUSTA INAB L E GROW T H

Sustainable growth is aimed at growth and jobsand covers two themes:

Competitiveness includes unding or researchand technological development, connectingEurope through EU networks, education andtraining, promoting competitiveness in a ullyintegrated single market , the social policyagenda, and nuclear decommissioning. The EUexpenditure earmarked or competitiveness or

growth and employment or 200713 amountsto 89.4 billion, or 9.2 % o the total, withclose to two thirds devoted to research anddevelopment; and

Cohesion for growth and jobs mainly concernsCohesion policy, which is implemented throughunds covering deined areas o activit ies ,including the European Socia l Fund, theEuropean Regional Development Fund andthe Cohesion Fund. The unds are spent under

shared management by the Commission and theEU Member States. The EU Cohesion expenditureplanned or 200713 is 3 48.4 billion, 35.7 % othe total EU budget.

During 2011, the ECA adopted the ollowingspecial reports in this area:

o eect iveness o the Small and MediumEnterprise Guarantee acilit y (4/2011), in termso its design and planning, the managemento its operations and the achievement oits objectives. The SME Guarantee acilityis a inancial instrument managed by theEuropean Investment Fund on behal o

the European Commission and providesguarantees or counter guarantees to inancialintermediaries or loans granted by inancialinstitutions to SMEs aimed at increasing thesupply o debt inancing;

o eectiveness o the European RegionalDevelopment Fund (ERDF) co-f inanced

to ur i sm p roj e c t s (6/2011), in terms oexpected results , their sustainabil ity , EUadded value and project design. It was basedon a wide survey o project s in nine Member

States in 26 regions. Between 2000 and 2006, 4.6 billion o EU unds was allocated underthe ERDF or p hysical investments in tourismthrough projects selected and managed bymanaging authorities in the Member States;


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o eectiveness o e-government projectssup p o rted by the E uro p ea n Reg i o na l

Development Fund (ERDF) (9/2011) ocusedon the 2000 06 programme period and ourMember States: France, Italy, Poland andSpain. The audit assessed whether the co-inanced projects were selected accordingto the needs, carried out as expected, anduseul and sustainable. The aims o the

6.7 billion EU support earmarked or theInormation Society by the ERDF were thedevelopment o new secure technologies,inrastructure capabilities and connectivitybetween regions through broadband;

o e e c t i v e n e s s o t h e Co m m i s s i o n smanagement of state aid control(15/2011).

The audi t examined whether the proceduresand systems ensure that the Commissionhandles al l relevant state aid cases, thatthe cases are handled eectively within

the deadlines and allow the Commission tomonitor the impact o its state aid control.The Commis sion is responsib le or ensur ingthat state aid granted by Member States iscompatible with the internal market o theEuropean Union. Member States are requiredto irst notiy the Commission o aid measuresand to obtain its permission beore givingstate aid;

o i m p l e m e n t a t i o n o t h e E U f i n a n c i a lassistance for decommissioning of nuclear

plants in Bulgaria, Lithuania and Slovakia

(16/2011) assessed wh ether t he progr ammeact ions wer e des igned in accor dancewith identiied needs, whether they werecarr ied out as planned and whether theaccountability and governance arrangementswere adequate or ensuring an eective use

o EU unds. Bulgaria, Lithuania and Slovakiacommitted themselves within their EUaccession negotiations to the early closureand subsequent decommissioning o eightnon-upgradeable nuclear reactors. Due to theexceptional burden, the EU provided inancialassistance o 2.9 billion to the three countryprogrammes betwe en 1999 and 2013.


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PR ESE RVAT ION AND MANAGEMENTOF NAT U RAL R ESOU RCES

Th e EU has ex tensiv e po licy responsibi li ty o ragriculture and rural development, isheries andthe environment. The planned expenditure or200713 is 413.1 billion, 42.3 % o the total.

Three quar ter s o the spending inv olves directpayments to armers and support to agriculturalmarkets through the European AgriculturalGuarantee Fund (EAGF) the irst pi l lar o the common agricultural policy (CAP). A

urther ith o spending goes to EU supportor Rural Development (RD), which is inancedrom the European Agricultural Fund or RuralDevelopment (EAFRD), the second pillar o theCAP. Agriculture and Rural Development areunder shared management by the Commissionand Member States.


o the Single Payment Scheme of the commonagricultural policy (special report 5/2011) See box: A perormance audit in ocus;

o whether agri-environment support policyis well designed and managed (7/2011).

The au di t as se ss ed wh et he r th e poli cy isdesigned and monitored to deliver tangibleenvironmental beneits , armers are wellsupported through appropriate guidanceand correct aid amounts, and managementtakes account o speci ic environmentalneeds. Agri-environment support involves 2.5 billion o EU spending per year and aimsto respond to societys increasing demandor environmental services by encouragingarmers to introduce or continue to applyagricultural production methods compatible

with the protection and improvement o theenvironment. Management o this polic y isshared by the Commission and the MemberStates;

o th e recovery of undue payments madeunder the common agricultural policy(8/2011), which assessed the eectivenesso the systems established and operated byMember States to recover identiied debts.

The audit examined whether Member Statesprocess and record debts correctly, whetherthey are successul in recovering identiied

undue payments, whether they write o irrecoverable debts according to the rulesand whether the Commissions supervisionand monitoring is eective. The EuropeanUnion spends around 55 billion per yearon agriculture and rural development, someo which is wrongly paid due to irregular orincorrect claims and needs to be recovered;


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o eectiveness o theschoolmilk and schoolfruit schemes (10/2011), which assessedwhether the EU subsidies have a direct impacton the beneiciaries consumption and i theschemes are likely to meet their educationalobjectives and inluence uture eating habits.

These EU schemes aim to encourage childrento eat healthily by consuming dairy productsand ruit and vegetables, and to contributeto improving the market or these products.

The EU currently earmar ks an annual budgeto 180 million or these two schemes;

o whether the design and management ofthe Geographical Indications Schemeallow it to be effective (11/2011). The auditassessed the robustness o the system, theattractiveness o the scheme or producersand the awareness o i t by consumers .

Th e Ge og ra ph ic al In di cati on Sc he me aimsto protect the names o products whosecharacter is t ics are associated with the

geographical area in which they are produced.It provides potential economic opportunityor armers and ood producers and aims ora positive impact on the rural community;and

o eectiveness oEU measures contributingto adapting the capacity of EU fishingfleets to available fishing opportunities(special repor t 12/2011). The audit examinedwhether the ramework o the reductiono leet capac i t y was c lea r and i t hespeciic measures were well-deined andimplemented. The audit was carr ied outat the Commission and in Denmark, Spain,France, Italy, Poland, Portugal and the UK. T he

EU common isheries policy aims to promotesustainable ishing by achieving a balancebetween ish resources and the ishing leetin order to avoid over-exploitation o ishstocks. For many years there has been aproblem o over-capacity, undermining thesustainability o stocks and the long-termviability o the ishing sector. The EuropeanFisheries Fund provides 4.3 billion or the200713 programming period.


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A PER FORMANCE AUD I T IN FOCUS

SPECIAL REPORT 5/2011 SINGLE PAYMENT SCHEME SPS: ISSUES TO BEAD D RESSED TO IMPROVE ITS SOUND FINANCIAL MANAGEMENT

Thi s per or ma nc e au di t co ve re d thesoundness of financial managementopayments under SPS, which is currentlyapplied in 17 o the 27 EU MemberStates. Expenditure on the schemeamounted to some 28.8 billion in 2009.

The introduct ion o the SP S was akey eature o the 2003 reform othe EU common agricultural policy.Its objective was to provide incomesupport to armers and to encouragethem to respond better to marketdemand. The reorm removed thelink between support and production(decoupling). Instead armers needeligible agricultural land at their disposaland to hold payment entitl ements.

From 2006 the ECA undertook a number of audits o Commission and Member State procedures orensuring the accuracy o payment entitlements and the correctness o payments to armers. Theseaudits covered all the 17 Member States applying the schemes, and the results were reported in the2006 and 2007 annual reports on the EU budget.

The ECA decided to build on these results throu gh a performance audit, which ocused on:

o the beneiciaries o the policy, the access to the support, the deinition o eligible land;

o the contribution o the scheme to the objectives o supporting armers income and o maintainingland in good agricultural and environmental condition; and

o the speciic eects arising rom the various implementing models o the scheme.

Audit visits were carried out at the Commission and in France, the United Kingdom and Italy in 2009and 2010.

The resulting special report 5/2011 concludes that SPS has contributed to the achievement o two mainobjectives o the common agricultural policy: encouraging armers to bet ter respond to market demandand supporting the income o the agricultural sec tor as a whole. However, overall, the implementation othe scheme resulted in a number o questionable eatures relating to the deinition o the beneiciarieso the policy, the nature o eligible parcels and activities, the environmental impact o the scheme,the distribution o aid across, and within, Member States and the speciic e ects o the historic andregional models.


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The report recommends that payments be better directed to active armers while excluding non-agricultural parcels and activities that do not contribute to increasing agricultural productivit y or toactively maintaining the environmental value o the land. The ECA also recommends that the costso environmental and other externalities that armers generate should be relec ted in the level othe support and the distribution o the aid between armers be more balanced. The calculation othe support should be based on current arming conditions.

The audit was carr ied out by a multidisciplinary team o eight auditors rom Chamber I. The auditwork provided not only urther insight into the concept o decoupled arm support, but also theeects associated with the change rom the ormer coupled support. According to Mr Sven Klling,the team leader: it was particularly challenging to audit the multitude of SPS implementing models andvariants together with the national and regional management policies, which influenced the effectiveness

and efficiency of the aid. Visits to inal beneiciaries and on-the-spot inspection o arms proved tobe indispensable or the collection o the evidence supporting the audit indings and conclusions.

A number o the ECAs recommendations are relected in the Commissions proposals or the reorm othe common agricultural polic y ater 2013 (under discussion at time o writing) including the deinitiono active armer and minimum activities on certain types o land, the distribution o aid betweenbeneiciaries, a reduction o the variety o SPS models, and a better relection o environmental

externalities in the support.

Aud it team (fr om le ft to right ): (fr on t row ) Heike Walz, EC A Memb er Miche l Cre tin, Aur el ia Pet liza,

(back row) Pietro Puricella, Dirk Pauwels, Sven Klling, Sylvain Lehnhard


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EU AS A GLOBAL PLAY E R

EU activities in the ield o external relationsocus on: enlargement; providing stab ility,security and prosperity in its neighbourhood;

wor k ing act iv e ly t o s u ppor t susta i nab ledevelopment at the international level; andpromoting gl obal political governance an densuring strategic and civilian security.

The EU has earmarked 55.9 billion or 200713,r epr es ent ing 5 .7 % o i t s t o t a l p lanned

expenditure on these objectives. Most spendingis managed d i r ect ly by t he C ommis s ioneither rom its headquarters or through itsdelegations. Some aid is also jointly managedwith international organisations.


o h a s d e v o l u t i o n o f t h e Co m m i ss i o n smanagement of external assistance from

its headquarters to its delegations led to

improved aid delivery? (1/2011). The auditexamined the management arrangementsand their impact on improving the speed and

quality o aid delivery and establishing soundinancial procedures. The EU is the worldslargest aid donor, with the Commissionmanaging a signiicant proportion o theaid 8.4 billion in 2009 through itsmanagement system, with responsibilitiesdelegated to its local o ices in partnercountries since 2002;

o e i c i e n c y a n d e e c t i v e n e s s o E Ucontributions channelled through United

Nations Organisations in conflict affected

countries (3/2011) by ocusing on projectsin Aghanistan, Iraq and Sudan rom 2006 to2008. The amounts channelled by EuropeAidthrough UN organisations were in the regiono 4 billion or the period rom 2005 to 2009.

The EU may contribute unds to projec ts asa sole donor or together with other donors,to multi-donor trust unds without allocatingthe money to speciic activities or objectives,or to the general budget o a UN organisation;

o eectiveness oEU assistance to improveC r o a t i a s c a p a c i t y t o m a n a g e p o s t -

accession EU funding (14/2011) assessed theCommissions planning o the assistance andwhether the EU inanced projects achievedthe intended results. The purpose o EU pre-accession assistance is to help candidatecountries strengthen their administrativecapacity in preparation or managing thelarger amounts o EU unding available tothem once they become Member States.Croatia has received 150 million in assistanceevery year since 2007.


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During 2011, the ECA adopted the ollowingreport in this area:

o whether the control ofCustoms Procedure42 prevents and detects Value Added Tax

(VAT) ev as io n (13/2011) assessed i there isa sound regulatory ramework in the ightagainst VAT evasion under customs procedure42. The ECA audited in Belgium, Denmark,

Spain, France, Austria, Slovenia and Sweden.Customs procedure 42 is a mechanism an EUimporter uses to obt ain a VAT exemption. I t isapplied when goods imported rom outsidethe EU into a Member State are transportedto another. In such cases, the VAT is due inthe destination Member State.

During 2011, the ECA adopted the ollowingreport in this area:

o management of the European Anti-FraudOffice (OLAF) (2/2011) assessed the actionstaken to implement the recommendationso a previous ECA special report (1/2005) onthe subject. The audit examined whetherthe activities o OLAF have been reocusedon its investigative unction, whether itimproved the eiciency o its investigations,how it demonstrated the eectiveness o its

investigations and whether the role o theSupervisory Committee has been clariied.OLAF is in charge o ighting raud andother illegal activities detrimental to the EUbudget. It is part o the Commission but hasinvestigative autonomy and employs around500 sta and has an annual budget o some 50 million.

ADM IN IST RAT ION

The administrative expenditure of the EUsinstitutions , agencies and decentralised bodiescovers sta costs, such as salaries and pensions,and spending on buildings, equipment, energy,communications and inormation technology.

The tota l sp en di ng o r 20 0713 am ou nt s to 55.9 billion, 5.7 % o the total EU budget.

R EVENU E

Th e bu dg et o th e Europe an Unio n is ma in lyinanced byown resources and other revenue.

Tra di ti on al ow n re so ur ce s ma in ly cu st omduties account or approximately 12 % o totalEU revenue and the VAT resource accounts or aurther 12 %. The majority o EU own resourcesrepresenting around 70 % are provided by theGross National Income resource, which ensuresthat the budget is always in equilibrium.


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OPINIONSANDPOSITION

PAPERSISSUEDIN 2011

The ECA contributed to improving EU financialmanagement through its opinions on proposalson new or revised legislation with inancialimpact . These opinions are requested bythe other EU institutions, and used by thelegislative authorities European Parliamentand Council in their work. The ECA can alsoissue position papers on other issues at its own

initiative.

In 2011 the ECA adopted seven opinions:

o 1/2011: Proposal or a regulation o the Councilamending Regulation (EC) No 215/2008 on theFinancial Regulation applicable to the 10thEuropean Development Fund, as regards theEuropean External Action Service.

o 2/2011: C lean Sky Jo int Und er t ak ing sFinancial Rules

o 3/2011: Proposal or an amendment to theFinancial Regulation o the European Schools

o 4/2011: The Commissions Green Paper on themodernisation o public procurement policy

o 5/2011: Proposal or a Council regulation(Euratom) laying down the rules or thepart ic ipat ion o undertakings , researchcentres and universities in indirect actionsunder the Framework Programme o theEuropean Atomic Energy Community and

or the dissemination o research results.

o 6/2011 : T h e a m e n d e d p r o p o s a l o r aRegulation o the European Parliament ando the Council amending Regulation (EC)No 1073/1999 concerning investigationsconducted by the European Anti-Fraud OiceOLAF and repealing Regulation (Euratom) No1074/1999.

Op in io n 7 / 2 0 1 1 c o v e r e d p r o p o s a l s o rregulation o the European Parliament and othe Council laying down common provisions onCohesion spending, which could represent upto 45 % o total EU expenditure or the 201420period. The contribution o the EU budget tomeeting Europe 2020 objectives depends toa large extent on an economic, eicient and

eective use o these unds. This will also impacton the credibility and legitimacy o EU action.

The ongoing challenge is to obtain good qualityresults rom a scheme when unds are pre-allocated to Member States and absorption isan implicit objective. Eective supervision andaccountability by the Commission would helpMember States use the unds successully.

The opinions are publ ish ed in u ll on the ECAswebsite www.eca.europa.eu in all oicial EUlanguages.


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THE ECA POSITION PAPER: CONSEQUENCES FOR PUBLIC ACCOUNTABILITYAND PUBLIC AUD IT IN THE EU AND THE ROLE OF THE ECA IN THE LIG HT OF

CURRENT FINANCIAL AND ECONOMIC CRISIS

The ongoing global financial and economic crisis has major consequences or the European Union.In response to the crisis, the EU has taken measures to support the sustainability o the inancial

sector, to promote economic recovery and growth, to provide inancial assistance to Member Statesand to strengthen iscal and economy policy coordination between them. These measures haveimportant implications or the use o public unds taxes paid by citizens in the EU. The changesin the economic polic y set-up o the Union raise new challenges or accountability, transparencyand public audit.

The ECA considers that thes e new measures should respe ct the princip le that where public fundsareat stake there should be adequate arrangements or transparency, public accountability and publicaudit. Thereore, on 19 May 2011, the ECA issued a position paper on the consequences or publicaccountability and public audit in th e EU and the role o the ECA in th e light o the current inancialand economic crisis.

In its paper, the ECA concludes that it will carry out audits in relation to the new supervisor y authorities,assistance mechanisms with EU budget guarantee and to the e xtent possible the Commissionsactivities in the European Semester. The ECA identiied cases where public audit arrangements arenot adequate. For example, it considers that the Treaty establishing the European Stability Mechanismshould include provision or public external audit. Finally, the ECA noted a number o cases whereaccountability and transparency issues need to be relected on by the competent institutions withinthe Union, in particular the European Parliament and the Council. They concern accounting/auditstandards, central banking activities and the ollow-up o iscal policies under the new set o rulesbeing established.


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The ECA cooperates with other sup reme audit inst itutions (SAIs) mainly throu gh:

o the Contact Committee o the SAIs o EU Member States;

o the Net work ofSA Is o candidate and potential candidate countries to the EU; and

o international organisationsor public audit institutions, notably the International Organisationo Supreme Audit Institutions (INTOSAI) and its European regional group (EUROSAI).

CONTACTCOMMITTEE

Th e EU Treat y re qu ir es th e EC A an d nati on alaudit bodies o the Member States to co -operate in a spirit o trust, while maintainingtheir independence. The ECA act ively co-operates with the EU Member State SAIs throughthe Contact Committee ramework. The ContactCommittee is an assembly o the heads o theEU SAIs and the ECA, and meets each year. It

provides a orum or cooperation and exchangeo proessional knowledge and experience onthe audit o EU unds and other EU-relatedissues. Day-to-day contacts are maintainedthrough l iaison o icers appointed by eachinstitution. Working groups and networks havebeen set up to help develop common positionsand practices.

During 2011, the ECA was the acting chair othe Contact Committee, continued with itsadministrative support to the Committee andparticipated actively in its var ious working

groups and networks.

CO OPERAT IO N WITH OTHER SA IS

T he 2011 annual meeting o the ContactCommittee was held at the ECAs premiseson 1314 October 2011. The main ocus o themeeting was a seminar on the impact or EUSAIs and the ECA o the European Semesterand other recent developments in EU economicgovernance. This included the regulation andsupervision o inancial systems and institutions,

state aid to the inancial sector and audit o theeuro crisis management mechanisms.

The Contact Committee adopted a statement(see box) addressed to the European Parliament,European Council and European Commission,as well as parliaments and governments o EUMember States. The Committee also adopted aresolution acknowledging the call o the SAIso the euro area countries or the provision oadequate external public audit o the EuropeanStability Mechanism. Both the statement andthe resolution are available on the Contact

Committee website www.contactcommittee.eu.

The key note speakers of the 2011 Contact Committee meeting: Commissioner Olli Rehn, Minister of Finance of Luxembourg

Luc Frieden and Vice-President Vtor Constncio of the European Central Bank, together with EC A President Vtor

Caldeira (third from the left).
http://www.contactcommittee.eu/http://www.contactcommittee.eu/


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Adequate public audit of public funds

Th e Cont ac t Commit tee bel ieves that the o llowing pr incipl es should be resp ec ted wh en pu bl icunds are at stake:

o sufficienttransparency, i n t he form of rel iab le and tim ely i nformat ion (in clu din g national sta tis tic s) onactual or intended use of public funds, and the risks to which they are exposed;

o appropriate accountability, involvi ng publi c scru tiny of the operations and h oldin g to a ccou nt decisi on-makers and those responsible for managing the processes; and

o adequate pu blic audit, to p rov ide a ssu rance and inf ormat ion o n t he use of public fu nds and t he risks towhich they are exposed, thereby contributing to transparency and providing a basis for accountability.

In order to ensure an eective public audit response to the inancial and economic crisis and itsatermath, EU SAIs and the ECA will consider to the e xtent possible and within their respectivemandates how to a dapt their audit work to the new context. In some cases this process has already

started, through the introduction of new and updated audit tasks.

STATEMENT O N TH E IMPACT O F THE EUROPEAN SEMESTER AND OTHER RECENT

DEVELOPMENTS I N EU ECO N O MIC GOV ERNANCE O N THE SUPREME AUD IT

I NST I TU TI O NS O F THE MEMBER STATES O F THE EUROPEAN U N I O N AND THE EUROPEAN

CO URT O F AUD ITORS , ADOPTED BY THE CO NTACT CO MMITTE E O N 14 OCTO BER 2011,

H IGH LIGH TED TH E PR I NC IPLES TO BE RESPECTED WHEN PUBLIC FU NDS ARE AT STAK E,

AND SE TS O UT THE MA IN LI NES FOR FUTURE CO OPERAT I O N


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Further developing cooperation bet ween EU SAIs and the ECA

Th e incr easing interdep endence o the economies o the EU rein orces the va lu e o the commonperspective that can be gained rom cooperating closely through the Contact Committee ramework.

This can include:

o sharing the lessons learnedfrom recent audit results, and their impa ct, as a way of a ccumulating andsharing knowledge;

o identifying and disseminating currentbest practices in auditing the new (and existing) arrangements;

o identifying pu bl ic au di t ga ps and the potential for new audit tasks and new partnerships, an dconsidering how these could be best addressed; and

o considering the development of specific audit methods and techniques for use by SAIs, and tools andguidance for implementing them.

To devel op these act ions, the Contact Commit tee wil l use its exist ing net wor ks coverin g the aud it oEurope 2020 and iscal policy, as well as parallel or coordinated audits and other cooperative activitiesestablished or the purpose.

2011 Contact Committee meeting on 1314 October in Luxembourg


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NETWORKOFTHESAISOFCANDIDATEANDPOTENTIALCANDIDATECOUNTRIES

The ECA actively participated in the activitieso the Network o the SAIs o the candidateand potential candidate countries or joiningthe EU1. The organisational structure o theNetwork is similar to the Contact Committee,

and involves periodic meetings o the headso SAIs and liaison oicers, as well as workinggroups, seminars, workshops and parallel audits.

The main goal is to promote the implementationo audit methods and techniques in compliancewith internat ional s tandards and best EUpractices.

A Presidents meeting o the Network tookplace on 89 March 2011 in Istanbul. It was co-chaired by the Turkish Court o Accounts and

the ECA, and led to the adoption o the IstanbulAgreement, including an outline work plan outure activities, which is to be implementedwith the active support o the ECA, SIGMA andrepresentatives o EU SAIs.

1 As at February 2012 the Network comprises five candidatecountries (Croatia, the former Yugoslav Republic ofMacedonia, Iceland, Montenegro, Turkey) and threepotential candidate countries (Albania, Bosnia andHerzegovina, Serbia).

OTHERCOOPERATION

In 2011 the ECA led a peer review o the Oiceo the Auditor General o Norway, along withthe SAIs o Austria and Finland. The report waspublished in June 2011.

The ECA continued it s active involvement in ,and contribution to, the activities o INTOSAIand EUROSAI. Since becoming a ull membero INTOSAI in 2004, the ECA has participated

actively in the subcommittees on proessionalauditing standards. During 2011, ollowingt h e e n d o r s e m e n t o a c o m p r e h e n s i v eset o Internat ional Standards ( ISSAIs ) bythe XX INCOSAI in November 2010, thesesubcommittees began to implement their newwork plans, ocused on the harmonisation o theISSAI ramework and the dissemination o thestandards and guidelines. The ECA also providedinput to the subcommittee on promotingbest practices and quality assurance throughvoluntary peer reviews, the subcommittee on

promoting increased capacity building activitiesamong INTOSAI members, as well as the INTOSAIWorking Group on Environmental Audit.

Moreover, the ECA has chaired the INTOSA IWorking Groupon Accountability or, and Audito, Disaster-related Aid since 2008. A main aimo this Working Group is to develop guidanceand to identiy and disseminate good practicesin the area o accountability or disaster-relatedaid, concentrating on activities directed tostakeholders (multilaterals, aid organisations,governments, private auditors).


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In respect to EUROSAI, the ECA took a stepor war d by becoming a m em b e r o f t h eGoverning Board or the next six-year period.

The ECA actively participated in the VII I EUROSAICongress (30 May2 J une 2011), which ocusedon the challenges, demands and responsibilitieso public managers and the role o SAIs, andon the audit o the independent regulatoryagencies by SAIs. A statement was approved

reinorcing SAI independence.

In December 2011, common eorts o theINTOSAI community and its regional workinggroups to strengthen SAI independence andprovide recognition o the Lima and MexicoDeclarations culminated in the adoption, bythe United Nations General Assemb ly, oa resolution on Promoting the e iciency,accountability, eectiveness and transparency opublic administration by strengthening supreme

audit institutions.


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On 15 November 2011, the Court of Justicedel ivered i ts j udg m ent in Case C-539/09

Commission versus Federal Republic o Germany,concerning the audit powers o the ECA in theield o own resources accruing rom valueadded tax (VAT).

Th e ca se or ig inated in th e re u sa l in 20 06 oth e German Federal Ministry of Finance toallow the ECA to carry out audits in Germanyconcerning administrative cooperation bet weenthe Member States under Council RegulationNo 1798/2003 in the ield o VAT. In preparingits special report 8/2007, the ECA chose to audit

in eight Member States, including Germany. TheGerman authorities raised objections to theECAs right to conduct the audit in question.

The German Government argu ed that thecooperation between Member Statesorganisedby Regulation No 1798/2003 had no direct link toEU revenue, as VAT is a national tax and must bedistinguished rom VAT own resources. The latterare established ater a series o calculations andcorrespond to a relatively small proportion othe amounts the Member States colle ct as VAT.

Th e Cour t o Jus ti ce de ci si ve ly rejected th ereasoning o the German Government, based ona strict distinction bet ween the Member StatesVAT revenue and the Unions own resourcesaccruing rom VAT. Following the argumentssubmitted by the Commission, the EuropeanParliament and the ECA, the Court o Justicestressed the dependence o VAT own resourceson the Member States VAT revenue.

OTHER ACT IVITIES

Th e Cour t o Ju st ic e recalled that the scopeo Regulation No 1798/2003 on administrative

cooperation in the ield o value added taxwas to establish mechanisms o cooperationbetween the Member States which a l lowthem to combat VAT raud and to collect VATmore eectively. This also has an impact onthe availability to the EU budget o VAT ownresources. I the cooperation between nationalauthorit ies is carr ied out eectively and inaccordance with the regulation, it contributesto a reduction in raud and to the eectivecollection o VAT in the Member States. It helpsmaintain VAT own resources at the level required

under the various EU legislative acts applicable,and thus to the preservation o the generalequilibrium o own resources.

Th e Cour t o Ju st ice concludedthat the ECAhad the power to carry out the planned auditrelating to administrative cooperation in theield o VAT, because it was dealing with EUrevenue rom the aspect o its legality and itssound inancial management, and thus had adirect link with the powers conerred on theCourt o Auditors by the Treaty.

Case C-539/09 is the irst case in which the Courto Justice has had to rule explicitly on the scopeo the audit powers o the ECA. The judgment othe Court o Justice is valuable and encouragingas it clariies and corroborates the audit powero the institution vis--vis the Member States.

EUROPEANCOUR TOFAUDITORS POWE RSINTHECONTEXTOFTHEAUDITOFVAT OWNRESOURCES


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LZAROAWARDFORRESEARCHONPUBLICSECTORAUDITING

In 2010, the ECA launched its first awar d o rresearch on public sector auditing with theaim o developing l inks with the academic

community and supporting the developmento public audit in Europe. This irst edition othe award paid tribute to the memory o MrJess Lzaro Cuenca, a ormer Direc tor at theECA, who contr ibuted over many years todeveloping the audit methods and approacheso the institution.

The L zaro Award winners, Mrs Sara Belleil andMr Jos Antonio Fernndez Ajenjo, received theirprizes rom ECA President Vtor Caldeira and theSelection Committee at a public ceremony,

which took place on 5 July 2011 at the ECA inLuxembourg. Both award winners presentedtheir theses during an academic session:

Mrs Sara Belleil: Contribution to sociology omanagement practices in European policy auditso humanitarian NGOs: between importation

and appropriation.

Mr Jos Antonio Fernndez Ajenj o : Thecontrol o public administration and the ightagainst corruption: Special reerence to theCourt o Audit and General audit o the stateadministration.

T he Eu ropean Co ur t o Audito rs was ver ysaddened to learn o the untimely death o SaraBelleil on 30 November 2011, and would like to

pay tribute to the quality and importance oher work.

President Caldeira with Lzaro award winners Sara Belleil and Jos Antonio Fernndez Ajenjo


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31OUR MANAGEMENT

In the past ew years, the ECA has been engagedin an internal reform process. This includedthe development o its irst strategy or 2009to 20122 setting overall goals to:

o maximise the overall impact o audits; and

o increase efficiency by making best use oresources.

2 The Audit Strategy 200912 is avai la b le on

www.eca.europa.eu.

Many o the strategy prior ity actions havebeen completed. The remaining actions will beaddressed during 2012. The main achievementsin 2011 were:

o an increase in the number of special reports ,with an average o 16 per year rom 2009 to2011, exceeding the annual target o 12 to 15reports;

o inf luential contr ibutions in view o EUbudget reorm;

o launching the production oregular follow-up to previous indings, including an overallollow-up report to be p roduced or the irsttime in 2012;

o revised audit procedures and standards;

o increasing emphasis on core activities byreallocating sta rom support services toaudit; and

o p u b l i c a t i o n o a p o s i t i o n p a p e r o nconsequences or public accountability andpublic audit in the EU and the role o the EC Ain the light o current inancial and economiccrisis.

ETHICAL GUID ELINES FOR THE EUROPEAN COURT OF AUD ITORS

Following the recommendation o the International Peer Review conducted in 20 08, the ECA hasstrengthened its audit management frameworkby adopting a set o Ethical Guidelines based on theINTOSAI Code o Ethics and International Standard on Quality Control or Supreme Audit Institutions3.In this context, the ECA has established a procedure or providing, on an annual basis, reasonableassurance that its audit sta comply with the relevant ethical requirements.

Respect o the values laid down in the Ethical Guidelines, such as impartiality, objectivity, loyaltyand proessional conidentiality, guarantees that ECA employees act in the public interest, with noinluence rom outside pressures, or personal or inancial interests. The ECAs ramework or proessionalbehaviour enhances the credibility o the inormation provided to its stakeholders.

IMPLEMENT IN G THE STRATEGY FOR 2009 TO 2012

3 ISSAI 30 and ISSAI 40.
http://www.eca.europa.eu/http://www.eca.europa.eu/http://www.eca.europa.eu/http://www.eca.europa.eu/


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TOWARDS A NEW ECA STRATEGY FOR 2013 TO 2017

Building on the achievements o the current strategy ending in 2012, the development o the nextstrategy started in 2011. The ECA is seizing the opportunity to adapt to developments in the EU andin the audit proession and to address the needs and expectations o its stakeholders.

Members of the European Court of Auditors


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Since 2008, the ECA has developed progressivelya set o key perormance indicators (KPIs) to:

o inorm management o progress towardsachieving the goals or the 200912 period;

o support decision-making; and

o provide inormation on perormance to itsstakeholders.

MEASUR ING THE ECAS PERFORMANCE IN 2011

Th e in di ca tors ai m to me as ur e ke y el em entso the quality and impact o the ECAs work,paying part icular attention to the opiniono key stakeholders, and the efficiency andeffectiveness o its use o resources.

2011 is the second year in which the ull seto the indicators has been available. The ECA

continues to be encouraged by the resultso its key perormance indicators, particularlyon the quality and impact o its audit work. Inaddition, the indicators provide a good basisor identiying where progress is required andthe issues to be addressed in order to improveuture perormance.

STAK E HOLDE R APPRA ISAL

Using a survey, the ECA invited the principal users o its reports (the Committee on Budgetary Controlo the European Parliament and the Budget Committee o the Council) and its principal auditees (mainlysta o the European Commission) to rate the quality and impact o its 2010 annual reports on the

EU general budget and the European Development Funds and the special reports published during2011. Respondents to the survey used a ive point scale (1 very poor, 2 poor, 3 suicient,4 good, 5 very good).

2011

PrincipaluserappraisalofthequalityandimpactoftheECAsreports

AuditeeappraisalofthequalityandimpactoftheECAsaudits

Targetin 2011

4.0

3.7 3.7

4.2

ThisresultindicatesthatonaveragetheprincipalusersoftheECAsreportsconsiderthemasgood.Inparticular, therespondentsappreciatetheclarityandusefulnessofthereportsaswellasthe

professionalismoftheECAsauditstaf.

2010

4.2

3.7

QUA

LITYAND

IMPAC

TO

FTHE ECA

S

WO

RKThe ECA assesses the qualit y and impact o its report s based on stakeholder apprais als , expert reviewsand ollowing up on the recommendations it makes.


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E XPE R T R EV I E WS

Two ex ter nal parties have rev iewed the content and presentation o a sample o the ECAs reportspublished in 2011. The reviewers assessed our special reports and the 2010 annual reports on thegeneral budget and the EDFs. They rated the quality o various aspects o the reports on a our pointscale ranging rom signiicantly impaired (1) to high quality (4).

2011

Externalexpertsreviewsofthecontentandpresentation

oftheECAsreports

Targetin 2011

2.8 3.0

TheresultindicatesthatthereviewersconsiderthequalityoftheECAsreportsassatisfactory.Thereviewshaveprovidedvaluableinformationandrecommendations, andwillbeusedtoimprovethequalityoffuturereports.

2010

3.0

FOL LOW- UP OF R ECOMMENDAT IONS

The E CA contr ibute s to improving financial management through its recommendations. To lead tochange the recommendations irst nee d to be accepted by auditees and then be implemented. Th eindicator is based on the recommendations in the annual reports and special repor ts published in 2011.

2011

Percentageofauditrecommendationsacceptedbytheauditee

Targetin 2011

93 % 90%

In2011theECA startedtosystematicallymonitortheimplementationofrecommendationsbyauditees.Startingfrom2012theECA willbeabletoreportontheextenttowhichrecommendationsareimplementedinpracticeandleadtoimprovements.

2010

90%


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TIME L INESS OF R EPOR TS

The ECA aims to adopt all its audit reports within the deadlines set. For annual reports and speciicannual reports there are statutory deadlines to respect. For special reports there is no statutorypublication deadline, and the planned adoption date is used as the measure o timeliness.

2011

Number o reports adopted compared to planned

Number o reports adopted on time

Targetin 20114

83 %

75% 90%

90%

Overall, the ECA did not ully meet its targets in 2011. While the very ambitious target or the number o reportswas not met, the overall objective o 1215 special reports per year was exceeded and output was higherthan in 2010. All annual reports, and all but one specific annual report, were adopted as planned and publishedwithin the deadline.

2010

90%

80%

EFFICIENTANDEFFECTIVEUSEOFRESOURCES

The EC A assesses the e i ciency and e ectiveness o it s use o resources in terms o it s ab il it y to:produce timely reports and indings; meet its obligations regarding inancial management; and ensurethe well-being and proessional competence o its sta.

TIME L INESS OF F IND INGS

Statements o preliminary indings (SPFs) detail thespecific audit findings and are prepared ateraudit visits to each Member State or the Commission. They are used by the ECA to conirm theactual accuracy o its indings with the auditees, and thereore represent a key milestone in the

audit process. The ECA previously identiied the need or signiicant improvement in the timelinesso the issue o SPFs, setting a target to issue 80 % o SPFs within two months o the related auditvisit by the en d o 2012.

2011

PercentageofStatementsofPreliminaryFindingsissuedontime

Targetin 2011

58 %80%

by 2012

TheECA improvedtimelinessofSPFsin2011, althoughthetargethasnotyetbeenreached.Therehasbeensignicantprogressoverthelastthreeyears(withonly27%ontimein2008)andtheECA willcontinueitsefortstoimprovefurtheritsperformance.

2010

54 %

4 The targets for these indicators have been revised from 100 % (200810) to 90 % to take account of unexpected events.


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E X T E RNAL APPRA ISAL OF F INANC IAL MANAGEMENT

The ECA seek s to recei ve an un qualified opinion on its financial statements and on the use o itsresources rom its external auditors as well as to be granted discharge by the European Parliamentater a positive recommendation rom the Council.

Theexternalauditoralsoprovidesassuranceontheuseofresourcesandcontrolprocedures.

2011

Unqualiedopinionoftheexternalauditoranddischargegranted

Target

Yes Yes

2010

Yes

PROF ESS IONAL T RA IN ING

Following guidelines published by International Federation o Accountants, the ECA aims to providean average of 40 hours (5 days) o non-language proessional training per auditor per year.

2011

Averagenon-languageprofessionaltrainingdaysperauditor

Target

6.1 days 5 days

2010

5.7 days

TheECA againexceededthetargetforprofessionaltrainingforauditstaf, reectingtheimportanceitplacesonstafdevelopment.Whenlanguagetrainingistakenintoaccountstafreceiveonaverage9.3daysperyear.

STAF F SAT ISFACT ION

According to an internal survey in 2009 on sta satisaction, 86 % o the ECAs sta were generally

satisied with their job. The overall average sta satisaction was rated as 2.8 on a composite scalerom 1 to 4, where a result over 2.5 indicates general satisac tion. The ECA aims to maintain or improveon this result in 2012 when a similar survey will be conducted.


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SUPPORT ING AUD IT

HUMANRESOURCES

STA

F F A

L LOCA

T ION

The ECAs main asset is its sta. On 31 December2011, the ECA had an authorised sta allocationo 887 oicials and temporar y agents (excludingMembers, contract agents, seconded nationalexperts and trainees). 564 o these are in auditchambers ( including 123 in private o iceso the Members), 148 in translation, 148 inadministrative support and 27 in the Presidency.

2009 2010

Audit 525 557

Translation 163 151

Administration 171 157

Total 880 889

2011

564

148

887

148

Distribution of ECA staff

posts at 31 December

Presidency 21 24 27

2008

501

163

173

857

20

The success o the ECAs audit activi ties depends, to a great ex tent, on the qualit y o it s specialisedsupport services. These ser vices provide the logistical and technical expertise that enable the ECA to:

o recruit, retain and motivate its staffand develop their proessional skills;

o communicate the audit results in all official languages o the EU;

o use information technology to best eect;

o manage its budget and maintain its facilities; and

o conduct audit visits to obtain on-the-spot evidence in the countries in which EU unds are raisedand spent.

To contr ibute to the goal o making best use oresources, all services in 2011 continued to lookor and introduce efficiency measures basedon the simpliication o procedures. Wheneverposs ible , non-audit posts made avai lablethrough e iciency gains were redeployedto audit, contributing over hal o the 12.6 %increase in the number o posts dedicated toaudit since 2008.


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GENDE R BALANCE

Th e EC A, li ke th e ot he r EU in st it ut io ns , has apolicy o equal opportunities in its humanresources management and recruitment. TheECA has reached equal proportions o men andwomen in its workorce, ater a gradual increase

over the years in the proportion o women.

Male

2001

2011

Female

54 %

50% 50%

46 %

R ECR U I TMENT

EC A staff have a broad range o academicand proessional backgrounds, and the qualityo their work and commitment is relected inthe institutions output. The ECAs recruitmentpol icy o l lows the genera l pr inciples andemployment conditions o the EU institutions,and its workorce comprises both permanentcivil servants and sta on temporary contracts.Open competitions or posts at the ECA areorganised by the European Personnel SelectionOice (EPSO). The ECA also provides a number o

traineeships to university graduates or periodso three to ive months.

In 2011, the ECA recruited 75 employees:23 o icials, 24 temporary agents and 28 contractagents. The ECA was particularly successulin recruiting new sta to audit posts. Therewere 25 vacant posts as at 31 December 2011,signiicantly ewer than the 44 in 2010. Thisbrought the vacancy rate bel ow 3 % or theirst time.

The char ts below show the proport ion o men and women by level oresponsibility at 31 December2011. O the 65 directors and heads o unit, 18 (28 %) are women, which is in line wi th previous years.Most are employed in the translation directorate and administrative departments.

Male

2010

2011

Female

31 %

33% 67%

69%

Assistants (AST level)

Male

2010

2011

Female

62%

61 % 39%

38%

Auditors administrators

(AD level)

Male

2010

2011

Female

70%

72% 28%

30%

Directors and Heads ofUnit

T he propor t ion o women at AD leve l i sincr eas ing . A t er t he la t es t r ecr u i t mentcampaigns, 45 % o all sta at AD5 to AD8 levelsare emale.


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AGE PROF I L E

The age pro ile o s ta in act ive s er vice at 31 D ecember shows that 60 % o the ECAs sta membersare aged 44 or less.

2024

2529

3034

3539

4044

4549

5054

5559

6064

0.0 %

16.3 %

20.7 %

17.5 %

11.5 %

7.6 %

3.4 %

3.8 %

Age

19.2 %

23 out o the 65 directors and heads o unit are aged 55 or above. This will lead to a signiicant renewalo senior management over the next 5 to 10 years.

PROFESSIONALTRAINING

The audit proession requires continuoustraining to keep sta abreast o proessionaldevelopments and to develop new ski l ls .Furthermore, the parti cular nature o the ECAsaudit environment creates a need or auditorswith good linguistic abilities.

In 2011, the ECAs s ta each received anaverage o 9.3 days o proessional training.

Language courses represented 54 % o thistotal, compared with 57 % in 2010. In additionto language training, auditors received 6.1 dayso proessional training in 2011, thus meeting akey target o the institution.

In 2011, the content o training was improvedand new courses developed to meet auditpriorities. Moreover, the ECA has streamlinedthe management system or training activities.

TRANSLATION

Translati on is an audit support activity whichenables the ECA to ulil its mission and to meetits communication objec tives. In 2011, the totalvolume o translated work was similar to the2010 workload. Over 99 % o translation serviceswere perormed on time.

Dur ing 2011 urther posts and sta wereredeployed rom the Translation Directorate to

audit.

The ECAs Translation Direc tor ate als o providedlinguistic support to auditors on audit visitsand during the successive phases o the dratingo audit reports. Support was also providedto the Contact Committee, INTOSAI workinggroups and or other speciic needs related tothe ECAs audit activities. The ECAs TranslationDirectorate was also active in interinstitutionaland international proessional orums.


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INFORMATIONTECHNOLOGY

Inormation technology (IT) is an enabler ormeeting the overall goals o t he ECAs strategyor 2009 to 2012. In 2011, the ECA:

o reinorced its investment in k now ledgemanagementby launching the developmento a new version o its audit support tool(project called Assyst2) based on its recently

deployed collaboration platorm;

o actively pursued its eorts to streamlinei nterna l p ro cesses t hr ou gh e lect r on icworklows in areas such as missions andt r a i n i n g m a n a g e m e n t , a n d e l e c t r o n i carchiving o personal iles, with a view tocont inuously improving e ic iency andeectiveness;

o continued to support mobility through thedeployment o smart phones and portable

computers as well as the launching o anextranet project which will also be key toacilitate electronic exchanges with a varietyo the ECAs partners (inter alia auditees,budgetary authority, new recruits, suppliers).

Th es e de ve lop me nt s ha ve been ca rr ied ou twhile continuing to reinorce the security ooperations and business continuity provisionsin order to guarantee the requisite availabilityand quality o all the ECAs IT services.

ADMIN

IS

TRA

TION

ANDFACILITIES

The F inance and Supp or t Dire ctorate s missionis to provide the ECAs auditors in an eicient,eective and timely manner with appropriates u ppor t s er v ices and t o ens u r e t hat t henecessary inancing, internal controls andaccounting mechanisms are in place to supportall o the ECAs activi ties. In 2011, the Directoratecont inued to ocus on urther improving

eiciency and eectiveness in order to releaseresources or redeployment to audit.

Following an agreement reached with thebudgetary authority (Council and Parliament)towards the end o 2008 on the inancing oit s K3 building , a major activity in 2011 wasthe construction o this second extension othe ECAs main building. The civil engineeringworks were completed during 2011 and thebuilding was closed to the elements by theend o the year. Signiicant progress has been

made in itting out the interior o the building.The cons tru ct ion o the bui lding is on scheduleand within budget. It is expected that the ECAwill take possession o the building by the endo 2012, with removals taking place in the irstquarter o 2013.

Reviews carried out in 2009 and 2010 led theECA to conclude that its security obj ectivescould best be achieved and risks managed mosteiciently and cost eectively by internalisingthe provis ion o its reception and securityservices. This was done in April 2011 with the

replacement o the external securit y contractorby a small team o contract workers. These newarrangements are operating well. Comparing2009 and 2012, annual costs will be reduced byan amount in excess o 0.5 million.


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AUDITVISITS

The ECAs audit work require s audito rs tomake visits to Member States authorities andother recipients o EU unds, as well as to theheadquarters o international organisationssuch as the UN. The purpose o these visits isto obtain direct audit evidence.

Audit visits are normally to central and localadministrations involved in the processing,management and payment o EU unds and

to the final beneficiaries who receive them.Audit visits within the EU are oten made inliaison with the supreme audit institutions othe Member States concerned. Audit teamsgenerally comprise two or three auditors andthe length o audit visits can range rom a ewdays to two weeks, depending on the type oaudit and travelling distance.

In 2011, the ECA undertook a total o 379 auditvisits5 343 in Member States and 36 outsidethe EU in respect o annual, speciic annualand selected audit tasks. A comparable numbero audit visits were made to the EU institutionsand bodies in Brussels and Luxembourg.

3433

32

30

25

19

17

15

12 1211 11

10 1 0 1 09

19

5 5 5

5

32 2

1 1 1 1 1 11 1 1 1 1

0

5

10

15

20

25

30

France

Germany

UnitedKingdom

Italy

Spain

Netherlands

Sweden

Portugal

Greece

Denmark

Hungary

Poland

Ireland

Austria

Romania

Belgium

Slovenia

Serbia

CzechRepublic

Tanzania

Albania

Barbados

Finland

Latvia

Benin

Congo

Croatia

Kazakhstan

Cameroon

BurkinaFaso

EastTimor

Georgia

Israel

Guyana

Malawi

Nigeria

Norway

Mozambique

Switzerland

Philippines

Nicaragua

9

Audit visits in EU

Total 343

Audit visits outside EU

Total 36

4

23

Cyprus

Bulgaria

Slovakia

111

Vietnam

Tunisia

Senegal

1

Malta

2

4

Luxembourg

11

Chad

Zambia

2011 AUD IT V IS ITS

5 This ref lec ts the number of Member and beneficiary

States visited for each audit task. The corresponding

number for 2010 was 376.


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The ECA is financed by the general budget othe EU. The budget represents around 0.1 % ototal EU spending, and less than 2 % o totaladministrative spending.

FINANCIAL INFO RMAT IO N

IMPLEMENTATIONOFTHE 2011 BUDGET

Finalappropria-

tions2011 FINANCIAL YEAR Commit-

mentsPayments

% use(commit./

appr.)

10 Membersotheinstitution

( 000s)

12 Ofcial and temporarystaf

14 Otherstafand external services

162 Missions

161 + 163 + 165 Otherexpenditurerelatingtopersonsworkingortheinstitution

Subtotal Title 1

20 Immovableproperty

210 IT&T

212 + 214 + 216 Movablepropertyand associatedcosts

23 Currentadministrativeexpenditure

25 Meetings, conerences

27 Inormationandpublishing

Total ECA

13 411

Subtotal Title2

119 169

12952 1281797%

95 416 87 624 8738292%

4 205 3864 382092%

3 652 3 417 282794 %

2 485 2 115 1 53085%

109972 10837692%

25 162 24 365 1287497%

144 331 134 337 121 25093%

14 171 13915 591398%

6 500 6 500 4 702100%

816 746 69191 %

542 482 26589%

893 753 57084 %

2240 1 969 73388%

Title 1: People working withtheinstitution

Title2: Buildings, movable property, equipment and miscellaneous operating expenditure


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In 2011, the overall rate o implementationor the budget was 93 %. For Title 1 this ratewas 92 %, with the lowest percentage (85 %)in Chapter 16 (Other expenditure relating topersons working or the institution). The averageimplementation rate or Title 2 was 97 %.

T he amount o payment s o r Chapter 20(Immovable property, e.g. buildings) is a ectedby the construction o the K3 building. The

third tranche o inancing o 7 million or thisproject was included in the 2011 budget; thisamount has been committed and partly paidin 2011. The balance o appropriations or theK3 building is carried orward to 2012 to covercontracts signed by the Project Manager on theECAs behal with construction companies. Theappropriations will be utilised in accordancewith the submission made by the ECA to theEuropean Parliament and the Council in 2008.

The tota l co st o th e co ns tr uc ti on o th e K3building is estimated at 79 million, to beinanced in ive successive years: 55 millionin 2009; 11 million in 2010; 7 million in 2011;and 3 million in 2012 and 2013 respec tively.


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BUDGETFOR 2012

The 2012 budget re pre sents a decre as e o1.28 % on that or 2011, mainly due to the lowerappropriations or the new K3 building.

2012BUDGET 2011

( 000s)

10 Membersotheinstitution

12 Ofcial andtemporarystaf

14 Otherstafandexternal services

162 Missions

161 + 163 + 165 Otherexpenditurerelatingtopersonsworking

ortheinstitution

Subtotal Title 1

20 Immovableproperty

210 IT&T

212 + 214 + 216 Movablepropertyandassociatedcosts

23 Currentadministrativeexpenditure

25 Meetings, conerences

27 Inormationandpublishing

Total ECA

Subtotal Title2

14 592 12930

96 487 95957

4 173 3825

3802 3 652

2 682 2 485

121 736 118849

20741 25 482

142 477 144 331

9941 14 611

6 501 6 500

837 816

525 422

793 893

2 144 2240

Title 1: People working withtheinstitution

Title2: Buildings, movable property, equipment and miscellaneous operating expenditure


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46

AUD IT AN D ACCOUNTABILITY

INTERNALAUDIT

The mission o the Internal Audit Service (IAS)is to provide independent, objec tive assuranceand consult ing serv ices des igned to addvalue to and improve the operations o the

ECA. It assists the ECA in accomplishing theInstitutions objectives by bringing a systematicand disciplined approach in order to evaluateand make recommendations or improving theeectiveness o risk management, control andgovernance processes.

In per orming i ts miss ion, the IAS acts inaccordance with the EUs Financial Regulation,with the rules applicable to European Unionoicials as well as the International Standardsor the P rofessional Pra ct i ce o f Interna l

Auditing . Since 2009, the ECAs Internal AuditService has been certiied as complying withthe internationally recognised standards o theInstitute o Internal Auditors.

In 2011, the ECAs IAS reported on: the stateo implementation o the ECAs Strategy or2009 to 2012; the implementation o the KPIs;the construction o the ECAs new K3 building;

the use o the iduciary account or paymentsto eligible beneiciaries; as well as the ollowup to its previous audit recommendations. TheIAS provided ull support to the ECAs externalauditors in their certiication audit o the ECAsinancial statements and the eectiveness o itsinternal control procedures.

Th e EC As Internal Audit Committee adviseson matters o internal audit and monitors theassociated internal control environment in thecontext o the Institutions risk management

processes. During 2011, the Internal AuditCommittee and the Internal Auditor discussedthe results o the IAS audits, the implementationo the action plans having an impact on theinternal control environment as well as risksaecting the Institutions governance.

EXTERNALAUDIT OFTHECOURT

The annual accounts o the ECA a re audited byan independent external auditor. This is as animportant element o the ECA applying the sameprinciples otransparency and accountabilityto itsel as it does to its auditees.

T h e r e p o r t o t h e e x t e r n a l a u d i t o r P r i cew a terho use Co o p ers S r l on t heECAs accounts or the 2010 inancial year waspublished in September 20116.

6 OJ C 267, 9.9.2011.


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OPINIONS OF THE EXTERNAL AUD ITOR 2010 FINANCIAL YEAR

R EG A R D I N G THE FI N A N CIAL STATEME NTS :

In our opinion, the inancial statements give a true and air view o the inancial position o theEuropean Court o Auditors as o 31 December 2010, and its cash lows or the year then ended inaccordance with Council Regulation (EC, Euratom) No 1605/2002 o 25 June 2002, the Commission

Regulation (EC, Euratom) No 2342/2002 o 23 December 2002 laying down detailed rules or theimplementation o the said Council Regulation and the Accounting Rules o the European Union.

R EG A R D I N G THE U S E OF R E S OU R CE S A ND TH E CO NTR OL P R O CED U RE S :

Based on our work described in this repor t, nothing has come to our attention that causes us tobelieve that in all material respects and based on the criteria described above:

(a) the resources assigned to the Court have not been used or their intended purposes;

(b) the control procedures in place do not provide the necessary guarantees to ensure the compliance

o inancial operations with the applicable rules and regulations.


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DECLARATION BY THE AUTHORISING OFFICER

BY DELEGATION

I, the undersigned, Secretary-General o the European Court o Auditors, in my capacity asauthorising oicer by delegation, hereby:

o declare that the inormation contained in this report is complete and accurate; and

o state that I have reasonable assurance that:

the resources assigned to the activities describe d in this report have been used or theirintended purpose and in accordance with the principles o sound inancial management;and

the control procedures in place provide the necessar y guarantees concerning th elegality and regularity o the transactions underlying the accounts and ensure anadequate treatment o allegations o raud or suspected raud.

This assurance is based on my judgment and on the inormation at my disposal , such as theresults oex postchecks, the reports o the internal auditor and the reports o the external

auditor or previous inancial years.

I conirm that I am not aware o anything not reported here which could be detrimental tothe interests o the institution.

Luxembourg, 8 March 2012.

Eduardo RUIZ GARCASecretary-General


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The European Court o Auditors is the independent external audit ins titution o the EuropeanUnion based in Luxembourg. The ECA operates as a collegiate bod y o 27 Members, onerom each Member State. Its Members are appointed by the Council, ater consultation withthe European Parliament, or a renewable term o six years. The Members elect one o their

number as President or a renewable term o three years.

The ECA is org anised in Chamber s, to which Members are assigned. The Chambers preparereports and opinions or adoption by the Court. Audit Chambers I to IV cover the di erent areaso revenue and expenditure, and the i th, the CEAD Chamber, is responsible or horizontalissues. The Chambers are supported by Audit Directorates o sta. Following the 2010 revisiono the ECAs rules of procedure, certain categories o the ECAs reports and opinions can beadopted by Chambers, rather than the ull Court.

The administrative committee is chaired by the President and comprises the Deans o the

Chambers and the Se cretary-General (responsible or the ECAs administrative and supportservices). The committee plays a coordinating role and prepares Court decisions on issues ostrategic planning, perormance management and administrative matters.

Each Me mber is responsible or speciic tasks, primarily within auditing. Members presentaudit proposal and reports on the task s or which they are responsible at Chamber and Courtlevel. Once a report has been adopted, the reporting Member presents it to the EuropeanParliament, Council and other relevant stakeholders. Members are supported by the sta otheir private oice and by the team assigned to the audit task.

GOVERNANCE

OFTHE EUROPEANCOURTOFAUDITORS


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European Court ofAuditors

Annual Activity Report 2011

Luxembourg: Publications Offi ce of the European Union

2012 49 pp. 21 29.7 cm

ISBN 978-92-9237-510-2

doi:10.2865/6592


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Free publications:

via EU Bookshop (http://bookshop.europa.eu); at the European Unions representations or delegations. You can obtain

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Priced publications:

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European Court of Auditors

12, rue Alcide De Gasperi

1615 Luxembourg

LUXEMBOURG

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www.eca.europa.eu

@EUAuditorsECA

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mailto:[email protected]://www.eca.europa.eu/http://www.eca.europa.eu/mailto:[email protected]

raport activ ue eng 2011

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