European Court of Auditors annual activity report 2009

2009

ISSN 1684-0739

EUROPEAN

C

OUR

T OF

A

UDIT

ORS

ANNUAL AC TIVITY

REPORT

EN

Eu ro p e a n Co u r t

o f Au d i to r s

ANNUAL AC TIVITY REPORT

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Luxembourg: Publications Offi ce of the European Union, 2010 ISBN 978-92-9207-638-2

doi:10.2865/27832 © European Union, 2010

Reproduction is authorised provided the source is acknowledged.

Printed in Belgium

CONTENTS

4–5

6–7

8–13

14–17

18–28

29–30

31–32

33–35

36–38

39

40–47

48–51

52

PRESIDENT’S FOREWORD

MISSION, VISION, VALUES AND STRATEGIC OBJECTIVES

THE COURT’S ROLE AND WORK

ROLES AND RESPONSIBILITIES

OVERVIEW OF AUDIT REPORTS AND OPINIONS

FOLLOW-UP AND IMPACT

THE COURT’S VIEW

THE COURT’S PLANNED WORK IN 2010

PERFORMANCE — MEASURING AND IMPROVING

INTERNATIONAL COOPERATION

HUMAN RESOURCES AND SUPPORT SERVICES

FINANCIAL INFORMATION

DECLARATION BY THE AUTHORISING OFFICER BY DELEGATION

I w o u l d l i k e t o w e l c o m e y o u t o t h e A n n u a l A c t i v i t y R e p o r t 2 0 0 9 o f t h e E u r o p e a n C o u r t o f A u d i t o r s . I t a i m s t o p r o v i d e a n o v e r v i e w o f t h e k e y re su l t s a n d a chi eve m e nt s o f th e Co u r t du r i n g th e ye a r as we ll as th e m ai n d eve l o p m e nt s i n i t s au d i t e nv i ro nm e nt a n d i nte r n a l o r g a nis ati o n .

20 0 9 w a s a n i m p o r t a nt ye a r o f r e n e w a l f o r t h e EU m a r ke d by t h e e l e c t i o n o f a n ew Eu ro p e a n Par liam e nt , th e e nt r y i nto f o rce o f th e Tre at y o f L isb o n a n d th e s t a r t o f th e p ro ce ss f o r s e l e c ti n g a n ew Euro p ea n Co m m issi o n . T h e n e w Tr e a t y r e a f f i r m s t h e Co u r t ’s r o l e a n d m a n d a te a s w e l l a s i t s s t a t u s a s a n EU i ns ti t u ti o n a n d i nt ro du ce s cha n g e s to th e w ay i n w hi ch EU f u n ds a re t o b e m a n a g e d a n d s c r u t i n i s e d , s t r e n g t h e n i n g t h e r o l e o f t h e E u r o p e a n Parliament and emphasising Member States’ responsibilit y for implementing th e b u d g e t .

T h e C o u r t a n t i c i p a t e s t h a t t h e s e d e v e l o p m e n t s w i l l b r i n g i m p o r t a n t o p p o r t u n i t i e s f o r i m p r o v i n g EU f i n a n c i a l m a n a g e m e n t . T h e s e c t i o n ‘T h e Co u r t ’s v i ew’ su m m a r is e s o u r o p i ni o n o n th e r isk s a n d cha ll e n g e s that th e new Commission will face. It identif ies improving the qualit y of EU sp ending as a hi g h p r i o r i t y.

PRESIDENT’S FOREWORD

T h e Co u r t m a d e s i g n i f i c a n t p r o g r e s s d u r i n g t h e y e a r i n i m p l e m e n t i n g i t s Au d i t St r ate g y 20 0 9 –12 a n d tow a r ds t h e g o a ls o f i m p r ov i n g t h e i m p a c t o f o u r w o r k a n d m a k i n g b e t t e r u s e o f o u r r e s o u r c e s . A m a j o r s t e p w a s t h e Co u r t ’s d e cisi o n to ask th e Co u n cil o f th e Eu ro p e a n Uni o n to a p p rove n ew R u l e s o f Pro ce du re to h e lp s t re a m lin e o u r p ro ce du re s f o r a d o p tin g re p o r t s a n d o p i n i o ns .

I n a d d i t i o n , t h e n u m b e r o f r e p o r t s p r o d u ce d by t h e Co u r t r o s e f r o m 42 i n 2 0 0 8 t o 57 i n 2 0 0 9. I a m a l s o p l e a s e d t o b e a b l e t o r e p o r t t h a t o u r m a i n p r o d u c t , t h e a n n u a l r e p o r t o n t h e i m p l e m e n t a t i o n o f t h e EU b u d g e t , w a s o n c e a g a i n w e l l r e c e i v e d b y o u r p r i n c i p a l i n s t i t u t i o n a l s t a k e h o l d e r s w h o e n d o r s e d m a ny o f i t s re co m m e n d ati o ns .

D u r i n g 20 0 9 t h e Co u r t co nt i n u e d to co o p e r a te a c t i ve l y w i t h t h e S u p r e m e Audit Institutions (SAIs) of the Member States to develop common approaches for the audit of EU funds and in considering how SAIs can assist governments i n re sp o n di n g to th e f in an cial - e co n o m i c cr isis .

T h e C o u r t ’s a c h i e v e m e n t s d e p e n d o n t h e q u a l i t y a n d m o t i v a t i o n o f i t s 8 8 0 s t a f f. T h e i r s atis f a c ti o n is a key i n d i c ato r o f th e i ns ti t u ti o n’s a b ili t y to su cce e d , a n d o n e w hi ch is i n clu d e d i n this re p o r t f o r th e f ir s t tim e. I wo u l d l i k e t o t h a n k t h e m f o r t h e i r e n t h u s i a s m a n d c o m m i t m e n t i n h e l p i n g t h e Co u r t f u l f il i t s m issi o n .

Ví to r M a nu e l d a Sil v a C a l d e i r a

Pre si d e nt

MISSION, VISION, VALUES AND

STRATEGIC OBJECTIVES

MISSION

VISION

VALUES

VALUES Independence, integrity and impartiality for the institution, its Members and staff

Providing adequate output to stakeholders without seeking instructions or succumb-ing to pressure from any outside source

INDEPENDENCE, INTEGRITY & IMPARTIALITY

PROFESSIONALISM ADDING VALUE EXCELLENCE

& EFFICIENCY

Producing relevant, timely, high-quality reports, based on sound findings and evidence, which address the concerns of stakehold-ers and give a strong and authoritative message

Contributing to effective improvement of EU management and to enhanced accountabil-ity in the management of EU funds

Keeping high and exemplary standards in all professional aspects

Being involved in EU and worldwide public audit development

Valuing individuals, developing talents and rewarding performance

Ensuring effective communication to promote a team spirit

Maximising efficiency in all aspects of work The European Court of Auditors is the EU institution established by Treaty to carry out the audit of EU finances. As the EU's external auditor, it contributes to improving EU financial management and acts as the independent guardian of the financial interests of the citizens of the Union.

An independent and dynamic Court of Auditors, recognised for its integrity and impar-tiality, respected for its professionalism and for the quality and impact of its work, and

providing crucial support to its stakeholders to improve the management of EU finances.

PROFESSIONALISM

Robust methodology, appropriate audit strategy, development of public audit practice, common auditing standards and audit criteria on EU funds, collaboration with EU SAIs, effective ‘Community control framework’

AUDIT STRATEGY 2009–12 GOALS

Maximising the overallimpact of our audits Increasing efficiencyby making best use of resources

OUTPUT

Selection of appropriate audit topics, timeliness, clarity and readability of reports, quality of performance audits, increasing impact of reports

STAKEHOLDERS LEARNING

& GROWTH

Learning from the peer-review exercise in order to strengthen and develop the organisation, the methods, the processes and the output and to maximise efficiency

Implementation of an effective and dynamic human resources policy High-quality professional training, upgrading infrastructure

Implementation of IT policies

Increasing relations with auditees to foster the understanding of the audit process and to achieve a wider acceptance of the audit results

Development of contacts with the European Parliament and the Council as budget and discharge authorities

Effective

communication with EU citizens

THE COURT’S ROLE AND WORK

T h e E u r o p e a n U n i o n h a s a b u d g e t (2 010 ) o f a p p r o x i m a t e l y 12 3 b i l l i o n e u r o , a r o u n d 1 % o f t h e g r o s s n a t i o n a l i n co m e (G N I) o f i t s 27 M e m b e r St a te s . Co m p a r e d to n a t i o n a l budget s this is a small share. H owever, for som e M emb er St ates f unds f rom the EU p lay a n i m p o r t a n t r o l e i n f i n a n c i n g p u b l i c a c t i v i t i e s a n d t h e t o t a l a m o u n t i s s u b s t a n t i a l co m p a r e d t o t h e G N I o f s e v e r a l M e m b e r St a t e s . T h e r e v e n u e o f t h e Eu r o p e a n U n i o n m a i n l y co n s i s t s o f co n t r i b u t i o n s f r o m M e m b e r St a t e s b a s e d o n t h e i r G N I ( 76 %) a n d c u s to m s a n d a g r i c u l t u r a l d u t i e s (s o - c a l l e d t r a d i t i o n a l ow n r e s o u r ce s — 12 %) a n d o f a co nt r i b u t i o n b a s e d o n v a l u e a d d e d t a x co l l e c te d b y t h e M e m b e r St a te s ( VAT — 11 %). The composition of the budget has evolved over time, agriculture and cohesion policies b e i n g i t s m a j o r co m p o n e nt s (s e e B ox 1).

T H E E U B U D G E T I S T H E

S TA R T I N G P O I N T F O R

T H E C O U R T ’ S AU D I T W O R K

BOX 1 — WHAT DOES THE EU SPEND ITS MONEY ON?

The EU budget is financed through financial contributions from Member States (based mostly on national GNI), customs and agricultural duties as well as VAT. The EU budget is to a large extent directed to other objectives than national budgets, partly due to differences in responsibilities. The Union is for example not responsible for social security systems, usually a large part of national spending.

The largest single element of European Union spending is agriculture and rural development — principally in the form of payments to farmers — accounting for almost half of the budget. Another significant proportion is spending on cohesion — regional and social development — co-financing a wide range of projects, from road construction in Latvia to courses for the unemployed in the Netherlands. This constitutes about a third of the budget.

Source: General Budget of the European Union for the financial year 2010.

EU

spending

Sustainable growth (mainly cohesion)

38,8

%

Preservation and management of natural resources

(mainly agriculture)

47,3 %

Citizenship, freedom, security and justice

1,1

%

Administration

6,4

%

The European Union as a global partner

6,3

%

T h e b u d g e t i s d e c i d e d a n n u a l l y — w i t h i n t h e c o n t e x t o f s e v e n - y e a r f i n a n c i a l framework s — by the Council, i.e. representatives of the Member States, and the direc tly elec ted European Parliament. The European Commission proposes the budget and is also r e s p o ns i b l e f o r i m p l e m e nt i n g i t . A ve r y s i g n i f i c a nt p r o p o r t i o n — n o t a b l y a g r i c u l t u r a l a n d c o h e s i o n s p e n d i n g — i s i m p l e m e n t e d i n c o o p e r a t i o n w i t h t h e M e m b e r S t a t e s . D e p e nding on th e sp ending sch e m es , national adminis tr ations may b e resp onsib l e for set ting spending strategies, selec ting benef iciaries and projec ts and mak ing payments. A s p e c i f i c f e a t u r e o f C o m m u n i t y e x p e n d i t u r e i s t h e h i g h p e r c e n t a g e o f p a y m e n t s b as e d on claims submit te d by th e b en e f iciaries th ems e lves , b e th ey f ar m er s or proje c t m a n a g e r s t h r o u g h o u t t h e U n i o n .

OVERVIEW OF INTERNAL CONTROL AND EXTERNAL AUDIT OF THE EU BUDGET

W H AT I S T H E R O L E

O F T H E C O U R T ?

I n d e m o c r a t i c s o c i e t i e s t h e r e is a n e e d f o r a cc u r a te p u b l i c l y av a i l a b l e i n f o r m a t i o n a s a b a s is f o r d e b a te a n d d e c is i o n - m a k i n g , b o t h to i m p r ove f i n a n c i a l m a n a g e m e n t a n d to e ns u r e a cco u nt a b i l i t y. T h e EU, l i ke i t s M e m b e r St a te s , h a s a n e x te r n a l a u d i to r a s a n indep endent guardian of th e f inancial interes t s of th e citizens . A s th e e x ter nal auditor of the EU, the Europ ean Cour t of Auditor s che ck s that EU f unds are corre c tly accounte d f o r a n d s p e nt i n co m p l i a n ce w i t h t h e r e l e v a n t r e g u l a t i o ns , w i t h d u e co n s i d e r a t i o n f o r a c h i e v i n g b e s t v a l u e f o r m o n e y, i r r e s p e c t i ve o f w h e r e t h e f u n d s a r e s p e nt .

T h e r e s u l t s o f t h e Co u r t ’s w o r k a r e u s e d b y t h e Co m m i s s i o n , t h e P a r l i a m e n t a n d t h e C o u n c i l , a s w e l l a s b y M e m b e r S t a t e s , t o i m p r o v e t h e f i n a n c i a l m a n a g e m e n t o f t h e E U b u d g e t . T h e C o u r t ’s w o r k p r o v i d e s a n i m p o r t a n t b a s i s f o r t h e a n n u a l d i s c h a r g e p r o ce du r e w h e r e b y t h e Pa r l i a m e nt , b as i n g i t s d e cisi o n o n r e co m m e n d ati o ns f ro m th e Co u n c i l , d e c i d e s w h e th e r t h e Co m m is s i o n h a s m e t i t s r e s p o ns i b i l i t y f o r t h e e xe c u t i o n o f t h e p r e v i o u s ye a r ’s b u d g e t . D e s p i te i t s n a m e, t h e Co u r t h a s n o j u d i c i a l p ow e r s . In the areas of the budget where management is shared, Memb er States coop erate with the Commission in set ting up sup er v isor y and contro l s ys tems — internal contro l — to ensure that f unds are sp ent prop erly and in accordance with the rules . Inter nal contro l t h u s h a s a n EU a s w e l l a s a n a t i o n a l d i m e n s i o n . I n a d d i t i o n t o t h e w o r k d o n e b y t h e Co u r t , m a ny n a t i o n a l a u d i t i n s t i t u t i o n s a u d i t Eu r o p e a n f u n d s t h a t a r e m a n a g e d a n d s p e nt b y n a t i o n a l a d m i n is t r a t i o ns .

Commission (DGs, internal audit service)

National audit institutions Member States’

Implementing authorities

European Court of Auditors

EU level

Ex

te

rnal audit

In

te

rnal c

o

ntr

o

l

W HAT D O E S T H E

COUR T AUD I T ?

T h e C o u r t c a r r i e s o u t t h r e e d i f f e r e n t t y p e s o f a u d i t s1_{: f i n a n c i a l , c o m p l i a n c e a n d} p e r f o r m a n ce a u d i t s . T h e s e a d d r e ss t h e t h r e e f o l l ow i n g q u e s t i o ns :

1. Do the accounts present fairly, in all material respec ts, the f inancial position, results a n d c a s h f l o w f o r t h e ye a r, i n a cco r d a n ce w i t h t h e a p p l i c a b l e f i n a n c i a l r e p o r t i n g f r a m e wo r k? (FI N A N CIA L AU D I T )

2 . Are transac tions in all material resp ec ts in compliance with the legal and regulator y f r a m e wo r k s w h i c h g ove r n t h e m? (CO M PL IA N CE AU D I T )

3 . I s t h e f i n a n c i a l m a n a g e m e n t s o u n d , i . e . a r e t h e f u n d s u s e d k e p t t o a m i n i m u m (e co n o my), a r e t h e r e s u l t s a c h i e ve d w i t h t h e l e a s t p o s s i b l e r e s o u r ce s (e f f i c i e n c y) a n d h ave o b j e c t i ve s b e e n m e t (e f f e c t i ve n e s s)? (PER FO R M AN CE AU D I T )

1 _{For more information about the Court’s methodology please consult the manuals on the Court’s website}

(www.eca.europa.eu).

2 _{The TFEU Treaty requires the Court to give a statement — or opinion — on the reliability of the accounts and the legality and}

regularity of underlying transactions. In this context, underlying transactions are typically payments from the EU budget to fi nal benefi ciaries. The annual Statement of Assurance is generally known by its French acronym DAS (‘ Déclaration d’Assurance’ ). Contrary to practice in Member States, the Court gives such a statement on the entirety of the EU budget.

H O W D O E S T H E C O U R T

R E P O R T I T S R E S U LT S ?

T h e Co u r t p u b l is h e s t h e r e s u l t s o f i t s a u d i t wo r k i n t h e f o l l ow i n g t y p e s o f r e p o r t :

A n n u a l r e p o r t s — p r e s e nt i n g t h e r e s u l t s o f f i n a n c i a l a u d i t s i n t h e f o r m o f s t a te m e nt s o f a s s u r a n c e o n t h e g e n e r a l b u d g e t2 _{a n d t h e E u r o p e a n D e v e l o p m e n t Fu n d s}3_{. T h e s e} t wo r e p o r t s a r e p u b l is h e d to g e t h e r i n N ove m b e r.

S p e c i f i c a n n u a l r e p o r t s — p r e s e n t i n g t h e r e s u l t s o f f i n a n c i a l a u d i t s o n t h e a g e n c i e s o f t h e Eu r o p e a n U n i o n a n d d e ce nt r a l is e d b o d i e s .

S p e c i a l r e p o r t s — p r e s e n t i n g t h e r e s u l t s o f s e l e c t e d p e r f o r m a n c e a n d c o m p l i a n c e a u d i t s . S p e c i a l r e p o r t s c a n b e p u b l is h e d a t a ny t i m e d u r i n g t h e ye a r.

In addition, the Cour t is called upon to provide its opinion on new or updated legislation w i t h a f i n a n c i a l i m p a c t .

H O W D O E S T H E

C O U R T AU D I T ?

T h e C o u r t ’s a u d i t o f t h e E U a c c o u n t s i s c a r r i e d o u t i n l i n e w i t h i n t e r n a t i o n a l a u d i t standards, which are applied by the public and the private sec tor. E xisting international s t a n d a r d s o n a u d i t d o n o t h ow e ve r cove r t h e k i n d o f co m p l i a n ce a u d i t u n d e r t a ke n b y the Cour t. The Cour t takes an ac tive par t in the development of international standards, b y s t a n d a r d - s e t t i n g b o d i e s (I nto s a i , I FAC )4 _{a l o n gs i d e n a t i o n a l a u d i t i n s t i t u t i o n s .} I n o r d e r t o p r o v i d e a s s u r a n c e a s t o w h e t h e r t h e p a y m e n t s c o m p l y w i t h l e g a l a n d r e g u l a t o r y f r a m e w o r k s , t h e C o u r t d r a w s o n t h e r e s u l t s b o t h o f i t s e x a m i n a t i o n o f s u p e r v is o r y a n d co nt r o l s y s te m s , i nte n d e d to p r e ve nt o r d e te c t a n d co r r e c t e r r o r s o f le galit y and re gularit y, and of a s ample of the trans ac tions (p ay ment s) themselves (se e

Box 2). When s ys tems are tes te d and found to b e reliable, then fewer trans ac tions ne e d to b e audite d by th e Co ur t in order to co m e to a v alid co nclusion on th eir le galit y and r e g u l a r i t y. O t h e r s o u r ce s , s u c h a s m a n a g e m e n t r e p r e s e nt at i o ns i n t h e f o r m o f a n n u a l a c t i v i t y r e p o r t s o f t h e D i r e c t o r s G e n e r a l o f t h e C o m m i s s i o n a n d t h e w o r k o f o t h e r a u d i to r s , a r e a ls o u s e d to s u p p o r t t h e Co u r t ’s co n c l u s i o ns .

I n p e r f o r m a n c e a u d i t , t h e C o u r t u s e s a v a r i e t y o f a u d i t m e t h o d o l o g i e s t o a s s e s s managem ent and monitoring s ys tems and information on p er formance agains t criteria d e r i ve d f r o m l e g is l a t i o n a n d t h e p r i n c i p l e s o f s o u n d f i n a n c i a l m a n a g e m e nt .

W h e n s e l e c t i n g w h i c h p e r f o r m a n c e a u d i t s t o c a r r y o u t , t h e C o u r t a i m s t o i d e n t i f y a u d i t s u b j e c t s w h i c h a r e l i ke l y to y i e l d h i g h i m p a c t i n te r ms o f i d e n t i f y i n g p o te n t i a l i m p r ove m e nt s i n t h e e co n o my, e f f i c i e n c y a n d e f f e c t i ve n e s s o f EU s p e n d i n g .

3 _{The European Development Funds (EDFs) are the result of both international conventions and agreements between the}

Community and its Member States, and certain African, Caribbean and Pacifi c (ACP) States, and Council decisions on association of overseas countries and territories (OCT). The Commission manages most of the expenditure in association with ACP countries, partly through EuropeAid (see the policy area group ‘External relations, development and enlargement’) and partly through delegations in the recipient countries. The investment facility part of the EDFs is managed by the European Investment Bank (EIB) and is not included in the Court’s audit mandate.

The Court does not have the resources to audit all the transactions of the EU budget in detail. It therefore uses statistical sampling techniques to provide a result which is representative of the population as a whole. This involves randomly selecting a representative sample of underlying t r a n s a c t i o n s f r o m , f o r e x a m p l e , c o h e s i o n for de t aile d tes ting. T he Cour t tr aces th es e transactions down to the final beneficiaries of the aid, for example a project promoter in Italy. The Cour t then per forms check s to verif y the compliance of the claim with realit y, in many cases on the spot.

The representative nature of the Court’s sample means the result s can b e e x trap olate d over the total population, i.e. a specif ic revenue or expenditure area, and, together with information arising from the evaluation of management and control systems and other sources, be used as a basis for an overall audit opinion.

BOX 2 — THE COURT’S TESTING OF A SAMPLE OF PAYMENTS FROM THE EU BUDGET

Random selection of a representative sample

Population of all cohesion payments

Payment to a project promoter in Italy

SAMPLING OF TRANSACTIONS

ROLES AND RESPONSIBILITIES

5

G O V E R N A N C E A N D

O R G A N I S AT I O N

T h e C o u r t o f A u d i t o r s o p e r a t e s a s a c o l l e g i a t e b o d y o f 27 M e m b e r s , o n e f r o m e a c h M e m b e r S t a t e a n d a p p o i n t e d b y t h e C o u n c i l , a f t e r c o n s u l t a t i o n w i t h t h e E u r o p e a n Pa r l i a m e nt , f o r a r e n e w a b l e te r m o f s i x ye a r s . T h e M e m b e r s e l e c t o n e o f t h e i r n u m b e r a s p r e s i d e nt f o r a r e n e w a b l e te r m o f t h r e e ye a r s .

Fi ve a u d i t g r o u p s , to w h i c h M e m b e r s o f t h e Co u r t a r e a s s i g n e d , p r e p a r e r e p o r t s a n d o p i n i o n s f o r a d o p t i o n b y t h e Co u r t . A s t h e o r g a n i s a t i o n c h a r t s h o w s , t h e r e a r e f o u r s e c to r a l g r o u p s cove r i n g d i f f e r e nt p a r t s o f t h e b u d g e t a n d o n e g r o u p r e s p o ns i b l e f o r ‘ h o r i z o n t a l ’ m a t t e r s . I n a d d i t i o n a n A d m i n i s t r a t i v e Co m m i t t e e o f M e m b e r s p r e p a r e s t h e Co u r t ’s a d m i n is t r a t i ve d e c is i o ns .

At the end of 2009, the Court sent to the Council a proposal for a revision of its Rules of Procedure to allow certain categories of the Court’s opinions and reports to be adopted by Chambers, rather than the entire Court. These changes will streamline the Court’s decision-making, making it more efficient partly by decreasing the amount of time needed to adopt decisions.

Each Chamber has two areas of responsibility — firstly, to adopt special reports, specific annual reports and opinions; secondly, to prepare draft observations for the annual reports on the general budget of the EU and the European Development Funds, and draft opinions for adoption by the Court as a whole. As for the Court, decisions are taken by a majority of the Members of the Chamber. Members may

participate in the meetings of any Chamber, but may vote only in the one to which they have been assigned by the Court.

Naturally, the full Court will continue to convene to discuss and adopt the documents for which it is solely responsible, such as the annual reports on the general budget of the EU and the European Development Funds.

The role of the Administrative Committee will be enhanced. It is chaired by the President of the Court and the Deans of the Chambers are its Members. Administrative matters requiring a Court decision and decisions on matters of policy, principle or strategic importance will be prepared by the Committee for approval by the Court.

Ap ar t f rom b eing p ar t of th e co lle g e, t ak ing th e f inal de cisions on audit s and opinions a s w e l l a s o n b r o a d e r s t r ate g i c a n d a d m i n is t r at i ve iss u e s , e a c h M e m b e r is r e s p o ns i b l e f o r h is o r h e r ow n t a s k s , p r i m a r i l y w i t h i n a u d i t i n g . T h e a u d i t wo r k i t s e l f is i n g e n e r a l c ar r ie d out by th e audito r s in th e audit unit s co ordinate d by th e M e mb er resp onsib l e, w i t h t h e a s s i s t a n c e o f a p r i v a t e o f f i c e . H e o r s h e t h e n p r e s e n t s t h e r e p o r t a t g r o u p a n d C o u r t l e v e l a n d , o n c e a d o p t e d , t o t h e E u r o p e a n P a r l i a m e n t , C o u n c i l a n d o t h e r r e l e v a n t s t a ke h o l d e r s .

T H E C O U R T ’ S S TA F F

T h e Eu r o p e a n Co u r t o f Au d i to r s h a d i n t h e 20 0 9 b u d g e t a to t a l o f 8 8 0 a l l o c ate d p o s t s (o n 31 D e c e m b e r 2 0 0 9 ). T h e C o u r t ’s a u d i t s t a f f h a v e a b r o a d r a n g e o f p r o f e s s i o n a l b a c k g r o u n d s a n d e x p e r i e n c e f r o m b o t h t h e p u b l i c a n d p r i v a t e s e c t o r s , i n c l u d i n g a cco u nt a n c y, f i n a n c i a l m a n a g e m e nt , i nte r n a l a n d e x te r n a l a u d i t , l aw a n d e co n o m i c s . L i ke a l l o t h e r EU i ns t i t u t i o ns t h e Co u r t e m p l oy s n a t i o n a ls f r o m a l l M e m b e r St a te s a n d t h e y a r e s u b j e c t to t h e EU ’s St a f f R e g u l a t i o ns .

T h e Cour t ’s audit s t af f p lan and p er for m audit s and prep are th e dr af t rep or t s to which t h i s w o r k l e a d s . T h e y w o r k i n t e a m s , v a r y i n g f r o m f o u r o r f i v e f o r s o m e s p e c i a l i s e d audit s to 20 or m ore for s om e of th e larger audit s which th e Cour t under t akes (e.g. th e f i n a n c i a l /co m p l i a n ce a u d i t s o f a g r i c u l t u r a l a n d co h e s i o n e x p e n d i t u r e f o r t h e a n n u a l St atem ent of A ssur ance). Ty pic all y an audit will re quire th em to s e ek audit ev idence in a v a r i e t y o f w ay s : b y d e s k wo r k i n Lu xe m b o u r g , b y v is i t s to t h e Eu r o p e a n Co m m is s i o n a n d b y e x a m i n i n g w h a t h a p p e n s ‘o n t h e g r o u n d ’ i n M e m b e r St a t e s , w h e r e r e v e n u e f o r t h e EU b u d g e t is g e n e r a te d a n d w h e r e t h e a c t i v i t i e s w h i c h a r e f i n a n ce d f r o m t h e EU b u d g e t t a ke p l a ce .

T h e Co u r t ’s r e p o r t s a n d o p i n i o ns m u s t b e a cce s s i b l e to r e a d e r s t h r o u g h o u t t h e U n i o n and, in its audit work , the Cour t must maintain contac t with public authorities and others throughout th e Union . N on e of this could happ en without th e Cour t ’s tr anslator s , who translate the Cour t ’s repor ts and opinions (almost always prepared in English or French) i n t o 2 2 o f t h e U n i o n ’s o f f i c i a l l a n g u a g e s a n d a s n e ce s s a r y t r a n s l a t e co r r e s p o n d e n ce p a s s i n g t o a n d f r o m t h e C o u r t . C o u r t t r a n s l a t o r s a l s o s o m e t i m e s a s s i s t a u d i t o r s i n c a r r y i n g o u t a u d i t v is i t s to M e m b e r St a te s .

The Cour t ’s administrative staf f are responsible for the wide variet y of suppor t func tions w h i c h a r e n e ce s s a r y i n a m u l t i n a t i o n a l o r g a n is a t i o n o p e r a t i n g w i t h i n t h e f r a m e wo r k o f t h e EU : f i n a n c e , a c c o u n t i n g , t h e b u d g e t , b u i l d i n g s , I T, t r a n s p o r t , s e c u r i t y a n d s o o n . T h e S e c r e t a r y - G e n e r a l is t h e m o s t s e n i o r m e m b e r o f s t a f f i n t h e i ns t i t u t i o n a n d is r e s p o ns i b l e f o r t h e m a n a g e m e nt o f t h e Co u r t ’s s t a f f a n d a d m i n is t r at i o n .

EUROPEAN COURT

OF AUDITORS

2009

Michel CRETIN (FR) Irena PETRUŠKEVIČIENĖ (LT) Igors LUDBORŽS (LV) Jan KINŠT (CZ) Massimo VARI (IT) Olavi ALA-NISSILÄ (FI) Harald NOACK (DE) Henri GRETHEN (LU) Ovidiu ISPIR (RO) Nadejda SANDOLOVA (BG)

Morten Louis LEVYSOHN (DK) Ioannis SARMAS (EL) Gejza HALÁSZ (HU) Július MOLNÁR (SK) Vojko Anton ANTONČIČ (SI) Jacek UCZKIEWICZ (PL) Josef BONNICI (MT) Kersti KALJULAID (ET) Kikis KAZAMIAS (CY) Karel PINXTEN (BE) Lars HEIKENSTEN (SE) Maarten B. ENGWIRDA (NL) Máire GEOGHEGAN-QUINN (IE) Hubert WEBER (AT) David BOSTOCK (UK) Juan

RAMALLO MASSANET (ES) Vítor Manuel

da SILVA CALDEIRA (PT)

President

This organisation chart refl ects the situation on 1 February 2010. For an updated organisation chart, please visit the Court’s website (www.eca.europa.eu).

Vítor Manuel da SILVA CALDEIRA President

ORGANISA

TION

CHAR

T

David BOSTOCK, Dean Kersti KALJULAID Massimo VARI Ovidiu ISPIR Harald NOACK Henri GRETHEN

Structural policies — Financial audit

Transport, research and energy — Financial audit

Transport and energy — Performance audit

Environment, society and welfare, tourism and culture — Performance audit

Human capital, technology and innovation, enterprises, ICT and information society, technical assistance — Performance audit

AUDIT GROUP II

STRUCTURAL POLICIES, TRANSPORT, RESEARCH AND ENERGY

Gejza HALÁSZ, Dean Hubert WEBER Július MOLNÁR Kikis KAZAMIAS Olavi ALA-NISSILÄ Michel CRETIN

EAGF — Financial audit

EAFRD — Financial audit

Performance unit A

Performance unit B

Performance unit C

Fisheries, Environment, Health

AUDIT GROUP I

PRESERVATION AND MANAGEMENT OF NATURAL RESOURCES

PRESIDENCY

For fur

ther details and an updat

ed or

ganisation char

t, please visit the C

our t’s w ebsit e (w w w .eca.eur opa.eu). Š

Irena PETRUŠKEVIČČIENĖĖ, Dean Morten Louis LEVYSOHN Ioannis SARMAS Igors LUDBORŽS Juan RAMALLO MASSANET Nadejda SANDOLOVA

Revenue of the European Union

Administrative expenditure of the institutions of the European Union

Internal policies of the European Union

Borrowing, lending and banking activities

Agencies of the European Union

AUDIT GROUP IV

REVENUE, BANKING ACTIVITIES, ADMINISTRATIVE EXPENDITURE, INSTITUTIONS AND BODIES OF THE EU AND INTERNAL POLICIES

Jan KINŠT, Dean Maarten B. ENGWIRDA Máire GEOGHEGAN-QUINN Jacek UCZKIEWICZ Karel PINXTEN

Cooperation with developing countries (general budget of the EU)

Pre-accession and neighbourhood policies

European Development Funds (African, Caribbean and Pacifi c States)

AUDIT GROUP III

EXTERNAL ACTIONS

Í Eduardo RUIZ GARCÍA Secretary-General

Human resources

Finance and Support

Information Technology

Translation

SECRETARIAT-GENERAL

Josef BONNICI

Member responsible for the DAS, Dean

Vojko Anton ANTONČIČ

Member responsible for ADAR

Lars HEIKENSTEN

Member responsible for Communication

Olavi ALA-NISSILÄ (AG I) Kersti KALJULAID (AG II) Jacek UCZKIEWICZ (AG III) Morten Louis LEVYSOHN (AG IV)

Audit methodology and support

Quality control

Communication and reports

Audit supervision and support for fi nancial and compliance audit

Reliability of the accounts and of management representations

CEAD GROUP

COORDINATION, COMMUNICATION, EVALUATION, ASSURANCE AND DEVELOPMENT Supervision of the performance

of the Court’s work pp p

Relations with the institutions of the European Union

Relations with SAIs and international audit organisations

Legal matters

Internal audit

OVERVIEW OF AUDIT REPORTS

AND OPINIONS

6

A N N UA L R E P O R T S O N T H E

2 0 0 8 F I N A N C I A L Y E A R

Eve r y ye a r t h e Co u r t a u d i t s t h e EU ’s a cco u nt s a n d EU i n co m e a n d e x p e n d i t u r e . T h e r e s u l t s o f t h is a u d i t a r e p r e s e nte d to t h e p o l i t i c a l a u t h o r i t i e s o f t h e EU, t h e Pa r l i a m e nt a n d t h e Co u n c i l , i n t h e Co u r t ’s a n n u a l r e p o r t s .

6 _{The intention of this section is to introduce, rather than to provide a summary of, the Court’s reports and opinions.}

Readers are requested to refer to the full tex ts as adopted by the Cour t — available on the Cour t ’s website (www.eca.europa.eu) — for further details.

In 20 0 9 th e numb er of sp e cial rep o r t s has increas e d co mp are d to prev ious year s while t h e n u m b e r o f o p i n i o ns h a s d e c r e a s e d . T h e a n n u a l r e p o r t s o n t h e g e n e r al b u d g e t a n d t h e Eu r o p e a n D e ve l o p m e nt Fu n d w e r e a d o p te d a s p l a n n e d .

2005

2006

2007

Number of special reports

6

11

9

Annual reports (EDF included)

1

1

1

Specific annual reports

20

23

29

Opinions

11

8

9

2009

18

1

1

37

5

29

1

12

2008

AN N UAL R EP O R T O N T H E I M PLEM EN TAT I O N O F T H E EU B U D G E T: SIX K E Y M E SSAG E S

•

T h e a cco u nt s f o r t h e Eu r o p e a n U n i o n g ave a t r u e a n d f a i r v i e w o f t h e f i n a n c i a l p o s i t i o n a n d r e s u l t s .

•

T h e ove r a l l r e s u l t s o n l e g a l i t y a n d r e g u l a r i t y o f t r a ns a c t i o ns f o r 20 0 8 r e f l e c te d t h e i m p r ove m e nt s i n t h e m a n a g e m e nt o f t h e b u d g e t i n r e ce nt ye a r s .

•

T h e ove r a l l i m p r ove m e nt i n 20 0 8 is a co ns e q u e n ce p r i m a r i l y o f t h e b e t te r r e s u l t s i n t h e l a r g e s t p o l i c y g r o u p ‘Ag r i c u l t u r e a n d n a t u r a l r e s o u r ce s ’. W i t h i n ‘ R u r a l d e ve l o p m e nt ’, t h e e s t i m a te d l e ve l o f e r r o r, t h o u g h s t i l l m a te r i a l , is l ow e r t h a n i n p r e v i o u s ye a r s . Fo r ‘Ag r i c u l t u r e a n d n a t u r a l r e s o u r ce s ’ a s a w h o l e t h e Co u r t f o r t h e f i r s t t i m e d o e s n o t g i ve a n a d ve r s e o p i n i o n .

•

‘ Co h e s i o n’, w h i c h is t h e s e co n d - l a r g e s t p o l i c y g r o u p, r e p r e s e nt i n g a l m o s t a t h i r d o f t h e b u d g e t , r e m a i n e d p r o b l e m a t i c a s t h e a r e a m o s t a f f e c te d b y e r r o r s . T h e Co u r t e s t i m a te d t h a t a t l e a s t 11 % o f t h e to t a l a m o u nt r e i m b u r s e d s h o u l d n o t h ave b e e n p a i d o u t .

•

Pa s t r e co m m e n d a t i o ns m a d e b y t h e Co u r t to i m p r ove s u p e r v is o r y a n d co nt r o l s y s te ms s t i l l r e m a i n v a l i d . T h e y m u s t b e s e e n a s p a r t s o f a n o n g o i n g p r o ce s s w h e r e t h e r e l e v a nt m e a su r e s w i l l t a ke t i m e b e f o r e t h e y c a n b e d e e m e d to b e e f f e c t i ve .

•

Pa r t i c u l a r a n d a d d i t i o n a l a t te n t i o n n e e d s to b e d i r e c te d at t h o s e e x p e n d i t u r e a r e a s w h e r e t h e Co u r t co nt i n u e s to r e p o r t a h i g h l e ve l o f e r r o r. I n m a ny s i t u a t i o ns t h e e r r o r s a r e a co ns e q u e n ce o f to o co m p l e x r u l e s a n d r e g u l a t i o ns . Si m p l i f i c at i o n , t h e r e f o r e, r e m a i ns a p r i o r i t y.

Unqualified opinion on the reliability of the accounts

The Court concluded that the 2008 annual accounts of the European Communities present fairly, in all material respects, the financial position of the European Communities and the results of their operations and cash flows.

Unqualified opinions

For 2008 the Court gave unqualified opinions for ‘Revenue’, commitments for all policy groups and payments in the policy groups ‘Education and citizenship’ and ‘Administrative and other expenditure’.

Qualified opinions

Payments for the policy group ‘Agriculture and natural resources’, except for ‘Rural development’ were in all material respects legal and regular. Payments for the policy group ‘Economic and financial affairs’, except for expenditure in this policy group concerning the Sixth Framework Programme for research and technological development (FP6), were in all material respects legal and regular.

Adverse opinions

The Court gave adverse opinions for the policy groups ‘Cohesion’, ‘Research, energy and transport’, as well as ‘External aid, development and enlargement’. Payments in these policy groups were materially affected by errors, although at different levels.

Improvements needed in supervision and control systems

The supervisory and control systems for the policy groups ‘Research, energy and transport’, ‘External aid, development and enlargement’ and ‘Education and citizenship’ were partially effective in providing assurance as to the prevention or detection and correction of the reimbursement of overstated or ineligible costs.

For the policy group ‘Agriculture and natural resources’, the Court also concluded that the supervisory and control systems were partially effective. However, it noted that the Integrated Administrative and Control System (IACS) generally continued to be an effective control system. Issues need to be addressed in certain areas, in particular for ‘Rural development’, where there were weaknesses.

For the policy group ‘Economic and financial affairs’ the supervisory and control systems were found to be effective in two of the three areas assessed. In the third one, ‘Enterprise’, the systems were judged as only partially effective, mostly due to weaknesses concerning FP6.

For the policy group ‘Cohesion’, the Court found that the systems in Member States for correcting errors found by national controls were in most cases at least partially effective.

The Commission, the Member States and other beneficiary states need to make further efforts to implement the necessary improvements concerning these policy groups, so as to ensure an adequate management of the risk of irregular expenditure.

A u d i t o r s c a n g i v e t h e f o l l o w i n g k i n d s o f opinions:

•

an unqualified opinion (also called ‘clean’ ) when there is evidence that the accounts are reliable or the underlying transactions, i.e. payments, are legal and regular in all material aspects;

•

an adverse opinion when the level of error in the underlying transactions is material and pervasive, or the accounts are not reliable;

•

a disclaimer of opinion if auditors are unable t o o b t a i n s u f f i c i e n t a p p r o p r i a t e a u d i t evidence on which to base an opinion, and the possible ef fects are both material and pervasive;

•

a qualif ied opinion when an unqualif ied opinion cannot be expressed but the effect of any disagreement or limitation on scope is not so material or pervasive as to require an adverse opinion or a disclaimer of opinion.

Revenue

Agriculture

andnatural resources: 55billioneuro Cohesion: 36,6billioneuro

Research,

energyandtransport: 7,5billioneuro

External aid,development andenlargement: 6,2billioneuro

Educationand citizenship:

1,7billioneuro

Economic andfinancial affairs: 0,6billioneuro

Administrative andotherexpenditure: 8,5billioneuro

Assessmentofsupervisory

and control systems NotNoteffeeffecctivetive PartiaPartiallllyyeffeeffecctivetive

Rangeinwhichtheestimate

errorrate(ER)issituated ERER > > 55%% 22%% ≤ ≤ ERER ≤ ≤ 55%%

Effective Effective ER < 2%

(belowmateriality) ER < 2%

(belowmateriality)

ASSESSMENTS

OFSYSTEMS ERARRORTE RANGE

T h e t a b l e b e l o w s u m m a r i s e s t h e o v e r a l l assessment of supervisory and control systems, as outlined in the relevant chapters of the 2008 Annual Repor t, and gives the broad results of the Cour t ’s testing of representative samples of transac tions. The table highlights the key

elements but cannot present all of the relevant detail (in par ticular concerning weaknesses of super visor y and control systems and t ypes of error), for which it is necessar y to refer to the main report.

BOX 4 — SUMMARY OF THE LEGALIT Y AND REGULARIT Y OF UNDERLYING TRANSAC TIONS BY AREA OF EXPENDITURE

T H E 2 0 0 8 AU D I T O P I N I O N —

T H E E D F s

T h e Co u r t co n c l u d e d t h a t t h e 20 0 8 a cco u nt s o f t h e ED Fs p r e s e nt f a i r l y, i n a l l m a te r i a l respec ts, the f inancial position of the EDFs. A s regards the legalit y and regularit y of the t r a ns a c ti o ns t h e Co u r t g ave a n u n q u a l i f i e d o p i n i o n f o r t h e r e ve n u e a n d co m m i t m e nt s o f t h e E D F s . T h e C o u r t a l s o c o n c l u d e d t h a t p a y m e n t s o f t h e E D F s w e r e a f f e c t e d b y m a te r i a l e r r o r. T h e Co u r t ’s a s s e s s m e nt o f t h e s u p e r v is o r y a n d co nt r o l s y s te m s f o r t h e E D Fs w a s t h a t t h e y w e r e p a r t i a l l y e f f e c t i ve .

S P E C I F I C A N N UA L R E P O R T S

A f u r t h e r 37 s p e c i f i c a n n u a l r e p o r t s , p e r t a i n i n g to t h e Eu r o p e a n a g e n c i e s a n d o t h e r d e ce nt r a l is e d b o d i e s o n t h e 20 0 8 f i n a n c i a l ye a r, w e r e a d o p te d i n 20 0 9.

The Union’s agencies cover a wide variet y of task s in dif ferent locations throughout the Union . E ach agenc y has a sp e cif ic mandate and manages it s ow n b u dge t . Au dit s of th e Eu r o p e a n U n i o n’s a g e n c i e s a n d o t h e r d e ce n t r al is e d b o d i e s a r e t h e s u b j e c t o f s p e c i f i c annual rep o r t s which are p ub lish e d s e p ar ate l y. T h e Co ur t issue d un qualif ie d opinions o n t h e r e l i a b i l i t y o f t h e a c c o u n t s a n d t h e l e g a l i t y a n d r e g u l a r i t y o f t h e u n d e r l y i n g t r a ns a c t i o ns f o r a l l a g e n c i e s e xce p t f o r t h e Eu r o p e a n Po l i ce Co l l e g e .

S P E C I A L R E P O R T S

7

T h e Co u r t s e l e c t s a n d d e s i g ns i t s p e r f o r m a n ce a n d co m p l i a n ce a u d i t t a s k s b a s e d o n criteria including the risk s to per formance or compliance for a par ticular area of income o r e x p e n d i t u r e , t h e l e v e l o f s p e n d i n g i nv o l v e d , t h e t i m e e l a p s e d s i n ce a ny p r e v i o u s a u d i t , f o r th co m i n g d e ve l o p m e n t s i n t h e r e g u l ato r y o r o p e r ati o n a l f r a m ewo r k s as we ll a s p o l i t i c a l a n d p u b l i c i nte r e s t .

T h e co m p l e x a n d d e t a i l e d n a t u r e o f p e r f o r m a n ce a n d co m p l i a n ce a u d i t s m e a ns t h e y g e n e r a l l y r e q u i r e , f r o m t h e t i m e o f a p r e l i m i n a r y s t u d y t o t h e f i n a l r e p o r t i n g , m o r e t h a n o n e ye a r to co m p l e te .

T h e Co u r t a d o p t e d a t o t a l o f 18 s p e c i a l r e p o r t s i n 20 0 9. S p e c i a l r e p o r t s a r e d i r e c t l y available from the Cour t ’s website (w w w.eca.europa.eu) and their publication is notif ied in the O f f icial Journal of the Euro p ean Union. A s in previous year s the rep or t s e xamine d f i n a n c i a l m a n a g e m e n t i s s u e s i n a w i d e r a n g e o f a r e a s — f r o m , f o r e x a m p l e , t h e E U f o o d a i d f o r d e p r i ve d p e r s o ns (SR 6/ 20 0 9) to t h e Co m m is s i o n’s t r e a s u r y m a n a g e m e nt (SR 5/ 20 0 9).

The Court’s work identifies many different types of problems, with diverse consequences, and formulates recommendations aiming at improving financial management, efficiency a n d e f f e c t i v e n e s s .

B e s i d e s t h e 18 s p e c i a l r e p o r t s , t h e C o u r t a l s o i n 2 0 0 9 a n a l y s e d t h e u s e o f EU f u n d s i n m a k i n g t h e C h e r n o b y l s i t e e n v i r o n m e n t a l l y s a f e . R e c o m m e n d a t i o n s , h e l p i n g t o i m p r o v e t h e m a n a g e m e n t o f t h e EU f u n d s c h a n n e l l e d t h r o u g h t h e E B R D, h av e b e e n t r a n s f e r r e d t o t h e P r e s i d e n t o f t h e C o m m i s s i o n i n t h e f o r m o f a m a n a g e m e n t l e t t e r

(n o t p u b l is h e d ).

T h e s p e c i a l r e p o r t s a d o p t e d b y t h e C o u r t i n 2 0 0 9 a r e p r e s e n t e d b e l o w u n d e r f i n a n c i a l f r a m e wo r k h e a d i n gs . To i l l u s t r ate t h e k i n d o f issues dealt with and conclusions drawn, a brief presentation is given of one rep or t under each h e a d i n g .

25 SUS TAI NAB LE G R OW T H

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SR 3/ 20 0 9 T h e e f f e c t i ve n e s s o f St r u c t u r a l M e a su r e s s p e n d i n g o n w a s te w a te r t r e a t m e nt f o r t h e 19 9 4 – 9 9 a n d 20 0 0 – 0 6 p r o g r a m m e p e r i o ds

•

SR 7/ 20 0 9 M a n a g e m e nt o f t h e G a l i l e o p r o g r a m m e ’s d e ve l o p m e nt a n d v a l i d a t i o n p h a s e

•

SR 8 / 20 0 9 ‘ N e t wo r k s o f e xce l l e n ce ’ a n d ‘ I nte g r a te d p r o j e c t s ’ i n Co m m u n i t y R e s e a r c h p o l i c y : d i d t h e y a c h i e ve t h e i r o b j e c t i ve s?

•

SR 13/ 20 0 9 D e l e g a t i n g i m p l e m e nt i n g t as k s to e xe c u t i ve a g e n c i e s : a s u cce s s f u l o p t i o n?

•

SR 17/ 20 0 9 Vo c a t i o n a l t r a i n i n g a c t i o ns f o r wo m e n co - f i n a n ce d b y t h e Eu r o p e a n S o c i a l Fu n d

PR E SER VAT I O N AN D M ANAG EM EN T O F NAT U R AL R E S O U R CE S

•

SR 6/ 20 0 9 Eu r o p e a n U n i o n f o o d a i d f o r d e p r i ve d p e r s o ns : a n a s s e s s m e nt o f t h e o b j e c t i ve s , t h e m e a ns a n d t h e m e t h o ds e m p l oye d

•

SR 10/ 20 0 9 I n f o r m a t i o n p r ov is i o n a n d p r o m o t i o n m e a s u r e s f o r a g r i c u l t u r a l p r o d u c t s

•

SR 11/ 20 0 9 T h e s u s t a i n a b i l i t y a n d t h e Co m m is s i o n’s m a n a g e m e nt o f t h e L I FE -N at u r e p r o j e c t s

•

SR 14 / 20 0 9 H ave t h e m a n a g e m e nt i ns t r u m e nt s a p p l i e d to t h e m a r ke t i n m i l k a n d m i l k p r o d u c t s a c h i e ve d t h e i r m a i n o b j e c t i ve s?

The Court audited the development and validation phase of the Galileo programme, aiming at establishing a European Global Navigation Satellite System. In doing this it looked at which factors accounted for the failures.

The Court concluded that management of the development and validation phase was inadequate. If the mid-2007 redirection of the

EGNOS (European Geostationary Navigation Overlay Service) and Galileo programmes is to succeed, the Commission must considerably strengthen its management of the programmes. This report includes a number of recommendations aimed at supporting the Commission in this task. Finally, should the EU resolve to engage in other large infrastructure programmes, the Commission must use the appropriate management tools.

The management of the Galileo programme’s development and validation phase

26

CI T IZENSH I P, FR EED O M , SECU R I T Y AN D J US T I CE

•

SR 2 / 20 0 9 T h e Eu r o p e a n U n i o n’s Pu b l i c H e a l t h Pr o g r a m m e (20 03 to 20 07 ): a n e f f e c t i ve w ay to i m p r ove Eu r o p e a n c i t i z e ns ’ h e a l t h?

The Court reviewed the operation of the market in milk and milk products since the introduction of milk quotas in 1984, and analysed how the Co mmissi o n w as mana gin g th e p ro g ressi ve d e re gulatio n of th e milk s e c to r initiate d in 2003.

Based on the situation at the end of 2008, the Court makes recommendations to the Commission: it should avoid a re tur n to over p ro du c tio n,

monitor price formation within the food chain and intensif y ref lec tion on the prospec ts for producers in less favoured regions and on the environmental consequences of a geographical concentration of pro duc tion. Also it should reorient milk production towards the needs of the European domestic market and towards high added value products, which can be expor ted without budgetary assistance.

Have the management instruments applied to the market in milk and milk products achieved their main objectives?

26

The Court analysed the European Union’s Public Health Programme (PHP) for 2003– 07. In doing this it asked whether the right conditions were set for projec ts f inanced from the EU budget to complement the measures taken by Member States to protect and improve public health.

T h e r e p o r t d e t a i l s c o n c l u s i o n s a n d r e c o m m e n d a t i o n s i n p r o g r a m m e d e s i g n , implementation and management. In view of its findings, the Court calls into question the utility of certain components of European public health programmes such as the PHP. The Commission and the Member States are invited to reconsider the EU’s funding approach in the field of public health.

The European Union’s Public Health Programme (2003 to 2007): an effective way to improve European citizens’ health?

27 EU A S A G LO BAL PL AY ER

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SR 1/ 20 0 9 B a n k i n g m e a s u r e s i n t h e M e d i te r r a n e a n a r e a i n t h e co nte x t o f t h e M EDA p r o g r a m m e a n d t h e p r e v i o u s p r o to co ls

•

SR 4/ 20 0 9 T h e Co m m issi o n’s m a n a g e m e nt o f N o n -St ate Ac to r s ’ i nvo l ve m e nt i n EC D e ve l o p m e nt Co o p e r a t i o n

•

SR 12 / 20 0 9 T h e e f f e c t i ve n e s s o f t h e Co m m is s i o n’s p r o j e c t s i n t h e a r e a o f J u s t i ce a n d H o m e A f f a i r s f o r t h e w e s te r n B a l k a ns

•

SR 15/ 20 0 9 EU a s s is t a n ce i m p l e m e nte d t h r o u g h U n i te d N a t i o ns o r g a n is at i o ns : d e c is i o n - m a k i n g a n d m o n i to r i n g

•

S R 16/ 20 0 9 T h e Eu r o p e a n Co m m i s s i o n’s m a n a g e m e n t o f p r e - a cce s s i o n a s s i s t a n ce to Tu r ke y

•

SR 18 / 20 0 9 E f f e c t i ve n e s s o f ED F s u p p o r t f o r R e g i o n a l Eco n o m i c I nte g r a t i o n i n E a s t A f r i c a a n d We s t A f r i c a

The Court analysed the Commission’s management of pre-accession financial assistance to Turkey.

Particularly the first pre-accession assistance period 2002–06 suffered from many weaknesses common to pre-accession programmes. The Commission had not set sufficiently specific objectives for its funding to allow assessment of the project outcomes and did not have sufficient information to demonstrate the effectiveness of its pre-accession assistance. However, the

projects visited did deliver their intended outputs and the results of the projects are likely to be sustainable. While the Commission has already made some significant improvements, the Court makes several recommendations for further corrective measures. The most critical areas for improvement are the setting of strategic objectives for the financial assistance, the development of more realistic timescales for the objectives and the monitoring of actual project performance and results based on clear objectives and appropriate indicators.

The European Commission’s management of pre-accession assistance to Turkey

O P I N I O N S

A n o t h e r co nt r i b u t i o n by t h e Co u r t to i mp r ov i n g t h e f i n a n c i a l m a n a g e m e nt o f EU funds is provided via opinions on proposals on f inancial management issues. These o p i n i o n s a r e r e q u i r e d a s p a r t o f t h e p r o ce ss o f a d o p t i n g f i n a n ci a l l e g is l at i o n8_{, o r}

can b e delivered at the request of any of the EU institutions9_{. The Cour t of Auditors}

m ay a ls o p r o du ce o p i n i o ns o n i t s ow n i n i t i at i ve.

In 20 09 the Cour t adopted one opinion on a prop osal for an amended regulation of the budget commit tee of the O f f ice for Harmoniz ation in the Internal Market laying d ow n t h e f i n a n c i a l p r ov isi o ns a p p l i c a b l e to t h e O f f i ce (‘Fi n a n ci a l R e g u l a t i o n’).

8_{Article 322 of the TFEU Treaty.} 9_{Article 287(4) of the TFEU Treaty.}

28 ADM I N IS T R AT I O N

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SR 5/ 20 0 9 T h e Co m m is s i o n’s Tr e a s u r y M a n a g e m e nt

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SR 9/ 20 0 9 T h e e f f i c i e n c y a n d e f f e c t i ve n e s s o f t h e p e r s o n n e l s e l e c t i o n a c t i v i t i e s c a r r i e d o u t b y t h e Eu r o p e a n Pe r s o n n e l S e l e c t i o n O f f i ce

T h e Co ur t fo cus e d o n h ow EPSO (Euro p ean Personnel Selection Office) coped with the large increase in the number of competitions due to enlargement. It also looked at whether EPSO provided lists of laureates in a timely manner, ensuring the required numbers and geographical balance.

The Court concluded that EPSO had successfully m a n a g e d t h e i n c r e a s e i n t h e n u m b e r o f

competitions needed for the enlargement of the European Union. However staffing needs of the institutions were not communicated to EPSO in a timely manner; the duration of the personnel selection process was too long; competitions only produced, on average, two thirds of the targeted number of laureates (successful candidates). F i n a l l y, m a n a g e m e n t i n f o r m a t i o n w a s n o t consistently reliable or comprehensive.

The efficiency and effectiveness of the personnel selection activities carried out by the European Personnel Selection Office

FOLLOW-UP AND IMPACT

T h e Co u r t ’s a u d i t s p r ov i d e i n f o r m a t i o n d i r e c t l y to d e c is i o n - m a ke r s i n t h e i ns t i t u t i o ns co n ce r n e d — i n t h e Eu r o p e a n co nte x t , p r i m a r i l y t h e Co m m is s i o n , t h e Pa r l i a m e nt , t h e C o u n c i l a n d t h e M e m b e r S t a t e s . T h e y c a n t a k e a c t i o n o n t h i s i n f o r m a t i o n , w i t h o r w i t h o u t r e f e r e n ce to t h e Co u r t ’s a u d i t co n c l u s i o ns .

While the main impac t of the Cour t ’s audit is through its published repor ts and opinions, t h e r e i s a l s o i m p a c t d u r i n g t h e a u d i t p r o c e s s . I n p a r t i c u l a r, a l l a u d i t s i n v o l v e t h e p r e s e n t a t i o n o f d e t a i l e d f i n d i n g s , s e n t t o t h e a u d i t e e t o co n f i r m t h e ve r a c i t y o f t h e Cour t ’s obser vations. The f inal repor t tex t is also subjec t to a ‘contradic tor y procedure’. T h e r e p l i e s o f t h e a u d i t e e — m a i n l y t h e Co m m i s s i o n — a r e p u b l i s h e d to g e t h e r w i t h t h e r e p o r t s . I n m a ny o f t h e s e r e p l i e s t h e a u d i te e r e co g n is e s t h e p r o b l e m s i d e nt i f i e d b y t h e Co u r t a n d s e t s o u t s te p s t h a t i t i nte n d s to t a ke to a d d r e s s t h e m .

O n ce t h e a u d i t i n g wo r k is f i n is h e d a n d a r e p o r t h a s b e e n p u b lish e d i t is a n a l y s e d a n d us e d by th e Parliam ent and Council, in e xercising th eir p o litic al over sight over th e us e o f t h e b u d g e t . T h e Co u r t ’s r e p o r t s p r ov i d e a b a s is f o r t h e Co u n c i l ’s r e co m m e n d a t i o n a n d Pa r l i a m e nt ’s d e c is i o n o n t h e a n n u a l d is c h a r g e o f t h e b u d g e t .

A few examples of the impact of the Court’s work can be found in actions taken by the Commission as a result of the discharge resolution on the 2007 budget (mainly impact in 2009):

In the area of Agricultural expenditure

The management and control system for expenditure under the newly created Rural Development Fund (EAFRD) has been aligned with the EAGF guarantee system, and will thus benefit from the widely recognised advantages of the latter. (See Court’s AR (Annual Report) 2004, paragraph 5.54 and AR 2007, paragraph 5.57).

In the area of Cohesion

The Commission is continuing to revise the 2007–13 rules in order to simplify the system for reporting irregularities; it is committed to reporting in early 2010 on actions carried out in 2009 and on the first impact of all actions taken within its action plan to strengthen the Commission’s supervisory role for structural actions. (See AR 2007, paragraph 1.53 and paragraph 6.36(a)).

In the area of External Actions

In order to reinforce the controls at the level of implementing organisations, the Commission plans to develop specific guidance to help implementing organisations manage EU funds better and comply with EC rules. (See AR 2007, paragraph 8.33(a)).

In the area of Internal Policies including Research

The Commission has devised a multiannual control strategy for Framework Programme 6, based on the detection and correction of any errors which could not be identified by desk checks before a payment was made. In order to simplif y the procedures under Framework Programme 7, the Commission introduced a participants’ guarantee fund, considerably reducing the number of ex ante financial checks and the use of protective measures. (See AR 2007, paragraph 7.43(b), paragraph 10.34 and paragraph 2.42(a)).

Source: Repor t from the Commission to the European Parliament on the follow-up of the discharge 2007 decisions.

S p e c i a l r e p o r t s a r e a l s o t a k e n i n t o c o n s i d e r a t i o n d u r i n g t h e d i s c h a r g e p r o c e d u r e . D u e to t h e f a c t t h a t t h e y a r e p u b l i s h e d t h r o u g h o u t t h e y e a r t h e y h ave n o r m a l l y b e e n p r e s e nte d a n d d is c u s s e d a t a n e a r l i e r s t a g e a t Pa r l i a m e nt a n d Co u n c i l m e e t i n gs . T h e i m p a c t o f a u d i t r e p o r t s c a n b e i n c r e a s e d i f t h e y a r e t a k e n u p b y t h e r e l e v a n t m e d i a , s ti m u l a t i n g w i d e r a t te nti o n a n d d e b ate . T h e Co u r t ’s a n n u a l r e p o r t w i l l u s u a l l y g e t s i g n i f i c a nt m e d i a cove r a g e . T h is w a s t h e c a s e i n 20 0 9 w h e n t h e i nte r e s t o f m e d i a p r i m a r i l y f o c u s e d o n t h e i m p r o v e m e n t s i n a g r i c u l t u r e e x p e n d i t u r e . S e v e r a l o f t h e s p e c i a l r e p o r t s h ave a ls o b e e n f o l l ow e d w i t h i nte r e s t b y t h e p r e s s .

For instance, the rep or t on the milk market (SR 14/20 09), which assessed to what e x tent t h e m a n a g e m e nt i ns t r u m e nt s o f t h e m i l k m a r ke t a c h i e ve d t h e i r m a i n o b j e c t i ve s , w a s i n t e n s i v e l y d i s c u s s e d i n t h e C o u n c i l a n d P a r l i a m e n t , a n d w i d e l y t a k e n u p b y m e d i a a n d p r o f e s s i o n a l s c o n c e r n e d , a t a t i m e w h e n t h e s e c t o r i s f a c i n g a w i d e r a n g e o f d i f f i c u l t i e s .

T he Cour t is f ur ther developing it s analysis of the imp ac t of it s work . In 20 09 the Cour t b e g a n d e v e l o p i n g a s y s t e m a t i c f o l l o w - u p p r o c e d u r e f o r t h e C o u r t ’s s p e c i a l r e p o r t s a i m i n g a t i d e n t i f y i n g a n d d o c u m e n t i n g p r o g r e s s m a d e b y t h e a u d i t e e i n a d d r e s s i n g w e a k n e s s e s i d e n t i f i e d a n d r e c o m m e n d a t i o n s m a d e . T h i s w i l l p r o v i d e a d d i t i o n a l f e e d b a c k t o t h e C o u r t o n t h e i m p a c t o f i t s w o r k , a s w e l l a s t o P a r l i a m e n t a n d o t h e r s t a ke h o l d e r s .

THE COURT’S VIEW

I n Fe b r u a r y 2010 t h e Co u r t p r o d u ce d , f o r t h e f i r s t t i m e, a n o p i n i o n o n w h a t co u l d b e d o n e to r e d u ce t h e l e ve l o f i r r e g u l a r p ay m e nt s a n d i m p r ove t h e q u a l i t y o f s p e n d i n g (e co n o my, e f f i c i e n c y a n d e f f e c t i ve n e s s) i n t h e EU b u d g e t .

T he Cour t conclude d that building on re cent pro gress in re ducing the level of irre gular p ay m ent s will dep e nd on simp lif y ing th e le gislative f r am ework s in th e high - r isk areas a s w e l l a s i n t r o d u c i n g m o r e c o s t- e f f e c t i v e c o n t r o l s y s t e m s . S u c h r e f o r m s s h o u l d b e u n d e r t a ke n i n t h e b r o a d e r co nte x t o f t h e c u r r e nt r e v i e w o f t h e a r r a n g e m e nt s f o r EU sp ending. In th e Cour t ’s v iew, improv ing th e qu alit y of sp ending is a high priorit y that c a n b e a c h i e ve d b y a p p l y i n g t h e co n ce p t o f Eu r o p e a n a d d e d v a l u e w h e n s e t t i n g t h e priorities for e xp enditure and by addressing the sp e cif ic prob lems the Cour t identif ies i n t h e s e l e c t i o n , d e s i g n a n d o p e r a t i o n o f e x p e n d i t u r e p r o g r a m m e s a n d s c h e m e s .

TA R G E T T H E A R E A S W I T H

T H E H I G H E S T L E V E L S O F

I R R E G U L A R PAY M E N T S

A l t h o u g h t h e o v e r a l l l e v e l o f i r r e g u l a r p a y m e n t s f r o m t h e E U b u d g e t h a s f a l l e n , i t r e m a i ns h i g h i n Co h e s i o n a n d E x te r n a l a i d , D e ve l o p m e nt a n d En l a r g e m e nt , a s w e l l a s f o r t h e Fr a m e w o r k Pr o g r a m m e f o r R e s e a r c h a n d Te c h n o l o g i c a l D e ve l o p m e n t a n d f o r Rur al D eve lopm ent E x p e nditure. T h e m os t co mm on ir re gularities are in e ligib le claims b y b e n e f i c i a r i e s , o v e r- d e c l a r a t i o n o f c o s t s a n d n o n - c o m p l i a n c e w i t h c o n d i t i o n s f o r p a y m e n t s , e . g . p r o c u r e m e n t r u l e s . T h e y r e s u l t l a r g e l y f r o m t h e c o m p l e x i t y o f r u l e s a n d p ay m e n t co n d i t i o n s a s w e l l a s d e f i c i e n ce s o f s y s t e m s t o co n t r o l t h e r i s k s a t t h e f i n a l b e n e f i c i a r y l e ve l .

S I M P L I F Y T H E R E L E VA N T L E G A L

F R A M E W O R K S A N D I M P R O V E

S U P E R V I S I O N A N D C O N T R O L

T h e Co m m is s i o n s h o u l d a d d r e s s t h e s p e ci f i c s y s te m s w e a k n e s s e s t h e Co u r t h a s f o u n d i n t h e h i g h - r is k a r e a s a n d i m p r ove i t s s u p e r v i s i o n . H ow e ve r, a s co n t r o l s i n c r e a s e a n d e r r o r r ate s f a l l , t h e co nt r o l co s t s b e g i n to o u t we i g h t h e b e n e f i t s . T h u s , s i m p l i f i c at i o n s h o u l d r e m a i n a p r i o r i t y. R u l e s a n d r e g u l a t i o ns t h a t a r e c l e a r to i nte r p r e t a n d s i m p l e to a p p l y n o t o n l y d e c r e a s e t h e r is k o f e r r o r b u t c a n a ls o r e d u ce co nt r o l co s t s .

O P I N I O N 1 / 2 0 1 0 —

I M P R O V I N G T H E F I N A N C I A L M A N A G E M E N T O F T H E

E U R O P E A N U N I O N B U D G E T: R I S K S A N D C H A L L E N G E S

I M P R O V E T H E D E S I G N

O F E X P E N D I T U R E

P R O G R A M M E S

I n a d d i t i o n to s i m p l i f i c at i o n , w h e n r e v is i n g e x is t i n g i nte r ve nt i o ns a n d d e si g n i n g n e w ones, the Commission should ensure that clear obje c tives are set. T here is of ten a ne e d for m o re realism as we ll as increas e d tr ansp arenc y and acco unt abilit y. To achieve this , the Commission´s e xisting processes for developing p olicies — in par ticular its prac tice o f e x a nte e v a l u a t i o n a n d i m p a c t a s s e s s m e nt s — co u l d b e f u r t h e r s t r e n g t h e n e d .

F O C U S O N E U R O P E A N

A D D E D VA LU E W H E N C H O O S I N G

E X P E N D I T U R E P R I O R I T I E S

T h e Cour t sugges t s that th e concept of Europ ean adde d v alue should b e ar ticulate d in a s u i t a b l e p o l i t i c a l d e c l a r a t i o n o r i n t h e EU l e g is l a t i o n . T h is s h o u l d p r ov i d e g u i d a n ce to t h e EU´s p o l i t i c a l a u t h o r i t i e s to b e u s e d w h e n c h o o s i n g e x p e n d i t u r e p r i o r i t i e s .

S E I Z E T H E O P P O R T U N I T Y

O F B U D G E T R E F O R M TO I M P R O V E

T H E Q UA L I T Y O F S P E N D I N G

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