THE EUROPEAN COURT OF AUDITORS

1. THE EUROPEAN COURT OF AUDITORS 13/01/2009

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

3. Mission of the European Court of Auditors The mission of the European Court of Auditors is to audit independently the collection and spending of European Union funds and, by so doing, to evaluate the way in which the European institutions discharge these duties. The Court examines whether financial operations have been properly recorded, legally and regularly executed and managed with an eye to economy, efficiency and effectiveness. In this way, the Court aims to contribute to improving the financial management of European Union funds at all levels, so as to ensure maximum value for money for the citizens of the Union. The Court makes the results of its work known through the publication of relevant, objective and timely reports.

4. Institutions of the EU Legislature European Parliament 785 Members Legislature Council of the EU Ministers from the 27 Member States Executive European Commission 27 Members Judiciary European Court of Justice 27 Judges 8 Advocates-General External Audit European Court of Auditors 27 Members

5. THE EUROPEAN UNION THE THREE PILLARS OF THE EU European Communities Common Foreign and Security Policy Police and judicial cooperation in criminal matters • The EC (formerly EEC, ECSC • and Euratom) cover most of • the common policy areas, i.e. • competition, single market, • Euro, immigration (no • direct impact on the budget) • agriculture, research, social policies, • development aid • EU position on armed conflicts, human rights etc. • High Representative for the CFSP • strengtheningsecurity of the Union • preserving peace • developing and consolidating democracy • Establishing an area • of freedom, security and • justice • Eurojust • Europol THE TREATIES

6. Historical background July 1975Treaty of Brussels, creation of the European Court of Auditors (ECA) October 1977The ECA becomes operational February 1992Treaty ofMaastricht, the ECA becomes a Community Institution, introduction of the Statement of Assurance October 1997Treaty of Amsterdam, extension of the ECA’s auditing powers to the second and third pillars of the EU and conferment of right to refer cases to the Court of Justice February 2001Treaty of Nice, one Member per Member State, introduction of system of chambers, possibility of issuing specific Statements of Assurance for individual areas of activity

7. Structure • Court of 27 Members one Member per Member State appointed for a six-year, renewable term of office • President elected by the Members from amongst their number for a three-year, renewable term of office • Secretary-General appointed by the Court for a six-year, renewable term of office • Total number of staff in September 2007: 915 Audit sectors: 355, Members’ Private Offices: 160, Administration: 238, Translation: 162

8. PRESIDENCY Supervision of the performance of the Court’s work. Relations with the Community and other institutions. Legal matters. Internal audit. AUDIT GROUPS I Preservation and management of natural resources II Structural, Transport, Research and Energy policies III External actions IV Own resources, Banking activities, Administrative expenditure, Community institutions and bodies, Internal policies CEAD GROUP Coordination, Communication, Evaluation, Assurance and Development ADMINISTRATIVE COMMITTEE (1 Member per Audit Group)Administrative matters requiring a Court decision AUDIT COMMITTEE (3 Members and 1 external expert) Court’s internal auditor reports to Audit Committee SECRETARIAT-GENERAL Human Resources, IT and Telecommunications, Finance and Administration, Translation, Court Secretariat

9. The Court‘s role • Article 248(4) of the EC Treaty: • “[The Court] shall assist the European Parliament and the Council in exercising their powers of control over the implementation of the budget.” • the external auditor of the EU • the Court has no judicial powers • a collegiate body that draws up reports and delivers opinions... • ... which have no binding force but are of help to those managing EU funds...

10. The Court‘s tasks • Article 248 of EC Treaty: • to audit the EU’s accounts (financial statements) • to examine whether all EU revenue has been received and all EU • expenditure incurred in a lawful and regular manner • to provide the European Parliament and the Council with a Statement of Assurance (“DAS”) • to examine whether the financial management has been sound • to deliver opinions

11. The role of the Members • A Member’s main role is to supervise the specific audit tasks for which he is responsible, i.e. monitor the planning and perfomance of tasks. • with his colleagues, he lays down Court strategy • with his colleagues, he decides upon Court reports and opinions • he represents the Court within the framework of the tasks entrusted to him • he represents the Court in his home country

12. Audit field • The general budget of the European Union (including all borrowing and lending operations guaranteed by it) • plus: • European Development Funds (EDFs) • European agencies and bodies • European Schools • European Central Bank

13. 2009 General Budget – RevenueTotal: 133.8 billion euro

14. 2009 General Budget – ExpenditureTotal: 133,8 billion euro

15. Types of audit • Financial audit: reliability of the accounts • Financial/compliance audit: legality and regularity of underlying transactions • Sound financial management audit or performance audit: value for money

16. Financial audit: Reliability of the accounts • The objective is to obtain sufficient evidence to show that all transactions and all assets and liabilities have been completely, correctly and accurately • entered in the accounts and presented in the financial statements. • As the custodian of public funds, the Commission must report accurately on their use. • An important element of accountabilityvis-à-vis the citizens of Europe.

17. Financial audit: Legality and regularity • The objective is to obtain sufficient evidence to show that the revenue and spending operations underlying the EU budget have been carried out in accordance with contractual and legal requirements and are correctly and accurately calculated.

18. Sound financialmanagement auditPerformance audit • The objective is to obtain sufficient evidence to show that European Union funds have been used economically, efficiently and effectively, either by • maximising output for a given input or through minimising costs for a defined objective.

19. Audit approach The direct substantive testing audit approach examines transactions directly to provide an often statistically based conclusion as to their legality and regularity or value for money; or.. The systems’ analysis based audit approach examines the effectiveness of the internal control systems set up to ensure that EU funds are properly spent. If the tests show that the systems are operating effectively, the amount of direct substantive testing of transactions can be reduced. Advantage: this approach may be more efficient: it allows systems’ weaknesses to be identified and recommendations for improvement to be made.

20. Audit approach • Auditing involves obtaining direct evidence on the audit subject. As not all transactions can be audited every year, statistical sampling is often used to provide representative evidence. • When carrying out its audits, the Court pays particular attention to the internal control systems set up to ensure that EU funds are properly spent. • If the tests show that the systems are operating effectively, the amount of direct substantive testing of transactions can be reduced. • Weaknesses identified in the systems result in recommendations for improvement which actively contribute to improving financial management.

21. The Court’s audit powers • Audit of records and on the spot in the European institutions, Member States’ and beneficiary States’ administrations and on the premises of final beneficiaries. • Auditors may request at any time any document considered necessary for the audit.

22. Fraud • Responsibility for preventing or detecting and repressing fraud lies with • those who manage and supervise policy implementation (i.e. the Commission). • The Court is not specifically responsible for detecting all cases of fraud. • The Court, as external auditor, audits the arrangements made by • management, including OLAF. • Normal audit procedures identify fraud indicators. Cases of actual or suspected fraud are reported to OLAF, which is responsible for follow-up at EU and Member State level.

23. Organisation of audit work Multi-annual andannual programming Preliminary study Audit planning memorandum Audit field work Contradictory procedure with the auditee Published report

24. Publications • Annual Report: Statement of Assurance, observations on the • implementation of the EU budget and the European Development Funds • Special Annual Reports: on EU bodies and agencies • Special Reports: on specific budgetary areas or management topics • Opinions: on new or amended legislation with financial impact

25. Impact of the Court’s work • Contributing to improving the financial management • of the European Union: • Used during the discharge procedure by the European Parliament (given • on the Council’s recommendation) • The EU institutions make improvements based on the Court’s • recommendations • The ECA systematically checks whether the appropriate corrective action has been taken and presents its conclusions in the Annual Report

26. Liaison with the national Supreme Audit Institutions (SAIs) • Audits in the Member States are carried out in liaison with the SAIs (or • competent national bodies). • The Court of Auditors and the SAIs cooperate in a spirit of trust while maintaining their independence. • Regular meetings of SAI Presidents (Contact Committee) / working • parties / joint audits, etc.

27. www.eca.europa.eu